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It's clear 2022 has been dominated by inflation fears and for a good reason.
Inflation is skyrocketing
Interest rates are rising
Bond yield curves are inverting
Energy wars are raging
Debt holes are deepening
I hate to be the bearer of bad news, but nothing has changed.
The reason inflation continues higher is because it’s a feedback loop in a low interest rate debt driven economy.
1.Commodities demand/lack of supply in oil, food, wood, etc.. cause prices to increase.
2.Companies costs go up so they raise their prices and pass on to consumers.
3.Consumers use more debt to buy more thinking it saves costs and they avoid supply disruptions, but this only drives up demand in Commodities… back to step 1.
You’re a consumer, Companies are consumers, Governments are consumers.
Increased spending by Government will only exacerbate inflation as we saw since March 2020.
The only way to break this feedback loop would be to increase interest rates to a point where consumers can’t afford to service their debt.
This hasn’t happened so the feedback loop will continue until there is… a. collapse, b. crash, or c. kaput.
As for what will happen tomorrow, I have my theories….
Higher CPI - with a higher CPI print tomorrow I think we drop similar to April. 2-4 o’clock today will be a good indication of what the street thinks.
Flat CPI - happy street got it right last month (peak inflation), a cautionary drift higher, maybe a rally off the 200d.
Lower CPI - nah, you’re dreaming. APPL issuing debt and even META jumping on the band wagon, Gov is on a spending spree for votes… no way…
Not investment advice. The only good advice is not to take investment advice from strangers on the internet….
Inflation is skyrocketing
Interest rates are rising
Bond yield curves are inverting
Energy wars are raging
Debt holes are deepening
I hate to be the bearer of bad news, but nothing has changed.
The reason inflation continues higher is because it’s a feedback loop in a low interest rate debt driven economy.
1.Commodities demand/lack of supply in oil, food, wood, etc.. cause prices to increase.
2.Companies costs go up so they raise their prices and pass on to consumers.
3.Consumers use more debt to buy more thinking it saves costs and they avoid supply disruptions, but this only drives up demand in Commodities… back to step 1.
You’re a consumer, Companies are consumers, Governments are consumers.
Increased spending by Government will only exacerbate inflation as we saw since March 2020.
The only way to break this feedback loop would be to increase interest rates to a point where consumers can’t afford to service their debt.
This hasn’t happened so the feedback loop will continue until there is… a. collapse, b. crash, or c. kaput.
As for what will happen tomorrow, I have my theories….
Higher CPI - with a higher CPI print tomorrow I think we drop similar to April. 2-4 o’clock today will be a good indication of what the street thinks.
Flat CPI - happy street got it right last month (peak inflation), a cautionary drift higher, maybe a rally off the 200d.
Lower CPI - nah, you’re dreaming. APPL issuing debt and even META jumping on the band wagon, Gov is on a spending spree for votes… no way…
Not investment advice. The only good advice is not to take investment advice from strangers on the internet….
Note
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