The INFLATION MEGA-TREND - Ripples of Deflation on an Ocean of Inflation!
Economics / Inflation Nov 16, 2021 - 11:59 AM GMTBy: Nadeem_Walayat
So called transitory US inflation surged to 5.4% for September remaining sticky at above 5% with little signs of moderation and thus likely to prompt the Fed to taper in the near future to signal intentions to bring inflation down to 2% in 2 years time as their 'transitory' propaganda smoke screen is wearing thin. Of course real US inflation in is at least double official fake CPI. Whilst the real rate of inflation in the UK is even worse, likely 3 to 4 times official CPI i.e. about 15% to 20%.
Ripples of Deflation on an Ocean of Inflation!
Though don't worry folks if the clowns in the mainstream press are to be believed deflation is always just around the corner! THIS is what official inflation actually looks like, there is no temporary, there is no transitory, there is only the EXPONENTIAL INFLATION MEGA-TREND courtesy of government / central bank money printing! Which is why we have to take risks with out hard earned capital by contemplating investing in garbage such as Amazon trading at near 60X earnings!
All whilst the mainstream press have got their knickers in a twist on soaring energy prices, always remember folks the real cause of inflation is rampant government and central bank money printing. The government prints bonds and the central bank well just prints money. THAT'S WHAT CAUSES INFLATION! And as the US deficit and fed balance sheet illustrate the anoint of money printing going on is on an epic scale! Which is why I have been warning since at least March 2020 to expect highly inflationary consequences to the pandemic induced rampant money printing.
The Inflation stealth tax is EATING away at the value of our cash, savings and bond investments, thus we have no choice but to deploy funds into risky more inflation proof assets even though they may suffer as a consequence of central bank incompetence.
Energy Inflation Canary on the Coal mine - The UK and much of Europe is experiencing the full force of inflation in the energy sector with energy prices rocketing higher even before winter has arrived, that has many energy firms walking away from their fixed rate customers, dumping them onto the regulator to pass onto other energy firms on much higher tariffs.
As an example how much inflation is in the pipeline for UK households, my own Natural Gas is fixed with ZOG Energy at 2.5p per unit until the end of April 2022. The current quote for a similar fix is 6.8p per unit, that is 2.7X, so no wonder many energy firms are doing fake closedown's to reopen later under a different name rather than honour energy contracts with their customers.
These high energy prices will feed through right across the economy, and push up consumer prices much higher than most are expecting. And what is happening now in Europe will soon to taking place in the United States. This is the natural consequences of what happens when governments go on a money printing rampage! PRICES RISE!
Protect yourselves by capitalising on ways to profit from heating ones home!
How? crypto mining with an RTX class GPU where one gets paid for mining whilst pumping out 200watts of extra heat per GPU. Unfortunately the prices of GPU's never fell, so currently I only have 2 desktops earning and heating rather than my planned 6, maybe for next winter I will have compact miners earning and heating every room. Anyway if you have RTX class GPU's in your systems then do investigate mining in the background with the likes of Nicehash that roughly translates into a profit of about $150 per month (after electric costs) using an RTX 3080 GPU as I covered 6 months ago.
HOUSING is leveraged to inflation and is a great long-term inflation hedge, BUT understand that it is an illiquid investment i.e. ones gains are locked in whilst one incurs inflationary costs in terms of maintenance and property taxes, which is why I am not so keen on accumulating a string of properties as it can become a full time job looking after them.
STOCKS can be leveraged to inflation i.e. revenues increase in line with consumer prices though in a climate of rising interest rates the consumers of such products such as iphones have less disposal income to spend on said products and services, thus the best corporations to invest in are either those that the consumers cannot do without such as utilities and the energy sector, or the the basically free to the consumer services such as Google and Facebook which earn the bulk of their revenues from advertising. Though don't take this a signal to start piling into tech stocks because they are OVER VALUED. A P/E of over 30 going into an inflationary period is NOT going to result in higher stock prices. For instance today CPI is 5.4%, in a few months it may be 6% or even 7%, that is going to put a squeeze on earning multiples, pulling them to below 20, even for the likes of Amazon, Microsoft, Apple and Google, one needs to be prepared to see ones tech stocks trade at multiples of under 20!
Luckily our recent binge into small cap high risk Pharma stocks gives us some protection from inflation, especially for those stocks trading on PE's below 20.
Additionally major super market chains should benefit from inflation, the likes of Tesco, Costco and Wall mart given economies of scale, own transport networks and pricing power with the ability to absorb some of the price rises in exchange for higher market share.
Gold and Silver - Should do well during inflation. However rising interest rates act as a drag on precious metals as they do not pay interest so cannot compete. Personally precious metals are not on my radar to gain further exposure to.
Commodities bull runs are already well under way, leading precious metals higher.
Crypto's - Inflation rises and what does Bitcoin do? DOUBLE! Clearly crypto's are the new inflation hedge, FAR MORE SENSITIVE than the older assets such as precious metals. The key positive is that they are the new kids on the block and thus continue to carry an air of mystery of representing the future, and have thus yet to gain widespread popularity. So in terms of percentage returns crypto's should beat most other asset classes over the medium to long-run, BUT are very volatile, NOT for the faint hearted. The thing about crypto's is that just as most people become aware of crypto's and start piling in then that is probably the time they are about to see their value crash by half!
So the key strategy here is to buy crypto's AFTER a collapse, and not during the run up to a peak. Many crypto bugs see the recent run up to BTC $62k as marking the start of the next big bull run, well of course they would, just as every gold bug sees every gold price rally as the start of the run to $10k! Crypto's are volatile, very volatile! But saying that a break above $64k (recent high was $63k) is technically very bullish!
Where, my crypto portfolio is concerned I am raising my buy limits with my focus on the alt coins, such as Ravencoin, Cardano, Pokadot and less so for exposure to Bitcoin and Ethereum. Though note I am no crypto bug i.e. crypto's remain a tiny proportion of my total assets where actual cash invested will be less than 1% total assets, probably more like 0..5%, unlike stocks that can range to as high as 1/3rd of total assets, with housing always the single largest asset class at currently about 42%. Anyway BITC trading above $64k should be taken as a major bullish signal even if BTC corrects afterwards, whilst the Alt coins have a delayed reaction to BTC strength so offer an opportunity of sorts, so I would take such a signal to further raise my buy limits i.,e. raising raven coin limits from $0.05 - 0.08 to 0.07 - 0.1. And as things stand it looks like the only BTC I will likely be accumulating is that which I am mining from 2 GPU's and Eth only if it spikes lower by about 50%.
On a side note what are the consequences of $2 trillion of crypto assets that do not figure into any of the central bank statistics as they largely exist on unregulated decentralised exchanges. Answer - Hidden inflation by means of the wealth effect.
This ties into the effect of asset price inflation since hyper QE began with Covid for why many people may not be going back to work because they have become crypto and stock speculators or rely on speculation for a large part of their earnings thus the economy has far more DEMAND than the central bankers looking at their economic indicators such as Unemployment data realise, and thus the US and other economies rather than slowing down, are in fact over heating due to the hidden wealth effect that crypto's are a small part of. Thus the Fed is trying to engineer a lower unemployment rate may ignite far higher inflation because the economy has shifted it is no longer that which it was in 2019. Thus inflation could go much, much higher whilst the PHD's that populate the central banks cling onto their busted economic models that do not take account of increased profits / earnings from speculation.
WHAT THIS MEANS IS TO EXPECT PERMANENT TRANSITORY INFLATION! The Central banks / academics will fail to understand why inflation is not falling when all their indicators suggest it should. A year ago 5% CPI was unthinkable to most, just as 10% CPI is today, but that is where US CPI could be heading to in 2022, with real inflation twice CPI!
The bottom line is that your crooked central bank and government is STEALING 5.4% (x2) of the purchasing power of your hard earning savings and earnings form every american citizen! And worse for the UK! And that is on the official fake statistics,. We have no choice but to take risks with our capital as the alternative is to a guaranteed total loss! And it may be that the only way to keep pace with central bank real inflation one seriously needs to consider assets that move to the extent that crypto's do. I know many don't want to hear this because they do not want to expose themselves to crypto's given the risks involved such as exchanges disappearing with customer funds etc.. But that is the world that the central bankers have created for us and so one has no choice but to do the work to seek to include crypto's to some extent because that is the only way one can climb the learning curve that crypto's are, never mind NFT's!
This article is an excerpt from my recent extensive analysis of why inflation will be far from transitory, so batton down the hatches for whats to come- Protect Your Wealth From PERMANENT Transitory Inflation
Contents:
- Best Real Terms Asset Price Growth Countries for the Next 10 Years
- Worst Real Terms Asset Price Growth Countries for the Next 10 Years
- The INFLATION MEGA-TREND
- Ripples of Deflation on an Ocean of Inflation!
- Stock Market Trend Forecast Current State
- US Dollar - Stocks Correlation
- US Dollar vs Yields vs Dow
- Stock Market Conclusion
- 34th Anniversary of the Greatest Crash in Stock Market History - 1987
- Key Lesson - How to REALLY Trade Markets
- AI Stocks Portfolio Current State
- October Investing Plan
- HIGH RISK STOCKS INVEST AND FORGET PORTFOLIO
- Can US Save Taiwan From China?
Also access to my latest extensive analysis - AI Tech Stocks Portfolio Updated Buying Levels and Zones as Financial Crisis 2.0 Continues Brewing
Contents:
Financial Crisis 2.0 Checklist
The China Syndrome
Stock Market Begins it's Year End Seasonal Santa Rally
Stock Market Trend Forecast Current State
INVESTING LESSON - BUYING VALUE
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock
INVESTING LESSON - Give your Portfolio Some Breathing Space
INVESTING LESSON - Give your Portfolio Some Breathing Space
How Stagflation Effects Stocks
INTEL Bargain - 15.5% Discount Sale
Why Intel stock price dropped 15%?
FACEBOOK - 10% DIscount
IBM - 20% Discount
Amazon - 5% Discount
APPLE 4% Discount
AMD $136 on Route to $200
TSMC - $117
Microsoft $336
Google $2980, PE 28.7, EC 30.
Nvidia Leaves planet Earth - $299, PE of 106
Heads Up on NEW Potential Tech Stocks
AI Stocks Portfolio Updated Buying Levels
AI Stocks Buying Plan B
FREE TRADE the Perfect Stocks and Shares ISA?
FREE SHARE FROM FREETRADE
High Risk Stocks Brief
Crypto's 20% Discount Event
Bitcoin Trend
Palladium Brief
The whole of which was first been made available to Patrons who support my work. So for immediate first access to ALL of my analysis and trend forecasts then do consider becoming a Patron by supporting my work for just $4 per month. https://www.patreon.com/Nadeem_Walayat.
Also access to my recent analysis that maps out what I expect to happen during the next big crypto bull market is only just beginning for most crypto's
Bitcoin NEW All time High is TRIGGER for Future Alt Coins Price Explosion
Contents:
- Bitcoin & Ethereum 2021 Trend
- Crypto Portfolio Current State
- The BITCOIN NEW ALL TIME HIGH Changes EVERYTHING!
- Ravencoin to the MOON!
- What am I doing?
- How to Invest in Crypto's
- Bitcoin 2022 Price Target
- Ethereum 2022 Price Target
- Ravencoin 2022 Price Target
- Cardano (ADA) 2022 Price Target
- Chainlink 2022 Price Target
- Pokadot 2022 Price Target
- Solano 2022 Price Target
- Litecoin 2022 Price Target
- Arweave 2022 Price Target
- Stellar Lumens - XLM 2022 Price Target
- Eth Classic 2022 Price Target
- Vechain 2022 Price Target
- EOS 2022 Price Target
- Earnings Noise Delivers INTEL And IBM Buy Opps
- Facebook and Google Could CRASH 10% Post Earnings Day
- High Risk Stocks Swings and Roundabouts
For crypto trading and investing see Binance for 10% discount on trading fees - Discount Code LZ728VLZ
For managing your crypto's see Coinbase
For GPU mining check out Nicehash (affiliate links).
And access to why inflation will be far from transitory, batten down the hatches for what's to come-
And my extensive analysis of Silver concluding in a trend forecast into Mid 2022.
Silver Price Trend Forecast October 2021 to May 2022, CHINOBLE! AI Stocks Buying Plan
- UK Inflation Soaring into the Stratosphere, Real rate Probably 20% Per Annum
- The 2% Inflation SCAM, Millions of Workers take the Red Pill
- Silver Previous Forecast Recap
- Gold Price Trend Implications for Silver
- Silver Supply and Demand
- Silver vs US Dollar
- Gold / Silver Ratio
- SILVER Trend Analysis
- Long-term Trend Analysis
- Formulating a Trend Forecast
- Silver Price Trend Forecast October 2021 to May 2022
- Silver Investing Strategy
- SIL ETF - What About Silver Mining Stocks?
- Gold Price Trend Brief
- Why the CCP is Living on Borrowed Time and Needs a War
- Understanding the Chinese Regime and What it is Capable Of
- Guanxi
- Chinese People do NOT Eat Dogs Newspeak
- CHINOBLE! Evergrande Reality Exposes China Fiction!
- AI Stocks Portfolio Investing Strategy
- AI Stocks Portfolio Amendments
- AI Stocks Portfolio Current State
- October Investing Plan
- HIGH RISK STOCKS INVEST AND FORGET PORTFOLIO
- Why China Could Crash Bitcoin / Crypto's!
- My Next Analysis
So for immediate first access to ALL of my analysis and trend forecasts then do consider becoming a Patron by supporting my work for just $4 per month. https://www.patreon.com/Nadeem_Walayat.
My analysis schedule includes:
- UK House Prices Trend Analysis, including an update for the US and a quick look at Canada and China - 65% done
- How to Get Rich! - 90% done - This is a good 6 month work in progress nearing completion.
- US Dollar and British Pound analysis
- Gold Price Trend Analysis - 10%
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Nadeem Walayat
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Nadeem Walayat has over 35 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.
Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk
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