Don’t believe the lies about tapering, we are headed for disaster. Plus a look at even more inflation.

Does Anyone Really Believe This Will Happen?
August 30 (King World News) – Egon von Greyerz:  Optimists will say we can “grow our way out of debt.” But to grow our way out of Debt in a normal rather than increasingly more negative real-rate environment would require GDP growth rates of 20% or higher for the next 5 years. Does anyone believe that will happen?

Don’t Believe The Lies About Tapering
Egon von Greyerz:  Should the Fed turn hawkish and “taper,” it would be a disaster for every asset class but the dollar and would likely be a short-lived and immediately reversed policy, akin to the 2019 reversal after the 2018 Q4 rate hike. Current debt levels cannot be sustained at higher rates!…

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Headed For Disaster
Otavio Costa:  In 100+ years data: Such depressed earnings’ yields have always led to very significant market meltdowns. Great Depression. 1937-8 Recession. Tech Bust. Average return for the subsequent 3 yrs being close to -53%. Thinking the Fed can sustainably taper here is just nonsense.

Expect Disastrous Returns For Stocks
In The Next 3 Years!

Inflation
Peter Boockvar:  While Powell used multiple pages of his speech Friday to argue the transitory inflation path, the TIPS market said not as inflation breakevens rose. The 5 year was higher by 4 bps and 14 bps for the week and getting back all that was lost in the week prior. While off the highs of May, we are still near 13 year highs.

5 Year Inflation Breakevens Remain High

The 10 year inflation breakeven was also higher by 4 bps Friday and 13 bps for the week, also recovering from the drop in the week before.

As Do 10 Year Inflation Breakevens

MORE TRANSITORY INFLATION: Expect Higher Energy Bills
While the Fed wants us to focus on inflation ex food and energy, the price of natural gas is at the highest since the winter of 2014.

Natural Gas Prices Soaring…

High Prices Not Hurricane Induced
This is not just a temporary move in response to hurricane Ida, this is an ever growing mismatch between supply and demand. After years of too much of the former, we’re now seeing what you get when there is too little relative to the demand. See the chart below of the natural gas rig count, down by more than half from its peak in 2019. Energy stocks remain cheap, particularly natural gas stocks, relative to where pricing currently is.

…As Rig Counts Remain Historically Low

Real Estate
While Powell basically said NOTHING Friday about the epic home price gains that his policy is feeding on the demand side, tomorrow’s S&P CoreLogic June home price index is expected to show an 18.6% y/o/y increase. It’s epic because we’ve never seen home price gains like this before, not even in the mid 2000’s.

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***ALSO JUST RELEASED: A Short Squeeze In Gold Mirroring 2020’s $600 Spike Is Becoming More Likely CLICK HERE.

***To listen to James Turk discuss Friday’s big 4+% rally in the mining stocks along with the surge in gold and silver as well as what to expect next CLICK HERE OR ON THE IMAGE BELOW.

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