Look at what just hit the highest level since 1981…
Land Of The Rising Sun
June 8 (King World News) – Peter Boockvar: Don’t call it a taper but the Bank of Japan did not buy one share of ETF’s in May. Not one of a market that they already own 70% of. Don’t worry though because I’m sure they will be back on any sharp decline in stocks. That said, there has been an enormous amount of pressure on them to stop because of the distortive impact of what they are doing in return for little gain. I’m still a bull on Japanese stocks whose companies have some of the best balance sheets in the world, will be direct beneficiaries of the growth in Asia in the coming decade, the area of the world that will see the quickest pace of activity all with attractive valuations…
New interview from legend Doug Casey discussing gold, silver and
global chaos! To listen click here or on the image below.
We’ve heard from former NY Fed president Bill Dudley this year after he drank his truth serum again after leaving the Fed. Now former Governor Kevin Warsh is doing a few shots of the same in today’s WSJ and I’m a fan. “The Fed might be right. The surge in prices and wages might be transitory. The widespread anecdotes of worker shortages and significant wage increases might not constitute a sustainable trend. Inflation expectations might be stable. Count me skeptical of the Fed’s convictions. The risks the Fed is taking with its winsome forecast are significant, and the consequences of policy error are severe…No other major central bank has adopted anything like the Fed’s new framework…The Fed says it’s still too early to slow its purchases of Treasurys and agency backed housing debt. If the Fed doesn’t begin action imminently, it may be too late.”
He even compared the current state of group think at the Fed to the behavior of the Soviet Union, not from a Gosplan standpoint (which is clearly applicable) but where “Maintaining a veneer of infallibility was more important to Moscow than accommodating changing circumstances. Dissent was strongly discouraged.”
What to do now?
“Talking about tapering is a sideshow, however well publicized. What matters most now is what the Fed does, not what it says. The Fed should change its policy regime. It should stop buying mortgage securities immediately. Soon after, it should slow its purchases of Treasury debt. It should not tolerate Fed financed fiscal expansion. It should unlock the handcuffs imposed by its novel doctrine and render an informed and humble judgment on the state of the economy and the attendant risks to the outlook.”
Monetizing Exploding US Debts
Again, QE’s direct impact is only in monetizing the exploding US debts and its psychological help to asset prices. There is no economic read thru and benefit. The Japanese and Europeans can also attest to that.
The May NFIB small business optimism index was little changed at 99.6 vs 99.8 in April. I listed the labor market components yesterday where ‘labor quality’ was the top business concern and here are the other relevant ones. I’ll start with inflation as those planning Higher Selling Prices rose another 4 pts to 40%, the most since April 1981.
INFLATION: Higher Selling Prices Hits Highest Level Since 1981!
It was 25% in February and 17% in January. Much of this right now is offsetting higher prices of products sourced, higher transportation costs, and higher commodity prices. With respect to the tight labor market and what that will mean? “Owners are offering higher wages to try to remedy the labor shortage problem. Ultimately, higher labor costs are being passed on to customers in higher selling prices.” Yes, hopefully the supply of workers will increase in July and again in September when enhanced unemployment benefits expire and we’ll see what that does to labor costs, but the bar is being raised and I just don’t see how a 40 yr high in the desire to raise prices will be so transitory.
Stagflation
The stagflationary situation we are seeing where higher costs and labor shortages are slowing growth was reflected in the number of those that Expect a Better Economy. It fell a sharp 11 pts to -26%, the weakest print since January 2013. So yes, well below where it was a year ago.
Those Expecting A Better Ecomomy Fell To Lowest Since 2013!
Bottom Line
Bottom line, small business optimism peaked at 108.8 in August 2018 just as the tariff battle with China ramped up. It was 104.5 in February 2020. The NFIB said that notwithstanding what will be another good quarter in Q2 in part due to massive government spending, “There is much uncertainty, about Covid, about economy policy (taxes, regulations, etc…) and politics, globally and domestically.”
I’ve said before but will again that Taiwan and its tech industry is now a crucial link in the global supply chain. They said exports rose 38.6% y/o/y in May, above the estimate of 30.5% and imports were higher by 41% vs the forecast of 30.5%. The world has a voracious appetite for its chips in particular.
***To listen to one of the great veterans in the business discuss gold, silver, how to invest in the coming inflation, and much more CLICK HERE OR ON THE IMAGE BELOW.
***To hear Alasdair Macleod discuss the impact of the coming Basel III regulations on bullion banks and what the banks are up to right now CLICK HERE OR ON THE IMAGE BELOW.
Also just released: A Number Of Things Now Coming Together That Will Push Gold Prices Even Higher CLICK HERE.
Also just released: WARNING: Shortages To Continue Into 2023, Plus An Email From A KWN Reader CLICK HERE.
Also just released: SPROTT: Strong Tailwinds Are Supporting The Gold Bull Market CLICK HERE.
Also just released: Ted Oakley – To Invest In The Coming Inflation You Have To Make Dramatic Shifts CLICK HERE.
Also just released: Bullion Banks Gamble, Getting Even More Short Gold CLICK HERE.
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