Miners vs Tech Stocks, Plus A Look At The Surging Inflation Story

Here is a look at miners vs tech stocks and the surging inflation story.

Miners vs Tech Stocks
September 14 (King World News) – Otavio Costa:  Miners have never been this cheap relative to tech on a free cash flow yield basis.

Yet there is no AI revolution without metals…

Listen to the greatest Egon von Greyerz audio interview ever
by CLICKING HERE OR ON THE IMAGE BELOW.

Inflation Story
Peter Boockvar:  For the sake of the economy, the stock market, the earnings picture along with profit margins, the existential question is whether ‘It’s time for AI improvement pacing’ is more in the functionality and feature rollout or will it mean a slowdown in the overall level of CapEx spend. The stock market this morning is of course hedging for the latter but of course it remains to be seen. My bar of expectations with respect to GenAI CapEx is what is currently estimated on the Street broadly, $800 billion for this year and $1.2 trillion next year.

Ahead of the expected rate increase on Wednesday from the Federal Reserve, I want to highlight how nuanced the inflation story is and the rate response to it. Some think simplistically that ‘we still have inflation above 2% after all these years, the Fed should hike.’ If it were only that easy. First, we know we have major supply chain problems and supply chain driven inflation that the Fed will have difficulty addressing directly. Then, it’s how can they influence the demand side. Well, a main driver of demand side inflation has been the robust pace of upper income consumer spending.

What will a rate increase do? It will put even more money in their pockets as interest income would rise for those holding US Treasuries. Easy back of the envelope puts $700 billion into the pockets of US domestic holders of US Treasuries (about $1 trillion of US federal gov’t interest expense and where domestic holders own about 70% of) annualized currently in interest expense and goes up by about $56 billion for each 25 bps rate increase (on $32 trillion of marketable securities, 25 bps equals $80 billion of which domestic holders own 70%).

What can negatively impact the demand side of upper income consumer spending that can help to cool inflation on the flipside? A decline in the stock market driven by higher interest rates, to speak honestly, that would impact the wealth effect and thus the economy but that is not something the Fed, nor anyone wants.

I also want to state again my belief that a complete inflation analysis MUST include both producer prices along with consumer prices. Unfortunately this was made crystal clear to me again over the weekend when I saw this message below on the window of an ice cream place in the town I live in.

So, I’ll say again, an environment where CPI is at 2% (the Fed’s ultimate goal) when PPI is at 4% (for sake of this argument), is not and should not be considered ‘price stability.’

$200-$300 Silver
To listen to why Nomi Prins, who has been so accurate with her gold and silver price predictions, believes the price of silver will hit $200-$300 in the next 12-24 months CLICK HERE OR ON THE IMAGE BELOW.

Gold, Silver, Oil, Bonds, Stocks, Currencies
To listen to Alasdair Macleod discuss gold, silver, oil, bonds, stocks, currencies and more CLICK HERE OR ON THE IMAGE BELOW.

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Gold Surged Last Time This Happened CLICK HERE.
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