On the heels of the Dow tumbling roughly 450 points, investors should expect a lot more volatility and “transitory” inflation was always bullsh*t.
Expect A Lot More Volatility
December 1 (King World News) – Graddhy out of Sweden: The closer we come to the monetary system dying, the more volatile things will get. This means that the volatility will increase constantly during the coming years. Be prepared for this mentally, otherwise it will be a rough ride.
Omicron Market Reaction
Alasdair Macleod: It appears the global association of interest rate setters is using omicron variant as reason to drop transient narrative! Market reaction is intensely Keynesian with regards to gold and silver and bonds. Big mistake!
“Transitory” Inflation Was Always Bullsh*t
Peter Boockvar: Now that Jay Powell has finally thrown in the towel on ‘transitory’ and realizes that he needs some catching up to do in recalibrating monetary policy with the current inflation reality that he so badly missed, the key task at hand is how will he pull it off without causing a market hissy fit. Good luck to him as the challenge is the incestuous relationship between Fed policy and markets we are all aware of and it is why I don’t know how he’ll do it without accident. How do you tighten policy that has been so extreme in order to counter inflation without at the same time tightening financial conditions, aka lower stock prices and tighter credit spreads? Unfortunately, it will be really difficult and choices will eventually have to be made.
The Fed has believed that if they are very communicative with what they will do that somehow that will ease the impact but I’m going to give this analogy again. If Mike Tyson gave me fair warning that he was going to punch me in the face, no matter how prepared I’ll be, I’m still going to hit the floor.
If I were to guess, speeding up the taper by a few months would imply a $20b monthly reduction instead of $15b which would mean an April end rather than a June one…
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Regarding Inflation
The November Eurozone manufacturing PMI was revised slightly lower to 58.4 from the 1st print of 58.6. That compares with 58.3 in October. Markit said “Although demand remains strong, as witnessed by a further solid improvement in new order inflows, supply chains continue to deteriorate at a worrying rate. Shortages of inputs have restricted production growth so far in the 4th quarter to the weakest seen over the past year and a half.” Production was inhibited particularly in Germany, France and Austria with better performances in Italy, Ireland and the Netherlands.
On inflation, “With demand once again outstripping supply, November saw a continuing sellers’ market, pushing prices charged for manufactured goods higher at a rate surpassing anything previously recorded in almost two decades. Higher factory gate prices suggest consumer inflation has further to rise.”
Inflation expectations for the Eurozone is up another 3.3 bps to 1.89%. Sovereign yields are higher while the euro is down a touch.
The UK manufacturing PMI was left little changed at 58.1 vs the initial read of 58.2 but up from 57.8 in October. The wording was similar to what was said for the Eurozone but also partly UK specific, “Manufacturers are facing a challenging backdrop, with rising supply chain disruptions, staff shortages and inflationary pressures stifling growth while ongoing difficulties caused by Brexit and logistical headaches restrict opportunities to expand into overseas markets.”
On inflation, “Firms costs meanwhile continue to surge relentlessly higher, rising at the steepest pace in the three decades of survey history. Stretched supply chains, component shortages and a vast mismatch between demand and supply are all exerting massive upwards pressure on input costs. This is also filtering through to prices charged at the factory gate, which rose at a rate close to October’s record high.”
We’ll see to what extent this intense price pressures ease after the time crunch of the holidays. The Bank of England next meets two weeks from tomorrow and I expect a rate hike.
***ALSO JUST RELEASED: EXPECT A WILD RIDE IN 2022: We’ll See DRAGFLATION Instead Of STAGFLATION – Much Worse Than 1970s Fiasco CLICK HERE.
***ALSO JUST RELEASED: ALERT: This Is Why You Must Own Physical Gold In This Great Inflation Where Money Is Being Destroyed CLICK HERE.
***ALSO JUST RELEASED: Look At These Stunning Charts, Plus Gold And Mining Stocks CLICK HERE.
***ALSO JUST RELEASED: Silver Preparing For Liftoff, Easy Money, More Inflation And Fed Un-Taper? CLICK HERE.
***ALSO JUST RELEASED: Silver Bottoming Formation Suggests Strong Year-End Rally But Look At What Else Is Happening CLICK HERE.
***ALSO JUST RELEASED: Greyerz – The World Is About To Experience Another Major Dose Of Economic, Financial And Social Upheaval CLICK HERE.
***To listen to E.B. Tucker discuss the available physical gold disappearing and why he expects a big turnaround in the gold market CLICK HERE OR ON THE IMAGE BELOW.
***To listen to Alasdair Macleod discuss the available physical gold disappearing CLICK HERE OR ON THE IMAGE BELOW.
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