The deflationists had one other dangerous day yesterday.
Deflationists argue that inflation doesn’t exist as a result of the Treasury market isn’t appearing as if inflation is an issue. They at all times fail to say that the Treasury market is ALSO essentially the most manipulated market on the planet. The Fed is at present spending over $1 trillion per 12 months shopping for these bonds, successfully cornering them.
So why was yesterday a nasty day for deflationists?
As a result of it was revealed that condo rents are up nearly 15% 12 months over 12 months since June. Sure, 15%. That is the best annual enhance since 1993.
By the best way, the Bureau of Labor Statistics, which compiles the official inflation knowledge for the U.S. claims “rents or shelter” is actually solely up 2.6% over the identical interval. As Invoice King notes, if CPI precisely mirrored the actual soar in lease inflation, CPI can be a minimum of 4% increased (north of 9%).
So, whereas the bond market continues to exist in a manipulated state of fantasy, actual persons are experiencing actual jumps in costs, which is inflicting actual financial harm.
It will ultimately result in disaster.
Shares initially LOVE inflation however that love ultimately turns to hate when prices rise a lot that they eat into income.
This was the case over the past actual bout of inflation within the Seventies. At the moment shares initially rallied aggressively from mid-1970 to 1974. Then inflation spiraled uncontrolled and the markets crashed some 50%.
This time round will show no totally different. We’re already starting to see indicators of this in particular person shares.
Contemplate Clorox (CLRX). The corporate misplaced over 11% of its market cap yesterday when it revealed that the corporate’s value of merchandise as a proportion of internet gross sales spiked from 53% in 2Q20 to 63% in 2Q21.
The explanation for this spike in prices?
CLRX shares erased months’ value of good points in a single day and are actually again to the place they have been in early 2020, erasing the ENTIRE COVID-19 ramp.
This type of collapse might be spreading increasingly all through the inventory market as inflation roars.
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Phoenix Capital Analysis