Hey Three Income Hunters,
So we have our first global bank forecast of hyperinflation.
And only about six months after I started sounding the alarm.
It has been borderline crazy how little a concern inflation has seemed to cause at this point. Federal Reserve officials certainly have done their part to downplay it.
And I suppose when you consider that it hasn’t been an issue in 50 years, there aren’t many people around that actually lived through it.
Well, I did — and Americans better start waking up.
Bank of America Chief Investment Strategist Michael Hartnett had this to say this week after the personal consumption expenditures, a favorite inflation signal of the Fed, printed a 30-year high:
“(It’s) fascinating so many deem inflation as transitory when stimulus, economic growth, asset/commodity/housing inflation (are) deemed permanent."
Here’s something to burn into your brain …
The only true hedges against hyperinflation are silver and gold.
The signpost we are waiting on now is velocity — how many times a single dollar is spent — which is the measure of spending activity …
As soon as consumers realize the Fed is orchestrating a hyperinflationary collapse, a psychological shift driven by a loss of confidence in the Fed will force dollar holders to run out and buy real assets — sending velocity into overdrive.
The Clearest Example of Gold Fully Holding a Central Bank Accountable for Its Errors
We’ve seen this before, folks.
The gold line in the graph below represents, well, gold.
Notice how late in the rise of money supply (green dashed line) it was prior to gold spiking higher.
This was driven by the loss of faith in government — which is inevitable once the central bank commits to inflating their way out of debt.
That important psychological shift moves tons of capital into gold.
Silver With Another Bullish Pattern
This was the craziest week of trading in Silver… It followed the same pattern all week…
- Strong overnight
- Rally in the morning
- Sell-off in the afternoon…
The end result? As you can see below, over the last three days, silver recorded three consecutive inverted hammer candlestick patterns, all above the 200-day moving average and with a bullish price/RSI divergence.
Plus historic seasonal patterns for silver turn very positive in July, so keep an eye on that, as well.
Bring It Home
Monday is the day I have been waiting for, with new regulations on tap for gold markets.
After Monday I don’t think the market will trade off the Fed’s tough talk anymore.
I think next week’s forces a shift in psychology to:
- Will China sell US treasuries?
- Will the US start buying precious metals and get in the game?
- How low will the dollar go?
I don’t think this next shift will hurt equities, though.The two sectors I think may suffer as rates rise are banks and mega-growth stocks.
Until then …
Live and Trade With Passion My Friends,