Reflation Rebuttal?

Reflation Rebuttal

fund managers rank tail risks chart

Notice a trend here; the herd always needs something to fret about. The media understands this, so they churn out bombastic stories. If there was no demand for this rubbish, the press would stop dishing it. Now that the COVID hysteria is tapering down, the masses need something new to focus on; the latest issue at hand is reflation. We all know that real inflation has been an issue for decades. The price of everything that really matters (houses, education, food, rents, health insurance, medical, etc.) has been trending upwards. However, the basket of goods the Fed uses to determine inflation has been trending downwards. And in the end, that is all that matters, for they will use this basket to determine future policies. The Fed is the Fox that control the hen house, and it decides when it’s time to cull the broad/flock of chickens. The Fed is far more potent than most give them credit for. Their only function is to fleece the masses via boom-and-bust cycles, and the best/worst part is that they control these cycles to a T. We expect the reflation argument to die a horrid death.

One could argue that AI will create massive destruction in the above sectors; destruction in terms of significantly lower prices as the human element is replaced with the machine element. This will improve efficiency 100fold and eventually result in prices dropping as much as 90% from their peaks. The bottom line, the reflation argument is a non-event when one takes the long-term outlook. Even if rates had to surge to the 3.5% ranges, it would be a short-lived event, and the high-interest rates in the ’80s, current rates are godsent.

We have nervous nellies/spoilt brats with nothing better else to do then create projections of the next disaster type event to add some colour to their otherwise miserable and or boring lives.

prrof of no inflation chart

This long-term chart puts an end to the pathetic inflation argument and once again proves that the masses are wired to lose when it comes to investing. Remember this, misery loves company, and stupidity demands it.

Looking at the monthly chart of TLT, the current pullback is entirely normal, and something like this took place from Nov 2016 to early 2019. Despite all the proclamations of doom, interest rates topped out, and bonds rallied. TLT is sitting on support now, but given the highly volatile nature of this market, it is possible that TLT could (focus on the word “could”) trade down to the 123 to 126 ranges with a possible overshoot to 120.

If this comes to pass, it would be a very short-lived event and probably make for a long-term screaming buy. From a very long-term perspective, it is possible that TLT could rally all the way to 210 ranges with a possible overshoot to 240.00

Other Articles of Interest

Russia Update on Ruble Neon Gas and more

Russian Update: Ruble, Neon Gas and more

Russian Update 1: World's Top Performing Currency? The Russian Ruble, now the strongest currency in the World, has been trading below 60 for some time. If it cracks 50 this ...
Read More
Geopolitical Events

Interesting Geopolitical Events

Currency markets and Geopolitical events (usually unpleasant in nature) are intertwined. Some would prefer the more colourful term of currency wars leading to unpleasant geopolitical events and or developments. However, ...
Read More
Market Rally

Market Rally: Will the Market Rally This Summer

There is too much money out there for it to go anywhere else but the markets (and no matter what the experts state, the worst stock crash in history proved ...
Read More
stock market rally

Summer Stock market Rally?

We expected the markets to correct last year, but it was projected/expected to occur in two phases. The sanctions against Russia and not the war have exacerbated the situation. Hence, ...
Read More
Intelligent Investing Strategies

Intelligent Investing Strategies

To win, you have to have a stake in the market; it does not matter whether you are right or wrong if you have no stake. You will walk away ...
Read More
trading zone

The stock market is stuck in a trading zone

The markets will recover as they have always done in the past. Those who panicked and dumped their shares will live through the same regret they and their ancestors lived ...
Read More
Stock Market Trading range

Stock Market Trading range: what’s next?

Until the short term trend reverses course, the markets will be stuck in a trading range. There is a solid zone of support for the Dow, which falls in the ...
Read More
trading volatility

Trading volatility: A whole New Stock Market Game

Trading volatility will keep rising as we are in the battle of the trenches phase. This means the situation will appear horrendous at times (as is the case now). This ...
Read More
stock market crash 2022

Stock Market Crash 2022

In addition to the many reasons we have provided in previous updates, two extra factors could lead to a more robust correction in the 4th quarter. Stock market crash 2022: ...
Read More
Trading Journal

Trading Journal; The invaluable tool for traders

We will start by listing a series of quotes from recent market updates. If you have not kept a trading journal, then while you read these excerpts, jot down what ...
Read More
History of financial markets

History of financial markets: The Masses are Doomed

If one studies the history of financial markets, one can clearly state that the masses learn nothing other than repeating the same mistake more efficiently. Trying to save them or ...
Read More
Trending markets

Trending markets; Only The Trend is your friend

Trending markets currently favour value stocks and growth stocks that took a beating in 2021. Certain commodities like Palladium and Gold should also hold up well. The markets are trending ...
Read More