It has been ages since I've posted here, not from lack of interest. I've had a period of world travel sandwiched between my four-seasonal home migration. The travel has covered the globe excepting Africa south of the Sahara and South America. Due to improving wireless telephony and continued down-sizing of telephones and computers--virtually the same devices now--I was able to keep in touch with markets even on the high seas.
Recently I have been posting some at SiliconInvestor.com on pages called Humble1 and Swing Trading Friends. I've been a member at SI since 1996 and may be grandfathered in for costs, but I don't think it costs anything or not much. It's a convenient place to post short messages and read some interesting people.
My by now ancient interest in inflation and deflation, gold and currencies, has been rounded due with dedication to macro-economics both in "'flation" and economic growth cycles about which more later.
The development of massive intervention by Central Banks over the past ten years, much larger than their previous interventions since 1913 in the US, has aborted, or at least interrupted, the normal historic alternation of 25-30 year cycles of inflation and deflation. It is what it is, and I and millions of other people have had to accept this as a fact and move on.
I have found some good indicators of "flation" to add to commodity prices interest rates. Perquisite Capital's additions are very thorough. I'm going to show a chart from over a year ago which demonstrates the predictive power of one of their indicators:
The 2016 rebound inflation after five years of disinflation off the gold and later crude oil highs is clear, but also the turnover in 2017 indicating that re-inflationary power was subsiding once again.
The other most useful newer indicator I have is the 30 year inflations expectation chart. Perquisites' 10 year has data going back much earlier, but the 30 year Treasury Inflation Protected (TIP) bond interest rate minus the standard 30 Treasury bond yield is very helpful as the longer duration bonds are more leveraged to outcomes. RINF is the measure and has its own ETF which holds the actual bonds. IT is NOT an ETN. I use the RINF.iv or "indicated value" which is calculated live during each day and which is helpful since RINF itself doesn't trade heavily.
This RINF chart is a weekly chart through February 9, 2019. It shows there were three small pro-inflationary moves from January 2016 to September 24, 2018. RINF expected inflation started down in that week nearly coincident with the October top in the stock markets and other asset classes. Note that it had a very small blip since the last week in December, and MAY have turned back down again this past week.
From reading a lot of Gary Shilling, whom I have talked about here before, and others, I have become more convinced that disinflation or outright deflation has been far more common in 19th to 21st century than inflation. I'll go more into this another time, but the progress of efficiency and new inventions over time is one clear reason why. Major wars appear to be the reasons for periodic major inflation periods, such as 1810-15, 1860- 66, 1913-19, 1939-1945, etc.
Thee are quite a few others who share this belief, and I'll discuss them also another time. The bottom line is that not only the US but world disinflationary times have begun their return in the second half of last year, particularly in Europe and China, and will likely continue for some time. Macroeconomic data nearly worldwide has been slowing on a rate of change basis, and although the US has been slower in starting down, it's underway. Even the US Federal Reserve has had some qualms lately about its dis-inflationary push back from the markets.
Since September I have been short US stocks in a conservative manner I'll share with you soon, and long US Treasurys of various durations and more than usual gold assets. I also hold a lot of cash in money market funds and short duration "near cash" funds earning nearly 2-3% in some cases. Each of these four assets has a good place in dis-inflating times and stock bear markets. If I'm correct and I prosper from this portfolio, as I have so far, I'm thinking of putting my assets in the hands of one of several managers I have identified. I'm not getting younger and value my time with my family and our interests.
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