The old age home has an intertemporal preference for fake wealth now, over economy in the future. The surprise will be on them, because asset reflation has been confused for economic reflation. Remember the last cycle when the Fed raised rates 17 times in a row, obliterating anyone who borrowed their cheap money? This is that all over again. Since the casino class are not the ones with their balls in a vise, they don't see it coming:
Ironically, the riskiest stocks at this point in the cycle are the high beta financial advisory firms - the same ones assuring their clients that risks are low right now...
Which will make this a rich man's panic
"Great news"
I just read this questionable essay on ZeroHedge:
ZH: What Few Expect: Inflation
Coming, no less, one day after we learn that speculative Treasury shorts are at record highs. Stop me any time...
"Few seem to ponder the possibility that this surplus of everything might be temporary, a brief run of extraordinary luck rather than a permanent abundance. Few seem to ponder what global shortages in key commodities might do to prices."
The first non-recovery in U.S. history amid unprecedented global poverty, that's just extraordinary luck.
Of course, a few of us have seen this movie before, circa 2011. Transports were leading amid fake reflation, just as the Fed started to reduce its balance sheet. Fast forward to now with bond yields much lower and Transports much higher, it's time to try again from higher altitude, at the end of the cycle:
"What if I don't believe in reality, does it still apply to me?"
Don't try this at home again
Getting back to the above article, CPI can only be looked at in the context of year over year change. We've never seen this before, where the CPI is weaker at the end of the cycle than at the beginning.
The belief stated in the above article is that the Fed is creating deflation using low interest rates (leave aside the fact that rates have been rising for two years now). And shockingly the clueless Fed believes the same thing - that raising interest rates is reflationary:
“Despite weakening inflation...we should be wary of moving too gradually"
Unfortunately for that asinine theory, this below, is why the economy is weak, because the economy has been outsourced, and contrary to popular belief, raising interest rates is not going to help:
"There is not yet “empirical support” for the theory that global trade, worldwide supply chains, and other forces are holding down U.S. prices"
"We need a few more decades of proof"
U.S. capacity utilization with CPI:
Which completely "explains" why the Fed has embarked upon a reflationary campaign, and is wary of moving too gradually:
To be sure, if 35+ years of Supply-Side trickle down Ponzinomics magically gets reversed and the rentier-class begins caring about the middle class, then true inflation could happen. For example, if mortgages and student loans start getting monetized by the Fed in a debt jubilee.
However, while that's not happening, fake reflation will be the order of the day. Meaning tax cut fantasy will be competing with Fed reality.
And when the Treasury short force unwinds, forcing carry trade unwind and igniting the record short volatility trade, then risks assets will be the next thing to deflate:
