There are the scary guys claiming deflation is enemy number 1, and others like Bill Gross short the long bond in anticipation of an utter loss of control to the inflationary side. All I will say is that something like this had to happen for things to remain within the continuum by which we have operated for more than a decade now; the decade known here as the age of inflation onDemand.
Invest, trade, sit in cash... such your thumb if you have to, but keep emotion under wraps. It will kill you now because the herd is becoming very emotional. No matter the individual herd member's orientation (stock, commodity, PM bull or bear), topping is a process and each day or week is likely to see challenges to anyone's current view. Get the big picture or be subject to over thinking.
On the big picture, I have altered the monthly long bond 'continuum' to clearly show how the S&P correlated inversely with yields right up until Greenspan's initial panic into the LTCM, Asian Contagion and Y2k festivities. Ben Bernanke - who of course we noted as a dangerous inflator back in 2002 with his famous "Why Deflation Will Not Happen Here" speech - has dutifully put Greenie's ways on steroids.
As the chart shows, the S&P 500 will rise with inflation expectations (and the long bond's yield) because the venerable stock and trade of the USA is now just a gamed asset, like nearly everything else. From US stocks to foreign stocks to commodities of all kinds right on up to gold, it's a game of 'don't fight the desperate inflators (AKA the Fed and its counterparts)'. Gold is different in that it should be bought right, tucked aside and not fretted over. It is just a lump of monetary value; value assigned historically by human kind. I do not call buying at 1569 (NFTRH's most recent registered upside target) as buying right by the way, unless you plan to not look at it for years and through 100's of points of swings both up and down.
Gold stocks? A play... and the play could not be any better than it is shaping up now, with the HGR tanking, the bond yield declining, the economy decelerating and the misperceptions game in full swing. I note pockets of anxiety in my favored gold stocks. This, despite ongoing potential for exactly what we have going on right here. Gold stock fundamentals are improving each week, but timing and the emotion of the herd cannot be controlled. So patience is the name of the game on the way to opportunity.
And if the powerful clerks huddling and trying to cook up new inflation initiatives fail? Last one out turn off the lights, because the games end. Then you have the case for physical gold, guns, food, community building... and an eventual reversal in the bond's yield into hyperinflation, triggered by deflation. Deflation and the inflationary response have been in play for about 12 years +/-.
We may look back one day at all the crooks who made off with all the $Trillions at the expense of the very societies they lived in. This is of course, the fault of the average society member because they did what they were told by Wall Street, CNBC, Bloomberg, MSNBC, FOX, USA Today and the simply massive, too big to fail conventional financial services industry.
Then one day, after a brutal cleansing hopefully we can start anew.
Amazing the things a single chart can conjure up.
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