With gasoline prices now close to $5 per gallon in some places, it’s clear that our officials in Washington continue to be wrong about inflation…
But as much as I would love to, I can’t blame the politicians for this one just yet.
Because the people that should know, namely the economists at the Fed and in Washington, have been assuring us all it’s “transitory,” and now “transitory” is evolving into “robust inflation until at least mid-2022,” as Janet Yellen recently stated.
Lately, I’ve been noticing this type of backpedaling about how long prices will continue to run away from the average American.
In May, Christopher Waller (a member of the Federal Reserve Board of Governors), stated, “Despite the unexpectedly high CPI inflation report, the factors putting upward pressure on inflation are temporary.”
Let’s compare that to what he said just a few days ago, “The next few months for me are critical, we would have to be much more aggressive in our policy stance in 2022 than I was expecting.”
I appreciate his honesty, but it feels like the goalposts keep moving. They’re blindly looking at data that only tells them a fraction of the story – if not misinterpreting it outright.
Washington’s most recent attempt at fixing inflation issues was to end extended unemployment insurance to try and get people to go back to work…
But rather than focusing on their own perpetual money printing and offshoring of American supply chains, they suggested that unemployment benefits can serve as an incentive for people to remain at home. In turn, this contributed to the supply chain bottlenecks that have forced prices higher.
So, what’s been the outcome?
Well, the last two jobs reports showed a total of 429,000 new jobs created – analysts were expecting 1,232,000 – and people are quitting now more than ever before… even without the additional unemployment checks.
That’s because they don’t understand that the inflation problem goes beyond a need for more workers…
For example, the semiconductor chip shortage has caused runaway prices in things like cars and appliances.
China understands this and has been advancing its territorial claim on Taiwan – a global hub for semiconductor production.
For the U.S. though, our supply chains are far away.
Which means soon it’ll be time to blame the politicians, because the policies on the table now don’t do anything to solve the bigger issue.
But here’s the truly sad thing…
During the summer, there was a bipartisan push to bring home semiconductor production to the tune of $52 billion.
Finally, Washington got it right – Republicans and Democrats all came together… right?
Wrong.
Unfortunately, with all the infighting within the Democratic party to push through the current spending bill, that measly $52 billion to get our supply chain back home may have gone by the wayside…
In other words, Washington got it wrong once again.
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Well, at least they’re starting to start to think about it, as our Fed Chair likes to say when talking about raising rates… but they’re all going to have to think about it a little faster…
Because as it’s shaping up, the only way to bring down inflation is to either prematurely raise rates or bring production back home.
Keep in mind, not everyone wishes the U.S. well… supply chains can be weaponized.
I say all this because it’s becoming clear to me that the Fed and Washington alike are headed for a big policy mistake, and investors need to take control of their own destiny by getting in front of what could be a prolonged inflationary era.
And our pounding the table on commodities, like gold, will only look obvious in hindsight…
For instance, our subscribers were able to bring home a recent 100% winner on Jeff Clark’s recommendation on the VanEck Gold Miners ETF (GDX) – a direct play on the rising tide of inflation. And I believe gold will only rise further.
In fact, even though gold’s been through a rough patch this year, mostly due to a strong dollar, I’m even more convinced that it will hit $2,400 within 18 months.
Besides gold, we here at Market Minute recommended buying the 200-day moving average (MA) for copper back in late August, stating, “These technical setups are usually good for about a 5-10% bounce in the near term.”
Currently, copper is trading 7.5% higher as inventories are at the lowest levels since the early 1970s. Even platinum is up over 5%.
My point is that (for whatever reason) copper, platinum, and gold all found themselves at temporary lows.
With low supply, high demand, and a Fed with its head in the sand – any dip in prices is a buying opportunity.
After all, the more our cartoonish Fed characters backpedal… the more our politicians miss the point that inflation will hurt the poorest among us.
We need to find a way to get in front of inflation…
Because the trade of the year – as we called it back in February – may become the trade of the decade.
Regards,
Eric Shamilov
Contributing Editor, Market Minute
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