Friday, March 4, 2016

TIME TO PLAY METALS? here's what you need to know

Polemic's Pains - metals, the path to inflation.

He seems to feel iron, nickel and zinc have interesting bottomy charts right now, and heck gold has managed to avoid a breakdown and zoomed up.

This reminds me of a post a few months ago, maybe by New Deal Demoncrat, where it was noted that the second half of a secular bull market sees prices of base materials go up, as a result of a upward demand trend in developed markets taking up production slack (as opposed to emerging markets demand, which drove the last commodity cycle; EMs typically suffer financial crises at this point in the EM/DM equity cycle).

It also should mean silver finally begins to not suck.

It's also an interesting possible indicator of a local top in the USD.

All this is also interesting from a US Fed policy standpoint: a local top in the USD means Lael Brainerd will see the deflationary effect of a stronger USD receding, thus she'll be in favour of tightening.

Inflation in the metals will also pass through into the broader US economy, which will also be in tightening's favour.

Ultimately that ends in a Fed-induced recession when they tighten too far, but that's a few years off. And in any case you shouldn't expect a 50% collapse in the S&P when that happens, because a Fed-induced recession is nothing like a bank failure crisis.

Anyway, suddenly the Fed looks right and Wall Street Whitey looks stupid again.

Carry on....


  1. Well actually copper was the clearest base of that set I put up having lagged and about to break the reverse head and shoulders.

    Thanks for the ref!

    1. I appreciate your use of the poetry of Ogden Nash.

      But also you seem to have nailed the decorrelation.