The #everythingbubble is in it’s first stage of popping. We expect sharp monetary and fiscal reactions to a slowing economy and eventually an overdose which brings inflation and finally the bursting of the debt bubble in a second stage:
A short thread.
A short thread.
In our @IGWTreport s we have been writing a lot about the #everythingbubble and various pins which may prick them. It seems, as if the #bubble finally found it’s needle last week.
Graph from IGWT Report 2017.
Graph from IGWT Report 2017.
Last week’s market reaction priced in a highly deflationary scenario, which - all things being equal - seems quite rational as economic growth and velocity of money is plunging.
However, an increasing number of market participants are finally realizing, that any deflationary contraction will be countered by further expansionary experiments.
Coordinated central bank actions are now on the table. Fiscal policy surly will follow.
reuters.com/article/us-chi…
Coordinated central bank actions are now on the table. Fiscal policy surly will follow.
reuters.com/article/us-chi…
The most contrarian bet right now may be a position for #inflation. The Gold/Silver Ratio was close to historic highs on Friday, clearly pricing disinflation/deflation.
#Commodities have been underperforming financial assets for years. If the measures taken in response of the bursting bubble, this dynamic finally could change.
If a stagflationary environment manifests itself as result of the upcoming measures and an increased loss of trust in policy makers, this may be the beginning of a huge rotation out of financial assets into real/inflation sensitive assets.
