FED Loads of Money!

Economics / Inflation Nov 03, 2023 - 10:31 PM GMT

S&P Measuring Move

Rally from 4333 to 4540 is 207 points, 4333 - 207 points = 4126. Not a forecast rather another piece of the puzzle eyeballing sub 4200, and my long standing objective of 4150 as being probable.

So stock market eyes sub 4200, and eying achieving 4150 with possibility of overshoot to just under 4100 over the next 4 to 6 weeks. Therefore the market is primed to snap back inline with my trend forecast by means of taking a significant tumble over the coming weeks where we can all look for catalysts for but the forecast remains blind to all that has transpired since it was posted 10 months ago!

Loads of Money!

The key fundamental that counts for why the inflation of 2022 into 2023 was so obvious as early as March 2020 is the expansion in the money supply!

Rampant money printing! And I am mot saying this with the benefit of hindsight as I wrote at the time in March 2020 "get ready for very high inflation by investing in assets that are leveraged to inflation such as AI tech stocks and housing".

Yes the government / Fed panicked and have tried to bring INFLATION under control by reducing the money supply which is down about $2 trillion from it's peak. However the problem is that whilst during the reduction phase we will get lower manipulated CPI lie inflation. However as soon as the money supply starts expanding once more then the INFLATION will take off like a rocket again because folks will remember what happened during the inflation of 2021 to 2023, thus the velocity of money has INCREASED! The decades long trend that probably stretches back to the mid 1990's has REVERSED! You will see this when relatively little expansion of the money supply ignites a surge in inflation that will catch the EconoFools by surprise.

Do not be under any illusion! The fall in the rate of inflation due to monetary and economic contraction will be TRANSITORY! And worse for other western nations such as the UK who have very weak money printers vs that of the US.

Therefore nothing has changed, vs I warned 3 years ago that high inflation will run for the whole of this decade where we will see waves of HIGH inflation followed by temporary periods of disinflation as the central banks hit their respective PANIC buttons, all whilst the REAL inflation pain for the MASSES will get worse with each passing year for the fundamental fact that the official inflation indices are FAKE! Real inflation is typically X2 to X3 the official inflation indices!

So the only way to protect ones wealth is by riding the Inflation waves by being exposed to assets that cannot be easily printed such as housing and stocks that don't tend to dilute or those that do that have huge revenue and earnings growth courtesy of AI and INFLATION! Everything that has happened over the past 3 years has acted to reinforce the INFLATION MEGA-TREND and what one should do to protect oneself from it's consequence, where we get BUBBLES such as 2001 that POP into bear markets such as 2022 to capitalise upon, I'm not saying it's going to be easy to do so just as the 2022 bear market was NOT easy to capitalise upon which was apparent by Mid October when this is what it was like to BUY those falling AI tech knifes as I ramped up my exposure to beyond 95% invested.

There will be severe draw downs that WILL BE PAINFUL, that as I voiced in Mid October 'should' prove temporary and hence all one can do is to GET THE JOB DONE! Either that or invest and forget and ride out the draw downs.

The politicians only know how to do one thing well which is to PRINT MONEY! Mark my words it won;'t be long before US M1 money supply surpasses it's 2022 $20.6 trillion peak.

Bond Market Reacts to REAL INFLATION

Fake CPLIE has tumbled in the US and UK but the yields instead of falling have risen, why because real inflation persists! Where even when using official data we see this manifest in the 10 year rate that remains in an uptrend all whilst the econofools focus on the annual rate. Yes the annual rate is heading lower, may even touch 2% by Mid 2024 but the 10 year rate won't fall instead it will keep climbing higher to illustrate the REAL inflation pain that ordinary folk will experience just as I have been warning would transpire for several years is now coming to pass, FAKE smoke and mirrors annual CPLIE vs continuing real inflation pain!

Real inflation is twice CPLIE. and thus yields have risen as the market discounts higher REAL inflation which breeds opportunity for investing in bonds.

The Bond bear market is in it's last innings, failure to break to a new low would mark a higher low, of course I would prefer a lower low so as to allow for greater accumulation. but it would be a sign that the bear is over and thus target a break above the series of highs along $107 to mark the start of a 2 year bond bull run to deliver an estimated 50% return on the bond portfolio..

(Charts courtesy of stockcharts.com)

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S&P

Targeting 4600 Mid Summer 2023 Top followed by correction to below 4150 into October 2023.

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By Nadeem Walayat

http://www.marketoracle.co.uk

Nadeem Walayat has over 30 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

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