I am feeling particularly flat today. We have an office with friends and colleagues in Ukraine, the threat of war is increasing by the hour and I fear there may be consequences that spill over to the rest of the world. We have 2 sides building their respective support bases to what could become a lot bigger than the threat of a Russian invasion in Ukraine. Please G-d we can find a peaceful resolution.
On the market front we should keep a close eye on Gold. If Gold is to act as a safe haven from war and inflation then it should start to pick up from these levels. It is trying to get going, lets see if it has still got it, or crypto has messed with its shine.
You can see that the US Gov Bond Yield curve is flattening fast. This spells a slowing down economy.
If you look at inflation expectation (chart below) it is climbing a very steep wall of worry. You don’t need to be a genius to see all the inflation coming through the system. People are not even batting an eyelid when it comes to retailers pushing up prices. It has become accepted. When inflation expectation becomes part of our daily life it is bad and usually means someone is going to have to do something very unpleasant to stop it from becoming worse.
Once again I point to economic history. Most of us have either forgotten about inflation as it was so long ago or we haven’t experienced it in our lives. I need to write some more on this subject. We should now start expecting economic surprises to the downside. We are not even close to feeling the full effects of inflation in the economy, this is going to play out for years.
Take note of the yield curve it is a very advanced indicator we should all yield to.
I am not sure if I have written much about it in these letters but I have spoken at length with my family and friends how destabilising an increasing disparity between the have’s and have nots can be. This is the stuff that leads to civil unrest and dare I say it – Civil and Global War.
There is no such thing as a free lunch, you can be sure that any freebies we have received over the past few decades in the form of easy money come with an invoice, its just not always the kind of invoice we expect.