4 Nov 2021

It seems like Biden is coming up Trumps. I cannot believe I just said that. With the US markets continuing to make new all time highs I decided to take a look at how much the S&P500 went up under Trumps watch. It went up give or take 70%. Remember there was a lot of jawboning from him with consistent tweets each time the market went up a little. Biden has been silent on the markets and he has been lucky so far with a 23% increase under his watch.

If I haven’t raised alarm bells already I am doing so again with a little more desperation in my voice. I think we are on the verge of a sharp correction. It might be short and sharp or this time it could morph into something really nasty. Please be careful. You can see everything trading on steroids at the moment. Stock options volume is at record highs and is outpacing the underlying stock volume. Remember options give you much more “action”.

You may have heard the Chinese government issued a food stock piling notice earlier in the week creating a bit of a crisis. We know how the herd behaved in Australia from fear of toilet paper shortages with crazy behaviour. I would hate to be facing genuine food shortages and to have the government shout “fire” that is scary. It’s a pity we don’t get to see the uncensored story from the mainland.

As you can see Australian short dated bonds got a shellacking last week. It mystifies me how fast asleep Governor Lowe is. He is still maintaining there is no evidence of wage inflation. We got a top law firm early in the week stating that they are paying 10% salary increases. In todays paper we are reading that data analysts and other sought after positions are attracting 20% increases. With unemployment at 4% and skills shortages left right and centre he will be playing tighten catchup. His New Zealand counterpart is already hiking. Property prices grew 30% from Jan 2021 – end of Sep. Unemployment is below 4% so inflation is running hot.

Worth noting on the counter argument is that Iron Ore traded below $100 a ton down 20% in a week. Is the Chinese economy truly slowing down? I think a weak China is the only chance of inflation being transitory.

Let me end with a chart of Cotton making massive new highs. All I can say is that there is a lot inflation around right here and now.

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