Producer prices for the month of March are in and, unsurprisingly, prices jumped at a massive rate. In the 12 months through March, the prices that producers pay for goods rose 4.2%. That’s the biggest year-on-year rise since September 2011 and comes on the heels of a 2.8% rise in February.
If you think inflation is going to be tame (like the Fed insists it likely will be) — think again.
Inflation is here and it’s about to get so much worse.
I’ve said over and over that you cannot print money without consequences. And, printing money is all the Fed has been doing. Meanwhile, the Biden Administration is simultaneously giving out free money that we, as a nation, do not have.
So, you get it? The Fed prints the money, and the White House doles it out.
This is not a recipe for success… and, eventually, it WILL catch up with the stock market.
When Does the Stock Market Bubble Burst?
The question, of course, is WHEN does the inflationary pressures of irresponsible money printing catch up with the overall stock market.
Right now – there’s no hint that investors are worried AT ALL… and that, in and of itself, is a problem. There’s no yin-yang, no push-pull in the markets… no tension. Yet, why would there be when the Fed has promised to leave rates at record lows through 2024 — while continuing its aggressive bond-purchasing program?
In other words, the Fed is helping to drive up asset prices. Meanwhile, the Biden team is right there alongside the Federal Reserve board… offering hand-outs to nearly everyone and promising plenty more where that came from. ($1.9 trillion plus a proposed $2.3 trillion and a rumored additional $1.5 trillion!)
With interest rates and bond buying measures in place through 2024, investors are being pushed further and further out on the risk curve. Investors that DON’T participate in the run-up lose out… it’s like moral hazard has been thrown completely out the window!
And no one on the left, except former Obama administration member Larry Summers is saying ‘boo.’
Here’s what I will say: This run up in prices has all the earmarks of a BUBBLE.
The Fed and the Administration are on thin-ice walking a very tight rope.
Something, and what we do not yet know, will cause the inflationary pressures to be exposed in a way that will cause a market meltdown.
My recommendation is to continue to watch inflation data closely and keep an eye on the ten-year treasury. If yields start approaching 2.5%, it’s a signal to start reallocating and better diversifying your portfolio so that you’re shielded from the upcoming tsunami.
Yes. Tsunami. If the Fed doesn’t get this right, it will be a total disaster. And right now…my odds are on disaster.
So, bottomline… markets will move higher in coming months. Even over the next year. But, this bubble will burst before 2024.
And then? We rebuild. My advice is to NEVER bet against America. Instead, remain vigilant and well aware of the destruction that irresponsible polices can–and will–cause.