An Era Of Stagflation: Investor Tactics

When humans are newborn, they rely on mommy and daddy or a caregiver.  Over time, most children grow up and begin to look after themselves. 

Sadly, it appears that some of the kids didn’t make it to financial puberty.  They think Jay Powell is Ben Santa Claus Bernanke.  After drinking mugs of “hopium” flavoured Eggnog, they hang Christmas stockings and wait for Jay to fill them with policy pivots, QE, and rate chops candy like Ben did. 

These financial children are going to learn, the hard way, that what lies ahead isn’t policy pivot candy but instead… decades of pain.

Ray Dalio, Mo El-Erian, and a few other heavyweight analysts understand that stagflation-oriented pain is what lies ahead, and now it appears that Blackrock does too.

The three Blackrock themes for 2023 are “pricing the damage” (stock markets haven’t priced in the big recession ahead), “rethinking bonds” (long-term bonds will be terrible investments), and “living with inflation” (even a severe recession and restrictive Fed policy won’t get inflation back to 2%).

The horrifying US stock market chart.  I’ve suggested that America is at a period like 1965-1966.  The end of a multi-decade sideways chop for the market this time… could be the opposite of what it was in 1982.

America’s ageing population, the obsession with debt and fiat, and the relentless bullying and meddling in faraway lands while leaving 10 million Cubans in its backyard to rot… all this madness has put what could have been a bigger and better version of Switzerland into a suicidal death spiral.

Of course, this is spectacular news for most citizens of China, for all the “goldaholics” in India, and for the gold bugs of the West who are enjoying the action too.

The daily gold chart.  I suggested the $1808 marker would halt the advance, and it has. 

The gold futures chart.  Both charts look fabulous and both have price targets of about $2000, but in one scenario (the first chart) gold moves up from “about here”, and in the other there’s a pullback to the $1700-$1680 zone first.

A look at the weekly chart.  Stochastics is overbought.  It can stay overbought, but with the CPI and Fed announcements dead ahead, investors should be open to a pullback to $1700 or so.

That would be a simple retracement of about 50% of the rally from $1610 to $1808.

The short-term DUST chart. Bear ETFs like DUST can help investors manage price reactions in the miners… with a smile!

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Huge forces of transition are at work.  As an inflationary force, the enormous size of the populations of China and India is under-appreciated by most analysts.

China’s government has two pivots in play, the first one being the Corona lockdowns pivot.  The second pivot is the move away from focusing on growth and towards becoming self-sufficient.  The bottom line:

America blew its chance to become “Switzerland 2.0”, but China appears to be on that path now.

Also, Goldman has called copper “the new oil”.  Clearly, copper stocks are going to be an ideal holding for energy-focused investors… for the long term.

The bullish COPX chart.  A pullback is likely, but if investors have no positions, grub stakes can be bought right now.

The inflation from energy transition is being enhanced by the American government’s bungled war mongering.  Euro governments say, “How high?” when the US government says “Jump”.  Following orders from America, most Euro governments are trying to penalize their own citizens for not moving fast enough with green energy transition… while cutting them off from the Russian oil and gas that’s needed for a smooth transition. 

This is an exercise in madness, and it’s one of many reasons why (in the medium term) the Fed will become even more restrictive in policy, regardless of the severity of the economic downturn that follows.

The important GOAU chart.  In time, mainstream money managers will likely view the entire $18-$11 zone as the huge base pattern that astute gold bugs see it as now.

In the 1970s, there were numerous Fed policy pivots.  All were followed by more inflation and rate hike rivets.  Over the next couple of decades, there will again be numerous Fed pivots, and all will also be followed with fresh waves of inflation and rate hike rivets. 

Gold stocks are set for decades of great performance.  The only question is, are gold investor cowboys and cowgirls ready to mount up and ride?

Special Offer For Gold-Eagle Readers: Please send me an Email to [email protected] and I’ll send you my free “CDNX Leaders” report.  While junior mining stock investors wait for the sector to get its “mojo”, numerous miners are showing solid technical action.  I highlight ten of the great ones, with key buy and sell tactics for investors!

Thanks!    

Cheers

St

Stewart Thomson 

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Stewart Thomson is no longer an investment advisor. The information provided by Stewart and Graceland Updates is for general information purposes only. Before taking any action on any investment, it is imperative that you consult with multiple properly licensed, experienced and qualified investment advisors and get numerous opinions before taking any action. Your minimum risk on any investment in the world is: 100% loss of all your money. You may be taking or preparing to take leveraged positions in investments and not know it, exposing yourself to unlimited risks. This is highly concerning if you are an investor in any derivatives products. There is an approx $700 trillion OTC Derivatives Iceberg with a tiny portion written off officially. The bottom line:  

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