Here Comes The Deflation
We have been warning about this. While everyone was talking about inflation, the real peril is the whipsaw to deflation. This might be starting.
In this video we discuss how we use forward looking indicators like inventory to forecast what is going to happen. Since we started this in Decemeber, we came across many of the retailed announcing huge spikes in inventory on their last quaterly call (told you so?). For the past few months we highlighted some of the weakness in the commodities markets. We saw copper break down from its highs. Today, the markets are off big with gold, something else we mentioned, breaking out of its channel...to the low side.
All of this is shaping up to be an extreme warning for deflation. Of course, Powell and the Fed is going to keep raising since they are only looking at the Phillip's Curve as their sign of what is taking place.
▶️ 3Speak
the markets are having many problems in recent months, these inventories will surely continue to have problems since consumption has decreased and this leads to having many more in the future
I know an Amazon seller who is sitting with way too much stock and is kind of panicking now as all his profit is tied up in stock. This had to happen as people will only pay so much and the market gets smaller the higher the prices rise.
We had been toying around with the idea of becoming a drop shipper for Amazon stuff but now I’m glad we aren’t at this moment. It’s going to be a painful time for a while!
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Summary:
In this video, Task discusses the topic of deflation and its potential implications. He points out the recent trends in the commodity market that are signaling a potential shift towards deflation. Task highlights the reversal in inventory increases and the Fed's response to perceived inflation. He emphasizes that the current situation could lead to job losses and a significant economic downturn. Task also touches on the decline in gold prices and its implications, contrasting it with high inflation rates. He expresses concerns about the trajectory of the economy and warns of the possibility of a recession or even a depression if certain measures are not adjusted.
Detailed Article:
Task, in this video, delves into the concept of deflation and its emerging presence in the current economic landscape. He begins by noting the signals of a potential shift towards deflation in the commodity market. Mentioning the record, month-over-month increases in inventory over the past months as a forward-looking indicator, he underscores the significance of inventory levels in indicating future trends. Task points out that major retail companies like Home Depot and Walmart have reported significant year-over-year increases in inventory, suggesting weakening demand.
Furthermore, Task scrutinizes the Fed's response to perceived inflation, emphasizing the disconnect between the inflation data the Fed is using and other indicators like the Consumer Price Index (CPI) and Producer Price Index (PPI). He criticizes the Fed's approach of targeting the demand side to counter inflation, arguing that it may lead to detrimental effects on the economy, potentially resulting in job losses and a deep economic slump.
Task also draws attention to the performance of gold prices, which have shown a decline below $1,800. He contrasts this with the current high inflation rates, suggesting that the trajectory of gold prices might be a more accurate representation of the macroeconomic environment than the Fed's economic assessments. Task expresses skepticism about the Fed's stance and warns of the consequences if the current trends persist, hinting at a looming recession or depression if corrective actions are not taken promptly.
In conclusion, Task highlights the potential severity of the economic situation and urges caution in interpreting market signals. He paints a cautious picture of the future economic outlook, emphasizing the importance of monitoring key indicators and adjusting policies accordingly to avoid a more significant economic downturn.