THIS IS DEFLATION

I’ve been saying this for a long, long time. Ever since 2008, we’ve been in a deflationary vortex. Many people out there have been misinformed about inflation and how QE works. None of that Fed money was making its way into the economy, aside from the ‘wealth affect.’ I think it’s pretty clear, as well as evident, that without the Fed to buttress asset prices, the world is, inexorably, inside of the deflationary vortex.

Inside of this vortex, prices go lower. Commodities crumble like coffee cake and the dollar/bonds rise. The yen carry trade falls to pieces, forcing Yen higher.

Any nation who is dependent on commodities will see their currency ripped to shreds. It’s important that you know how it works, otherwise you’ll lose money.

And, finally, any stock that pays a dividend higher than 3%, particularly in industries whose main input cost is fossil fuels (utilities), will see their share price rise.

Stocks are the unfortunate victim in all of this. Simply put, there isn’t any appetite for risk and they must trade lower.

However, rest assured, as this process plays out, the central bankers will come to their senses and understand that QE must be forever. I cannot tell you when they will issue a statement, but they will. If they don’t, the market and everything that goes with it, will poleax itself into the oblivion.

Bullish: TLT, XLU, FXY, UUP

Bearish: GLD, SMH, FXE, USO