The Inflation Story Isn’t Over Yet

Chairman Pow is doing his damnedest to slay the inflation dragon, with mixed results. [The Rude Awakening] April 13, 2023 [WEBSITE]( | [UNSUBSCRIBE]( The Inflation Story Isn’t Over Yet - March’s month-on-month CPI was up only 0.1%. - The year-on-year number is 5.0%, much better than in previous months. - For the year, food prices are up, and energy prices are down. [Over 62 And Collect Social Security? Take Action Immediately!]( [James Altucher]( [If you’re over the age of 62 and currently collect Social Security, you need to prepare now](. Because Biden has given our country the worst inflation in decades – and many warn things will only get worse from here. Worse yet, the Social Security check you receive now may not keep pace with inflation… [Which is why, if you don’t act now, you could fall behind in the months ahead](. Is your retirement at immediate risk? [Click here now to get the simple, step-by-step actions to survive inflation](. [Click Here To Learn More]( [Sean Ring] SEAN RING Good morning from another overcast day in Asti! It’s Thursday, so there are only two full days left to go. But before you crack open a bottle of something cheerful, let’s grab a cup of joe and chat about the elephant in the room: inflation. Yesterday’s numbers weren’t terrible by any measure. But what they do indicate to me is that Powell isn’t done yet. There’s a lot more inflation slaying that Chairman Pow has on his schedule. And the market may not like that so much. Overall Let’s first look at the probability of a rate hike the market currently assigns to the May 3, 2023, FOMC meeting: [SJN] Credit: [CME Group]( The market is pricing in a 69.2% chance of a 25 basis point hike for the May 3, 2023 meeting. That seems fair enough, though I think a 25-bp hike is a sure thing. The current Fed Funds futures curve looks like this (from a rate perspective): [SJN] Credit: Sean Ring via [Marketwatch]( This curve shows the market pricing in the terminal rate as 5.00%, will the Fed cutting rates almost immediately after getting there. I just don’t see that happening. I reckon Powell, like his predecessors, will let the terminal rate of 5.00% reign for a while longer. And that’s assuming 5.00% will be the terminal rate. I wouldn’t be surprised to see him hike again in June. Then something really will break. After all, The Bernank let his terminal rate of 5.25% sit from July 2006 to September 2007. [SJN] I bring all this up to show where inflation fits into the Fed’s narrative. Let’s start with food. [America’s #1 Gold Expert Issues Urgent Buy Alert]( [Click here to learn more]( For the first time in a decade, gold is once again red-hot. - Global demand for gold soared 18% in 2022 to its highest level in over a decade. - Central banks bought a record 1,136 tons of gold in 2022, worth around $70 billion. - And M&A has begun to pick up in the gold mining sector at a significant pace. But you must hurry. The price of gold has just climbed past $2,000 an ounce. And America’s #1 gold expert says this is only the beginning of a much larger move. [To see just how high gold could run in the coming years – and how you can prepare today, even if you’ve never bought any gold before – click here now](. [Click Here To Learn More]( Food Let’s have some fun first. Bloomberg ran this headline: [SJN] Credit: [Bloomberg]( This is not a lie. Let me repeat: this is not a lie. And they even put “...After Recent Surge” to make the headline even more truthful. Bloomberg should be lauded for this honesty. Really. But while this is mathematically and even logically true, it doesn’t show the whole picture. Here’s the whole picture: [pub] Suppose most people could buy a dozen eggs for $1.50 during “normal times.” Then those damn sanctions and supply chain issues and bad governance caught up with us. Eggs go from $1.50 to $4.50 (roughly). That means the price of eggs tripled. Then, from that peak, eggs now fall back to $3.50. So, yes, Bloomberg is honest and correct. Egg prices did indeed fall by a great deal. But a more honest and correct headline would read, “Eggs Still 133% More Expensive Than When Scrambled-Brained Biden Assumed The Position.” ($3.50/$1.50) - 1 = 1.33 With all that said, the news is better on the food front. Month-on-month food at home prices were unchanged. That’s good news. Month-on-month food away from home was down 0.3%. That’s good for inflation, but I think this speaks to the demand destruction that Powell is trying to cause. After all, can the average American afford to go out as much as they did before? Still, we’ll take this as positive news for now. Year-on-year food prices remain elevated, up 8.5% since March 2022. Energy This is straight from the [BLS CPI Index Summary]( The energy index fell 3.5 percent in March after decreasing 0.6 percent in February. The gasoline index decreased by 4.6 percent in March, following a 1.0-percent increase in the previous month. (Before seasonal adjustment, gasoline prices rose 1.0 percent in March.) The natural gas index decreased 7.1 percent over the month, following an 8.0 percent decline in February. The index for electricity decreased by 0.7 percent in March, the largest decline in that index since January 2021. The energy index fell 6.4 percent over the past 12 months. The gasoline index decreased 17.4 percent over the last 12 months, while the fuel oil index fell 14.2 percent over the span. In contrast, the index for electricity rose 10.2 percent over the last year, and the index for natural gas increased 5.5 percent over the same period. The month-on-month numbers are good. Energy overall, gasoline, natural gas, and electricity all declined. That’s good news for inflation, but I worry about demand destruction. Interestingly, for the year-on-year numbers, electricity (up 10.2%) and natural gas (up 5.5%) increased quite a bit. This tells me that even if we’re entering into, or already in, a recession, energy is one of the critical sectors to remain invested in. The Fed’s Next Move The Fed will surely hike at their May meeting, a mere twenty days away. The market believes this 25 basis point hike will be Powell’s last in this cycle. I disagree with the market. I think he’ll go again in June. And for the “Sell in May and go away” crowd, it’ll be a shock. If they really have sold in May, they’ll be happy. But I think cheeky longs will be wrong. Then we’ll have our paradigm shift. Powell is serious, and he’s going to pull a Volcker. For those who think Powell’s done a bang-up job, I simply think it’s too early to call the race. Remember, it’s only 13 months after his rate hikes. To this day, we haven’t seen the full effects of those hikes. Wrap Up To summarize, food and energy prices are going the right way: down. But I don’t think this is enough to get Chairman Pow to relinquish the Hiking Hat yet. He’ll surely hike in May… and I think he’ll hike again in June. I hasten to add that almost no one in the market agrees with me, and there’s a high probability that I’m incorrect on this call. Nevertheless, I’ll stick with it until I’m proven wrong in June or something monumental changes my mind before then. With that said, have a wonderful day today! All the best, [Sean Ring] Sean Ring Editor, Rude Awakening P.S I’ll appear on [Rickards Uncensored]( tomorrow with good friends and colleagues Matt Insley and Byron King. We will cover gold, Bitcoin, the coming commodity decade, and the new 40-year mortgage. You want to be there. [Head here to sign up]( for some in vino veritas chatting to pick up a few golden nuggets. [See you tomorrow!]( In Case You Missed It… Will The Almighty Dollar Disappear? [Sean Ring] SEAN RING Happy Hump Day from an overcast Asti! My good friend, colleague, and Head of Customer Experience, Dustin Weisbecker, sent over a chunky mailbag after yesterday’s “[Tuscany, The Uffizi, and the Amazing Blue Paint]( piece. I want to thank Sandy W., Myron H., Jim T., and Gordon F. for their kind words. I’m going to answer some of their questions in this Rude. Let’s get straight into it. The Almighty Dollar and Other Dollars Although we speak of the USD as “The Almighty Dollar,” according to Note 18 of George Macdonald Fraser’s Flashman and the Dragon, the phrase originated in the 19th century with respect to the Chinese dollar. That leads me quite nicely to Jim T.’s question: Jim Rickards and you frequently state alternative asset classes for consideration. Are there other alternate currencies that you recommend? How does one venture into other currencies, not even familiar with how one would do so other than going to an airport currency exchange? How would I open a bank account in another currency in another country? Jim T. (1 of 2) Jim, two ideas come to mind. You can “FX” into another currency using your USD if you have a brokerage account. The big caveat with this is that the currency you change into is not FDIC-insured in the US, nor will it be subject to deposit insurance in the other country. In a word, this method is “risky.” The other way to do it, and it’s far trickier these days, is to fly to the country of the currency you’d like to keep your deposits in. Then head to a local bank and make a deposit. Thanks to FATCA, this is ridiculously onerous for Americans, as the IRS can punish any bank worldwide by not allowing it to transact in USD. It’s a shame because I love Singapore Dollars. You may remember Pam and I met, married, and lived in Singapore for many years. We still have our bank accounts there and use them as cash savings vehicles. The SGD is one of my favorite currencies because Singapore is so small and vulnerable to capital flows that it can never be as prolifigate as, say, the United States with its monetary policy. The SGD isn’t risk-free, and it’s freely traded, but it’s as close to a sure thing as you can get. Unfortunately, the last time one of my friends tried to open a bank account as a foreigner, they asked for an SGD 200,000 (USD 150,000) deposit. This was in 2019. So if you’ve got that kind of spare cash, I’d first call one of the local SG banks (DBS, UOB, or OCBC) to see if they’d take your money. If they will, book a lovely three-day holiday on The Rock to sort it out. But indeed, there are other ways to accomplish this more cheaply in the Western Hemisphere. Country Mice Versus City Mice Kudos! Being 100% Sicilian, if the mafia could trace my lineage all the way back to the old country I’d like to see it. Does the animosity between the northern Italians and the southern Italians still exist over there? Would a Sicilian be welcome in Asti? Jim T. (2 of 2) Jim, I know a bunch of Sicilians up here. Many southern-born Italians come to Italy’s Industrial Triangle (Milan-Turin-Genoa) to work. There’s no animosity that I’ve seen or heard of. Of course, the same snobbery you see between the blue coastal “elites” and the red state red meat eaters in the US exists here. And it’s the same as Northern English blue-collar workers versus Southern English white-collar workers. Or the allegedly “thrifty” Northern Europeans versus the “spendthrift” Southern Europeans. But that animosity is rarely between individuals. Remember, Abe Lincoln imposed the USD on Americans in the 1860s. You can argue the USD is just like the EUR. Structurally flawed, but necessary to bring a polity together. And just like the messy EUR, the USD is getting ripped asunder by having different types of economies (blue US service/industrial versus red US agrarian versus international multi-users). I genuinely think if city people understood harvest cycles, we’d be a lot nicer to each other. By the way, to hedge USD risk, we like gold, silver, bitcoin (no shitcoins!), and farmland if you can outbid Bill Gates. I don’t like diamonds because soon they’ll be too easy to fabricate. And remember, Jim, you’ll always be welcome at the Ring Household in Asti. [Biden’s BIG LIE Could Devastate Millions]( [Click here to learn more]( For far too long Biden and the Dems have been LYING to you… But this time they’ve gone too far! [This despicable “SCAM”]( – perpetrated by the highest levels of government… Is a danger to you and every American citizen. That’s why today… [>>This Is Your Chance to Get Your Revenge!<<]( This is your BEST chance to stick it Biden and the Dems… And possibly making a fortune in the process. [Click here to learn the truth NOW](. [Click Here To Learn More]( Open Market Operations Sean, Interesting ideas today. I have wondered if/when the dollar tide reverses if the US govt would suddenly declare that dollars held outside their borders are not welcome. That is, if you hold dollars outside the US, it would not be considered good to buy goods inside the US. Or only at a discounted rate, kind of like the yuan inside vs outside of China. Gordon F. Thanks, Gordon. I’ve abbreviated your question, but I’ll give you a complete answer. Let’s assume the USG isn’t insane - tough, I know - but they can’t cancel dollars if they want any of its credibility to survive. First, it’s important to note that the CNY (onshore Chinese yuan) and the CNH (offshore Chinese yuan) are entirely different currencies with a 1:1 exchange ratio. From [Wise.com]( [pub] Credit: [Wise.com]( Second, if the USG (via the Fed) wants to manipulate the number of dollars in circulation, they use open market operations. And they do this every single day. If the Fed wants to decrease the dollars in the world, they sell US Treasuries (USTs) and take in dollars. That reduces the supply of dollars (loanable funds) and increases interest rates. If the Fed wants to increase the money supply, they buy USTs and pay with USD. This increases the supply of loanable funds and decreases interest rates. The Fed won’t declare USD outside the US as dollar non grata. Gordon, I’d be far more concerned with the USG ramping up taxes on ex-pats for the privilege of owning that blue passport. To me, that’s a far greater danger because there is no group inside the US representing US citizens outside the US. That’s why it was so easy for an idiotic piece of legislation like FATCA to get passed. That’s also why a second passport is so valuable. That said, I wouldn’t trade my US passport for an Ecuadorian one. But if you have ancestry, marriage, or investments that avail you of a powerful second passport, I’d get on that immediately. Wrap Up Thanks for writing in. It’s great to get mail and answer these crucial questions. Keep thinking, mulling over, and considering what’s happening in the world. Your mind will churn over possible answers and solutions that will work the best for you and your family. Not every solution is suitable for everyone. And that’s why casting a wide net is critical. Have a wonderful day! All the best, [Sean Ring] Sean Ring Editor, Rude Awakening [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2023 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your Rude Awakening e-mail subscription and associated external offers sent from Rude Awakening, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. We welcome comments or suggestions at feedback@rudeawakening.info. This address is for feedback only. For questions about your account or to speak with customer service, [contact us here]( or call (844)-731-0984. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. 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