Where was I? Oh yeah, look out below...

It's been a while: recoveries take longer than most people think.  I finally feel good enough to start writing about my observations with (hopefully) some clarity.

The inflation machine is in second gear worldwide, and maybe shifting into third gear.  National governments, led by the U.S., have flooded financial systems with paper money.  The results can be seen in the rise in commodity prices (gold, silver, food, metals) and the reduction of disposable income because households and businesses must pay more for essential needs.

The next stage involves shortages.  As world supply chains have converted to just-in-time practices to reduce invested capital, inventories (read cushions) have been reduced to minimal levels.  Any disruption in supply due to shortages will result in delivery interruptions.  Lack of essential goods causes the prices of existing goods to rise as users offer more money to secure those goods.

This stage's effect on prices is more severe and price moves are faster and more dramatic.  The prior attitude of complacency and control is replaced with concern, anxiety, and eventually panic.

Having to pay a lot more for essential household goods will eliminate what disposable income most families have.  The general economy shrinks, causing a contraction in the GNP (Gross National Product) and tax receipts, further weakening the U.S.'s ability to service its debt and fund its programs.

The above situation is clearly global.  Our country has the capability to counteract this phenomenon, but while our President and Congress entertain us with their version of a Punch and Judy show don't expect conditions to change.

We'll get into prescriptions, cures, preventions and opportunities in the next missives.

Until next time

The Instigator

P.S. The general markets (D.J.I.A., S&P, Russell 2000) are headed lower for now (based on weekly measurements).  Don't expect a changing direction for the time being.