What does all this mean?
If this were the 1970’s, it would surely spell big inflation. And yet stocks are up 50 points today. Equities have been rising for years, even while gold and oil head ever higher and the dollar goes down.
So again, what does it all mean?
Inflation is bad news for stocks because equity capital gains are not indexed for inflation. Incidentally, the 10-year Treasury is at 4.36 percent. So if the commodity signal were right, bonds would be a lot higher’”somewhere around 10-12 percent. Stocks would be crumbling.
Maybe a simple explanation for all this is the global boom. Capitalism is spreading like wildfire to the four corners of the world, and so commodities are rallying and there’s no inflation.
Is that really possible? Or is there a more ominous end to this story?