History is Clear About June’s Rate Hikes
We’re 10 days away from the 3rd rate hike announcement of 2022. The markets have 100% priced in that the FED will hike by 0.50%. The economic conditions in the markets are reflecting this, but at the same time, Wall Street is REALLY EAGER to hear any “FED talk” that mentions the success of their policies…
The markets have accepted that the FED’s primary agenda is to balance the incredible demands of U.S. consumers with the supply shortages in global goods and domestic labor, as well as the oil/energy and food price crises brewing around the globe.
In the U.S., the average person spends roughly 10% of their income on food. Americans have gotten used to paying low prices compared to other countries; when it comes to gas at the pump and food on the table, the cost of living in most other parts of the world is higher!
Americans are now sensing what most people deal with all the time, and it’s a weird and new feeling.
To see gas hit such elevated prices and something as basic as food soaring is not the norm. Shortages in products are unheard of in a country that has the largest retail footprint in the world, with huge mega-malls, Walmarts, Costcos, and Targets.
Elsewhere, paying 10% of one’s income on fuel would be cause for celebration.
Coupled with this incredibly shaky geopolitical landscape in Europe, investors are just out of breath and don’t care to take risks.
People need to eat, and America runs on oil, so even if prices SOAR, people can’t change a whole lot about the fact that they must drive and nourish their bodies.
Every dollar that goes into energy and food is a dollar that doesn’t go into the consumer economy, the businesses that vitalize the U.S. engine.
At our current run rate, there has never been a time when a major economic catastrophe has not occurred. Oil is the basic commodity that humans consume, and making it unaffordable or uncomfortable to the average person is not a social issue but an international political one.
It doesn’t get tenser than this!
In a recession, one would expect oil prices to fall from a cliff, but not in stagflation, which is much more of what we’re experiencing.
Just look at what the FED Funds Rate ought to be for the need to hire to stabilize – the FED is clearly still behind the curve:
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In our world, we’re one policy mistake away from seeing social and civil unrest in Africa, Latin America, and parts of Asia and the Middle East. Food prices in some of these regions are reaching 40%-50% of incomes, and that is unacceptable.
Secondly, the froth in the stock market has totally evaporated, and options trading and leveraged debt have really vanished.
In other words, reality has sunk in, and the Winklevoss twins are talking about a crypto winter beginning.
The contrarian in you is screaming that this is a freak year, a “blood in the streets” moment, but the more refined and sophisticated investor in you says that this bloodbath looks “too easy.”
Everyone sees what you see… which is that we’ve had a horrible start to 2022, but instead of believing that stocks are about to make a roar of a comeback, history actually says that a JUNE RATE HIKE, when it’s the 3rd one the central bank does, historically sparks the mother of all COMMODITY RALLIES.
Therefore, I’m not rushing into general stocks yet. In 10 days, I believe we’ll see a major move for precious metals going into the summer months!
Governments Have Amassed ungodly Debt Piles and Have Promised Retirees Unreasonable Amounts of Entitlements, Not In Line with Income Tax Collections. The House of Cards Is Set To Be Worse than 2008! Rising Interest Rates Can Topple The Fiat Monetary Structure, Leaving Investors with Less Than Half of Their Equity Intact!
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