I’ll grant you that a Trump victory was a shock to many systems, but the response of the investment community has been contrary to everything predicted and expected. Moreover, a large number of editorials by many media outlets are equally out of whack, in their explanation of what’s happening and going to happen from here. Claims of a run to 30,000 for the DJIA, the collapse of precious metals prices, and the resurgence of the dollar as a dominant world reserve currency are simply to ludicrous to find humorous or even slightly entertaining. It’s more like the investment community has suddenly become desperate and is suffering from mass delusions.
Considering the massive infrastructure build out being discussed as part of President-elect Trump’s economic plan, it seems inevitable that we will experience profound stagflation, inflation in a country and world geared for sub-par growth. Further, the infrastructure activities will create a new level of deficit spending and the cost of servicing the national debt will most probably triple. With a potential explosion of inflation pending, it seems impossible for the Fed to continue not raising interest rates, regardless of the lack of necessary GDP growth. Precious metals are paying the price, as the 10-year bond price continues to surge, making the dollar look like a viable financial instrument, but it is all smoke and mirrors.
Unlike the Ivy League blowhards that have occupied the Federal Reserve Board for too many years now, the International Monetary Fund may be a group of people who take their charter seriously. That being the case, they’ll have to consider the plight of all countries, particularly with respect to the economic crapshoot the U.S. has chosen to embark upon. I have to believe that a very short leash will be provided by the IMF and if serious concerns are made to arise, the option of replacement with a “One World” currency seems a far greater possibility, rather than a reshuffle of percentage values among lesser approved currencies in the IMF basket.
There is a lot at play and many participants, but it doesn’t appear investors have a program. Herd-mentality is the driving force and the Fed seems to be the only speaker every investor is tuned to. But like I’ve said previously, it’s too little too late. I believe it inevitable that the Fed will have to start raising rates, as early as December, in advance of the coming inflation tsunami, with or without appropriate economic goal attainment. And anyone who sees today’s low precious metals prices as anything but a gift horse, will be sadly mistaken. Today’s precious metals prices and availability will be the stuff of dreams in the not-at-all-too-distant future.