The Bureau of Labor Statistics’ Consumer Price Index (CPI) was recently released and printed a rise of 7.9% in February compared to last year. This marks the fastest annual jump since 1982 and confirms the persistent inflationary trend that consumers have experienced over the past year.

A quick breakdown of the entire report is in the following graphic:

Further complicating the report is the reality that RENTS in many parts of the country are up 20% year over year as well.

Can you remember a time when USED CARS increased 41% year over year? Traditionally used cars depreciate about -8% per year.

The bottom line is this is not transitory as was announced! We were assured repeatedly by the monetary authorities over the past year that inflationary concerns were overblown.

As long-time readers of this blog know the one metric, we have been focusing on over the last several years is what is called the real rate of return. This is the risk-free rate that you receive when you loan money to the government by purchasing T-Notes and subtract inflation.

Current 10-year T-Notes are yielding 1.98%

Inflation is printing at 7.9%.

So, when you invest in the good faith and credit of the Federal Government you receive a guaranteed loss of about 6% annually.

What a deal!

Now the Fed is saying they are not going to purchase the Governments’ debt any longer and they are going to start raising interest rates.

So, who buys the government’s debt? Are you going to invest in a transaction that guarantees a loss of 6% of your money’s purchasing power annually?

The solution historically has been to debase the currency which is what we are witnessing in real-time.

The important thing to remember is that these metrics are the official calculations according to the monetary authorities, which are incentivized to report the lowest numbers possible. There is a widespread belief that the real inflation, especially what is experienced by the lowest income brackets, is well into double-digits now.

Simply look at the graph of Producer Prices which is also closely monitored by the Fed.

Since the last recession at the start of the economic lockdowns and pandemic, Producer Prices which represent the raw cost of a good are up over 30%.

Consider that better than 50% of all Americans own no investable assets and live paycheck to paycheck they are financially being robbed through currency debasement.

You can’t print trillions of dollars, manipulate interest rates to 0%, and conduct an enormous amount of asset purchases, while simultaneously expecting no consequences. What is truly infuriating is the level of gaslighting that is occurring. At first the financial media told us that inflation would not occur. Then it would be mild and transitory. Now they are trying to tell us that it is good for us and the system.

We are witnessing the traditional STAGFLATIONARY climate. Increasing inflation and decreasing growth. But this time around because of government borrowing we have the national debt over $30 trillion and the government’s debt to GDP ratio has ballooned to 125%! For perspective, that ratio was only 58% in the year 2000. Now we risk a severe recession or depression with interest rates at zero percent.

Here is the breakdown of what the Federal Funds rate was preceding each recession that the U.S. economy has had post World War 2.

This is the long-term chart of Fed Funds. The areas in grey are the recessions that have occurred since World War 2. The following table drives home the real conundrum that the Fed faces. Observe how steeply the Fed Funds rate has declined since 1979 and how it is currently at zero percent.

So, what we are looking at is extraordinary.

Inflation is at a 40 year high. The economy is contracting severely. Interest rates are at or near zero percent and the Fed is telling us they need to raise rates.

Should we slip into a recession, it will be the only recession I’m aware of that has occurred with interest rates at or near zero percent.

Yet, the Fed says they are committed to tapering bond purchases and raising rates. I’ll believe it when I see it, as I think the only option the Fed has that won’t topple the economy into a prolonged recession is to create more stimulus and continue with the currency debasement.

Inflation is destroying real wages and increasing borrowing costs. But its effects are much more insidious.

If you study the table above notice how inflation at 7.9% is greater than the performance of all of the stock indexes over the past year. The only thing that is keeping up with RENT increases are commodities. I would argue that RENT increases more accurately represent the real inflation level.

To put it mildly, I am concerned! Why? I would challenge you to try and find solid companies with solid financials that are growing more than the 20% rent increases.

The bottom line is that inflation makes everybody feel that they are being cheated.

Simply jump on an earnings call of any company that you invest in, and I can assure you that they are struggling to grow at the same rate that inflation is growing.

Now try and factor in against this backdrop the additional stress and friction on the financial system brought about by the war in Ukraine. Imagine for a minute the Fed trying to clear their balance sheet of their trillions of dollars of U.S. debt while the Chinese decide to dump their $1.1 trillion of U.S. Treasuries. Should that occur, it will clearly create a financial meltdown and dethrone the U.S. dollar as the worlds reserve currency.

Over the past two years the financial gaslighting that has occurred has been remarkable. The spike in used car prices we’re told is because of the chip shortage. Then we are told that housing prices have increased because of migration from the cities. The point is should you choose to ignore the cause and definition of inflation you are subject to huge risks. Inflation is always a monetary phenomenon. When you have too much money chasing too few goods the result is higher prices. When you lock down an economy and pay people to not produce and then print 4.5 trillion dollars there are consequences.

Everybody is looking for safety now. It’s an interesting predicament when the real rate of return is negative 6%! In this environment I would strongly urge you to learn how to trade with artificial intelligence. I have laid out what I think the real financial narrative is. But the key to successful trading and investing is getting on the right side of the right trend at the right time. That is why a.i. is so critically important today.

A few weeks ago, in one of our blog posts we shared the following 10-year chart of GOLD and urged Power Traders to PAY ATTENTION. Gold had formed a 10-year CUP and Handle pattern and was projecting a rise to at least $2400. As I write these words GOLD looks like it is in the process of breaking out of that pattern. I share this idea only because today more than ever you need a tool that will help you differentiate opinion from fact. That tool is artificial intelligence.

What’s Your Best Chance to Make Money in The Financial Markets Today?

The Answer A.I. offers will surprise you.

Today Artificial Intelligence, Machine Learning and Neural Networks are an absolute necessity in protecting your portfolio.

I have an extraordinarily strong opinion that stocks are going to go lower if the Fed follows through on their announcements. But my “NORTH STAR” will always be the trend highlighted by the artificial intelligence. 

A.I. combined with neural networks are exactly the types of analytical horsepower you need to stay on the right side of the right trend at the right time.

If survival of the fittest makes you uneasy, stay out of this zero-sum game.

Artificial intelligence is so powerful because it learns what doesn’t work, remembers it, and then focuses on other paths to find a solution. This is the Feedback Loop that is responsible for building the fortunes of every successful trader I know.

That should get you excited because it is a game changer!

While reporters, talking heads and analysts want to discuss esoteric economic ideas, my only loyalty as a trader is to the trend! This is how VantagePoint artificial intelligence simplifies and empowers traders daily!

Visit With US and check out the a.i. at our Next Live Training.

PAY ATTENTION!

It’s not magic. It’s machine learning.

Make it count.

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