The Markets: The Next Big Problem
This article is published in collaboration with Scutify, where you can find real-time markets and stock commentary from Robert Marcin, Cody Willard and others. Download the Scutify iOS App, the Scutify Android App or visit Scutify.com.
Fed chair Janet Yellen has said that the Fed has two missions: employment and inflation. The latter is not the usual inflation mission -- namely to keep it down -- but instead to push it up.
In her testimonies before two Congressional committees there were some revealing statements. She implied that the Fed would not start shrinking its balance sheet this year. That means the Fed would not start selling its 4.5 TRILLION portfolio of Treasury debt.
She said that the Fed's focus was on raising interest rates to keep the economy in balance, and not on reducing the Fed's holdings of bonds.
We consider this a very important statement. That's basically what the new Fed Chair G. William Miller said in 1978 when he was appointed. With that statement, we gave the inflation warning. We predicted that gold and silver would soar and that general stocks would become inflation hedges, something that was "ludicrous" in the words of one Wall Street analyst.
Our thinking was that companies could raise prices, consumers would increase buying to beat price increases, and that would exacerbate inflation, making stocks and precious metals inflation hedges.
We were right. Wall Street was wrong.
This article was written by Dohmen Capital for on .
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