The First 3 Signs of Inflation?

The Spotlight

1 minute read

Sep 7, 2020

a man in a suit running from a rolling paper money ball

The option of inflating the public debt away seems to have been put in action, commodities' prices have reached new heights, Warren Buffett has started purchasing gold-related assets…

Although there is no certainty yet that inflation is coming, many warning signs are already clearly visible.

Here are three of them:

FIRST SIGN: On August 27, Jay Powell, Chairman of the US central bank, gave a much-anticipated virtual speech at the annual Jackson Hole monetary policy meeting to talk about the central bank's new inflation target.

Here is star analyst Luke Gromen's summary of the speech:

“There is too much debt in the US & globally. It’s hurting growth.

This can be resolved [in] 1 of 2 ways:

  1. Widespread defaults (including on sovereign debt).
  2. Inflate it away.

Today we are accelerating Option #2.”

SECOND SIGN: Many commodities, along with the precious metals markets, have seen their prices reach new heights.

As you can see in the chart below, the price of lumber 🌳 recently soared to levels never before seen in history.

the chart showing increasing lumber prices per thousand board feet between 2010 and 2020, indicating signs of possible inflation.

This next chart shows how iron ore 🚄, the raw steel material, has increased and now trades at its highest price in six years…

the chart tracking iron ore price per tons that have recently reached its highest level in six years amid signs of possible inflation.

THIRD SIGN: As mentioned in our SPOTLIGHT #28, Warren Buffet, the ultimate "inside investor" himself, has started purchasing gold-producing assets.

As we've said, we can't be sure yet that inflation is coming (yes, this is a Jon Snow reference 😎), but the signs are starting to point this way.

And what is universally known as a hedge against inflation, you say?


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