The Inflation Mega Trend/Commodity Super Cycle is alive and well

10/19/2012 Portland, Oregon – Pop in your mints…

At the bottom of every Mint, we include a handy set of data which we consider so important that we have named the compilation ‘Key Indicators.”  Taken apart, they are just numbers.  They are neither good not bad, they are simply data points.

Taken together, they tell a story.  The story of The Mint’s Key Indicators is one of what Nadeem Walayat, over at the Market Oracle, refers to as the “Inflation Mega-Trend.”  The phenomenon, in other corners, has been referred to as the “Commodity Super Cycle,” and other superlatives.

The driving factor behind the narrative is that the monetary authorities across the globe are in the process of causing inflation, via direct electronic money printing and intervening in debt markets to create the illusion of low borrowing rates, on a scale once thought impossible.

What makes their inflationary actions all the more sinister is that they are continually trumpeted in the media as necessary due to fears of deflation.

The Inflation Mega Trend, if it indeed is intact, has serious implications for investment strategies.  First and foremost, fixed income is dead.  Most governmental and institutional debt instruments are issued today at negative real interest rates, meaning that those purchasing them are agreeing, up front, to a loss in purchasing power of the funds.

The classic way to invest in this environment, has been to purchase precious metals, other hard commodities, real estate, and, as one analyst put it, “plastic silverware, toilet paper, really anything real.”  Equities have also been a good place to invest as long as the trend is intact, preferably those stocks which are components of the indices which are targeted to rise by the monetary authorities, such as the Dow Jones and S&P 500.

If one is following this investment strategy, the question that must be asked, day after day, year after year, is the following:

Is the Inflation Mega Trend still in place?

The Mint’s Key Indicators are presented to respond to this question.  The following is a table which compares each Key Indicator to its level on the same day during the past two years, along with a one word interpretation as to what the annual change in the indicator is telling us:

The Mint's Key Indicators on October 19
The Mint’s Key Indicators on October 19

What is striking about this graphic is that, of the three indicators which do not indicate that inflation is continuing, two are, at this point, directly controlled by the Federal Reserve’s actions, the 10yr US Treasury Yield and the FED Target Rate.

Folks, despite deflationary propaganda to the contrary, the Inflation Mega Trend is alive and well.  Don’t believe the hype and invest accordingly.

Stay tuned and Trust Jesus.

Stay Fresh!

David Mint


Key Indicators for October 19, 2012

Copper Price per Lb: $3.71
Oil Price per Barrel:  $92.03
Corn Price per Bushel:  $7.60
10 Yr US Treasury Bond:  1.83%
Gold Price Per Ounce:  $1,742 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*:  0.25%
Unemployment Rate:  7.8%
Inflation Rate (CPI):  0.6%
Dow Jones Industrial Average:  13,549
M1 Monetary Base:  $2,334,000,000,000
M2 Monetary Base:  $10,199,400,000,000