Ed Steer
Mon, 07/12/2021 – 04:10
David Morgan
Mon, 07/12/2021 – 01:48
BloombergOpinion/John Authers/7-8-2021
“Much of the argument for higher imminent inflation, albeit not all of it, rests on the huge amounts of money that are currently burning a hole in the pockets of many Americans. The hope, which seems reasonable, is that they will rush to spend it once they have the chance. But that won’t necessarily happen.”
USAGOLD note 1: One of the major differences between the current pandemic and those of the past is the instantaneous flow of news and opinion via the internet. There has been an equally instantaneous ebb and flow in the market reaction to the pandemic’s economic implications – not all of it is based on rational thinking. Today’s reaction, though it is taken in some circles as the be-all, end-all, might not be the ultimate reaction. In short, in our view, the markets are still sorting things out. We will add that, during just the past week, it has begun to settle in that the economic ramifications of the pandemic (and its aftermath, if there is one) are still up in the air.
USAGOLD note 2: At a time, when no one really knows where this all ends, i.e., inflation, deflation, stagflation, disinflation, hyperinflation, does it not make sense to insulate one’s portfolio with an asset that protects against any of those ultimate scenarios? That said, for the more deeply curious, Authers lays out some interesting historical background at the link above.
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Technical Traders/Chris Vermeulen/7-8-2021
“The data and activity are supporting a hypothesis that speculators, flippers, and homebuyers have chased the rising price levels well past a key equilibrium level suggesting that a reversion process is very likely in the near future. This reversion event may be similar to the 2008-09 housing crisis as banks suddenly realize they’ve issued loans to borrowers at extremely high price levels with very little collateral to support these transactions. Or borrowers suddenly realize they are trapped in an overpriced home while the economy reverts to lower output levels. Either way, this seems like a receipt for some type of crisis in the making.”
USAGOLD note: Real estate values in many rural areas have certainly risen to extremes. Whether or not they have achieved bubble status remains to be seen. We might add, too, that it is not just the pandemic that has driven people from the major cities. Most in this group are moving for very fundamental reasons, and because it is possible given current innovations in technology – not as a speculation in the real estate market. We will add that for a good many in this group the reasons for the mood extend beyond just the pandemic. It is doubtful, in our view, that this group will react to a reduction value, or even a crash, as a terminal event. For the speculators and the financial system, though, it might be a whole different story, as Vermeulen points out.
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