So we definitely want to drill down to a weekly chart in order to better investigate what’s really happening “on the local scene” as it were… time-wise. Admittedly this is a big chart, but it provides a beautiful “one stop shopping experience” in that we can see all 4 components of this entire study and how they relate to each other, in one glance:
$CRX:$XPX ratio Weekly: Click here for a live and updating version. |
It appears that what we’re witnessing is that funds are beginning to flow back into the commodities only related stocks after 5 straight quarters of having fled that sector. Or at least seriously threatening to. As the original study showed, the ratio itself revealed that for over a decade liquidity had been more than abundant as witnessed by the fact that between 1999 and May of 2011 the commodities only stocks gained 6400% of the amount the S&P did. In other words over those 12 years the $CRX rose 64 times as much as the S&P did. How remarkable is that? After the recent 12-15 month correction in the ratio, we find that the commodities only related stocks are now only sporting 21 times the gains of the S&P 500. That really is a significant correction.
The bottom line was that although the Fed had been supplying liquidity for decades in order to prop up the bond markets, not to mention supplying a crack addicted, sick leaderless government spearheaded by a totally inept and corrupt congress, a huge percentage of those funds were being channeled through the central banks where it was immediately converted to “fun money” for their own use in the higher risk casinos of the world. Commodities markets are one such casino. And although that casino appeared to have gone out of business when the ratio peaked in the spring of 2011, it seems the high rollers may indeed recently have stepped back up to the tables.
The most obvious recent development seen in the weekly chart above is that all 4 components of this study broke a major weekly trend line during the week of September 3rd. Note the number of “UH OH”s on the chart. In the case of the S&P 500 though, the break is not yet impressive. In fact it looks more like a relatively weak overthrow at this stage. Nonetheless, 10 days later, to borrow a sentence as reported here, “A third round of quantitative easing, a set of asset purchases designed to increase the money supply, has been announced by the Federal Reserve. It said it would keep easing until job growth accelerates, and continue a “highly accommodative” monetary policy “for a considerable time after the economic recovery strengthens.“
“FOR A CONSIDERABLE TIME AFTER THE ECONOMIC RECOVERY STRENGTHENS“.
Friends, that’s a long, long way off.
What Mr. Bernanke is promising the world is that the Fed is going to hold rates down to zero pretty much at any cost under the guise of trying to save the world. The truth is that they’re not “saving” but “enslaving” the world. In order to print they need something to buy. The debate seems to be about whether or not there’s enough junk out there in the world for the Fed to purchase on an unending basis. Personally I don’t think that’s the only important question. I think the real question is “when is the world going to sit up and realize that the real goal is that they want to do just that, purchase every single debt in the world so that they have complete and total ownership of it. Of us. That is their ultimate goal, world domination by enslaving every debtor on the planet for eternity. At that point, who cares if the entire world defaults? Certainly not the central bankers, not as long as they have title to all things saddled with debt, which by the way includes most real estate on the planet and half the governments of the world. And of course, the governments are the people. And after all the smoke has cleared the bankers will be standing there holding title! This is exactly how they’re carrying that objective right before our very eyes. We are currently in the end game no matter which direction the markets finally decide to travel.
Ok, in summary here’s what has happened over the past 20 months. Early in 2011 we got the first signs of a top in the ratio. That signaled a major turning point in the business of “inflation”. From that point forward it was starting to become abundantly clear that deflationary forces had indeed been creeping out of the bottle all over the globe, Over the ensuing 12-15 months it appeared that the great deflationary cycle had begun. I was certain that the great deflationary collapse was upon us. Tonight that no longer seems the case. It truly looks like the deflationary phase might over although another week or two will likely be required before we can be more comfortable that we know what lies in store for perhaps years to come. At minimum, the ratio is currently trying to bottom and is at least ‘threatening’ to rise back above that incredible 13 year old trend line. If successful, the implications are that the world has reverted right back to the old standard,13 year theme of “print, print and print some more. Deflation must be defeated at any cost”. The implications would be very, very inflationary, especially if the banks even ‘dare‘ to issue loans in big numbers. Stock markets don’t tank in such a scenario. At least they haven’t in the past. Which leads to one more horrible possibility.