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As America’s run of the mill economic revisionist historians start to talk about a “V” shaped economic recovery (no less than 6 months after they allegedly saw a Great Depression), the only “V” I see is that of sequential inflation readings accelerating.

Evidence of as much today came on two fronts:

  1. The chart below, which is the Prices Paid component of the August ISM Manufacturing survey = moon shot to the upside
  2. The US stock market’s intraday test of the YTD high, and subsequent intraday rollover = bearish

At 65 for August versus the 55 reading we saw printed in July, the Prices Paid inflation reading is up over +260% versus the lows we saw in Q4 of last year. You want to know why revisionist economists were whining about depressions? Look at the chart – those Prices Paid were depressed!

The market read-through here is straightforward. Inflation expectations continue to climb. Inflation = higher interest rates than zero. Higher interest rates than zero = bottoming process in the US Dollar.

Who wasn’t long REFLATION at the top and short the US Dollar at the bottom? I have no idea, but I am happy to say that I was out of the way. We’ve called this Reflation’s Rotation. If you want to know where the buck stops going down, ask the guys who called the Burning Buck.


Keith R. McCullough
Chief Executive Officer

The only "V" I see...  - a1