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:
- The chart below, which is the Prices Paid component of the August ISM Manufacturing survey = moon shot to the upside
- 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.
KM