I keep thinking about a time about 9 months ago when the early talk of when people should go back to work was beginning. There were two satirical pieces in the WSJ (from memory): one from the view of "the cat" and one from "the dog"
The dog's piece was beautifully constructed around the notion "why don't you just stay home with me forever? We can take walks and play with the ball!!!"
The cat's piece was simple: "America needs to go back to work now"
Right now markets are at an interesting point where inflation is booming but (as seen in the jobs numbers) growth may not be.
If that happens we get stagflation which would be a real nightmare.
So is America going back to work?
Some interesting stats from Arbor Research showing the Googled search patterns are shifting.
“Video game” and “video game console” are decreasing rapidly while “business casual”, “public transport” and “commuting” are increasing. When that happens it's certainly an indicator folks are picking out ties and cleaning shoes. And planning somewhere to put your dog, kids and grandma.
Search terms for these things are also increasing. Search terms for the things you need to go back to work are also increasing. People may not be back at their desk with a double shot latte purchased between the bus stop and work with their dog walker booked but they’re prepping.
Act accordingly and stay the course.
We've seen rises of some kind of extreme in lumber, semiconductors, industrial commodities, food, housing, even second hand cars!! Inflation is here and it will inevitably mean rates will go up. 2022 is the plan and we're onlt 6 months away from that.
A rate rise is obviously bad news for the "high val on free money" theory so a slight change there megaphones into something very ordinary.
I'm buying quality growth on dips to fill the growth space while maintaining food, inflation, gold, gold miners, 5G, commodities and all the other brilliant themes you know I love.
Speaking of Commodities....
Relativity is a heckuva thing. Here is a little something from DB comparing the S&P500 to the commodities index (Energy: 39%, Agriculture: 41%, Precious Metals: 7%, Base/Industrial Metals: 13%.)
Can't be difficult to argue that something's gotta give on this difference. Doesn't have to be one or the other but it can be both. As my mate Callum Thomus from @topdowncharts wrote:
Stocks = significantly overvalued Commodities = facing prospective supercycle
So if you don't want to decide which quality reopening companies to buy and don't want to decide if Americans are actually going to get back into the workforce and don't want to decide if the US market is overbought then there's this: gold juniors vs inflation expectations.
Gold miners are cashed up and debt free and might just be the greatest value trade of the generation.Yellow line is gold juniors, blue line is inflation.
Because if you're looking for evidence that tech has dropped the ball then look no further than this comparison of the big SSGA tech name ETF XLK and the S&P500. That's a big line to have broken through and a bad sign.
Stay the course. Only own quality when the bloodletting is done and gold and gold miners.
And battery tech
All the best,
James Whelan | Investment Manager
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