BOOM as at 14th July 2018

OIL PRICES CRUNCHED AS EXPECTED — PLEASE BE SEATED THIS COULD BE A SHOCK  — INFLATION DATA IS 2 YEARS OLD — VENEZUELA INFLATION 46,305% — US DOLLAR DOMINANCE INTACT

 
OIL PRICES CRUNCHED AS EXPECTED

In last week’s editorial, BOOM suggested that the price of oil would soon have to fall. In particular, BOOM told readers to watch the price of Brent Oil because the global economy would simply struggle to continue growth if the price of Brent continued ever higher at this juncture.

Quote 9th July:  “BOOM is now suspicious that falls in the oil price could start to gain momentum from here. The rise and rise towards $ 100 per barrel that began in early 2016 may be meeting resistance at these current price levels.”
 So what happened?

The price of Brent Crude fell sharply by 6% on Wednesday and ended the week down almost 3%.  West Texas Crude fell 3.78% for the week. This could be the beginning of the expected correction.  We can watch the next few weeks and months with interest to see if this is, indeed, a significant pause in the rising price of oil. If so, that willl be a significant assistance to all global economies because the price of oil is a component of all goods and services.

US DOLLAR DOMINANCE INTACT

This week, BOOM includes an excellent article by Wolf Richter on Foreign Currency Reserves and the continued dominance of the US Dollar as the major preferred currency. The author is especially strong in his analysis of the commonly argued point that the Chinese currency (the Renminbi/Yuan) is somehow poised to rapidly take over that role.  He refutes that argument with facts.

Facts are a rarely used component of analysis these days. The mainstream media have trained the populace (including most economic and financial analysts) to only look for stories (narratives). BOOM calls them fairy stories.  So facts can be hard to assimilate if you are well brain washed into the “wait for the official narrative” mindset.

BOOM advises readers to be wary of all narratives that are supported by insufficient facts.

Quote:  ………… “watching grass grow is breathtakingly exciting compared to watching the RMB (Chinese Yuan currency) gain status as a reserve currency.”

PLEASE BE SEATED THIS COULD BE A SHOCK

INFLATION DATA IS 2 YEARS OLD

How accurate is the CPI inflation data in advanced, sophisticated nations? In the US, the official data is 2 years old. Stay seated.

The CPI market basket in the US  is developed from detailed expenditure information provided by families and individuals on what they actually bought. There is a time lag between the expenditure survey and its use in the CPI. For example, CPI data in 2016 and 2017 was based on data collected from the Consumer Expenditure Surveys for 2013 and 2014.

Over the 2 year period, then, expenditure information came from approximately 24,000 weekly diaries and 48,000 quarterly interviews used to determine the importance, or weight, of the item categories in the CPI index structure.

If you simply don’t believe this, you can check out the facts at US Bureau of Labor Statistics website.

 

INFLATION IN THE CAKE

The New York Fed has released its own measure to track underlying inflation. It is called the Underlying Inflation Gauge. The UIG doesn’t really have the ring of CPI, does it?  But maybe we’ll all get used to it.

The UIG incorporates dozens of variables outside of prices, including the unemployment rate, stock prices, bond yields and purchasing managers’ indexes. The Federal Reserve of New York states “the UIG captures sustained movements in inflation from information contained in a broad set of price, real activity, and financial data.”

The UIG derived from the “full data set” increased from a currently estimated 3.28% in May to 3.33% in June.

If that is an accurate reflection of current inflation inside the US, then it is way beyond the target figure of 2% set by the Federal Reserve in Washington DC.

The Atlanta Federal Reserve produces a “Sticky-Price CPI”.  The sticky-price consumer price index (CPI)—a weighted basket of items that change price relatively slowly—rose 2.7 percent (on an annualized basis) in June, following a 2.2 percent increase in May.

On a year-over-year basis, the series is up 2.6 percent.

As BOOM has been saying since mid-late 2016, “inflation is baked into the cake”. Lower interest rates are probably not coming soon inside the United States.

VENEZUELA INFLATION 46,305%

 
Venezuela’s inflation rate has hit 46,305%.  “It is by far the worst hyperinflation suffered by a Latin American country,” an opposition politician is reported to have said in an interview. Putting this inflation in monetary equivalents, one million Venezuelan Bolivars is now the equivalent of a mere 29 US cents.

The people have abandoned their currency. This is what Hyperinflation is really all about — currency collapse inside a nation. An alternative currency must be available in such a situation to switch to as barter simply cannot and does not work. BOOM suspects that the alternative currency is the US Dollar.

Venezuela has some of the world’s biggest oil reserves. It should have a successful economy. But it obviously hasn’t. We can only watch and wait for total collapse and social unrest resulting in chaos.

Governments often mis-manage their economies usually as they promise Utopian Dreams to their citizens. This is a common theme in history. Politicians of all kinds in all nations simply don’t have the skills to manage economies successfully. They have to rely on their advisers. And when the advisers are deluded, unwise and lacking in knowledge then the worst possible outcome can eventually occur. This has happened many times in history. Venezuela is just the current example.

The worst case on record of Hyperinflation occurred in Hungary in 1946.

From Wikipedia:–
In 1944, the highest denomination note was 1,000 pengő. By the end of 1945, it was 10,000,000 pengő. The highest denomination in mid-1946 was 100,000,000,000,000,000,000 pengő. A special currency, the adópengő – or tax pengő – was created for tax and postal payments. The value of the adópengő was adjusted each day, by radio announcement. On 1 January 1946 one adópengő equaled one pengő. By late July, one adópengő equaled 2,000,000,000,000,000,000,000 or 2×1021 (2 sextillion) pengő. When the pengő was replaced in August 1946 by the forint, the total value of all Hungarian banknotes in circulation amounted to 1/1,000 of one US dollar. This is the most severe known incident of inflation recorded, peaking at 1.3 × 1016 percent per month (prices doubled every 15 hours). The overall impact of that currency collapse: On 18 August 1946, 400,000,000,000,000,000,000,000,000,000 or 4×1029 (four hundred quadrilliard on the long scale used in Hungary; four hundred octillion on short scale) pengő became 1 forint.

    Start and End Date: Aug. 1945 – Jul. 1946

Peak Month and Rate of Inflation: Jul. 1946, 41.9 quadrillion percent.

In economics, things work until they don’t.


Until next week …………  Make your own conclusions, do your own research.

BOOM does not offer investment advice.

CLICK HERE FOR PODCASTS:   OUR BRAVE NEW ECONOMIC WORLD

PRICE PULSE DOMINANCE CHANGES DURING LAST WEEK Ended 14th July 2018:

1. YEN (AGAINST $US) — Changed to NO Arrow Dominant ===================================================================

NOTE — RED ARROWS INDICATE BOOM PRICE PULSE DOMINANCE in the present moment (as indicated by the date of the chart and taking into account the 3 year time frame shown).  The charts are now arranged in PRICE PULSE RED ARROW DOMINANCE.    NOTE: All Charts are WEEKLY Charts over the last 3 YEARS time frame.  Arrows indicate PAST price action (not future).  No predictions are implied from past action.

Comments refer to past PRICE PULSE (Red Arrow DOMINANCE) over the last 3 years, the week ended 14th July 2018.  You can RIGHT CLICK a chart and OPEN in a New Tab.   Make your own conclusions, do your own research. BOOM does not offer investment advice. 

PLEASE NOTE — Many charts are ETF’s from NY Market  (not the base commodity or currency etc). The NY Stock Code is in the Top Left Hand Corner of each chart.
Charts are produced from http://www.stockcharts.com

Return to the BOOM Main Website –  BOOM Finance and Economics at  http://boomfinanceandeconomics.com/


NOTABLE PRICE PULSE CHANGES OVER THE LAST WEEK ENDED 14th July 2018:-

YEN (AGAINST $US) — Changed to NO Arrow Dominant

YEN

========================================================

PRICE PULSE RISING — (RED ARROW UP DOMINANCE)

# US INFLATION PROTECTED BOND PRICES — UP Arrow Dominant
# US UTILITIES STOCKS — UP Arrow Dominant
# AGGREGATE US BOND PRICES (BND) — UP Arrow Dominant
# US LONG BOND PRICE (TLT) — UP Arrow Dominant
# RWR (US Real Estate REIT Fund) — UP Arrow DominanT
# AUSSIE ALL ORDS INDEX — UP Arrow Dominant
# INDIAN STOCKS — UP Arrow Dominant
# VALE STOCK (Iron Ore) — UP Arrow Dominant
# US BIOTECHNOLOGY INDEX — UP Arrow Dominant
# WEST TEXAS OIL PRICE — UP Arrow Dominant
# COMMODITIES INDEX (USCI) — UP Arrow Dominant
# TAIWAN STOCKS — UP Arrow Dominant
# US DOW STOCK INDEX — UP Arrow Dominant
# RUSSELL 2000 INDEX — UP Arrow Dominant
# US TRANSPORT INDEX — UP Arrow Dominant
# US INSIDER SENTIMENT (KNOW) — UP Arrow Dominant
# NASDAQ COMP INDEX — UP Arrow Dominant
# US JUNK BOND PRICES — UP Arrow Dominant
# US 3 MTH T BILL YIELD — UP Arrow Dominant
# LIBOR — UP Arrow Dominant
# FRANCE STOCKS — UP Arrow Dominant

PRICE PULSE FALLING — (RED ARROW DOWN DOMINANCE)

# COPPER PRICE — DOWN Arrow Dominant
# INDUSTRIAL METALS ETF (DBB) — DOWN Arrow Dominant
# YUAN (AGAINST USD) ETF — DOWN Arrow Dominant
# HANG SENG — DOWN Arrow Dominant
# GOLD PRICE in USD —DOWN Arrow Dominant
# SOUTH KOREA STOCKS — DOWN Arrow Dominant
# SINGAPORE STOCKS — DOWN Arrow Dominant
# THAI SETI INDEX — DOWN Arrow Dominant
# AUSSIE DOLLAR AGAINST US DOLLAR — DOWN Arrow Dominant
# CANADIAN DOLLAR AGAINST USD — DOWN Arrow Dominant
# BRAZIL STOCK INDEX — DOWN Arrow Dominant
# ARGENTINA STOCKS — DOWN Arrow Dominant
# BRITISH POUND AGAINST USD — DOWN Arrow Dominant
# NOMURA HOLDINGS — DOWN Arrow Dominant
# EURO (AGAINST $US) — DOWN Arrow Dominant
# SWISS FRANC (AGAINST $US) — DOWN Arrow Dominant
# PLATINUM PRICE — DOWN Arrow Dominant
# SHANGHAI STOCKS — DOWN Arrow Dominant
# US HIGH GRADE CORP BONDS (LQD) — DOWN Arrow Dominant
# PALLADIUM PRICE — DOWN Arrow Dominant
# BITCOIN INDEX $NYXBT — DOWN Arrow Dominant
# SWISS STOCKS — DOWN Arrow Dominant
# DEUTSCHE BANK SHARES — DOWN Arrow Dominant
# FOOD INPUT PRICES (DBA) — DOWN Arrow Dominant
# EURODOLLAR INDEX ($XED) — DOWN Arrow Dominant

PRICE PULSE UNCERTAIN NON-DOMINANCE OF RED ARROW –

# YEN (AGAINST $US) — NO Arrow Dominant
# JAPAN NIKKEI STOCKS — NO Arrow Dominant
# GOLD PRICE (in Aus Dollars) — NO Arrow Dominant
# TED SPREAD — NO Arrow Dominant
# RUSSIAN RTSI STOCK INDEX — NO Arrow Dominant
# TRIM TABS US FLOAT — NO Arrow Dominant
# COAL ETF (KOL) — NO Arrow Dominant
# FVL — VALUE LINE — NO Arrow Dominant
# US KBW BANK INDEX — NO Arrow Dominant
# NATURAL GAS (SPOT PRICE) — NO Arrow Dominant
# GERMAN DAX — NO Arrow Dominant
# DENMARK STOCKS — NO Arrow Dominant
# SILVER PRICE (IN USD) — NO Arrow Dominance
# UK INFLATION LINKED GILTS (INXG.L) — NO Arrow Dominant

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