#947 - Is Inflation Still a Worry? With Mish Schneider

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0:57Is inflation still a worry? Hi, everyone. Welcome to the Real Vision Daily Briefing. with me today is Mish Schneider, Chief Strategist at MarketGage.com and a member of the RV Marketplace. If you want to get regular research from Mish and Market Gage, just hit the RV Marketplace tab at the top of your RV homepage, and it'll take you to that site. Hey, Mish, great to have you on with us right out of the gate for this new year. Hi, Maggie and everyone. Happy New Year to you all. So yeah, we've been joking all week. Not a happy new year, though, if you're trying to hope that the US stock market went up, because we've had an interesting first week, a bit of a, seems like a sentiment reset for the markets.

1:40US stocks have been selling off. They continue to do that today, even though it looked like they were going to try to do a battle to hold into positive territory. It didn't seem like it really happened as we settle here. And we've seen, oh, actually, I think we did dip into positive territory. Okay. They fought back, but it was a battle right to the end. But we saw the 10-year yield flirting back again up above 4%. So it seems like everyone's sort of really rethinking that really dovish Fed scenario that dominated at the end of Q4. We had a payroll number today. We had a couple of payroll numbers out this week, private sector and weekly, and the government number today, all of them a bit higher than expected.

2:21So let's just start with it's the 800 pound gorilla, right? How are you thinking about inflation and rates here? It's the question I know you've been getting, we've been talking about all week. What are you thinking about here? Well, I sort of, you know, it's interesting because there is what the evidence is right now, which can certainly support that many areas, the inflation narrative has been broke, right? And people are talking disinflation. And yet there are other areas that really make you wonder that how attached you should get to that first narrative. Because just looking at shipping costs, they were at the 2023 lows, pretty much going into the end of 2023.

3:07And now here we are, we're not even a week into 2024. And they're at highs beyond what 2023 did. So, you know, And we know that there's a reason, obviously, a lot of it has to do with the Red Sea. And now there's still concerns, of course, with Ukraine and Russia kind of going at it again. Supply chain is a disruption. But I think what you really have to do is you have to step back. This is what I'm trying to do. And look at the notion of a super cycle in and of itself. And I've lived through them, or I should say I've lived through one, because I don't think we've really seen another super cycle in inflation since the one we saw.

3:46the 70s. And there are a lot of similarities and there are a lot of differences. But one thing that I know and kind of what we're seeing now evidence, not just about what I mentioned with shipping costs, but certain commodities that have continued to stay very elevated. The big question is still about oil. And then, of course, what we saw in the numbers today with employment, the wage is actually rising a little bit. The price of goods in the ISM have gone up. You know, All of this makes you wonder what is going to be the catalyst to take a super cycle back to what its meaning is, which means like a roller coaster.

4:23So to see a 40 % move up in commodity prices and then a 40 % move down, and even a 40 % move up is not necessarily accurate, depending on what you're talking about. We'll talk about sugar, of course, is not unusual. So right now, I always like to say, if the world stopped right now, we could say, all right, the market got a little ahead of itself with the idea of lower interest rates, which, by the way, I don't think is necessarily the best thing for the market anyway, but that's another story. And a lot of prices have come down. And yes, there are only certain areas that are elevated because of geopolitical situation.

5:00Fed funds rate around 4%. CPI just a little bit above 3%. Normalization. we got to pass. That's if it ended today. But we know the world's not going to end today. In fact, by the way, anecdotally, at New Year's Eve, I can't tell you how many, we have a few people over, people walked in the door and said, so Mish, is the world going to come to an end this year? I'm like, you'll be. That's where, that's where I feel, listen, you got to get off the internet, right? Like if you, you can certainly feel like that and you can't blame them. Right, exactly. So assuming that it's not, I do feel that almost like pickup sticks, any of the pickup sticks that could spike inflation, especially historically, when we know it can happen.

5:45We also know statistically that super cycles don't end and die on the vine. And we also have somewhat of a comparative nature looking at the 70s, where we had the spike in CPI, then the big trough, and then the big spike again. you know, I'd say we should be prepared. That's how I'm looking at it. It's so interesting. So this is why, you know, we love to have these conversations because we can get very keyed into the day to day, the week to week. And it's important to make sure, especially in this environment, we stay nimble. But, you know, sometimes you really have to pull the lens out. So it's interesting to think about it that way.

6:22And that this volatility we're seeing might be a condition of that. So it sounds like it's not your main base case, but it's something that you're watching for closely. So what are you looking at? What would indicate to you, hey, wait a minute, this is part of the super cycle that we're in. This is not, oh, it's all past us now. We don't have to worry. What are some of the things you're gonna be looking at? Because the problem is some of the main inflation indicators, they lag, right? So that's the hard part. What are you looking for? Yeah, and not to mention that CPI in and of itself is questionable.

6:58It's very cooked, but that's a story for another time. But that's a great question, Maggie. So here's four things that I'm going to be looking at. Number one is we already know that gold has been elevated. And I can't tell you how many times I get emails from people that I know that send me stuff from other analysts who are saying gold is toast. It's going down. How could you still be bullish gold? Look at it. It hasn't really gone anywhere. My answer is, yeah, it really hasn't gone anywhere except the fact that it's still only$50 away from its highs, its all-time highs, which means even in the face of the dollar bouncing off of 101, closing back over 102, as you mentioned before, the rate's going back a little bit up over 4%.

7:40The gold is still hanging in there. In fact, it closed green. So that's one indicator is that right now gold's been a flight to safety as like, OK, at least I know there's gold. So we have to look at silver. And silver has also been fluctuating pretty much between like$22 and$25. And it's not outperforming gold. And in an inflationary scenario, typically silver will outperform. So I'm watching for that. It's tangible. And it won't be a lagging indicator. It'll be a lead indicator. So I like that. Secondly, we have to watch oil. So the best thing I can say about oil is given all the abysmal news coming out of the Middle East and potentially again with Russia and Ukraine, oil hasn't really done very much.

8:29It's range bound. So I'm happy about that for two reasons. One is obviously it's nice, even though I have a hybrid, to go to the gas station and see prices at$249 a gallon as opposed to where we were not too long ago. But most importantly, it's telling me that if we have a range balance, let's call it$65 to$85 a barrel, we know that if oil starts to go above$85 an hour, that's probably a really good indicator that oil is starting to heat up a little bit. And that also could be a factor. So you're watching silver now to gold. You're watching oil. My go-to always is sugar. So just to repeat for people who haven't heard me pontificate on the white stuff, also evil in its own way.

9:23Right. You know, from a global standpoint, it is a staple in a lot of food from a social comfort food standpoint. It's what people turn to from an inflation standpoint, even though it's more expensive, sugary foods tend to be less expensive, or at least in the perception of people than some of the healthier foods. And all of that has always been why not to mention the fact that my first trade ever in life was in sugar futures back in the day. I've learned to watch that. So let's look at sugar, right? It went from six cents in 2020. It peaked this year at 28 cents. And this is a classic example.

10:02It actually consolidated for a little bit between 2021 until it started to move up in 2023, kind of between 15 and 20 cents a pound. And then it flew to 28. So from 20 to 28, and now it's back down to 20. So people go, oh, okay, sugar's over. Well, it's still four times more expensive than it was in 2020. And it's right back here on support. And I think, let me look, it actually closed green today. So I like to look at the sugar chart. And at 21 cents, I'm not really all that concerned. Starts to creep up over 22, 22.20 to be exact, because you have a major moving average there. Then I would say now you have some real tangible indicators at your disposal and you can forget about headlines and worrying about what the PPI is and the CPI is and the PCE.

10:56Just look there, those relationships. And that's kind of what I'm doing. That doesn't mean I'm frozen. So silver, sugar moving, oil just not collapsing. Or possibly moving back or possibly moving. Yeah. I mean, some other prices are still pretty high, relatively copper, steel, iron ore, those kinds of things. So it doesn't also have to be every commodity. I mean, people also think, oh, my God, a super cycle means what we saw in 2021 when there was nothing. And then all of a sudden there were shortages and nobody to move anything. No, super cycles just go back to the 70s. Not every commodity moved, but the ones that did wreaked havoc on the inflation numbers.

11:41And that's what you have to keep your eyes on. Hey, everyone, we're going to take a quick break right now to hear a word from our partners. We'll be right back with more of the day's top analysis on the Real Vision Daily Briefing. Have you ever wanted to trade Bitcoin but haven't dared try? With Plus 500 Futures, you can trade crypto without the hassle of opening a wallet. With just a few clicks, you can register and start practicing with their free and unlimited demo. See a trading opportunity? You'll be able to trade it in just two clicks. Feel ready? You can move to real money with as little as$100 once your account is approved.

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12:54Yeah, that's fantastic. Because this is the thing that everyone is sort of really focused on and I think struggling with. So, Mish, great question coming in from the macro butler. The market seems not hedged for a second inflation wave. Which asset would you buy to hedge if there is a second inflation wave? Well, that's a really good question. So I think I just mentioned a few, but they're not necessarily ripe yet. Although I have to tell you, we did buy gold miners today. and I'm kind of shaking because they're still pretty beat up chart. But from a technical standpoint, they've made a series of higher lows.

13:39So I've got a good risk point. But I would say, I mean, I still think gold. It's a question now of where people were expecting a better dip. And we really didn't get much of a dip here. I think while we're at like 2055, I was kind of hoping we We would see prices maybe closer to 1980, 2000. We may not get there. So I would say keep an eye there. I mean, you can sort of just jump in. And as kind of a more of a passive investment, that's not kind of what I like to do. Either wait for a substantial dip or wait for a major breakout. And that major breakout, of course, will be everybody and their brother has shown a chart on X over this 2100 level.

14:19So Doug, asking while we're in this spot, what do you make of, you mentioned Copper a moment ago, I think, what do you make of Dr. Copper's performance? I actually am considering, well, it's certainly, I mean, as a recession indicator, it looked a little bit dicey for a while. I actually think it's holding up pretty well. So again, I mean, a lot of it is going to depend on demand, not just demand in the U.S., because there is going to be, I believe, a push, and already has been a push, which is why the Dow has done so well, more into infrastructure. And I don't mean EV infrastructure. I just mean infrastructure in general and automation.

14:57And anything that requires the use of copper and the demand on copper being higher than what's expected, China being another player in that, could send it soaring. But we're just looking at it now as one of the basket of the industrial metals. And right now I'm thinking they're not wowing me, but they're not also telling me that, you know, don't worry about it. Those prices are going to go down and we're heading into a recession. Stagflation is back on the table. Talk about a word. Yeah. And that's a word nobody wants to talk about. Nobody ever wants to talk about it. Especially central bankers.

15:34So Ralph also asking, oh, actually two good questions from Ralph. I'm going to give them to you both, Ralph, you're on fire today. I want to talk about this one because you're talking about beat up charts and it has come up. So interestingly, we've heard I was going to give all of you credit because I think all of the people that we have on, you always are trying to look around the corner, right? All of you sort of do your craft in terms of trying to figure out what's coming. And there's been a consistent theme this week. You're all sort of worried about the same things circling around the same ideas, which I think is amazing.

16:08Ralph, asking any thoughts on NatGas? That has been really beat up. And when we're talking about the inflation break and reprieve that we got, some of it was from some of these energy prices falling so much. But now there's some concern, especially when you're looking at Europe, if that's on anyone's radar. So what are your thoughts about NatGas, Mish? I almost bought it when it started to clear back over like two 40, but I decided to wait because to me, this feels like a lot of noise until we get back over three. So right now I would accredit this to two things, probably some short covering, some bottom picking, and also talk of some really deep freeze temperatures coming out of Europe.

16:56And even here in the United States, I mean, I can't speak for the rest of the United States, but we're about to get a pretty good cold snap here in the Southwest. So I think that that doesn't necessarily mean to me that there is a huge problem with supply of natural gas. So I would start to get more interested in that potential. If we start getting through$3, we get through$3, then we start to look like we just had a major base for over a year. And that gives me at least some technical point to look at as far as a risk factor. It has to hold over three. It breaks down under three. Then, you know, it was a false breakout kind of thing.

17:38And that's kind of what I need to sink my teeth into right now for net gas. And so, Ralph's other really interesting question is, what commodities didn't move in the 1970s? Oh, wow. I know. I mean, I was throwing that at you, Mish. I mean, you're not a computer. So we'll put a pin in that one, maybe. Well, no, no, no. I mean, roughly, I can tell you, you know what I'm actually doing right now, Maggie? I am actually picturing myself as a very young, very young girl on the floor in the commodities exchange. It's practically a child. We should say practically a child. It's practically a child, right?

18:17Looking around the floor at the commodity prices and trying to remember what was moving back then and what wasn't. And the hot things that, of course, that I can remember was sugar and gold and silver and platinum and palladium, the metals in general. In terms of the grains, that was the Chicago border trade, so it wasn't in front of my very eyes. But they weren't necessarily participating in the same way. And I don't remember coffee or cocoa being particularly interesting at that point. But that is, by the way, an excellent question, Ralph. and I am now going to go back and have a look at that and report back next time.

18:57Yeah, I'm going to tell you right now, I think you're super close, Mish. You're amazing. I mean, this was not pre-planned and I don't think anybody answers that off the cuff. I just Googled it really quickly. I can't see everything, but beef did move some other things, but I think you're right about a couple of those, a couple of those commodities might've been the only ones, but we'll do some research. We have the best community that asks such smart questions though. I just absolutely love it. Right. That's a great one. I love it. It is a great one. And it's a good one for us all ponder, too.

19:27So, you know, Mish, she's always on Twitter and and on our platform. So we can always continue this conversation after the show. So want to ask about the other since we're talking about Macro Butler's great question about hedging, right? Hedging inflation. This is a concern. We got to talk about Bitcoin because we're all waiting. In fact, we were all kind of watching the headlines because I said nothing like burying something on a Friday afternoon as we head into the weekend if there's going to be an announcement. But it doesn't look like it happened. But we're all waiting to see about the spot, whether that's approved the spot, Bitcoin, ETF.

20:03We think we're looking at a deadline of January 10th for there to be some kind of word on that. But we saw a big move in crypto. It was really rocking and rolling at the end of the year. We saw this pullback in the first few days of this trading. year, this trading week rather. So how are you thinking about that? And are you getting a lot of questions about that? What are you hearing from the people, from your clients? Yeah, definitely getting a lot of questions about that. It was interesting because I had a conversation today with this guy who's in Dubai, who is part of the Mario Knopfel team.

20:39And they're big Bitcoin people. There's a lot of Bitcoin. And of course, even your own community, I did the RBIP this week And there were tremendous questions. So people want to know and people are confused. But what this guy said, I thought was really interesting because he started talking about something that I hadn't even really thought about lately, which is we get the spot ETF passed. We have the halving that's coming up later this year, which when you have this kind of accumulation that we've seen in Bitcoin in price, generally at that four year mark where they actually create more scarcity of Bitcoin.

21:15You do have a bullish move. It may not happen right away. Statistically, it can happen even 26 to 32 weeks later, which means it may not even happen to November. What he brought up was, yeah, we could go to all-time highs. And right now, everybody's about bullishness in Bitcoin. But what happens when we do get mass adoption through some kind of a spot ETF, and then regulation comes in. That could kill Bitcoin. Now, I'm not necessarily agreeing with that, but I just thought, oh my God, I hadn't really thought about that. So that was an interesting point to make, is along with adoption comes government regulation.

21:53So you always have to be aware of that. But for right now, this is exactly kind of what Holden, I got to give him mad props because he's our crypto guy. I have my own thoughts about it. But when he tells me these things and they turn out to be, whoops, I just froze. That's OK. Keep going. Your audio is fine. You'll pop back. OK. He said that he thought that it was going to go to 46 ,000, which is pretty much exactly where it went. And then it was going to pull back down to about 37 ,000. So right now we're hovering what, around 42. He actually feels that the anticipation of the ETF, sort of like, you know, buy the rumor, sell the news, could actually be the reverse impact.

22:39And that could make it go down to about 37 ,000, where he would be an aggressive buyer in anticipation of the next thing. He also gave me a couple of other interesting points to look at that are bullish for the whole crypto So Space, he talked about the Ethereum Cancun upgrade. So we tend to forget about Ethereum, but he said that could be a player. The USDC stablecoin IPO, he said, is coming up, even though there were rumors that that had been canceling. He feels that the whole FTX thing is over, basically. That's not going to be an issue. And finally, he said, you really have to be watching interest rates.

23:14So it goes back to our original question, right? is, is Bitcoin, how heavily influenced is Bitcoin going to be by interest rates? And what happens if they just sort of stay here? Will that just keep it range bound until the next major event or not? So that's kind of my thoughts right here. I'm waiting. I'm out. Coin. Do you remember, Maggie, last time we talked Coinbase? Oh, yes. Oh, yeah. So we bought it. We were long when we spoke and it was trading at about 75.80. Well, we're out now. We got out of our last crunch at 160. Now, that's 100 % gain. So I'll take that any day of the week and stand aside and wait.

23:52We're going to take another quick break to hear a word from our partners. We'll be right back with more of the day's top analysis on the Real Vision Daily Briefing. Hi, on the 5th and 6th of June, 2024, I'll be speaking at the largest AI event in Asia, Super AI in Singapore at the iconic Marina Bay Sands. Alongside brilliant minds like Edward Snowden, Benedict Devon and Balaji Srinivasan, I'll be on a stage exploring the extraordinary potential of AI and the profound change it represents, not just for financial markets, but also for the world as we know it. With over 5 ,000 attendees and over 150 side events, Singapore will become a vibrant hub for a full week from the 3rd and 9th of June.

24:36Visit superai.com to register and join me with 20 % off tickets using the code REALVISION. Use the link in the description and I'll see you there. It's going to be incredible. Yeah, that was an amazing mover last year. Incredible, some of the gains at the end of the year. So well done on that, Mish. So I want to ask about, we have some questions about Vietnam. So I want to get the emerging markets in because everybody loves to hear about that. How are you thinking about Vietnam right here? Two different people asked about that. Mish, is it time to catch the Vietnam trade? I mean, Mish has been talking about Vietnam.

25:20I can't even remember now how many times you've been on and you've been bullish Vietnam. So how are you thinking about that? Well, actually, we had taken some profits when it went all the way up to 1530 and then started to drop. We had a trailing stop. But it turns out we only sold half of it. So we're still long and we're long from lower levels, like down below 12. So that's a nice cushion. So just today, to be fully disclosed here, we bought more. We bought the other half back at 13. I think we paid like 1308. And I'm talking, of course, about the VNM ETF. I like the way the technicals look.

26:00I was actually kind of surprised at how viciously it sold off. I think a lot of it had to do with issues with China. So I think China sort of wagged its finger at Vietnam in terms of how much trade they were doing with the Western states, particularly the United States. But I think Vietnam is still, I'm bullish. I still think that it has the potential to trade up to 20 at some point. I think you just have to be patient. Greece is my best example of that, because years ago I was saying buy Greece at$7 when it was GREK at that level. Now it's been trading$36,$37, but it took a while to get there.