I'm Not a Smart Man, But I Know What Stagflation Is

If you caught Judy Shelton's thought-provoking interview on CNBC this morning not long after a disappointing GDP print, then you know she believes that The Fed and Powell's message is increasingly growing muffled. Specifically, the noncommittal Powell mentioned price stability and inflation running hotter than 2% a few times, but also gave no real timetable let alone any type of imminent message for tapering asset purchases and, in effect, beginning to slowly take away the punch bowl of delicious liquidity markets have enjoyed for a good while now. 

And so with both slowing growth concerns, government-induced unemployment still in effect, and rising consumer prices, the elements of stagflation are present. While many have been quick to counter that the current economic landscape vastly differs from the stagflation of the 1970s (labor unions are far less powerful nowadays compared to then, which undermines the potential for a vicious wage-price spiral as Powell noted yesterday), that argument may very well be a red herring. After all, who said that every stagflationary cycle needs to be exactly like the last one?

In such a stagflationary world, however, regardless of the wrinkles in each new cycle, gold typically does quite well. As such, with the Dollar weakening, I ramped up more long exposure to the precious miners since my blog post last week discussing my first foray into the sector since early-june. 

On the SILJ (ETF for small cap/junior silver miners), we have see the silvers breaching multi-month falling channel resistance upside. 

Either way, if Powell is going to defiantly hold off on tapering amid rising prices punishing consumers, the precious metals and miners (along with, perhaps, crypto) figure to be in the best position to have free rein until Jackson Hole in August.