The outcome will be default. Default is inherently deflationary, not inflationary. Long term dividend cycles, more accurate than PE ratios, skyrocket during periods of deflation. The public goes broke, while smart money is presented with a buy opportunity of a lifetime.
Reader may be wondering if 'smart money" will be hiding in real estate? Invisible hand says no!
Homebuilders, like financials, have been under performing the broader market since 2009 (chart 1 and chart 2). Large cap stocks broke their 2007 high in 2013, while homebuilders remain well below it.
Chart 1: Large Cap Stocks
Chart 2: Homebuilders
Headline: Why hyperinflation is coming
The stage is being set for a central bank-fueled hyperinflation to take place in several years.
Our position has remained the since calling the next turn of hyperinflation in 2012. Here is our epic piece on Zero Hedge. And while we are at it, we fully matched it with our bond call, which is the first pre-requisite.
Yes, we are currently in deflation. I could not agree more, but this time it is different, as assets will fork at a juncture and move beyond the expected behavior—the results of a failed monetary transmission mechanism.
Recall the London whale. What have we learned from it? That unless you bought the whole market, the remaining 5% not owned could derail prices—a situation where the tail wags the dog.
Market-driven money flow, trend, and intermarket analysis is provided by an Insights key.