"Principles have no real force except when one is well-fed." - Mark Twain
In my various writings here on Seeking Alpha and the many other sites I contribute to I have continued to hammer the idea that reflation either happens organically though panic low yields or central bank paranoia will force it upon us. The Summer Surprise I wrote about in June has come to pass as equities reach multi year highs, bonds break, and reflation returns. Intermarket trends continue to look very favorable for risk assets, and were hinting as early as late July that a comeback in metals was likely on global growth expectations increasing. This is the "Great Realization."
Global shock and awe to fight deflation appears underway as both the Federal Reserve and European Central Bank introduce the concept of "unlimited" to monetary policy. This, combined with the recent approval by China on the fiscal side to undergo new infrastructure spending, provides considerable fuel for higher highs to come. Dr. Copper seems to agree with this idea. Take a look below at the price ratio of the iPath Dow Jones-UBS Copper Subindex Total Return ETN (JJC) relative to the S&P 500 (IVV). As a reminder, a rising price ratio means the numerator/JJC is outperforming (up more/down less) the denominator/IVV.
(click to enlarge)
Copper has been a horrendous performer since the Summer Crash of 2011 took place and as deflationary fears increased markedly worldwide. Note the sharp comeback that has happened in strength in the last few weeks on the far right of the chart. It appears that the price behavior of copper, often considered a leading indicator for global growth, indicates that the global coordinated actions of Super Ben and the League of Extraordinary Bankers are stoking inflation and growth expectations. The breakout here appears likely to continue in what could be continued outperformance by copper and other industrial metals into the end of the year.
Surprise, surprise…
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.
