Real, No Bullshit Inflation

When I was 18 years old, after finishing high school, I went to the Greek Islands over the summer to party like a rock star. The island was packed full of teenagers aged 16-22, and it was a madhouse.

We’d wake up around noon, eat breakfast at lunchtime, head to the beach, come back to the pool at the hotel, take a nap, wake up around 10 PM and head to the clubs until the following morning.

Then, we’d repeat this routine and for 10 days, this was my life.

Looking at it today, some nineteen years later, having not gone to a club more than once a year for probably over a decade, and with my wife carrying twins in the womb and starting week 31, the memory of the Greek Islands in the early 2000s almost feels like an out-of-body experience.

One night, a friend of mine, who shared a room with me, saw a beautiful girl dancing right next to us. He was also good-looking and fairly confident. For 25 minutes, he’d whisper in my ear that he was going to go over and talk to her, invite her to the dance floor or buy her a drink – then he would do nothing.

It was hilarious; he would affirm it in my ear, pump himself up and freeze in his place. 25 minutes after he first said so, he got up the courage to go over and introduce himself, but his delayed response could have cost him dearly — she could have gone home or another guy could have walked over ahead of my friend.

Actions are worth much more than words and in 2021, the FED just kept talking about inflation and unemployment, but has done nothing.

Like my friend, you can’t take him on his words alone. You can assume they mean what they say, but fear paralyzes them. For illustration, had I wanted to approach her myself, I could have told my friend that if he didn’t, then I would and jump the gun on him, but since I’m a good buddy, I didn’t.

In the markets, when buyers and sellers feel the FED is procrastinating, they act ahead of it, and that means that the FED is “behind the curve.”

When that happens, the markets wait for the FED to acknowledge that and correct it. Right now, the markets feel that tightening is what is required; therefore, EVERYONE is waiting for tomorrow…

On the 15^th, the FED will announce its policy decision and, if backed by actions, will prove that it really doesn’t see inflation as being transitory.

If the FED expedites tapering and even implies how many rate hikes are expected, the markets will cheer. After all, the markets have long been persuaded that inflation is sticky and haven’t waited on the FED to admit as much.

There’s too much cash on the sidelines, too many short positions by institutions, too many corporate buybacks and far too much retail activity to hold back equities, which want to celebrate the FED’s actions against inflation.

Barring any surprises, we believe tomorrow the FED’s meeting will send markets to all-time highs and it will jumpstart the birth of a huge rally for gold.

There’s no reason to speculate, though. Once the FED minutes are out, within the hour, we will know exactly what the markets think of it. If deemed bullish for metals, then gold could shoot up by 2%, sending it to $1,836, and silver by 3.5% to 4%, sending to $23.50.

If the markets react by selling metals, we’re in a bear market.

Best Regards,

Lior Gantz
President, WealthResearchGroup.com