Approaching the Moment of Truth?

San Francisco Hard Assets Investment Conference 2012 Online Preview

Are we approaching a moment of truth in the great battle between the natural market forces of deflation and the power of the printing press to overcome our massive debt burden with printing press money? Are Bernanke and other central bank thieves about to win out over the morality of strong work ethics and savings by destroying the currencies citizens around the globe? Will we be forced to accept ongoing theft by government thugs? 

My Inflation/Deflation Watch (IDW), which is a measure of major commodities as well as equity and bond indexes, is suggesting a very possible resolution to the upside. In other words, my IDW is suggesting we could be nearing an inflationary breakout because as of Wednesday, October 17th, at 147.90 my “watch” is right up against the downtrend line. A breakthrough would suggest we may be nearing a breakout and with that a possible runaway inflation. 

But my IDW isn’t the only hint at a possible breakout. The following chart from Ian McAvity’s latest “Deliberations” newsletter shows that the broad based measure of US equities, namely the DJ Total Stock Market Index, formerly known as the Wilshire 5000, is also very close to a breakout above a long top dating back to the dot com bubble peak in 2000. 

And on the following page, note the straight 1 to 1 ETF short against the S&P 500. On Oct. 18, SH closed at 33.54, just 2 cents higher than its all-time low of $33.52. A breakout here would also suggest the equity may be ready to hyperinflate. Obviously, if we are ready to breakout in stocks, we will want to give up on FAZ and other short strategies. 

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