President Clouseau’s Plan to Fight Inflation
I led the largest releae from global oil reserves in history.
President Joe Biden, Wall St Journal Tuesday, May 31, 2022
This column predicted that releasing a million barrels a day from the Strategic Reserve would do nothing to lower oil prices. Indeed, the very day Biden’s column appeared, West Texas Intermediate hit $120, its second highest price since the inflation cycle began which was when Biden took office.
Peter Sellers played the inept French Detective, Inspector Jacques Clouseau in the Pink Panther movie series. Team Biden reminds me of the role except the Blake Edwards’ films were funny, our current situation is not.
As long as we are making predictions, Paul Krugman has a column today claiming inflation has already peaked. With the 39-year cycle of higher interest rates just ratcheting up from its March 2020 low, this is certainly not the case.
Biden also has faith the FED will handle inflation though its real job is to protect bankers from their own whacky schemes (remember dot.com and sub-prime mortgage?). As long as the thirty-year Treasury bond, now about 3%, remains well below the inflation rate of 8%, expect higher prices. Finally, he claims credit for reducing the deficit. In fact tax revenues have swelled as people return to work from his own enforced lock downs. I expect a a short-term pull back in oil prices with higher prices still later this summer.
The Russian seizure of Ukraine port cities is blocking Ukraine grain exports. This has agriculture prices at new highs. Higher fuel prices are also driving higher farm prices. Add to that the shortage of baby formula, the open border, and various demonstration incidents and as said, this looks just like 1973-74.
DJA stocks have staged a strong counter trend rally from 31,000 to around 33,000. This is the third day of the moth and yes those first three days are significant in terms of forecasting the rest of the month. As I write Friday, the index is 33,006. It needs a close today over 33,250 to turn the monthly trend back up. Our view remains that a bear market in stock prices is underway.
A final thought regarding politicians and disasters. Whether the cause of death is natural (tornado, hurricane) or man-made (shooting) disaster, can we agree on some responsible behavior. In the future all politicians need to stand , respectfully silent and away, from the area until at least the bodies are buried and we have some responsible third-party information. The victims deserve at least that.
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