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Inflation

The following questions seem to be apropos for the time we are living in. It was sent to me some time ago:

Do you think we are going into inflationary markets? And if so how soon? Can you tell us how to trade inflationary markets?

Inflationary markets provide ample opportunities to make a lot of bull and bear market profits very fast, with simple technical approaches.

Detecting Inflation:

Watch the CRB Index, which tracks inflation. Often the trend in the price of gold will also track the CRB Index price movement. The PPI, or Producer Price Index, is the price at which producers buy commodities and raw materials. The PPI forecasts the CPI, the Consumer Price Index, which is what the public pays for finished products. Both a PPI and CPI increase means inflation will rise—both have been rising for quite a while despite the fact that the government cheats on the figures by leaving out the cost of energy and food. Factory utilization capacity of over 85% forecasts inflation to some economists. Cotton for textiles, lumber for housing, and copper for durable goods, are the three major commodities that forecast inflation. Cotton is not currently rising. Lumber has made a bottom and is rising, Copper is in a raging bull market. The CRB contains these markets, but is heavily weighted towards the grain markets. None of the grain markets are rising at this time. Nevertheless, the debt level in the U.S. is forecasting inflation, and perhaps an inflationary recession. As long as the FED can print money and get away with it, we are not looking at deflation.

How Soon?

When will we see inflation for certain? That's anybody's guess. We already are having it in many goods and commodities priced in dollars. But the recent dollar rally is cooling things off a bit. At the same time, we are having inflation in sugar, metals, and energies, we are having deflation in corn, wheat, cocoa, and cotton.

Trading Inflation:
If you detect inflation, you can trade it longer term with futures, options, or a combination of both. You can trade it with stocks. You might find it helpful to read my book "Trading Optures and Futions," or take training with Andy Jordan.


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Thursday, 30 June 2022

Derivative transactions, including futures, are complex and carry a high degree of risk. They are intended for sophisticated investors and are not suitable for everyone. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results, and all of which can adversely affect actual trading results. For more information, see the Risk Disclosure Statement for Futures and Options.