The Non-Farm Payrolls just came out. The unemployment numbers came out at the higher end of expectations. So far price reaction from the markets has been muted: Gold is down a little, Crude up slightly, US$ down slightly, ES up slightly - more of the same.

But folks, if I am right, a bombshell is around the corner. On April 16, the CPI numbers come out.

It has been 8 months since the FED publicly started massive increases in the money supply. As a general rule, it takes around 9 months for the economy to start showing the effects of a loosening of the purse strings. I may be a month early, but the easing of the money supply has been so massive that the CPI increasing a month before ‘normal’ would not surprise me.

If the CPI does come out much greater than expected, what is that going to mean for the markets I trade? I expect:

  • The US$ to move up and therefore
  • Gold and Crude to drop. I also expect
  • The Grains to drop and
  • The stock market to tumble.

Interestingly, while I was watching the Cash Flow program on CNBC today, Illian Mihav, professor of economics at INSEAD, made an interesting observation: he said that the FED number 2, Rick Michigan has been, in effect, previewing FED policy in his speeches. And, his latest speech at the end of March was on the dangers of inflation. Hmm, does the FED know something we have yet to discover?

And, if the inflation numbers are going to start rising, what are the chances that the FED will continue to raise rates?In Aussie terms, ‘buckley’s’ (i.e. NIL).

Well, OK, I suppose there is some chance; but I certainly would not take the odds to a continuing rate decrease or other form of stimulus once the inflation numbers start to rise. Perhaps then we’ll break out of the market ranges we have been in.

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