March 12, 2018

Inflation is now reaching a crescendo.

The fact is that inflation develops in stages in the economy. The first stage concerns the price of items being bought and sold by wholesalers. We saw this begin to surge starting in the middle of last year. And it was a global phenomenon.

Paying more for something is manageable for a while. However, at some point the increase in prices is passed on into the economy in the form of more expensive goods and services. This is when inflation truly begins to become a problem.

And the tell tale sign that things are beginning to get out of control is when workers begin demanding higher wages to deal with increased cost of living.

We are now officially there.

Last week’s jobs data revealed that average hourly earnings for some 80% of workers rose at an annualized pace of 3% over the last three months. Again, this was over three months so it’s not a single data point, workers are DEMANDING higher wages to deal with higher costs of living/inflation.

We get confirmation of this from the bond market, where bond yields are spiking higher to accommodate higher inflation. Already we are seeing yields on US Treasuries, German Bunds, and even Japanese Government Bonds spike higher to test if not BREAK their long-term downward trendlines.

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This is a truly global problem for global Central Banks which are all WAY behind the curve. And this is going to present investors with one of the great money-making opportunities of 2018 if they;re positioned correctly.

Regards.

Deo Talaverano.

Chief Market Strategist DHF.

George Town. Cayman Islands.