Market On Open, Thursday 14 November

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PPI

by Alex King, CEO, Cestrian Capital Research, Inc

Well, PPI just printed and it, too, is beginning to warm up, just like CPI.

There are, I think, two things to worry about right now which can interfere with the good free money that the market will drop in your lap if you let it.

1. The obvious: GDP good, jobs good, reduced labor force arising from incoming Administration policies, means wages up means prices up means CPI up means Fed has to pause or hike. Bad for equities, when the pause or hikes come. (Prices up alone is good for equities, at least for those companies who are price-setters like Microsoft, etc)
2. The not-obvious-but-still-possible: inflation is already slowing if you use different measures (eg. Truflation, here), because debt service costs are consuming too much of government, corporate, and individual spending, so in the end GDP slows, less growth available, equities are trading at relatively high multiples of earnings, so, bad for equities.

Both of these arguments can’t be true. And the other argument that could be true is:

3. GDP good, jobs good, wages up a touch meaning more money for consumers to spend, CPI and PPI rising somewhat but not terrible, Fed doesn’t have to pause or hike, incoming Administration adopts pro-growth policies (less regulation etc), so, good for equities.

Now I don’t know which one of those scenarios plays out - no-one does - but these are the “Choose Your Own Ending” realities you have to keep in mind at all times right now I think. And, as always:

Trade The Market In Front Of You, Not The Market In Your Head.

The best way to see the market in front of you is to read charts. Charts aren’t infected with any kind of Mind Virus, be it a Bull or a Bear Virus. They’re just charts.

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