by Gary Alexander
October 26, 2021
At the 47th Annual (my 39th) New Orleans Investment Conference last week, the outside temperature was 84 degrees and the humidity hit 94%, but inside the air-conditioned Hilton Riverside Grand Ballroom, it was clear that Winter is Coming. In fact, one panel moderator, Adam Taggart of Wealthion, referred to The Game of Thrones when addressing the machinations at the Fed and Congress as we approach winter.
Very often, these New Orleans speakers predict a coming crash – or a “crack-up boom,” an event that Austrian economist Ludwig von Mises predicted, when excessive credit expansion and consumers’ inflation expectations will accelerate to the point that money would become near-worthless, and the economic system crashes. In the near-term, speakers warned of these events coming in the 2022 winter:
- The end of Jerome Powell’s term (in February) at the Federal Reserve and the potential appointment of a more progressive Fed Chair, like Lael Brainard, the preferred choice of Senator Elizabeth Warren.
- China’s Winter Olympics (also in February), requiring at least a 40% reduction in air pollution so TV cameras can film the action and the world won’t see how hypocritical China is about its green policies.
- The high and rising prices (and global shortage) of heating oil, natural gas, and other of fossil fuels, which may worsen as the northern hemisphere enters the frigid months of December through March.
As I entered the main conference hall last Wednesday afternoon, the first speaker I heard laid out the case for non-transitory inflation. Peter Boockvar, Chief Investment Officer at aptly-named Bleakley Financial Group, gave a talk titled, “Inflation is Not Transitory,” in which he presented a series of charts showing at least a dozen familiar (and many obscure) price indexes rising higher and faster than they had in decades.
In the shipping arena, the Baltic Dry Index is at a 13-year high and the Drewry Shanghai-to-Los-Angeles container ship rate is up 281% in the last 12 months, while the Manheim Used Car index is up 70% in the last year, due mostly to a semi-conductor chip shortage, resulting in these ‘hockey-stick’ chart formations:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
In the labor market, the Atlanta Fed’s Wage Growth Tracker is at a 13-year high, and the Atlanta Fed’s Job Switcher’s Tracker hit a 19-year high. Boockvar reminded us that wage growth inflation is seldom transitory, as today’s much-in-demand workers won’t cotton to any pay cuts, or low wage increases,
The energy sector is particularly hard hit now, and especially so in Europe over the last nine months:
|TRIPLE-DIGIT Energy Sector
Commodity Gains (YTD 2021)
|Gains of 50% or More (YTD)
In the U.S. Energy Sector
|Major Commodity Indexes
(2021 Gains, YTD) *
|Euro Nat Gas
||EU Carbon Permits
|UK Nat Gas
||S&P GSCI Index
||CRB Commodity Index
||LME (Metals) Index
|U.S. Nat Gas
||Nuclear Energy Index
|*Source: Tradingeconomics.com, covering spot price increases from January 1, 2021, to October 20, 2021
Even during warmer months, these price increases are very difficult for the middle class and poor to afford, but what will happen come winter? What happened in Texas last February is one hint. If federal, state, and local governments put too much reliance on sporadic sources of energy, like wind power and sunlight, they may end up causing pain, impoverishment, or even death to many of their constituents.
Next up, Jim Iuorio, managing director of TJM Institutional Services and a veteran futures and options trader, said it was the height of hubris for the Federal Reserve to think that they could more than double their balance sheet while launching “QE Forever,” thereby letting “the inflation cat out of the bag” and then say they could control it later on. They made that mistake in the 1970s. Already, the Fed has raised its inflation target rate from 2% to 3%, and they may need to raise that target even higher in future years.
“The House of Powell” May Face Ned Stark’s Bitter Fate
In the bloody and war-torn series, “The Game of Thrones,” Ned (Eddard) Stark is one of the few shining role models, a noble king, head of the House of Stark. Naturally, he is beheaded at the end of Season 1.
Such a fate may await the gentle Jerome “Jay” Powell, the current soft-spoken Chairman of the Fed.
Danielle DiMartino Booth, CEO and Chief Strategist for Quill Intelligence, and a frequent commentator on all the major financial networks, drew on her nine years of experience and contacts working with the Dallas Federal Reserve Bank and its President, Richard Fisher, in her New Orleans appearances and in her 2017 book, “FED UP: An Insider’s Take on Why the Federal Reserve is Bad for America.”
In her first appearance, on the “Gold, Crypto and Cash” panel on “The Future of Money,” she and the other three panelists (Russell Gray of “The Real Estate Guys,” Jon Najarian of MarketRebellion,, and James Rickards of Strategic Intelligence) all believed that the world’s major central banks – the Fed, the European Central Bank (ECB), the Bank of Japan (BOJ), and the Bank of England (BofE) – will install Central Bank Digital Currencies (CBDCs), virtual electronic currencies, as their main financial product within a few years, bypassing fiat paper currencies in favor of electronic credits, created out of thin air.
The main question facing governments and their citizens now is whether those digital currencies will be used to “spy” on our every transaction, or as a convenience for the customer. Basically, Jay Powell falls in the latter camp as a comparatively laissez faire capitalist, while the “progressives” in Congress are calling for more regulation of banks and customer transactions. Senator Elizabeth Warren is foremost in favor of tighter regulation, and she is therefore against the renomination of Jay Powell as Fed Chairman.
In her main speech, Danielle DiMartino Booth gave high odds that we will see the end of the House of Powell in February, to be replaced by either Lael Brainard or a similar candidate from the progressive wing of the Democratic Party. This is a very important choice for the future of financial privacy. It may also signal the Biden team’s design to regulate or close down their main competition – Bitcoin and other cryptocurrencies – which have soared in price lately. Most New Orleans speakers – traditional gold bugs, for the most part – put Bitcoin in the gold spectrum, saying any attempt to crush it will fail as they believe the more creative minds belong to the shadow currency markets as opposed to heavy-handed regulators.
In The Game of Thrones, Cersei Lannister is one of the more complex and cunning of characters, but she knows the ways of court intrigue, so don’t count the Liz Warren/Bernie Sanders/Leal Brainard wing out.
As I fly out of sultry New Orleans into unseasonal near-hurricane winds in Seattle, I’m wondering if the world has turned upside down. The poles might be shifting faster than scientists thought. What was once up is now down, black is white, wrong is right, and Halloween is forever, as masking seems here to stay.
But the calendar won’t be mocked. Winter is coming.