by Gary Alexander

March 15, 2022

“A soothsayer bids you ‘Beware the Ides of March’”

–Brutus to Julius Caesar in Act I, Scene 2 of Julius Caesar (Shakespeare)

On March 15, 2020, the Fed met in an emergency and reduced rates a full 1% to zero, but the Dow fell 3,000 points anyway. Then Modern Monetary Theory (MMT)* moved from the theoretical textbooks to a grim reality in America, as the Federal Reserve and Treasury threw $6 trillion of new money into the air,

Then, on March 15, 2021, when higher inflation began to surface, the major practitioners of MMT began to deny their role by using the word “transitory” as their habitual adjective before inflation. I rebutted that evasion with force in my April 13, 2021 column here: “Inflation Will Roar Again, and Probably Soon.”

Now, on March 15, 2022, the Bureau of Labor Statistics (BLS) will release the Producer Price Index for February – at about the same time we send out this mailing. It will be a shocker, with commodity prices soaring – and March’s rate will be much higher. (Last Thursday, the BLS reported that the more subdued Consumer Price Index (CPI) rose 7.9%, the largest full-year increase in 40 years, since January 1982.)

Before getting into these current inflation realities (and the Fed’s long denial of them), let’s look more closely at the 2020 Ides of March, at the start of one of the most dramatic weeks in stock market history.

*Modern Monetary Theory is the theory (grossly simplified) that a sovereign nation can create (print) almost unlimited money with no consequences other than inflation, which can be solved by higher taxes.

March 15-20, 2020: The Dow Falls 4,000 Points… Then “QE4-Ever”
A Soothsayer Warns: “Shut the World Down… Hell is Coming”

On Sunday night, March 15, 2020, the Federal Reserve Board of Governors held its second emergency meeting in a week. This time, they agreed to cut the Fed funds rate by a full 100 basis points to zero. They also offered unlimited liquidity (QE4-Ever), but the Dow fell 3,000 points the next day anyway. The VIX (volatility index) reached an all-time high of 82.69 that Monday, beating the previous record from 2008.

VIX Daily Closing Levels Bar Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

At mid-day Wednesday, March 18, 2020, a billionaire hedge fund manager, Bill Ackman, called CNBC (I was watching) and launched a 28-minute fear-laden plea to shut down the stock market, and the entire global economy for 30 days: “Shut it down. Shut it down now,” he virtually yelled. “America will end as we know it” unless we “completely close down the economy. Shut it down for 30 days. Hell is coming.” (“March 2020: How the Fed Averted Economic Disaster,” by Nick Thomas, WSJ, February 19-20, 2022)

The Dow fell off a cliff while Ackman was talking, dropping as much as 2,000 points and triggering a market-wide 15-minute trading halt shortly before 1 pm, one of several halts during that month. In a little over a month (33) days (23 trading days), from February 19 to March 23, the Dow fell over 11,000 points.

But just three trading days after Ackman’s tirade, the S&P bottomed out and gained 24% in three days!

Without shutting down the global economy, stocks soared, as did real estate, bitcoin, and other markets. Despite this asset inflation, the Treasury kept sending checks to most Americans, while forgiving rents, delaying taxes, and treating us as helpless pawns in their new “Pandemic Industrial Control Complex.”

In 2020 and 2021, Congress approved nearly $6 trillion in added spending for relief and “stimulus” programs, and the Fed fueled this fire with new liquidity. By early 2021, the inevitable inflation arrived.

Federal Spending Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

March 15, 2021: Inflation Arrived, But Don’t Worry:
“It’s Transitory” and “It’s Good for You”

In the March 16, 2021, Marketmail, Louis Navellier, Bryan Perry, and I each chided Fed Chair Jerome Powell for calling inflation “transitory,” since we knew the trillions of new dollars sloshing around in the system were already fueling asset price inflation. I printed the following chart – adding a logical question:

United States Households' Balance Sheet Bar Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

“And yet, in the midst of this growth, we somehow desperately need a new $1.9 trillion stimulus package?”

A month later, I predicted that inflation would return with a vengeance, while Fed officials were saying, all year long, that inflation would be “transitory.” What did they know that this old journalist did not?

The Federal Reserve employs over 400 PhD economists. I do not have a PhD in economics, but I know what the letters BS stand for. MS means More of the Same, and PhD stands for Piled Higher and Deeper.

These 400 economists went to the same high-tier universities, with renowned professors using the same lockstep textbooks. Maybe they and their professors viewed Milton Friedman as a kook teaching Voodoo Economics, saying “Inflation is always and everywhere a monetary phenomenon.” Friedman said that if you print boatloads of money and drop it by helicopters (or Relief Checks) to nearly everyone, higher prices follow. Here are two charts from the St. Louis Fed (with a monetarist tilt), which show that link:

Federal Reserve Money and Inflation Charts

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Did all 400 Fed PhD economists miss this link? Perhaps so. A Wall Street Journal interview with John Cochrane reveals that “All of the governors who reported forecasts, all of the staff, missed it. They’re leading us in the dark with a great pretense of knowing exactly what the map is in front of us.” Cochrane says the massive money drop during COVID was the closest thing to “helicopter money” (a 1969 Milton Friedman parable) you could imagine, yet Fed economists had not read Friedman, so they were clueless.

That brings us to the present – 8:30 am Eastern time today – the Ides of March 2022: New inflation data:

March 15, 2022: The Producer Price Index Release for February 2022

The release of the February Producer Price Index this morning will be dramatic, but nothing like the March releases, which will arrive April 12 (CPI) and April 13 (PPI) during the middle of Easter week.

Here are a few of the commodity price increases that will be reflected in the March PPI data, starting with Nickel and Wheat. Wheat soared to a record high last Monday on fears that Ukraine’s “breadbasket” would wither. Then, Bloomberg reported that the London Metal Exchange suspended trading in its nickel market after “an unprecedented price spike left brokers struggling to pay margin against short positions in a massive squeeze that has embroiled the largest nickel producer as well as a major Chinese bank.”

Wheat and Nickel Price Increases Charts

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Raw Materials Price Increases Bar Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Here are just a few of the 12-month, year-over-year price increases in some key commodities:

Year-Over-Year Price Increases in Key Commodities Table

Let me close with some good news. This inflation won’t go on forever. The Fed has cut back from its QE binge and its massive money infusion, and the Fed may raise rates later this year. Congress may not pass any further massive mailouts of “stimulus checks,” even in an election year in a “vote buying” campaign. The war in Ukraine may be over in a matter of months instead of dragging on for many painful years, and COVID may be nearly over, so the Pandemic Industrial Control Complex might let us return to normal.

If all these things happen, then the federal government money flood may be over, and today’s high energy prices would serve to squeeze out consumer cash from bidding up other prices. This will dampen demand in a variety of areas, shrinking prices, perhaps by year end. That should cool inflation and lift stock prices.

Just when you see headlines about inflation being “here to stay,” high inflation may be on its way out.

Hooray!

All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.

Please see important disclosures below.

Also In This Issue

A Look Ahead by Louis Navellier
The Messy Geopolitics of Global Energy

Income Mail by Bryan Perry
U.S. Natural Gas Prices Could Rally Big by 2023

Growth Mail by Gary Alexander
Beware the Ides of March (Again)

Global Mail by Ivan Martchev
Nickel’s Monstrous Short Squeeze

Sector Spotlight by Jason Bodner
At Times Like This, What Would Warren Do?

View Full Archive
Read Past Issues Here

About The Author

Gary Alexander
SENIOR EDITOR

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander

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