Mike Larson – Market Reactions To The 3 I’s – Inflation, Invasion, and Interest Rates

Mike Larson, Editor of The Safe Money Report, joins us to outline the primary forces acting on the markets through the lens of the 3 I’s:  Inflation, Invasion, and Interest Rates.   We start off probing the fiscal and monetary source of inflation, and how the pandemic supply shocks and invasion of Ukraine by Russia have only accentuated an inflationary picture that was already trending higher.  Mike makes the point that the real inflation people are faced with is actually much higher than the government produced 7.9% CPI reading, and that the sanctions against Russia have only pressured some raw commodities like oil, natural gas, base metals, wheat, and fertilizer to even higher levels.


Next we shift over to discussing the Fed rate hiking cycle kicking off, but noted just how far the central bank was behind the curve at this point, and that their 25 basis point hike, and even a series of them, in the face of higher far higher inflation percentages will still keep real rates very negative for some time to come.  Mike points out that the Fed monetary policy, and government fiscal policy definitely overstayed their welcome and overplayed their hand, and now with an environment of stagflation, similar to the 1970s in many respects, and a flattened yield curve, they are at risk of triggering  a market dislocation as their hawkish policy unfolds, or worse a recession.


We wrap up with a discussion on which kind of assets investors can turn to ride out the coming financial turbulence. Mike has been advising readers of his Safe Money report to reduce  general equity positions in speculative growth and tech sectors, increase their cash allocation, and to position in real hard assets in the precious metals and commodities and energy space, as well as build of basket of recession resistant dividend paying defensive income producing stocks.

Click here to learn more about Mike’s Safe Money Report.

    Mar 23, 2022 23:35 PM

    Fed Officials Nod To Big Rate Hikes To Fight ‘Inflation, Inflation, Inflation’

    Ann Saphir and Lindsay Dunsmuir – Reuters – Wed, March 23, 2022

    “Federal Reserve policymakers on Wednesday signaled they stand ready to take more aggressive action to bring down unacceptably high inflation, including a possible half-percentage-point interest rate hike at the next policy meeting in May.”

    “I have everything on the table right now. If we need to do 50 (basis points), 50 is what we’ll do, ” San Francisco Fed President Mary Daly said at an event organized by Bloomberg. “With the labor market so strong, inflation, inflation, inflation is top of everyone’s mind.”

    Mar 23, 2022 23:38 PM

    Gold Markets Forming a Basing Pattern

    Christopher Lewis – FX Empire – Wed, March 23, 2022

    “Gold markets have rallied a bit during the trading session on Wednesday as the $1920 level has offered a significant amount of support. At this point, the market is likely to see a lot of pushing to the upside, mainly due to the fact that the $1920 level begins a major support area that extends all the way down to the $1880 level. At this point, I think the market is more likely than not going to continue to see a lot of noise in this area, and perhaps we are trying to build up enough of a base to continue the longer-term uptrend. If that is going to be the case, a break above the $1950 would confirm it.”

    Mar 23, 2022 23:45 PM

    Although America has given away most of their industry to China, there is an irony in all of this, China is in a very delicate position. They still haven’t quite oriented their economy to where they can survive a depression by selling to their home market.

    America and Western Europe are the big buyers that keep their industry humming along, but Western buyers are tapped out. China’s industry has become inflated with bank credit, and American consumers are wondering how they will make the next payment on their debt loads.

    China’s industry is enlarged, bloated, but profitable with the innovation of technology, however without The Western consumer it will be very vulnerable to operate at an unprofitable basis as they wait for buying power to recover in The West. When there is a stock market crash stock profits will vanish leaving Chinese factories sitting idle for many years.

    I don’t think they will invade Taiwan until they can be sure that they aren’t so dependent on The Western consumer. Watching what has happened with Russia, they know The World cannot experience another huge economic shock because their way of life will be in the crosshairs for regime change. DT

      Mar 24, 2022 24:49 AM

      Global Bond Plunge Wipes Out 2.6 Trillion this year. More than the 2 trillion of 2008, and it isn’t over.

        Mar 24, 2022 24:35 AM

        Yep. We’ve been postulating on here since 2 years ago with the insanely low 10 year treasury yields in 2020, that it appears the 40 year bond bubble has burst. As both Jesse Felder and Rick Bensignor mentioned on the weekend show, and also Dana Lyons mentioned the end of last week in his interview, they believe money will continue to come out of bonds, even if there are reversals from time to time where rates come back down and bonds go back up for short counter-trend rallies.

    Mar 23, 2022 23:07 PM

    Actually there are 4 I’s, the fourth being….

    Mar 24, 2022 24:39 AM

    (MKO) (MAKOF) Mako Mining Reports Channel Samples at the La Segoviana Concession Which Yield up to 105.7 g/t Gold 17km North of the San Albino Mine; Key Surface Rights Acquired at La Reforma

    24 Mar 2022

    > La Reforma
    105.70 g/t Au and 90.6 g/t Ag over 1.5m ETW
    42.00 g/t Au and 15.7 g/t Ag over 1.4m ETW

    > San Luis – Caballo
    41.40 g/t Au and 56.9 g/t Ag over 1.5m ETW
    35.60 g/t Au and 37.0 g/t Ag over 1.5m ETW

    > Minas America
    44.10 g/t Au and 34.4 g/t Ag over 1.0m ETW
    43.60 g/t Au and 25.9 g/t Ag over 1.0m ETW

    > El Silencio
    44.40 g/t Au and 26.0 g/t Ag over 1.0m ETW
    26.00 g/t Au and 22.0 g/t Ag over 1.2m ETW

    Mar 24, 2022 24:59 AM

    Cookin’ !!

    Mar 24, 2022 24:08 AM

    Bigger silver companies doing well today, the following all up over 3%… trickle down from large to medium to small caps starting? The US AG large stocks going up first is a good sign that US investors are waking up to this sector.

    US – CDE, EXK, HL,

      Mar 24, 2022 24:22 AM

      Agreed Dan. It’s nice to see capital flows into the larger cap miners listed on the US big boards, and is a good signal that the sector is waking up.

        Mar 24, 2022 24:56 AM

        IMHO I think people are selling some of their small and micro cap silver stocks and buying the bigger cap stocks, especially the US miners.

          Mar 24, 2022 24:51 AM

          I have been tempted…

          Mar 24, 2022 24:18 PM

          That could be the case for some traders that didn’t have enough allocation to the producers, but I would imagine that most of the buying in the US big boards is coming from US traders getting positioned due to higher metals prices, and from ETF buying.

          Mar 24, 2022 24:06 PM

          Dan, you can bet on it. The retail guy is always chasing yesterday and it almost always ends badly.
          For the record, IPT is still up 13% vs SILJ over the last 6-7 weeks.

          In other news, NEM is about to secure a huge monthly and quarterly breakout…

            Mar 24, 2022 24:31 PM

            Yeah, NEM Newmont has been in beast mode as it about to make a high price level not seen since the late 1980s. This is good news and more confirmation that new generalist money is finding it’s way into the precious metals space, and it is good bellwether for where the rest of the mining stocks will be heading next as money flows down the risk curve to the junior miners.

            Mar 24, 2022 24:02 PM

            Luckily, it’s even better than it looks. Most are blind to the fact that pricing assets in dollars over the long term completely distorts and hides reality. NEM is nowhere near an all-time high in real terms. In fact, it would have to triple from here VERSUS GOLD just to match its high of 26 years ago. (That means, for example, that it would have to go up 6 fold from here if gold doubles by the time it tops. Again, that would only take it back to its 1996 high.)
            Contrary to popular belief, NEM has not had a true secular bull market since topping vs gold in 1996. It had a cyclical bull market from 2000 to the end of 2003 but fell vs gold for the 12 years that followed. We are now looking at a very different situation and a future that will see the gold miners trounce gold in a way that they never did between 2000 and 2011.

            Mar 24, 2022 24:21 PM

            IPT: I picked it up again recently to see if it made a difference in my alternating day pattern. It tanked 20%, but I figured it was”transitory” like my others. But, as long as it tanked over 20% I took the write-off.
            It actually was doing worse than most so it was a toss up whether to keep it.

            Mar 24, 2022 24:07 PM

            I rarely play the tiny caps with such a short term focus. Between the commissions, lack of trading liquidity and wide bid-ask spreads, such trading is a good way to compound losses and lose a great company permanently.
            IPT went up as much as 61% in 5 weeks and has been correcting in a normal/healthy fashion for the last 2.5 weeks. The lack of upside excitement so far has everything to do with silver and the larger silver miners not yet accomplishing what gold and the gold miners have but they will soon and have been making quiet progress lately.

            Mar 24, 2022 24:08 PM

            If SILJ can avoid falling 16 cents tomorrow, it will have its best weekly close since the first week of July…

            Mar 24, 2022 24:07 PM

            Matthew those are some interesting points on the contrast in the move of Newmont in nominal dollar terms versus in gold terms. I’d imagine that is the case for most of the mining stocks then.

            Mar 24, 2022 24:13 PM

            Lakedweller2, as mentioned over on the Jordan blog, it’s sad hearing you liquidated IPT, but understood you did it for a tax loss reason and will look at re-evaluating it in 30 days after the wash sale.

            Personally IPT is my largest silver mining position and I’d feel my portfolio was empty without at least a core holding in it. I guess as they say, “beauty is in the eye of the beholder.” In this case I’d ammend that to “beauty is in the eye of the HOLDer.” (haha!)

        Mar 24, 2022 24:55 PM

        Fortuna(FSM) would be an exception, having a bad day with Taylor Dart slamming the company mostly because of dwindling reserve replacement. Really gotta question management for letting this happen year after year, not replacing reserves at most of their mines. And still battling Mexican government over San Jose.
        I’m in it with some LEAP calls mostly because of Seguela, but starting to think it could be one of those perennial disappointments like Kinross.

          Mar 24, 2022 24:21 PM

          Yeah, I’ve only got a tiny position in Fortuna that I started a month or so ago, but mostly because it got monkey-hammered down so low it seemed compelling, and I really liked my old Roxgold position due to the potential growth of those West African assets. While I wasn’ta fan of that takeover, after further consideration I wanted exposure to them again which meant FSM.

    Mar 24, 2022 24:21 AM

    Elevation Gold (ELVT) closes $22.9 million financing at C$0.53


    I used the opportunity to buy in the open market

      Mar 24, 2022 24:05 PM

      Nice to see a capital raise above the market price, as it shows people are expecting prices to move much higher.

      Mar 24, 2022 24:29 PM

      Would be nice now to have an interview with Elevation. Maybe you can check?

      I think the plan is to increase the resources and create a 100.000 ounce producer

      A 100k producer for $50 million is ridiculously cheap

      Like to understand better how they plan to spend the $22 million to reach this goal

        Mar 24, 2022 24:28 PM

        Yes, Cory will be back next week and we’ll reach out to see about getting them on for an update.

        Mar 25, 2022 25:22 AM

        I am looking forward to an interview, if you can arrange one

        Maybe you can give a notice before that we can give you our questions

    Mar 24, 2022 24:28 PM

    Price Quality :
    Gas & Oil — Gold & Silver — Market Pulse
    Revamped. More Saturday. Comments?

      Mar 24, 2022 24:33 PM

      Thanks for sharing your Max Stats process BDC.

      It looks like the dark squares captured the turn mid-month fairly well.

        Mar 24, 2022 24:32 PM

        Yes. The 15th was shown as merely ‘possible’ for too long (medium grey) because only HUI had qualified, with 4 or more saturated factors. From here on a lesser number will be acceptable, but only at turns, as can now be seen there and at Natural Gas.

          Mar 24, 2022 24:25 PM

          Thanks BDC. I’m still not sure I fully understand your system and what the saturation numbers actually indicate, but I learn a bit more each time you explain things.

            Mar 25, 2022 25:22 AM

            Timing. They now often show, at or close to real time, when short term turns occur, particularly in sectors. Of course, more significant swings are included. All with confidence.