The Inflation Apocalypse: Here Comes the Next Super Cycle
Two big trends are about to collide: global warming and global re-inflation. And the result is going to create a lot of shocks and opportunity. I’ve heard people refer to the recent tsunamis, rising temperatures, floods, and droughts as the “weather apocalypse.” Whatever you call it, the re-inflation in prices combined with global warming is going to create a new super cycle in agriculture and agribusiness.
The business cycle is changing in financial markets. Currencies are being devalued. The bull market in bonds is over. Central banks are repatriating their gold. There’s massive monetary stimulus, and now there are rising prices, which should help boost earnings initially. The stock market could go a lot higher this year.
The re-inflation cycle has staying power, even through the next U.S. recession. An inflationary business cycle, product scarcity, increasing demand, and the weather represent a fundamental, long-term uptrend for agriculture—the final leg of the commodity price cycle.
The stock market’s recent breakout was very powerful. Wall Street is now ahead of first-quarter earnings season. Before the next big crash, I think the stock market will have one final push higher—a lot higher than current levels.
I absolutely agree with Jim Rogers’ view about agriculture. But hey, even Jim has something to sell you. The re-inflation definitely has consequences, but global monetary stimulus is on a tear. And as an investor, it doesn’t pay to fight it.
The stock market is holding firm ahead of first-quarter earnings season. Its performance is very similar to the strength experienced during the first four months of last year. “Sell in May, and go away?” I think it’s a very good possibility again. But the re-inflation/agriculture cycle is a multiyear trend.
The most important thing to note as an investor is what corporations say about their businesses. Gold, silver, oil, and natural gas are all taking a break, but the prices for agriculture crops, like corn, canola, oats, and soybeans, remain lofty. The price for live cattle futures just bounced off a multiyear high.
On top of social and financial unrest in the eurozone, due to its sovereign debt crisis, price inflation is about to be added to the mix. This will be helpful, initially, for stocks, earnings, and Wall Street. But there is a dangerous side effect, and central banks around the world will be caught between a rock and a hard place. Withdrawing monetary stimulus is going to be difficult.
It’s already time to add the entire agriculture group to your radar. It’s still not in the mainstream spotlight, but agriculture prices are holding firm. Population growth, rising incomes in emerging markets, product scarcity, monetary stimulus, and weather all put the re-inflation business cycle firmly into this investment theme.