So, the Fed is looking for a soft recovery.
The central bank basically sees no inflation at all on the horizon.
They’re showing no imminent sign of ending their ultra-easy money for an extended period any time soon.
But my message to them and to investors is this: Are you sure about this low-growth recovery?
Commodity charts are showing a V-shaped rebound. So are the latest ISM reports. Retail chain sales may actually be up 10 percent in March according to the latest reports. 10 percent. And don't forget growing household employment, up 1.1 million jobs in the first quarter according to the March report last Friday. And by the way, even non-farm corporate payrolls in March rose about 220,000 including prior upward revisions.
We know that money remains very loose with a negative real interest rate and a bloated Fed balance sheet. We also know there’s a global boom going on among the emerging countries. So the key issue is how long will this boom last?
Here’s my concern: we could get the big boom between now and the end of the year. On the other hand, higher tax rates next year and beyond may very well stifle this boom.
But between now and year end, I think the Fed may be missing an emerging story that suggests much stronger growth, with a big dose of commodity inflation thrown in. That is the risk right now.
You see, we are not operating a supply-side, free market model. What I wish for is sound money and lower tax rates. Instead, what we're getting is easier money and higher tax rates. So my fear is that we’re setting up a temporary boom which may be good for stocks and jobs in the short run. But all of this may backfire at some point, perhaps next year. We are on the verge of much higher tax rates and potentially higher interest rates. That would confound the whole scenario.
But for now, let’s take a look at this budding market boom story. The first thing I want to focus on is the boom in commodities.