This Crazy Chart Shows We’ve Been Here Before… So Be Prepared

Andy Snyder|March 26, 2021

We got more bad news last night…

More prices are going up.

Mrs. Manward, as you may know, runs quite a flower operation from our property. It’s acres of beauty… and hard work.

Because of it, she’s quite connected in the flower world.

Last night, we got a note from a leader in the industry.

Prices are rising, they said. There’s not enough product to meet demand.

Be prepared, they said.

It’s the same story we’re hearing across the economy. There’s too much money chasing too few goods.

Let’s add up all the shortages that we know of so far…

Factories are closing down because there aren’t enough computer chips.

Home prices are soaring because there’s not enough inventory.

Plastic shortages have led to record-high prices.

Coffee is in short supply, and prices are surging.

The price of building materials is soaring because there are too few processors.

And now… a sideways ship has gummed up just about all of global trade.

But still, the folks in charge say it’s temporary.

Here’s why they are wrong…

This Time Next Year

Despite rising prices, demand is not slipping. In fact, the National Retail Federation just predicted that retail sales will grow by as much as 8.2% this year to more than $4.33 trillion.

“We anticipate the fastest growth rate in GDP since 1984, and we expect consumers to fuel that drive,” said the folks at JLL, a major commercial property manager.

“Nominal retail and food services sales stand a good chance of setting a record for calendar-year growth, and real retail and food services sales could reach the fastest calendar-year growth rate since demobilization at the end of World War II in 1946.”

Of course, we’re not ignorant. We know we’re coming off one of the biggest slowdowns in history. It’s why the Fed isn’t concerned. Folks are just making up for what they lost.

It’s true. It’s fair logic.

But what’s the next step? What will happen next year when the wonks and the politicos sit down and look at the numbers?

“Mr. Biden,” Powell will say has as he huffs and puffs into brown bag. “Prices have fallen sharply. The year-to-year numbers are falling apart. Deflation is at the gate.”

“Golly,” the president will respond. “We need more stimulus.”

And so it goes… the circle of death continues.

It sounds too simplistic, right? Our leaders can’t possibly be that shortsighted, can they?

They sure were the last time federal spending got this crazy.

Been Here Before

Right after World War II, debt was soaring and the nation’s economy was reshaping itself. The folks in charge purposely let inflation run higher than it should.

Real interest rates (that’s the headline rate minus the pace of inflation) were negative… just like they are today.

They stayed that way for years – quietly helping to pull Uncle Sam out of his massive wartime debt mess.

It was good news for investors. The chart back then looks quite similar to what it looks like today.
It backs our Dow 100K thesis. In fact, it perfectly portrays the potential in stocks. If this analogy continues for the next seven or so years, stocks will double once more… and then double again.

We won’t show you a chart of what happened next, though. Too gruesome.

The whole thing got cut in half… and then got sliced down the middle once again.

An entire generation suffered.

Even so, the textbooks say stocks only go up in the long term. Hmmm… tell that to the folks who invested their life’s savings from 1966 to 1982 – when the Dow went from more than 8,000 to less than 2,200.

But something quite curious did go up in price during that time… gold.

Your Opportunity

Just about the time stocks topped out, the government gave up on its efforts to control the price of gold. With the free market in control, prices went from $35 per ounce in 1966 to more than $670 in 1980.

Is it any wonder then that some of the world’s biggest (and smartest?) investors are turning to what the Fed just called gold’s digital equivalent?

Our mailbag is loading up with questions about Bitcoin and crypto alternatives.

Perhaps the most robust line of questioning comes from reader S.B.

He’s crypto-curious… but is, understandably, having a tough time with it all.

Digital Currency – I have a terrible time with this concept.

• I’ll use Bitcoin as an example – it is not really anything I can touch.
• If I can’t touch a Bitcoin, it must be something that is traded virtually.
• If Bitcoin is worth anything, there must be a finite supply.
• If Bitcoin is worth anything, then I have to trade something to get Bitcoin.
• If Bitcoin is virtual, I have to use the internet to trade something for Bitcoin.

So let’s say I use my credit card to pay for $1,000 in Bitcoin. How do I use this $1,000 in Bitcoin to trade goods I need to live such as food and shelter?

Do you have a guide you can send so that I can learn about digital currency?

These are all great questions. We don’t have the space to answer them all. But, as S.B. asks for, we do have a guide that answers all of these questions.

Here’s a link.

But before you click it… here’s our challenge to you.

Try this. Replace each use of “Bitcoin” above with the word “dollar.”

Your perspective will change.

As a fiat currency, the dollar isn’t really anything we can touch. Sure, we may be lucky enough to have a little green piece of paper. But it’s still no more than a promise from a fella who makes a lot of promises.

Is there a finite supply of the dollar? Hardly. They just printed $4 trillion more of the stuff.

But Bitcoin and many cryptos have a cap. There can be only so many.

Is a dollar worth anything if we don’t have to trade something to get it… you know, like the fact they’re stuffing thousands of dollars into each mailbox on Main Street?

There’s no free Bitcoin. You’ve got to work for it… or trade something of (increasing) value for it.

Our point is simple and clear.

The current economic situation looks quite familiar. As a country, we’ve been here before.

Prices will rise. The folks in charge will refuse to make the tough decisions. But Mr. Market never fails to step in when he needs to.

Ride the wave higher. It will go higher… much higher.

But be prepared with an alternative.

You will need it.