Good Morning,

 

The Fed doesn’t get it.  The experts have missed it too.  Most of the financial talking heads are almost always behind the 8-ball.

 

What did they miss?

 

Inflation being snuffed out.

 

You see, history has taught that a growing, fully-employed economy must end with out-sized inflation.  I say “end” because what usually happens next is the Fed is forced to raise rates (the bond market always does it for them first) and “kill” the growth curve. Then, a recession sets in and creates the base for a makeover and a fix.

 

Kind of like a 1,000,000 mile check up on your truck.

 

But here is the thing:

 

First, history never met Generation Y.

 

Second, 2008-2009 created so much pain, success was nearly assured.

 

To get a sense of this normal human process, take a minute and watch this fantastic Gatorade commercial.  It’s message is a breath of fresh air for all who care to listen.  A real game-changer for some.  For others, maybe the best 1:07 spent today as the summer haze endures for another two weeks:

The Lesson?

 

Markets and economies are funny beasts.  They will twist you and turn you until your brain is fried – causing you to chase ghosts down dark alleyways in your mind.  Only to find that by the time you think you have found the reason – the problem no longer exists – or, it turns out never to have been a problem at all.

 

Case in point?  The inflation ghost.

 

The Fed is sure it is coming.  The experts have chanted of its risk for years into this “weak, stagnating recovery.”  Here is the deal:  they have misunderstood inflation and are unwilling to respect the idea than things change.

 

The tools being used today are (finally) beginning to just scratch the surface of the promises of the Internet so many were feasting on in the late 90’s.  As such, their impact and long-term trajectories are most definitely being misunderstood.

 

Add the massive force of Generation Y, fully-tooled and having been brought up on nothing but technology – and you can begin to get a sense of the forces pressing against the re-ignition of the inflation monster.

 

This is all capped off by the massive – and still growing – cash hoard sitting in bank accounts across the land, fearing anything that moves in the market.

 

How Does One Know?

 

Look no further than the bond market.  Generation Y has set the stage for years of a fully-employed economy, steaming forward on a steady clip – with rates staying far lower for far longer than currently perceived by many.

 

We are setting records in GDP output, manufacturing, finding oil, creating new tech, blasting into new highs in earnings – and yet, we fear many things – still.  Think I am kidding?  Check the stats on bond rates below.

 

First, be assured these bond boys are not fun guys to be around.  They sniff even a remote chance of a whiff of inflation, rates move up – period – Fed hike or no Fed hike:

More?

 

Also check the latest data on mortgages – they just hit new yearly lows:

This all within hours of manufacturing data and ISM data reports showing we are hitting highs!

 

And yes, right on cue, AAII Bullish sentiment was toasted by the 2-days of selling in the last week.  Note in last week’s reference to this data, I hinted that a little bit of harsh selling should snuff out the bulls quickly and the 20’s were right around the corner….and:

I hope you are getting how good all of this really is for the long-term investor.

 

Once again – more bears than bulls – by a solid margin.  And, to cap off the sentiment story, you have 72% of the crowd either bearish or “confused” – and that is all good for summer swoons becoming valuable gems instead of mortally feared events.

 

Bring on the defeat – and watch how it leads to more success for the patient investor and the Barbell Economy.

 

So, take a minute and watch that Gatorade video above again – let it sink in and thread through your mind.  Then note how big a defeat 2008-2009 was – and how much power that defeat instilled in millions who will continue to drive successful growth forward.

 

Do Your Best to Enjoy The Rest of the Haze….

 

Still a couple weeks before this all ends.  Then we can get back to the normal level of terrifying fear of all the many bad things coming at us – sure to end life as we know it.

 

Steady as she goes friends.

 

When the dust settles and everyone is back to full force, I remain confident all sorts of “bargains” will be unearthed and the process will go on.

 

Enjoy the remainder of your summer vacations.

 

Hazy as it is, we will soon long again for the days we can relax…and be chanting for the next break.

 

Travel safe, be well.

 

Remember:

 

People Drive Markets – ignore the fear-mongering as much as you can.

 

I know, it can be a head-twisting pathway at times – that’s why they call this “wealth-building” and not “fun.”

 

Focus on demographics – not economics.

 

Until we see you again, may your journey be grand and your legacy significant.