Stagflation With Sugar On Top
In 1969, The Archies, live TV cartoon characters, released a song called "Sugar Sugar". It's really quite fitting that an animated entity ties into today's article as sugar, the commodity, is perched around a six-year high with the potential of shortfalls ever present in the world market.
Sugar is found in many manufactured food product. Along with other commodity prices, when the cost of a basic ingredient rises, the shelf price the public pays at the grocery store rises. A couple times in the early and late 1970s the price of sugar exploded higher. The reaction in the 1970s helped to add fuel to the stagflation fire. There's a good chance it is going to happen again.
Sugar is kind of a bell weather commodity. Products that use sugar, everything from baked goods to restaurant desserts to syrups to that little package Starbucks will soon be handing out instead of putting on the stand, will increase in price. Those prices are passed on to the consumer. Those consumers, already strapped with higher food bills will seek raises in their wages. It's economic effect is circular in nature so the spiral upward of one causes the other to follow.
We are back in the 1970s where Burns and Miller played havoc with rising and declining interest rates at the Federal Reserve. When they thought they had inflation under control the all too soon lowered rates. The market swings of the 1970s followed suit. Declining rates signaled that the worst was over and the buyers rushed in only to discover that stagflation was in control. Inflation increased and so did interest rates. Seems like this is exactly what this current market perceives so "Jack Be Nimble; Jack Be Quick" is becoming the traders watchword. Where's Voelker when you need him?
It's only fair to give The Archies a plug . . .
. . . after all, being cartoon characters they reflect what our elected and appointed officials are, animated likenesses of reality. Hope you enjoyed this post. I turn 68 next week; my Dad became a broker when I was 13. It’s time for me to ‘give back to all of you what’s in my head. It's not always pretty but while it's usually based on history today it's the future I'm worried about and there are some historical reasons . . . I'm a student of The Depression and the Federal Reserve . . . Allen Meltzer was too. If we're not careful that historical period could once again become our future . . . economically the worst has yet to come so hang in there . Might be a good time to buy gold . . . or Yuans.
Remember, learning how to trade is not a sprint; it's a marathon. Everyone learns at their own pace. If you pick everything up the first time through, great but if not email me at david@substack.com so we can further help..