Occam’s razor tells us that a simple answer to a problem is usually the best answer. The simple and basic answer to today’s perplexing markets is that the world is in a condition of deflation, following years of inflation since World War II. The US Federal Reserve has chosen to fight the deflation trend by creating trillions of Federal Reserve notes out of thin air. The Fed has attempted to produce its desired 2% inflation. It has failed.
Europe is also suffering from deflation, and Mr. Draghi, head of Europe’s Central Bank, has declared that the bank will do “whatever it takes” to hold back deflation. The counterforces of inflation and deflation have resulted in the schizophrenic markets that we now see.
We have experienced many markets with the Industrials and Transports closed in different directions. When the Averages disagree, wise men step aside. For many weeks now I have advised ... Log in or subscribe to continue reading.
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