James Turk Issues Dire Warning As Fed To Monetize ‘Everything In Sight’
Today James Turk issued a U.S. dollar hyperinflation warning. Turk warned that the Fed is going to “monetize everything in sight.”
James Turk: “There is a very important change taking place in the stock market, Eric. While subtle and little noticed so far, this change is starting to stick out like a sore thumb and can no longer be ignored…
Although the Dow Jones Industrials and other major indices are making new highs, the banking sector is glaringly underperforming. This divergence is clear from the following chart showing the NYSE Composite Index of all stocks on that exchange compared to the sub-sector of companies involved in banking and finance, the NYSE Financial Index.
I’ve put these two indices at the same starting point ten years ago. The comparison presented at the bottom of the chart shows that the NYSE Financial Index is underperforming the overall NYSE Composite by -57.5%.
So this bull run into record highs for the Dow and other averages has done little for financial stocks. The NYSE Financial Index is still below its dead-cat-bounce recovery high that ended in 2015. In fact, is still about 35% below its record high reached in 2007.
Also, note that the NYSE Composite Index has not made a new high, so even it is diverging from the Dow Jones Industrials. The important point here is to distinguish between those stock groups that are moving higher from those sectors that are lagging.
Shares of companies owning real assets – like commodity producers – are glaringly diverging from shares of companies owning financial assets – like banks.
Dire U.S. Dollar Warning
The reason this is important Eric, is that this divergence is an early warning sign that the dollar is headed toward hyperinflation. When you look at countries where the currency has hyperinflated – like Zimbabwe or more recently, Venezuela – their stock markets showed this same divergence we are now seeing on the NYSE.
The conclusion is obvious. Avoid shares of companies who assets consist of financial assets in the hyperinflating currency, and instead own shares of companies with a lot of tangible assets.
I have been forecasting hyperinflation of the US dollar for some time because there are just too many new dollars being created by the Federal Reserve. So it has been my expectation that the US dollar will be destroyed in a hyperinflationary blow-off, but it hasn’t happened – yet.
Timing is always problematical and impossible to predict. So I have been focusing more on the outcome and road signs along the way that we are indeed headed to the destruction of the dollar’s purchasing power.