VRA Investment Letter: More Strong Jobs Data. No, Economic Growth Does NOT Cause Inflation. Gold/Silver/Miners; This Move Could Be Special.
/Good Friday morning. Breaking: the jobs report for April is in and it’s another beat to the upside. 117,000 jobs were created, beating the estimate of 65,000, with private payrolls almost doubling previous estimates. The unemployment rate stays unchanged at 4.3%. For a comp, take a look north at our neighbor Canada, which just reported a miserable unemployment rate of 6.9%. If you’ve been with us a while you know that one of our big calls from the inauguration was that “The Trump Doctrine” (free market capitalism meets the Trump Economic Miracle) would severely punish our competitors (Europe, Canada, etc). Folks, Canada is in real trouble…we continue to send positive vibes to our friends in Alberta as they attempt to leave this mess behind.
VRA Bottom Line: another solid jobs report…get ready for many years ahead of same.
Economic Growth Does NOT Cause Inflation
We want to prepare everyone for what’s directly ahead, as new Fed Chair Kevin Warsh soon comes into the job. Trump, Bessent and Warsh are on record (often and correctly) as saying that "economic growth does not cause inflation”. Of course they are exactly right. Why does this matter now? Look below and you’ll see that the Atlanta Fed is now predicting Q2 GDP growth of 3.7%, which is much higher than mainstream economists are forecasting (coming off of a 2% Q1 GDP).
Our target for full year GDP growth remains 5% + and we expect we’ll first see that reading in late Q2 or early Q3, as the Trump Economic Miracle and Innovation Revolution begin to display serious economic growth. Of course, this is the reason our markets are in full-on melt-up bull market mode (the markets know what’s coming).
Here’s what we want to prepare you for; as the economy begins to surge, loud voices in the MSM...combined with the banking cartels most vocal Trump critics, including J Powell and his fellow DS economists….will be seen everywhere on TV, social media and print media, screaming “the Fed can’t cut rates…look at this economic level of growth. The Fed should be hiking rates instead!”. As sure as the sun will rise in the morning, this exact message will soon come from the never-Trumpers and critics that simply don’t want the economy to flourish (because once Fed rate cuts pick up speed, led by the housing market, both the economy and markets will act as if on steroids).
Here’s the truth about economic growth and inflation; only one thing causes inflation….money printing! Economic growth itself is disinflationary or even deflationary. If you grow real output (economic growth) while money supply stays the same, prices HAVE to fall. More stuff chasing the same dollars pushes prices down. That’s why productivity booms historically bring falling prices when the money supply isn’t messed with.
If you understand what I’ve written above, then you know why we’re so committed to our forecast of plummeting interest rates. In the near future, what I’ve laid out above will be repeated often from Warsh, Bessent and Trump. And the end result will be glorious for the US, as rates decline and the economy lifts off (taking the markets with it).
New Atlanta Fed Forecast; Q2 GDP at 3.7%
Gold/Silver/Miners; This Move Could Be Special.
Below we see a near-test in GDX of the 200 dma with each moving average now curling higher. This is one of our favorite set-ups with the VRA System. In the next couple of days we should get a new MACD buy signal as well. Significant higher low from the Q1 shakeout (war). Over the last year when GDX has approached this level of OB the end result has been a sharp and extended move higher.
We think this is important; the shakeout in gold (below) and silver (below) kicked off roughly 1-month before the war begin. The markets are the best discounting mechanism on the planet and commonly telegraph something important coming our way. My spidey senses tell me that certain inside sources knew that war was coming, and following gold and silvers parabolic move higher (gold to $5600, silver to $121), both were ready to have some air taken out of their prices. Just a perfect set-up for profit taking (also at EOBOS). Importantly, both gold and silver bottomed prior to the war ending (along with Bitcoin/TAO), making them great FIFO set-ups and meaning THE lows are in. The move higher coming in gold/silver/miners has the potential to be special.
On Wednesday, silver and GDX were both up more than 7%, while gold was up “just” 3%. We want to see the miners and silver leading higher (big tell). Even more importantly, the 3 “war tells” of interest rates, the US dollar and oil are now each moving sharply lower. These are the exact tells that sent this group sharply lower, when the inverse was true. Our call remains that the primary trend of our 3 war tells is now “lower”, which should put a low in place for PM’s and miners.
We remain extremely bullish on this sector, and this week, we added a new position in this group (you can find out all of the details with our 14-day Free Trial at VRAletter.com)
Until next time, thanks again for reading.
Have a good weekend all.
Kip
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