The majority see inflation as rising prices, primarily in the necessary things we need to survive and/or live a functional life. The minority - schooled in Austrian economics - see inflation for what it really is, an increase in money supplies relative to 'things' that money would buy.

Some people read this blog, sense a negative tone and automatically think 'another perma-bear'. But that is not the case. I am bearish on the system yes, but not on nominal prices of many assets. How can I be when I am what some would call an 'inflationist', meaning I believe inflation is a systematic and willful tide designed to lift as many boats as possible with some boats rising much more than others. Hence my strong bull status with regard to the precious metals markets, and in the most intense phases of the great and ongoing inflation regime, commodities, resources and other areas vital to modern life.

Then there is the stock market. Under-performer that it is, the market defied those with a net bearish stance from 2003-2007 and it was all due to the need for newly created money and credit to go somewhere. The conventional financial services industry generally offers its clients a choice; stocks and bonds. Hence, a huge portion of new money was allocated to conventional stocks. As most precious metals and commodity traders know however, the highest percentage of funds go to those assets that stand to benefit the most by inflation born of policy.

The bull market out of Armageddon '08, which NFTRH originally projected to be nothing more than a powerful rally to reset unsustainably negative sentiment, has dragged on much longer than anticipated. But I want to quote NFTRH13 (dated 12/27/08) for perspective:

"At this point, my personal plan holds that a bear market rally is beginning as the markets grind out a bottom. The rough target for the S&P500 is in the 1200 area. The plan holds that the gold miners have begun a new bull market; one that may eventually make heads spin."

Specifically, what interests me is that I could so coldly target 1200 on the SPX and then allow ongoing noise to interfere with such a nice, clean and early projection. Such are markets, and such are human beings. We all should take every day as an opportunity to learn. For the record, NFTRH is and has been carrying forward two primary scenarios, one of which calls for a significant decline to major support well above the 2009 lows, before new highs for the cycle above 1200.

The current chart shows the situation. We have been watching a 'bull trigger' point on the SPX for many many months now in NFTRH. The broad market continues to hold above this point. MACD is above zero and the slower TRIX smooths things out and provides a clear picture of a cyclical bull market.

Yet still, I must caution that risk is very high right now (on a risk vs. reward basis) even as money creation (inflation) continues to float this boat. The above excerpt was written when I was bullish and every contrary bone in my body was saying "FADE THE FEAR". Things are wildly different now and the down-triggered TRIX argues a correction (within a cyclical bull) can come at any time.

But in an age of inflation by policy, a net bearish case is iffy at best. We are not going to experience a genuine deflation and now, with the t-bond threatening to break down, for the first time in decades there is a viable chance that inflation is going to break down the barn door in what would be a return to the casino mentality that drove the 2003-2007 cycle.

So yes, a correction can come at any time, as we await sentiment readings that should once again come in line with the very bearish levels that registered in January. Pending this correction however, it will be wise to set up for investment in the areas that usually benefit from too much manufactured money, devoid of productive origins, and seeks its way into assets. In other words, the next inflation problem is likely to be a whopper.