Every summer, the Fed throws a big party at Jackson Hole, Wyoming. The Fed chairman typically gives a speech about the money matters of current interest, and anyone who is anyone in the markets-and-finance biz gets invited (Source). “The Kansas City Fed will host its 45th annual conference starting today at the Jackson Lake Lodge in Wyoming’s Grand Teton National Park. The three-day meeting brings together economists, academics, U.S. Government officials, and news and financial media to discuss the economy in a gorgeous setting.”
I’m guessing if you say something to piss off the Fed – say you ask an untoward question at a press conference – they toss you right off the list. And don’t write an ugly news article either. Just saying.
So, judging by the sharp plunge in the equity market on Friday during Powell’s speech at Jackson Hole, there was still a strong expectation built into prices that this “pivot” was going to appear. It appears as though retail investors “Ma & Pa Kettle” had been repeatedly told by people in the financial entertainment biz that the Fed was getting ready to print money any moment now. Wolf calls this group “tightening-deniers” (Source). Instead, Powell threw a bucket of cold water on poor Ma & Pa Kettle and their bullish hopes for a near-term pivot:
Powell warns of ‘some pain’ ahead as the Fed fights to bring down inflation (Source – CNBC)
In his annual Jackson Hole, Wyoming, policy speech, Powell added that higher interest rates likely will persist “for some time. The historical record cautions strongly against prematurely loosening policy.”
The remarks come amid signs that inflation may have peaked but is not showing any marked signs of decline. Powell said the Fed will not be swayed by a month or two of data.
“The beatings will continue until morale improves.” And/or “the rate increases will continue until the shortages in energy/supply chains/labor have been addressed.” Do interest rates drive shortage-inflation? Not so much. Ok, maybe some of the inflation is money printing. But a huge chunk is an energy shortage and related “sanctions” on evil Putin. Another chunk is due to China, “Zero COVID”, and the resulting supply chain issues. Rate increases can’t possibly fix either issue. And I believe the labor shortages are due to the 2.6 million Americans that have been newly disabled by “something.” Like “long COVID”. Or maybe something else. Regardless, rate increases won’t heal the newly-disabled people either.
So, it was another “No Pivot For You” week. The drop in equities on Friday – the day of Powell’s speech – was a huge 3.49%, with a very ugly candle print, showing a close at the dead lows. The sector map underscored the bearish sentiment: the risk-on sectors did worst, with tech (-5.88%) and discretionary (-4.92%) leading the market lower. That’s not what you want to see if you’re long. The outcome on the SPX daily chart can be seen below, revealing a “chance to go short” at the close on Thursday, the day before the meeting. Which I (sadly) didn’t take. I guess I’ve been thinking about other things. Gad, it really was an awful candle print.
Note: that doesn’t mean I’m going to run off and go short equities Monday at the open; who knows what the Banksters/Fed will do to wang prices around in the overnight session? The pros told me to “short the rallies” when in a downtrend. Speaking of which – notice how SPX touched the 200 MA (green line) a few weeks back, and that marked the top of the recent move? It is almost like Big Money used the touch of the 200 MA line as their “shorting the rally” entry point. Pity, I just noticed this today!
Crappy debt (JNK) confirmed the No-Pivot risk-off plunge in equities on Friday, dropping a big 1.59% and breaking down below the 50 MA (blue line), making a new 7-week low. Who wants to own crappy bonds in about-to-die companies with Powell on the interest rate-raising warpath? JNK remains a risk-off coalmine canary. The candle print was a “bearish engulfing” (a technical candle pattern) which was assessed a fairly negative (48%) rating by my model. Mostly, the candles aren’t that important; this one might be. Anything approaching 50% on the daily candle models are interesting. Plus, the close below the 50 MA (blue line), and the new low, are both bearish indicators also.
The futures markets are projecting a 75 bp rate hike on Sept. 21, and a 50 bp rate hike on Nov. 2 (Source- CME). This reinforces what the equities and crappy debt are saying: No Pivot For You.
There were a number of economic reports this week. I’ll list a few of them here:
- Personal Income [+0.22% m/m]
- Durable Goods [new orders: +0.42% m/m, shipments: +0.36% m/m]
- Median New Home Sales [price: +5.58%, supply: 11 months, # sold: -14% m/m, -42% y/y]
- Auto/Light Truck Sales +2.39% m/m [from a very low level]
Analysis: both personal income (PI) and durable goods (orders = next month, and shipments = last month) remain strong – relatively near post-pandemic highs – although neither series is adjusted for inflation, which is a fascinating topic all on its own.
See the chart below of PI divided by PPIACO, yielding (my attempt at) an adjusted-for-inflation personal income (PI) number using the ancient producer price index (PPIACO) dating back (unchanged) to 1913. Notice the plunge in what I will call “real personal income” during the recent 18 months of “Biden-flation?” Yow. Down roughly 20% (100B to 80B). Peak-to-trough (when we include the government stimmy checks) the “real personal income” is actually down by 30% from peak. Mostly, I suspect, the big drop in PI is about energy prices. Energy, after all, is civilization. Due to PPI-measured inflation, your “real personal income” buys less now than it did back in 2015.
Auto/Light truck sales remain at a very low (recessionary) level, and the plunge in the number of New Homes Sold [-42% y/y] and the jump in Months/Supply [to 11 months!] suggests that the buyers have utterly fled the new home market, while prices (for said new homes) set by the sellers have yet to meaningfully react.
Looking at the historical case for a recent property bubble (remember all that fun we had back in 2008?), prices are the last to correct. Usually, the market sees a steady move higher in “months of supply” (the buyers slowly go on strike) and – eventually – prices correct, once the sellers figure out that the party is over and they need to adjust. Right around the time supply peaks is when the low in price is reached. Where are we now? We have only seen a slight price decline after a rapid and dramatic move higher in supply; it looks like there is further to go in this process. Given the very modest reaction in prices, I suspect we have not yet seen the high in supply.
Here are some items I like to watch; weekly moves were:
- Gold -13.10 [-0.75%]
- Silver -0.24 [-1.30%]
- Miners -0.22%
- USD +0.60%
- Copper +0.03 [+0.89%]
- Crude +2.62 [+2.82%]
- Gasoline -0.11 [+4.16%]
Gold didn’t do all that badly, given the new high in the buck. It certainly could have been worse. All the damage to gold happened on Jackson Hole Friday.
We saw yet another 20-year weekly closing high for the U.S. dollar (USD), which tends to be bad for the metals. This was caused (more or less) by the EUR/USD (FRED:DEXUSEU) dropping through 1.00 down to 0.997, its lowest weekly close in 20 years. For some reason, my model thinks the Euro will reverse real soon now – although you can also see the model is often wrong. “Buying the dip” (blue dots) when it probably shouldn’t. Ah, AI. If only I had a better underlying architecture for my model than a neural network. The 20% plunge in the currency since April tells us something is up in Europe. And, it isn’t particularly good.
There was a large drop in the Strategic Petroleum Reserve this week – some eight million barrels – which sets the “empty SPR” date just 56 weeks in the future. If it’s one thing the Biden-Handlers know how to do, its how to pillage public resources in an attempt to remain in power. They go from raiding a former President’s home with a gang of armed FBI agents to stripping national public emergency oil reserves in order to try not to lose a midterm election. Or – maybe – this is all for the benefit of the Chines Communist Party. It’s hard to say. My guess is, “10 held by H for the Big Guy” was one of the cheapest purchases the CCP ever made.
Besides the potential corruption, here is another reason as to why the feckless Biden-Handlers are shipping America’s SPR off to China. This week marks a new 30-week low for gasoline (gasoline contract is RB, at the CME). Prices dropped -0.11 [-4.00%] to 2.68. “See? By selling America’s oil to China, we lowered gas prices right before the election! Keep the Biden-Handlers in power!”
If you get the sense that draining America’s SPR (or armed raids on former Presidents) for utterly selfish, remain-in-power reasons irks me, you’d be right. It is an indicator, and not a good one, of where “the line” has been moved. The prior agreement between the parties to maintain emergency oil reserves to preserve “the common good” – dating back to 1982 – no longer exists. This is End of Empire stuff. Effectively, Caligula-Biden-Handlers have decided to loot Rome’s treasury to throw a sex party for their friends “just because they can.” Perhaps, in time, the U.S. Praetorian guard will finally step in and do something, but that too wouldn’t be such a good sign. How much would they auction the presidency off for? Absent a brisk set of “legal consequences” for the traitors involved, it really is the End of Empire.
We have not been here before as a nation, and I do not think it will have a happy ending. As with most everything done by the Handlers, their actions are short term-focused, executed on a complex system, and will probably end up backfiring in some spectacular and impossible-to-predict fashion. We are definitely living through history.
U. S. Politics:
DHS Terminates Disinformation Governance Board, Months After ‘Pause’ (Source – Epoch Times). Sign of the Times. A Biden-Handler Bridge Too Far.
Fauci resigns; with this many rats jumping, questions as to the seaworthiness of the ship must be asked (Source – El Gato Malo).
Video: Fauci Claims Lockdowns Have Not “Irreparably Damaged Anyone” (Source). Turns out, Fauci didn’t push the lockdowns. And, they didn’t hurt anyone. Fauci denies everything. They’re attacking Science!
CDC Director Lays Out Overhaul of Agency After Pandemic Missteps (Source – Bloomberg). Time for a new agency, with even more authoritarian powers!
Study: Pfizer COVID pill showed no benefit in younger adults (Source – AP). “… people between the ages of 40 and 65 saw no measurable benefit, according to the analysis of medical records.”
Anyone up for a head-to-head trial on Ivermectin + Hydroxychloroquine vs. Paxlovid for the 40-65 group? Anyone? I’d say “crickets”, except I’d probably get a package of processed food designed by Mr. Gates and his insect-producing team.
Trump White House exerted pressure on FDA for Covid-19 emergency use authorizations, House report finds – The report by House Democrats examining the pandemic says Trump officials sought vaccine approvals to sway voters before the 2020 election (Source – Politico). Note: the article mostly talks about Hydroxychloroquine, not the vaccine, in spite of the nudging by the subtitle.
Donald Trump’s Vaccine (Source – Tucker). I posted this [13:00] video yesterday, not sure if everyone saw it. This lays out “the Trump-Vaccine Pivot” that the previous article just hinted at.
Now that Fauci is bailing-and-denying, and Walensky is hinting at an organizational name change, and Fox anchors are (apparently) now allowed to report negative news about the Holy Shot, the Bad Orange Man is explicitly being set up to take the blame for said shot. After only two years, hundreds of thousands of dead Americans, and millions of disabled Americans – the greatest tragedy since the Civil War – my friends at Fox have now actually started to notice the Holy Shot may not be quite so wonderful. (Amirite, Hannity?) Possibly the government money to flog the shots is drying up (Source)? For me, Tucker’s video may mark a key turning point in Pharma/Sickcare’s vaccine wars which successfully corralled the U.S. government as well as the MSM.
Unintended consequence: if the counter-reaction to this deadly propaganda campaign goes to its logical endpoint, I can’t see how the vaccine industry – in its current form – survives. Pharma/Sickcare may have destroyed Andrew Wakefield’s career back in the day, but I suspect he will end up having the last word (Source – Steve Kirsch). Eventually.
China drought causes Yangtze to dry up, sparking shortage of hydropower (Source – Guardian). “Last week, Sichuan suspended or limited power supply to thousands of factories and rationed public electricity usage due to the shortage. Toyota, Foxconn and Tesla are among companies reported to have temporarily suspended operations at some plants over the last fortnight.”
Note: the 25-million-person city of Shanghai, with its large industrial base – now temporarily turned off – is located in hydropower-heavy (78% hydro) Sichuan. More “supply chain” issues. And, I wonder how those electric tricycles are doing?China’s power supply, energy structure tested in extreme drought amid transition to cleaner energy future (Source – global times.cn). Nationwide power generation: 16% hydro, 68% coal. Note: Hydro doesn’t work so well during droughts. (Drought + Hydro = No Electricity For You!). The CCP narrative: “Climate Change!”, regardless of the astonishingly high national coal use for power generation.China’s Growing Water Crisis; A Chinese Drought Would Be a Global Catastrophe (Source – Foreign Affairs). Some factoids in this long, informative, relatively alarming article:
- industrial facilities: account for over 65% of electricity use in China
- agriculture: accounts for over 60% of China’s water consumption
- groundwater: 30% being deemed unfit for human consumption and 16% deemed unfit for any use
- China uses nearly two and a half times as much fertilizer and four times as much pesticide as the United States does despite having 25% less arable land. [Think maybe that pollutes groundwater?]
- For decades, Beijing has generally chosen to conceal the full extent of China’s environmental problems….This lack of transparency suggests that an escalation to acute water distress could be far closer than most outside observers realize – increasing the chances that the world will be ill prepared for such a calamity.
My summary, there are three interlinked problems: power generation (coal & hydro) requires water, agriculture requres water, river transport requires water, and China started out highly deficient in usable water – the nation has less water per capita than Egypt – with the underground water tables falling more dramatically than the Ogallala Aquifer in the U.S. China’s water-margin-of-safety may be surprisingly narrow. A serious drought in China means famine, less power, no globalized industry, and no river transport. Naturally, the impacts of this will NOT stay in China – it will affect food prices and supply chains driving prices higher irrespective of Powell’s rate increases.The China Situation Isn’t As Bad As It Looks. It’s Far Worse; The International Criminal Conspiracy of “Change Through Trade” (Source – Senger). The author draws a parallel between “how the Nazis came to power funded by global elites” with how China and the CCP came to its current position. I’ve always wondered how Germany was able to secretly rearm post WW1. Senger explains, and relates it to the CCP and the past 20-30 years. Long, but interesting historical context. And the story is not yet finished.Founder of China’s Huawei urges focus on cash flow, survival in downturn – media (Source – Yahoo). The global economy would continue to decline over the next decade, while war, the “continued blockade” from the United States and the COVID-19 pandemic would leave “no bright spot in the world” in the next three to five years, Yicai cited Ren saying.The well-connected founder of Huawei is blessing us with specific numbers for what might be the WEF/CCP planned economic decline schedule: 3-5 years of engineered global economic doom and gloom. Do you think maybe Mr. Huawei (Ren Zhengfei) has been to meetings we haven’t been invited to? When a deep insider gives us numbers, I pay attention. He’s probably seen the project-plan. You can’t give a ship-date for a product without a project plan.
So, I’m going to go out on a limb and declare the beginning of the end for the “vaccine” narrative. At the same time, we are in the early innings of the WEF/CCP planned economic decline campaign, which may be scheduled to last for 3-5 years. In the U.S., the Fed’s lack of a pivot (“inflation!”) is our mechanism of planned decline, while the crushing of German manufacturing through “No Natgas For You” is perhaps just the start of what is planned for our friends across the pond.
And, there’s the wildcard of a serious drought in water-starved China. Then again, it wasn’t so long ago they were talking about the Three Gorges Dam being busted by too much water, so we can’t extrapolate disaster from where we are today. But it’s good to keep the “drought” issue (along with the endemic, relatively severe and impactful structural water shortage) in mind, just in case it continues.
I believe a more official denoument of the vaccine may be coming up shortly, possibly because the vaccine promotion money has recently dried up. Fauci has given us a clue how they might attempt to handle it: “I never said the vaccines would work, and besides, they work great, and there are just very, very rare side effects! Get boosted! I’m Science!” Or something. They’ll lose the middle, while the Vaccine Church faithful go for it, but that’s probably good enough at least for now.
A general realization about the planned economic decline is probably still years in the future. People will awaken to what is going on in their own time. But, the severity of the impacts will definitely cause a backlash. Will the WEF’s campaign of engineered poverty kill more people than the shots? It sure could. And if the project-plan for the engineered economic catastrophe is saying 3-5 years, just imagine what that sort of decline will do to (say) housing prices. Perhaps: “you will own nothing.”
That’s it. As always, this is just my best current guess.