A little too quiet

This was a quite week on all fronts, without major evolutions: warmongering rhetoric, government spending and slow meltup in Equity markets.

Here are the couple of things that caught my attention though ...

Geopolitics

• Russia's head of FSB affirmed that U.S., Britain and Ukraine are behind Moscow's terror attack (Reuters). The question is not really if it is true or not, if it is propaganda or not. The issue is the situation is still escalating, until the point of no return will be reached. And all governments seem to be comfortable with that, sure they are to win a potential conflict. Only one side is right though.
• France asked 45 foreign countries for military and police support to boost Olympics security (Reuters). For a country willing to fight with Russia ...

• An update on major BRICS trio (Russia, India, China) official gold reserves (1940-Feb2024, Tonnes)

It is clear that after 2008, BRICS wanted to protect themselves from a financial economic system seen as toxic on which they have no control on.

Economy

The $1.2 TRILLION spending bill is not only providing government funding, but also, among others:

• $850,000 for a gay senior citizen home in Massachusetts
• $15 million dollars for Egyptian college tuitions
• $400,000 for a group that helps teens hide their gender
• $500,000 for an anti-racist nature appreciation group at the San Diego zoo

This is why these bills are shared at 2am before a vote the same day, to ensure no one has the time to read and ask questions.

Do not laugh they’re doing this with your money !

US debt issuance is at peak levels

US issued as much deb this quarter as it did during Covid, in a "soft landing" non crisis period ...

This has to be correlated with debt service now eating nearly 2/3 of individual income tax. Americans are not paying taxes to build infrastructures, schools, or whatever could benefit to the US citizen: Americans pay taxes to pay the US creditors: Wall Street, Japan, China, …

There is only one outcome from this situation: printing US$ to pay the debt (this is a default), trigger hyperinflation (another form of default), and sovereign debt crisis.

We've seen the hyperinflation cycle before, and its consequences: Germany, between WWI and WWII

Personal interest payments excluding mortgage interest are about to break above 2008 levels, rising 10x faster than 2008, at 3% of personal consumption.

Consumers are "fighting" inflation with debt. Simply unsustainable!

Still, the Fed is expected to cut rates 3x this year, with the first cut coming in June, when:

• S&P 500, Dow, Nasdaq: All-Time Highs
• Home Prices: All-Time Highs
• Bitcoin: All-Time Highs
• Unemployment Rate: 3.9%
• Inflation (CPI): 35 straight months above 3%

The Fed/Govt have chosen what they perceive to be the only politically acceptable solution (to be re-elected): let the average American die with inflation, and blame someone/something else, or even manufacture the excuse (where we start talking WWIII again ...).

Stagflation (inflation and recession) is here:

According to the Richmond Fed, manufacturing contracted faster in March as shipments fell, new orders plummeted, backlogs and capacity utilization nosedive, and job gains evaporate.

Oil prices are rising again. The OPEC remains committed to production cuts and global demand forecasts are being raised. Non-OPEC production is at record highs and oil prices continue to rise. Looks like the end of fossil fuels is not for tomorrow ...

Also looks like the Fed won't receive any help about inflation here either.

Markets

David Rosenberg appears to be a economist who still got common sense, and declares "The stock market is at odds with what is going on in the economy".

He added: "The latest market frenzy has shades of July 2007, when stocks were caught in a swift decline just three months later, the mania fueling gains is beyond the extreme."

I'd add that 2024 so far feels like a late 2017, Jan 2018 melt-up with Equity volatility compressed, to only result in a massive volatility event in Feb 2018.

The VIX is now hitting its historical lows

With a VIX term structure intact so far:

Oil now up 17% this year and above $80/barrel again (ETF price below)

However, Oil has been evolving in a wide range since last summer. It will be interesting to monitor if it breaks out on the upside.

Gold continues its ascension towards new highs

And Bitcoin is up about 18% over the last month.

Oil / Gold / Bitcoin show the rise of hard assets/anti inflationary assets.

Even the Equity markets can be considered hard assets to store value, rather than fiat, in periods of inflation.

Cash is definitely trash !

See you next week for the LIVEs !

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