Looking Backwards …
LB #1
So this last week has been a doozy. Last week the Japanese government tried raising interest rates into their economy that is in a recession. I told you that we tried a similar thing and it led to the great depression. Well the stock market in Japan dropped about 20% in a three days culminating with 12% on Monday. Stock markets were down across the globe and then as predicted the Japanese were forced, by whom unknown, into a U-turn.
This from ZeroHedge, “… little did we know just how soon the BOJ would stop prolonging the inevitable – and admit it has no choice – because less than a day later, the Japanese central bank confirmed everything we said in the past 72 hours when BOJ Deputy Governor Shinichi Uchida capitulated shortly after 10am local time, when, pressed for answers to the ongoing market collapse, he sent a strong dovish signal in the wake of historic financial market volatility in Japan by pledging to refrain from hiking interest rates when the markets are unstable.
Uchida tried to save face, but in the end the only thing the market heard is that rate hikes are basically over after last week’s teeny, tiny 10-25bps rate increase unleashed a global deflationary tsunami and crashed Japan’s market.”
This is how fragile the Japanese markets are to raising rates, the smallest moves in a leveraged economy can break the markets. Now they can go back to watching their currency drop a third in just over a year. They are in a tight spot now for sure because no one will believe that they can raise rates again.
In 2018, Jerome Powell raised rates just over 2 full points and the market had its December sell off of just about 20 percent culminating at Christmas before he bailed on the plan and reversed course. As you can see, these governments are figuring out that raising rates will kill the stock markets, except in the US evidently where the markets bounced back after being down Monday to finish the week almost even.
The US market has seen interest rates rise 5.25 pts and is or was making new highs just weeks ago. This is what 7% of deficit spending looks like. I called a recession in January largely because the labor market is not well and layoffs were beginning to take a toll. However, this how much worse they would be if the government wasn’t spending war levels of fiscal stimulus during peacetime. 7% of GDP spending to create 2% GDP is not a healthy economy.
Back to ZeroHedge, “More importantly, the deputy chief suggested that the bank will carefully consider the state of financial markets in future decisions on rate policy, and as noted above, will refrain from any more rate hikes when markets are unstable.
“In contrast to the process of policy interest rate hikes in Europe and the United States, Japan’s economy is not in a situation where the bank may fall behind the curve if it does not raise the policy interest rate at a certain pace,” Uchida said. “Therefore, the bank will not raise its policy interest rate when financial and capital markets are unstable.”
Well, dear central banker, a quick primer: this is called passive aggressive forward guidance. The Japanese market will now NEVER become “stable”, in doing so preventing any more rate hikes, and in fact will become so unstable the BOJ will have to cut again…And now, we sit back and watch as the carry trade is put back on, and the BOJ desperately tries to refloat the $20 trillion carry trade titanic which as we reported on Sunday night, is now in the process of sinking. The good news, at least for the Kamala administration, is that the BOJ’s panicked concession will enable US stocks to surge once again as the carry trade is promptly re-established…Unfortunately for the BOJ, by admitting defeat it has just dug its own grave for the last time, and having capitulated on further tightening just because of a modest bear market in stocks, the full court press to short the yen is now back on and we expect it won’t stop until the currency hits new record lows in the very near future, with the BOJ now completely powerless to do anything as Japan’s hyperinflation finally kicks in.”
We need to watch Japan as they are ahead of us, they have more debt than us, they took interest rates lower than us, and they are going to crash before us. That doesn’t mean we aren’t following the same playbook, we are just three beers behind.
LB#2
The stock market rallied back all week as traders put the Yen carry trade back on, borrowing cheap Yen and buying US stocks. This grabbed most of the headlines but there are some serious geopolitical items of note that seem to have been swept under the rug. Ukraine attacked Russia and has moved into the Russian areas of Kursk and Lipetsk. The Russians are evacuating civilians from the region. This comes as a surprise to Mother Russia as they are advancing in Ukraine and some say this is a desperate attempt by the Ukrainians to have Russia pull troops from the front to cover the intrusion. I don’t know the details of military strategy, but I do not think it is a coincidence that Russia is under greater attack after what I read late last week. This from ZeroHedge, “The NY Times and others confirmed this week that Russia has begun delivering radars and air defense equipment, possibly including S-400 anti-air missile components, to the Iranians. This can be seen as Moscow’s ‘payback’ for America arming Ukraine. Now, Russia is arming America’s (and Israel’s) chief enemy in the Middle East…There are reports that heavy Russian military transport planes have been flying in non-stop rotation to Tehran for days since hosting a top Russian defense delegation in Tehran at the start of this week…” Folks, this is accelerating. We mentioned that Israel had assassinated two leaders last week and that Iran has vowed revenge. We also mentioned that Putin was very upset that the US has okayed using American weapons on Russia in Russia and now it seems that Russia is going to supply Iran with weapons that will prepare Iran to deliver a significant blow against Israel versus the token telegraphed rocket and drone attack in April.
In other geopolitical news, the country of Bangladesh just fell. That’s right the political protests against giving jobs to legacy freedom fighters’ kids just caused the nation to fall into chaos. Julhas Alam and Krutika Pathi write for the AP, “Bangladesh’s prime minister resigned and fled the country Monday after weeks of protests against a quota system for government jobs descended into violence and grew into a broader challenge to her 15-year rule. Thousands of demonstrators stormed her official residence and other buildings associated with her party and family…The military chief, Gen. Waker-uz-Zamam said he was temporarily taking control of the country, and soldiers tried to stem the growing unrest. Mohammed Shahabuddin, the country’s figurehead president, announced late Monday after meeting with Waker-uz-Zamam and opposition politicians that Parliament would be dissolved and a national government would be formed as soon as possible, leading to fresh elections…Protests began peacefully last month as frustrated students demanded an end to a quota system for government jobs that they said favored those with connections to the prime minister’s Awami League party. But amid a deadly crackdown, the demonstrations morphed into an unprecedented challenge to Hasina, highlighting the extent of economic distress in Bangladesh, where exports have fallen and foreign exchange reserves are running low.”
Americans watch in safety and continue to discuss what is on Netflix completely unaware that they are staring their own bifurcated nation’s future straight in the eye. Their foreign currency reserves are running low, meaning they have a currency problem also. We saw Sri Lanka fall last year, now Bangladesh, and we see the problems in Japan. Governments that print fiat cannot last, and we are no different, only the timing.
LB #3
With the political rise of Kamala Harris from VP of doing nothing because she was a liability to the candidate for president of the Democratic Party and leading Don Trump in the polls, she has become a little more comfortable in her power. She, who was such a liability that the Dems trotted out Joe Biden to cover for her, has still made very few public appearances. One small appearance was when the Russia hostages appeared back home where she met them with such an unintelligible word salad that she promptly went back into hiding. I told you to go back and google Tulsi Gabbard who destroyed Kamala so bad in the 2019 debates that Kamala withdrew before the primaries where she didn’t receive a single delegate. Which is weird, because she also didn’t get any delegates this time around either. I guess technically they did a little virtual blessing ceremony the other day which officially made her a Democratic candidate, but boy I find our democracy weird in that she didn’t even have to campaign to get the spot. So she must take protections, and the Gabbard thing is a problem for her so she chose to become a problem for Gabbard. Tulsi Gabbard is now on the TSA Watch list. This from Undercoverdc’s Wendi Strauch Mahoney, “In an exclusive breaking story, several Federal Air Marshal whistleblowers have come forward with information showing that former U.S. Representative and Presidential candidate Tulsi Gabbard is currently enrolled in the Quiet Skies program. Quiet Skies is a TSA surveillance program with its own compartmentalized suspected terrorist watchlist. It is the same program being weaponized against J6 defendants and their families. Quiet Skies is allegedly used to protect traveling Americans from suspected domestic terrorists.”
We are watching the logical conclusions to the unforeseen consequences of George Bush’s Patriot Act play out. No other country is as remotely dangerous as your own. That is the lesson history teaches us time and again.
Looking Forwards…
LF#1
Well, I hate to see this happen. Super Micro Computer’s plunged this week despite a 10 for 1 stock split after their gross margin dropped from 17% to 11.2%. This from Annie Palmer at CNBC, “Super Micro said gross margin dropped to 11.2% from 17% in the year-ago quarter and from 15.5% in the third quarter, which means it’s making less profit on each product it sells, despite noting that it “continues to experience record demand of new AI infrastructures…Shares of Super Micro, which joined the S&P 500 in March, surged 246% in 2023 and are up 117% year-to-date. The stock closed Tuesday at $618.94.” Now nothing Annie said was inaccurate, but I want to point out how invested the mainstream media is to this AI story. They didn’t point out that Super Micro has crashed 57% since March as the AI bubble continues to deflate. In fact Super Micro closed Friday at 508 down another 18% since her article on Tuesday. The AI story is not being covered correctly.
LF#2
I keep warning about Chicago and the state of Illinois because I am a black swan hunter and I can see destruction coming to this bastion of progressive policies. Their pensions, crime, and finances are broken, and I want it on the record that I don’t want my federal dollars bailing out these dumbass liberals and their stupid policies. But alas, I am simply an amateur. I try to give the authors where I get information credit and a link to their source reporting, but folks I found the holy grail of how bad Chicago and Illinois are. I will provide the link but if you go to Wirepoints.org and their Aug 5 pre-Democratic convention warning to the Democratic party entitled Convention Visitors, Here’s the true impact of progressive government on Illinois and Chicago. It is a master class with reports, categories, dumb quotes like Gov. Pritzker talking about Illinois claiming “the most progressive state in the nation and damn proud of it.” These are the categories it offers statistics for, these are just the categories: fleeing population and tax base, stagnant economy and job market, expensive and broken education system, rampant crime, suffocating taxes, pension crisis ignored, massive spending on illegal immigrants, no equity- a failure by their own standards, economic policy centered on statism and doomed focus on renewable energy, free speech under assault and autocracy reigns, and disastrous pandemic management yet no accountability. It is unbelievably good reading as simply an insight into how our non-federal governments are being run. Here is just a primer from the sight, “Illinois had 24 U.S. House Representatives after the 1970 Census. Today it has just 17…Illinois’ current unemployment rate of 5.0% is 3rd-worst in the nation. Chicago is ranked dead last among major cities for creating new millionaires…Not a single child tested proficient in math in 67 Illinois schools. For reading, it’s 32 schools…Chicago has led the nation in total homicides for 12 years in a row.”
Folks, I could go on for another 30 minutes. This just happens to be on someone at Wirepoints radar because the Dems convention is coming to town. I think you could do that to every major city in California, Detroit, Cleveland, Baltimore, St. Louis, New Orleans, and right on down the line with blue policy leaders. These policies have destroyed American cities and that is why there is such flight to the suburbs and the country. Props to Wirepoints for their unbelievable data.
LF#3
Lastly, we circle back to a small town and away from the big city. Marion Kansas is the small town that we covered last year that had the police chief, who was under investigation by the town’s newspaper publisher, raid their house and office. It turns out that the newspaper was cleared of any and all wrongdoing while the Police Chief Gideon Cody was charged with obstruction of justice. This from ZeroHedge, “The investigation revealed that the newspaper staff had not broken any laws…Seth Stern, director of the Freedom of the Press Foundation, argued that Cody should face additional charges. “The raid itself was criminal,” Stern stated. “And Cody is far from the only one at fault here.”
It seems that legally justice will be served here, but for Eric Meyer, the publisher, whose home was raided and mother died the day after the raid, I get it feels like too little too late.
Remember that nothing is as dangerous to a free individual as their own government, vote accordingly.
Sincerely Yours,
C Thomas Printer
The Dow Jones finished trading …at 39,497.
The 10-year Treasury bond is at …at 3.94%
The price of Brent Crude is … at $79.66 per barrel.
The price of gold is … at $2,470/oz.
The price of silver is … at a $27.54/oz.
I leave you with this from the information superhighway, “If life gives you lemons, make lemonade. If life gives you melons, you might be dyslexic.”
Thank you for listening today and you can find all of our articles and more on our website cthomasprinter.com.