All the recent talk in the financial media has been about the rotation out of growth and tech stocks into value stocks. While this narrative may have worked yesterday as the Nasdaq sold off and the DJIA gained, this story did a complete 180 as the Nasdaq and big tech names rallied today. That is quite a short rotation! Even Tesla (TSLA) rallied about 20 percent today alone! This happened off of no major or minor news event, and this type of movement is more akin to a penny stock as opposed to one of the largest corporations in the world by market cap. Of course this is all a bunch of nonsense at the end of the day. It is not the narrative that really matters, but rather how much liquidity is being thrown into the system and whether or not the markets continue to buy it and grind higher.
This is why The Kapital News has been stressing the importance by policy makers and media outlets to promote various narratives, in the hopes that it will distract investors from the underlying economy, reckless policy decisions, and cause them to bid up equity, bond, and real estate prices. So far, this has been working, which is why they continue to jump from one narrative to the next. However, story time can only last for so long. And as we have been witnessing in recent weeks, global bond markets may be waking up from their years of central bank manipulation, as yields begin to rise. Even more recently would be Chinese authorities entering into their equity markets in order to bid prices higher, but failing to do so. It is crucial to understand that while central governments and central banks are powerful institutions, they are not bigger than nor more powerful than the markets. The day will come, when market forces overwhelm central planning policies, and it will not end well. Some of the signs as to when the markets have or are about to hit levels of exhaustion, are when yields rise, and financial asset prices fall, despite the best efforts of policymakers. If current events are any indicator, then we may be nearing these limitations. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Stocks #Markets #Debt #Jobs #EndTheFed #Liberty #USA #bananarepublic #FireCongress #Bonds #Inflation #Gold #Silver #Commodities
With the $1.9 trillion spending bill all but certain to pass through Congress this week and make it to President Biden’s desk, we wanted to take a moment to provide some context. It was only a little over a decade ago when we were in the midst of the Great Financial Crisis or GFC. It was here that Congress decided to pass the Troubled Asset Relief Program or TARP. It had a price tag of $700 billion. According to those who drafted the legislation and came up with the number, apparently this was large enough to save the US financial system, and thus the US economy. Fast-forward to where we are today, and just looking at a handful of spending measures that Congress has passed in one year’s time – it takes us to roughly $6.4 trillion! This is nearly 10x the amount of the TARP funds during the GFC, which was the worst financial and economic crisis since the Great Depression.
The $6.4 trillion figure comes from the Nobody CARES Act 1.0, which was around $2.2 trillion. The Nobody CARES Act 2.0, which was passed last December as the spending from 1.0 was coming to an end, cost another $900 billion. This was accompanied by a $1.4 trillion spending measure just to “keep the lights on,” as this was for ordinary government expenditures. And now finally, at least for now, we have the $1.9 trillion monstrosity. This gives us a total of $6.4 trillion. This is nearly two full years of federal government revenues! It is thus easy to understand why the country is running multi-trillion dollar deficits. And to place this into further perspective, any one of those aforementioned spending measures would be one of the top 20 economies in the world by GDP. The total of $6.4 trillion would be the third largest behind the US and China. And more than $1 trillion above the GDP of Japan!
To add insult to injury, the $1.4 trillion spending bill was only good for through Q1 2021, which means another round will have to be passed or the government may have to shut down. This also does not take into consideration any further spending with respect to infrastructure, which is needed, healthcare policies, environmental policies, or the like, which are likely to be brought up with Democrats in control of the White House and Congress. So one of the saddest things about all of this is that all of this money is being borrowed and printed into existence and then spent, but with very little to show for it. All of this spending could have rebuilt this country’s infrastructure 2x or 3x over. And you can use your imagination on all the other items that may have been improved with that kind of money…Of course none of this is free. The inflation that has thus been created and unleashed is now underway and the costs will be historic and devastating. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Inflation #Debt #Markets #Spending #EndTheFed #bananarepublic #FireCongress #Jobs #Bailouts #Liberty #USA #Gold #Silver
A focus on the overnight trading session on Sunday evening as markets around the globe begin to open. What is of particular interest, is the price increase in WTI and Brent crude oil. Where WTI is trading at over $67 per barrel, levels not seen since 2018, and Brent is trading near $71 per barrel, levels not seen since 2019. Of course, the global economy was quite different only 18-24 months ago. There was no pandemic and there were greater numbers of people employed globally. Now, we are living in a pandemic world with lockdowns, restrictions, and millions unemployed. It would make sense in an environment of full or near full employment to see energy prices increasing. However, with so many people still without work, it becomes a little more of a head-scratcher. That is, when analyzing the energy market from a demand perspective. However, if looking through the lens of inflation and inflationary pressures, then it makes complete sense to see prices rising across the commodity spectrum – from energy, to industrial metals, to agricultural goods.
You see, there is no free lunch and there are consequences to printing trillions of dollars, euros, yen, yuan, et cetera globally. Now, once economies begin to re-open and restrictions are lifted, there is likely going to be a rush of people who want to go out and attempt to live as they were prior to the pandemic. This is understandable, yet this will contribute to the price increases, as inflationary pressures are met with demand for goods and services. And on the other side of the equation is supply. There remains supply chain disruptions, geopolitical risks, and production levels of OPEC+ that will likely contribute to energy prices remaining at elevated levels for the foreseeable future. This will squeeze corporate profit margins for small, mid, and large firms, and also squeeze the consumers’ balance sheet as well due to higher prices. As we stated last year, free was never so expensive! And we are about to find that out the hard way. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Oil #Inflation #Gold #Silver #USA #Liberty #EndTheFed #bananarepublic #FireCongress #Leadership
For the month of February, employment rose by 379,000 well higher than market expectations. The official unemployment rate now stands at 6.2 percent, little changed from January. Most of these gains were in the leisure and hospitality sectors. In fact, nearly 3/4 of the gains came from restaurant and bar workers. Of course it is tough to classify these jobs as “gains,” as they are more realistically just call backs from being laid off due to the pandemic restrictions. Such gains are likely unsustainable in this area because so many small businesses have closed for good. Therefore, the places of employment are no longer available to readily employ the millions that remain out of work. Furthermore, those bars and restaurants that remain open will gain some market share. However, they will likely remain hesitant to expand their operations due to the uncertainties that exist, as well as limited access to capital to finance such expansions. Also, as commodity prices continue to rise, it is likely that dining out will become more expensive as well. There is no free lunch, even with all of the money printing. Especially because of the money printing. Revisions for the months of December and January combined, result in an additional 38,000 jobs than was previously reported.
In some other news, Q4 2020 data for productivity shows a decline of 4.2 percent, and unit labor costs increased by 6 percent (annual rates). This is the exact opposite of what we want to witness. However, with people not working, then how is productivity to truly increase? This becomes a double whammy of lower productivity and higher costs. If we had higher levels of productivity, then this would likely result in costs dropping. The US trade deficit widened in January. And net exports of goods and services hit a near record low of -$804 billion. The only reading worse than this was prior to the GFC, which stood at -$805 billion. The US has to contend with a very serious problem with respect to its dual deficits of fiscal and trade. Both measures are further evidence of a weakening economy, not a strengthening one. This need not be the case, but when such policies are enacted, this is the result. Stay diversified, stay vigilant, and stay with The Kapital News. Happy Birthday YiaYia! #Economy #Debt #Jobs #Inflation #Markets #Bonds #Gold #Silver #Commodities #Oil #EndTheFed #Liberty #USA #bananarepublic #FireCongress #Bailouts #Protests #Leadership
Initial jobless claims continue to remain stubbornly high, as 745,000 initial claims were filed for the week ending 27 February. Last week’s figure saw an upward revision of 6,000 filers, to now stand at 736,000. Since restrictions have been in place, claims have been well above those witnessed during the depths of the GFC, which were around 650,000 for a couple of weeks. We are now at the one year anniversary of lockdowns and this is the type of economic carnage that still exists. For all Americans that continue to claim some form of unemployment insurance, now rests at 18 million. Giving us a de facto unemployment rate of around 12.7 percent. This is double the official rate that stands at 6.3 percent. The official jobs report for February will be released tomorrow morning by the Bureau of Labor Statistics.
Other items discussed today were the Federal Reserve’s balance sheet and M1 and M2 money stock. All monetary measures are at or near all-time highs. This is expected to remain the trend on a weekly basis as the Fed remains committed to purchasing $120 billion worth of US Treasuries and mortgage-backed-securities on a monthly basis. This alone should elevate their balance sheet to north of $8.5 trillion, which is 10x higher than where it was prior to the GFC! The Kapital News projects that the balance sheet will be closer to, if not above, $10 trillion by the end of the year, as Congress continues to pass large-scale spending measures.
Earlier today the Chairman of the Fed, Jay Powell, made some remarks that apparently spooked the markets and caused a sell-off on the major indexes. The Chairman apparently believes that inflation will run hot for a short period of time, but will only be transitory, and that the Fed is monitoring closely, and has the tools to contain inflation. This led to yields on Treasuries moving higher, which was cause for concern last week and earlier this week, and has been placing downward pressure on global equities. The same upward effect was seen in the dollar index, as it now trades near levels not seen since last Nov/Dec. Commodities, however, is more of a mixed bag for the time being, with oil prices climbing higher, while precious metals continued their downward trend. In short, the markets are broken and heavily manipulated. All that is left are the narratives that central bankers can tell. The major question is, will markets continue to buy it? If yes, then equity and bond prices may continue higher. If no, then this may be the beginning of the end of central bank control over markets. If this is the case, then it could be a scenario of, look out below. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Jobs #Inflation #Debt #Spending #Gold #Silver #USA #Liberty #Commodities #EndTheFed #bananarepublic #FireCongress #Markets #Leadership
Top Chinese financial regulators are sounding the alarm bells with financial bubbles that exist globally. The focus of the statement was on the disconnect between the underlying economies in the USA and throughout Europe and their respective financial markets. This is of course true, as we are observing equity prices at or near all-time highs on a price basis and across virtually all valuation metrics. The only comparable points would take us to 1929, 1937, 2000, and 2007/8 – and things did not end well. The Chinese regulators nonetheless did look internally to their real estate markets and mentioned the frothiness is of concern. Noting how many people are buying real estate and homes not for the purpose of living, but rather as a form of speculation. Has the global economy not learned anything from the housing crisis that is only a decade old?
What further makes these statements interesting, is how the regulators warned of potential spillover effects from the US and European bubbles impacting the Chinese economy. The Kapital News believes this is the first shot across the bow and the start of a narrative that the Chinese want to begin building so that they can blame others for their own missteps and failures, if and when their economy and financial markets turn downward. There is no question that many financial markets are greatly disconnected from their respective economies, and China is guilty of this as well. Now, it will be interesting to see how other regulators and central bankers in the US and Europe respond to these statements. True to form, no policymaker wants to be held responsible for their actions and policies, and it is always easier to play the blame game and say it is the irresponsibility of another country.
These policymakers know that time is running out and they are low on ammunition. And there is no question that due to the interconnectedness of the global economy that there will be spillover effects from one country to the next. This is already being experienced in weaker economies around the world. It is always the weakest links that break first. And a couple or few countries experiencing difficulty may not be of significant concern for the rest of the world, but as these weaknesses persist and travel to other countries, then momentum starts to build. It is this momentum and its size and scope that can begin to negatively impact larger economies. When this takes root, coupled with market forces moving global debt yields higher, is when we will know that we are in the final chapters of this massive central bank economic money printing experiment. We are there. And it will not end well. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #USA #China #Debt #Liberty #EndTheFed #Infrstaructure #Inflation #Gold #Silver #Bonds #Markets #bananarepublic #Leadership
With the $1.9 trillion monstrosity set to be passed by Congress, just in time as the benefits are about to expire from the Nobody CARES Act 2.0 passed last December, we continue to witness the insanity of our politicians and the weakness of our economy. With several hundred thousand Americans continuing to file weekly initial jobless claims to the rising prices across commodities, one thing is certain – we are far from a real economic recovery. So in order to mask this reality, politicians are attempting to do what politicians do best, and that is spend money that we do not have and to kick the can down the road. These policies have proven and will continue to prove destructive. We are in the land of trillions and there is no end in sight as to how much more spending will be coming down the pike. This measure continues to pertain to the pandemic (or so we are told). What is next on the block is likely infrastructure spending, and measures dealing with the environment and healthcare. We are just getting started. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Debt #Inflation #Gold #Silver #Jobs #Bailouts #USA #Liberty #Spending #EndTheFed #bananarepublic #Markets #Leadership
A large sell-off today occurred across the major stock indexes as global bond yields continue to rise. The US 10 year note hit 1.6 percent earlier in the trading session and is now around 1.5 percent. Some are arguing that this is a sign of growth, which is causing the rise in yields. Well if this was attributed to growth, then why would stocks sell-off some 2-4 percent today? Stocks are supposed to be vehicles of growth, no? The more realistic answer is because it is not growth expectations, but rather inflation expectations, as well as the inflation that already exists. The effects of inflation will prove destructive over the coming years.
Earlier this week in testimony before Senate and House committees, Jay Powell, Chair of the Federal Reserve, declared that there is robust demand for US debt. The Treasury auction that occurred today saw poor performance and demand to say the least. That is to say, not much of a bid, so prices dropped and yields rose. This is a phenomenon that will be witnessed more and more around the globe as the only buyer (or major buyer) of government debt is going to be that country’s respective central bank. Rising yields are causing much concern in central banks around the world. After all, their entire plan was to get interest rates and yields to record lows in the hopes of stimulating the global economy. US mortgage rates hit a six month high, while prices are at record highs and continue their climb. So what can they do now? In order to push these yields back down, central banks will have to go back into the markets and purchase this debt, bid up the price and push down the yields. Of course, this is all inflationary by its very definition, as central banks will have to expand their money supply in order to do so. In effect, this is monetary authorities, fighting inflation with inflation. They are trapped and they know it.
The Kapital News has been saying for the last two years since we have been online that one day the markets will say enough is enough to these radical fiscal and monetary policies. And that this would be witnessed with rising yields. We are not saying that the end of the road is right here, but we are getting closer, and this is what one would expect to see. When the markets call out these central authorities, and they attempt to utilize the same policies, but no longer get the expected return, such as rising stock markets, then this will be the time when we know that the clock has run out of time. Look out below. What is also a near certainty is that it will take a lower yield on bonds, and lower market interest rates to pop these bubbles. This is because the economy and various markets are extremely fragile. Recall in Q4 of 2018 that the stock market dropped nearly 20 percent because the Fed dared to taper their balance sheet and increase interest rates. The Fed Funds Rate was around 2.25-2.5 percent and the US 10 year note was around 3.25 percent. Those levels could not be sustained within the US economy nor the stock market in 2018. With even greater levels of debt and millions of Americans out of work, and countless numbers of businesses closed, it will take even lower rates to bring the economy and markets to its knees. The markets know this. Central authorities know this. They are scared. And they are trapped.
Initial jobless claims for the week ending 20 February came in at 730,000 on a seasonally adjusted basis. The prior week’s figures were revised downward by 20,000 to now sit at 841,000. The number released today is the lowest figure since last November. However, this is still some 80,000 higher that what was experienced during the depths of the GFC. For all unemployment insurance programs, some 19 million Americans are still claiming benefits. This gives us a de facto unemployment rate of 13.4 percent, which is double the official rate at 6.7 percent. The Federal Reserve’s balance sheet hit a new all-time high at $7.59 trillion. Weekly all-time highs are likely the norm throughout the remainder of this year as the Fed remains committed to purchasing $120 billion worth of Treasuries and mortgage-backed securities. This will take the balance sheet to at least $8.5 trillion and The Kapital News projects a figure closer to $10 trillion. M1 and M2 money stock figures are also around all-time highs and both measures have been updated, definitionally speaking, by the Fed. New data sets have been created and the older sets have been discontinued. Always moving the goal posts. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Debt #Inflation #Markets #Bonds #Gold #Silver #USA #Liberty #EndTheFed #bananarepublic #Commodities #FireCongress #Fraud #Bubbles #Leadership
Just when you thought the GameStop stock frenzy was over, the markets today give us a gain of nearly 104 percent in shares of the company. After hours trading is up another 83 percent to trade at $168/share. The concern of course is that this will most certainly lead to more retail and speculative traders coming into the stock in order to chase the price action. Have people not learned their lessons from last time? It was only a month ago. Many novice traders thought the stock price could only go up and wanted their hands on the shares at any price, even as the stock traded in the 300s, then 400s, per share. Then in short order, the price collapsed back to $40/share. A year ago, shares of the company were trading in the single digits.
These markets are broken and this type of action should serve as solid evidence that something is very much amiss. These types of events lend themselves for some people to attempt to take advantage of the situation by preying on the ignorance and lack of experience of others. Markets in their best and true form are supposed to be a win-win. Markets are here to provide people and businesses with the goods and services they need and want, thus benefiting the end-users that consume them, and the businesses that produce such goods or offer such services. But now, due to the asinine and reckless fiscal and monetary policies that have been implemented, people believe that money grows on trees and that stocks can only go up. This is extremely dangerous and the day of reckoning will be devastating when prices reflect the true underlying economy. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Debt #Inflation #GameStop #Bubbles #Markets #Liberty #USA #EndTheFed #bananarepublic #FireCongress #Gold #Silver #Commodities #Fraud
Large intraday trading swings may likely become the new normal as we continue through this asinine economic experiment. Or perhaps these are the foreshocks to something much larger awaiting us over the horizon. Such volatility of course is not new, as this is something that has been witnessed from time to time over the last few years. But today was clearly a case in point. The Nasdaq Composite was down nearly 4 percent earlier in the day’s trading session, only to close down 0.5 percent. Much of the bounce-back came off of the statements made this morning by Jay Powell, Chairman of the Federal Reserve, as he was giving testimony before the Senate Banking Committee.
Continuing with the same narrative of remaining accommodative for as long as it takes, evidently is what the markets wanted to hear to cause a frenzy of late-day buying. The question is of course, how much longer can this go on before the system reaches exhaustion? If bond yields are any indicator, then we may not be too far from that point. Powell remains committed to the Fed’s policy of purchasing $120 billion per month in Treasuries and mortgage-backed-securities through the remainder of the year. This will take their balance sheet to levels around $8.5 trillion. Questions and comments were made about inflation as well, and the Fed Chair nonchalantly swept them under the rug as not of major concern and that if inflation does occur that there will be plenty of time to contend with it and that the Fed has the requisite tools to manage it properly. Talk about a bunch of hogwash. Inflation is here, it has been here, and it is only going to get worse as we make our way through this decade. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Debt #Inflation #USA #EndTheFed #Revolution #Liberty #bananarepublic #FireCongress #Recession #Depression #Fraud #Leadership
