In today’s podcast we continue to discuss the Derek Chauvin trial, the conviction, and the political fallout. We then continue with various articles pertaining to geopolitical risks. The focus of these news stories are centered around US and Turkish relations, rising tensions between Russia and Ukraine, and tensions among Israel, Syria, and Iran. To put it simply, the world is in chaos. Stay diversified, stay vigilant, and stay with The Kapital News. #DerekChauvinTrial #Geopolitics #War #Peace #USA #Israel #Russia #Ukraine #Turkey #China #Iran #Syria #Liberty #Leadership #Justice
Only a day after closing arguments in the case of Derek Chauvin, the jury rendered their verdict. Guilty on all three charges that were levied against Derek Chauvin. His sentencing hearing will be held about eight weeks from now. The Kapital News is an advocate for justice, peace, truth, and prosperity. If the jury made their decision based on the totality of the evidence, then their decision is to be respected. However, if their decision was rendered due to fear as to what may happen to themselves personally and/or to their city by mob actions should they have acquitted, then this would be a major problem. Of course, if the latter should be the case, we will likely never hear about it.
Nonetheless, The Kapital News is quite concerned with the growing trend of mob rule, media biases, and political grandstanding. True, these things are not new, but the 24/7 news cycle combined with the usage of social media, sets the stage for a lot of misinformation and disinformation. And none of this serves to promote and build a better Republic – quite the contrary. Our justice system is far from perfect and most definitely has many flaws. However, the pillars of our justice system are rooted in a trial by jury, due process, being innocent until proven guilty, right against self-incrimination, burden of proof lying with the State, and an appeals process. These are good things to have and are foundational to building a sound justice system. Yet if the media, politicians, and the general public are already rendering verdicts in the court of public opinion, and continuing to push their narrative despite the totality of evidence that is released throughout a trial, then this country is in a lot of trouble. We imagine many members of our audience would march peacefully to bring changes to the justice system to make it better. But if we should succumb to mob rule, then the foundation upon which our Republic was built, will experience further erosion. Stay diversified, stay vigilant, and stay with The Kapital News. #GeorgeFloyd #DerekChauvinTrial #Peace #NoJusticeNoPeace #Protests #Justice #Truth #USA #Liberty #Economy #FireCongress
Initial jobless claims for regular state unemployment benefits finally came in below the levels seen during the depths of the GFC, with a number of 576,000 for the week ending 10 April. The prior week was revised upward by 25,000 to now stand at 769,000. However, it must also be understood that since the pandemic and the subsequent lockdowns, the Congress passed the Nobody CARES Act, which created the Pandemic Unemployment Assistance program that allows people who would normally not qualify for regular state aid to file a claim. This number came in at 132,000, which in aggregate takes us north of 700,000 initial jobless claims. So still not entirely below the GFC levels, but trending that way and hopefully that continues. However, The Kapital News remains highly skeptical as printing, borrowing, and spending this money is not real economic growth or productivity. This means we have be living off of a temporary “high” from such fiscal and monetary measures that could lead to further economic deterioration.
Other economic news released today pertained to US retail sales, which came in well above market expectations with a print of 9.8 percent month-over-month. The prior month was revised downward to -2.7 percent. This data has been tracking very closely with the money handed out by the government. January saw a nice increase due to stimulus checks, February saw the drawdown referenced above, and March saw the big jump, most likely due to a combination of stimulus checks and tax refunds. Should this trend continue, then absent some further government money, retail sales will likely cool off. However, it should be noted that government money will be sent out to people with children. And it should be stressed that by government money, we mean US taxpayer money.
The Federal Reserve’s balance sheet has hit a new all-time high to now stand at $7.79 trillion! A week-over-week increase of some $80 billion. The Fed remains committed to their QE policy of purchasing a minimum of $120 billion per month of US Treasuries and mortgage-backed securities. The Fed continues with such a policy with respect to MBS, despite housing prices at all-time highs. At a minimum, the balance sheet will likely hit $8.5 trillion by the end of the year, and could be closer to $10 trillion, should fiscal and monetary authorities take further action in the markets. For context, prior to the GFC, their balance sheet was around $900 billion.
Lastly, Chinese economic data coming across the wires shows GDP for Q1 year-over-year grew by 18.3 percent. Despite such a large increase, this was below market expectations that were closer to 19 percent. Further, Chinese residential real estate prices grew by 4.6 percent year-over-year. Earlier this year, Chinese regulators noted that their real estate market was likely in a bubble. This recent data appears to indicate that this continues to be the case. The regulators were also pointing fingers at the US and European economies, and stating that these economies were also in bubbles. Essentially setting the stage to blame the US and European nations should there be any weakness in the economy and/or financial system. With all of the fiscal and monetary actions that have been conducted throughout 2020 and continuing to today and beyond has placed the global economy on even shakier ground, thus making the global system that much more fragile and susceptible to shocks. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Jobs #Inflation #USA #China #Liberty #Gold #Silver #Debt #Spending #Bailouts #Leadership #EndTheFed #bananarepublic #FireCongress #Fraud
The intersection of economics, politics, and society is always present. The question is whether this is a free-flowing relationship or one that is rife with tension, conflict, and frustration. Given what the world went through in 2020 and continues to traverse in 2021, the likelihood of further protests and riots taking shape is increasing by the day. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Inflation #Protests
Were we not just informed last Friday with the release of a “stellar” jobs report that the economy and namely the jobs market recovery was well underway? Well then how can we have another 744,000 Americans filing initial jobless claims for the week ending 3 April? Furthermore, you have to understand that this figure only represents regular state unemployment benefits. However, due to the pandemic and the subsequent lockdowns and restrictions, federal government programs were established to assist those who would not traditionally qualify for state benefits. So, taking into consideration such a program, known as Pandemic Unemployment Assistance, or PUA, we see that nearly 152,000 Americans filed an initial claim for the week ending 3 April. This means in aggregate that nearly 900,000 Americans filed an initial claim last week! Talk about recovery, as this is now over one full year since such draconian measures have been implemented. Last week’s figure of 719,000 was revised upward to now stand at 728,000 for the week ending 27 March. In aggregate, across all unemployment programs, some 18.2 million Americans continue to file claims. This is little changed from the prior week, and gives us a de facto unemployment rate of 12.7 percent. This is more than double the official unemployment rate, which now rests at 6.0 percent.
In other news, the Federal Reserve’s balance sheet sits at $7.708 trillion, which is a week-over-week increase of $20 billion and is just shy of hitting a new all-time high. The Fed remains committed to their QE program of purchasing at least $120 billion per month of US Treasuries and mortgage-backed securities. They continue to purchase MBS despite the fact that housing prices are at all-time highs and continue to climb, even as lumber and other construction materials prices continue their ascent.
And lastly, major geopolitical risks are taking shape around the globe. Whether it is increasing tensions between Russia and Ukraine, China, Taiwan, and the Philippines, Northern Ireland rioting against Brexit, how the US is involved in all of these areas, or leaders in Italy and Turkey doing some name-calling, one thing is certain, the globe is on very unstable ground. With so much taking place, it increases the likelihood of mistakes being made or it creates the perfect environment for a false-flag attack, which will then be used as justification for conflict or even war. And oh yes, the Middle East and Africa remain hot spots for conflict as well. And if enough people in poorer and middle-income nations does not constitute enough financial strife, add Canada to the mix. A new survey released indicates that 53 percent of Canadians are on the verge of insolvency as they are only $200 away from not being able to pay their monthly bills and debt obligations. This figure includes the 30 percent of Canadians who are already insolvent. And despite all of this or perhaps because of it, real estate prices in Canada continue to skyrocket, with many homes selling well above their asking price, site unseen! But remember, our fearless leaders inform us that there is NO inflation. What a joke. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Debt #Inflation #Geopolitics #Protests #Peace #USA #Liberty #Leadership #EndTheFed #bananarepublic #FireCongress #China #Russia #Germany #Ukraine #Taiwan #Philippines #Italy #Turkey #Canada
We say it on a near daily basis when covering market performance, and that is calling out Uncle Sam’s debt as junk. It is not said to be facetious or to act as a wise-guy, but rather to admit reality. Currently, junk bond or high yielding debt is trading near all-time lows and is trending lower. Meanwhile, the US 10 year note and 30 year bond, are trending higher. There has never been a time when these yields have converged and rightly so. US debt is supposed to be risk-free, whereas junk bonds are called junk because there are several inherent and obvious risks. The higher the yield, the higher the chance of default. During the GFC, high yield hit nearly 23 percent! This was an example of markets functioning in attempts to accurately price risk. Well not this time. While it is true that yields spiked during the onset of the pandemic, rising to over 11 percent, they quickly came back down. The reason was because of fiscal and monetary measures. Emphasis given to monetary measures, because the Federal Reserve created various emergency facilities to purchase corporate debt and they did. Not only did the Fed purchase corporate debt on the secondary market, they also purchased it directly from the companies themselves in the primary market. Many of these companies were far from being junk rated as some were the largest firms in the world. So not only did the Fed purchase US corporate debt, but also foreign corporate debt!
By undertaking such measures, the Fed also sent the signal to the markets that they will be there to cushion and even perhaps prevent, any sort of further sell-off in the corporate debt market. What this then translates into is comfort and confidence of investors to get back into the game because they believe they have an insurance policy from the Fed. That is to say that should corporate bonds sell-off again, the Fed will purchase them and make the investors whole or at least lessen their losses. This goes completely against the Fed’s charter and any semblance of free-market functioning. This also goes against logic, because it can be argued that this economic lockdown was worse than the GFC and many economic variables conclude as much. Thus junk bond yields should be much higher. However, they are not due to the centrally planned actions undertaken by the Federal Reserve.
All of this has thus led to junk bond yields being at record lows. Should this downward trend continue in concert with rising US government debt yields, they may very well converge, although not likely. At this juncture there will be no denying that Uncle Sam’s debt is junk. It is important to stress that the Treasury market and corporate debt markets, along with others, are being greatly manipulated due to these policies. This in turn creates great distortionary effects and one of the biggest and most problematic is the mispricing of risk. In essence, without such policy interference, yields on Treasuries and corporate debt would likely be much higher. Furthermore, the spread in yields is tightening even as we have Fitch Ratings issuing a note forecasting a wave of bankruptcies across 2021 and 2022 as fiscal and monetary measures are scaled back. So understand that we have added trillions of dollars to our national debt, our trade deficits are at record highs, and we are still going to have to contend with a countless number of bankruptcies and insolvencies. Then what was the purpose of all of this money spending, borrowing, and printing if we still have such economic devastation on the horizon? These actions, coupled with these yield spreads tightening, and several other data points are indicative of a system that is nearing exhaustion. Policymakers understand the extent of their Ponzi scheme better than anyone and thus we are witnessing one extreme policy after the next to keep it all afloat for as long as they can. But remember, they cannot keep it going forever, and the longer they do, the bigger the fall and negative consequences. Abuses of power and billions and trillions of dollars are stolen right in front of our faces, and nothing is done about it to stop this madness. We need to wake up and we need to wake up now! Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Debt #Inflation #USA #FoodPrices #Liberty #Protests #Revolution #EndTheFed #Leadership #bananarepublic #FireCongress #JunkBonds
Whether it is the trillions upon trillions of dollars that are being spent by Uncle Sam and printed by the Federal Reserve, or the $650 billion that Treasury Secretary Janet Yellen, just gave to the IMF, one thing is certain, and that is the American taxpayer is paying the bill. Now the US taxpayer is not the only group that will be feeling the consequences of such reckless policy. Instead it will be millions, if not billions of people the world over. They will feel the effects via inflation. Many poorer and middle-income nations are already contending with the destructive nature of inflation. Most notably for these countries is the price of food, energy, medicines, and other living necessities. Such cost increases are in turn leading to political and social unrest. This trend is likely to continue. However, The Kapital News would like to note that there may be a delay as to when some of these protests and riots gather more steam and traction. This is potentially due to the $650 billion that was given to the IMF to assist such countries with their ailing and failing economies. They are on the verge of defaulting on their debts, which in turn would have caused further problems, thus creating a vicious-cycle for these countries, which would likely manifest itself with people protesting and rioting. The $650 billion, buys some time. Furthermore, with our reckless spending, is leading to record trade deficits. That is to say we are importing more than we are exporting at record levels. This signifies that our spending is leading to increasing production levels in other countries. If we were producing such goods, then we would not need to import them to such a degree. So understand simply, the US produces dollars, and the world is producing goods. How long will this continue?
The Kapital News has also been informing our audience of further fiscal policy measures amounting to trillions of dollars before 2021 even got started and prior to the election of now President, Joe Biden. It would not have made much of a difference as to whom is the President, as further spending was coming regardless. Nonetheless, the new infrastructure bill has gained some parliamentarian clearance to be passed, at least in part, via budget reconciliation. This is where a simple majority in the Senate, 51 votes, is enough to pass the legislation. In this instance, as was the case for the Nobody CARES Act 3.0 worth $1.9 trillion, VP Kamala Harris would be the tie-breaking vote, assuming this falls on party lines. This determination by the Senate parliamentarian does not mean that this bill will pass quickly. There are a few Senate Democrats who are not huge fans of the current bill, and they also come from more conservative states. Therefore, it is very likely that these Senators will leverage this to gain extra funds to their states in order to look the other way with their objections and then ultimately pass the bill. When it is all said and done, trillions more in spending will be appropriated throughout the remainder of 2021 and perhaps beyond.
A recent report released by Fitch Ratings, one of the major corporate credit rating agencies within the United States, is issuing a warning with respect to bankruptcies. The agency rightly claims that the level of bankruptcies that occurred throughout 2020 was well below what would have been expected and historically experienced in past recessions. They also correctly note that this anomaly occurred due to the unprecedented monetary and fiscal policy actions that were implemented. However, Fitch remarks that once these fiscal and monetary supports are removed, forbearances and moratoriums lifted or scaled back, that “bankruptcies will rise, potentially significantly.” Their projections are for both 2021 and 2022. This is a very damning report and rebuke of said monetary and fiscal policies. What this in effect means, is exactly what The Kapital News has been saying since last year, and that is all of the trillions in spending, borrowing, and printing will have been only to kick the can down the road. In other words, nothing structural has been resolved. You may be able to print dollars, but you cannot print solvency. Most of the damage is believed to be experienced by small and medium sized firms, which will further the consolidation process by larger corporations. One of the direct results of extraordinary and reckless fiscal and monetary decisions, has been the “zombification” of the economy. At recent count, nearly 25 percent or 1-in-4 businesses in the US are classified as zombies. This is the economy of the living dead, and if Fitch Ratings is correct, then some of these zombies may be going out of business for good. There are still a ton of risks and headwinds staring us in the face and coming down the pike. Money printers and stimulus checks will not solve these problems. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Bailouts #Inflation #Debt #USA #Liberty #Leadership #FoodPrices #Gold #Silver #Commodities #Oil #EndTheFed #bananarepublic #FireCongress #Protests #Bubbles #Fraud
The official unemployment rate now stands at 6.0 percent according to the Bureau of Labor Statistics. The jobs reports was released last Friday, which is the standard schedule being that it was the first Friday of the month. Employment rose by some 916,000 jobs. The bulk no doubt is more of a reflection of lockdowns and restrictions being lifted as opposed to new economic and business growth. In short, it is people being called back to work. This is still a good thing generally speaking, however, The Kapital News has some serious concerns as it relates to the true economic damage that has been done, much of which is still hanging in the balance, and the fiscal and monetary policies that have solved nothing, but have filled a void for the time being. Economic growth is not generated via the printing press, but rather through savings, capital formation, investment, and productivity gains. Printed money is not a substitute for real economic growth and activity. These policies are extremely expensive, reckless, and dangerous.
Nonetheless, some of the biggest gains came from the leisure and hospitality sector, which put on a gain of 280,000. This sector was one of the hardest hit due to the pandemic and subsequent lockdowns and restrictions. It is fair to reason that such gains were witnessed last month since such restrictions have been lifted in part or in their entirety. Most other sectors also saw job gains. It is important to note that many of the macro data points with respect to the employment picture, were little changed from the previous month. This signals that structural unemployment and underemployment remains throughout the economy. This can of course reverse course to the positive, but until we see these numbers improve significantly, then it is a hard sell to say that this is a solid jobs report. There is a long way to go and their exists major headwinds. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Jobs #Inflation #FoodPrices #Gold #Silver #Housing #Liberty #USA #Leadership #EndTheFed #bananarepublic #FireCongress #Protests
Despite initial jobless claims going back up from last week’s figures, the S&P 500 closed at an all-time high, north of 4,000 points. This has been the common theme throughout 2020 and into 2021 and that is jobless claims continue to remain at levels above those seen during the depths of the GFC, but nevertheless, equity markets make new all-time highs. It truly is the tale of two economies.
Initial jobless claims for the week ending 27 March came in at 719,000. Last week’s figures were revised downward by 26,000 to now stand at 658,000. In aggregate, amongst all unemployment insurance programs, some 18.2 million Americans continue to file claims. This takes the de facto unemployment rate to 12.8 percent, which is more than double the official rate of 6.2 percent. The official jobs report for March will be released tomorrow by the BLS.
The Federal Reserve’s balance sheet currently stands at $7.69 trillion, which is a week-over-week decline of around $30 billion. However, the Fed remains committed to its policy of QE, and will continue to purchase at least $120 billion worth of Treasuries and mortgage-backed securities on a monthly basis. This will take the balance sheet to north of $8.5 trillion by year end, and if Congress should pass more spending and/or the economy or markets decline to a certain level, then the balance sheet could easily approach $10 trillion!
In attempt to mitigate the effects of a dollar doom-loop, something The Kapital News has been describing over the past year, the US Treasury is perhaps going to be sending $650 billion to the International Monetary Fund, IMF. The purpose would be to assist poor and middle-income countries with their debt burdens. Despite the mammoth figure of $650 billion, Treasury actually does not even have to go to Congress for approval! Talk about checks and balances. This is almost the same size as the Troubled Asset Relief Program, TARP, which was passed during the GFC to help stop the GFC! Now, this much American taxpayer money may be going out the door as early as August if the IMF and others approve. Developing and poorer nations are facing the perfect storm of economic, political, and social issues. Whether it be runaway inflation, supply chain disruptions, coups, protests, or riots, or government corruption taken to its limit, these countries are in dire straits. Their stress can easily turn into global stress. The officials at the Treasury, IMF, and other agencies understand this situation. And while it does not justify giving away US taxpayer money, that is likely going to be what happens. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Jobs #Debt #Inflation #FoodPrices #IMF #USA #Liberty #EndTheFed #bananarepublic #FireCongress #Leadership #Bailouts #Protests
If the incompetence of central bankers was not enough to deal with, now we have to contend with their arrogance. European Central Bank, ECB, President Christine Lagarde, remarked in a recent interview that central banks remain steadfast in achieving their goals and dared the markets to test their resolve. What is she talking about? Is the ECB President openly admitting that central bank policy and natural market forces are at odds with each other? If this is the case, which The Kapital News believes to be true, then Lagarde has just declared that equity and bond prices would be quite lower compared to current levels.
Of course this is the open secret about global monetary policy, yet no one dares to say it, especially not a central banker. Quite the contrary, as central bankers attempt to attribute equity and bond price gains to fiscal support or a more resilient global economy. Rarely, if ever, do central bankers want to stand in the center of the stage and take all the credit nor do they ever openly taunt the markets. Global equity prices are at their outrageous valuations, especially in the United States, because of the monetary measures that were undertaken since the pandemic and even prior. So it is a simple thought experiment to ask oneself the following, if such measures and liquidity were removed from the system, would equity and bond prices be at their current levels? The answers is a resounding, NO! Prices would be much lower and interest rates much higher. This is what needs to occur in order for markets to find fair value, for zombie corporations to be liquidated or restructured, and for all other malinvestments to be liquidated or restructured as well.
This will be a lengthy and painful process, but it is one that is needed and required in order to establish a solid foundation on which to build a sustainable future economy and society. But we will never hear this from central bankers or politicians. Instead they give us their lethal combination of incompetence and arrogance. And while the top 1 and 10 percent of the population see trillions of dollars added to their net worth in the midst of a pandemic, these same central bankers inform of us a growing wealth inequality problem. Yet they never seem willing or capable of placing the blame at their own feet for such inequality. This type of rhetoric from Lagarde and other central bankers is concerning to say the least. This is now open warfare between free-market capitalism and central planning. Let us hope for the sake of freedom, sound economics, individualism, and posterity that free-markets win the day. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #CentralBanks #Inflation #Markets #Debt #Protests #Riots #Liberty #USA #Leadership #EndTheFed #bananarepublic #FireCongress #Pandemic #Gold #Silver #Commodities
