Tag: Trade

Ep. 585 – Priced Out of Housing

The Kapital News

Ep. 585 - Priced Out of Housing

00:00 / 00:34:01

Only a few months ago the average new home build cost an extra $24,000 due to the price increase of lumber alone. Fast-forward to today and now that increase is $36,000! That is an increase of 50 percent in only a few short months. And of course we are told constantly by our policymakers that there is no inflation. Do not believe your lying eyes is supposedly their message. Further, this is placing upward pressure on rents as well, and according to the National Association of Home Builders (NAHB), monthly rent payments are likely to increase by $120 per month. So understand that Uncle Sam and company have been sending out stimulus checks over the last year. If your rent should increase by $120 per month, then that check simply went to covering this rent increase. However, it will not be able to cover all of the other price hikes that exist from A-Z.

As we continue to see upward pressure on prices, many major corporations have been issuing press releases to their customers indicating that they will be increasing their prices, if they have not done so already. It would also be prudent to not only pay attention to the price hikes, but also the volume of product. Is it the same weight or lesser? Is it the same count or fewer? With these prices increasing there are only a few things that can happen. For example, corporations can assume the price hikes, thus squeezing their margins; they can pass along the entire cost to their customers, thus increasing consumer prices yet also risk losing market share; or a combination of the two. However, whichever option is chosen by what company, one thing is certain and that is margins and savings will be squeezed. The markets are priced to perfection, as the saying goes and thus anything that strays from this narrative can have some serious negative consequences.

Some such negativity right now with the current state of housing is the likelihood of pricing out a generation of homebuyers. The demographic most negatively impacted right now is the Millennial generation. This cohort has to contend with purchasing record-high housing prices, equity prices, car prices, rents, student debt payments, and the lack of current and future opportunities. All while likely to be left with the responsibility of cleaning up this mess from a budgetary and governmental standpoint. This is the intersection of economics, politics, and social issues. The dam is about to burst globally because of these issues, and when it does, it will be epic! Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Housing #Lumber #Jobs #EndTheFed #bananarepublic #FireCongress #Liberty #USA #Leadership #Inflation #Gold #Silver #Commodities

Ep. 564 – Margin Calls + Fragile Markets

The Kapital News

Ep. 564 - Margin Calls + Fragile Markets

00:00 / 00:33:45

Too much is never enough and when markets and investors are punch drunk on cheap liquidity and deficit spending, an environment gets created that places the entire system at risk. The dominoes have been set for a while and all it takes is for one to go down to commence the collapse of the others. News stories were breaking today around Archegos Capital Management, which is a family office, that ran into some problems. This firm is not a household name, which serves the point in highlighting how fragile the system is when a hedge fund or family office can cause or lead to a systemic event. In the case of Archegos, they received a margin call due to some of their equity positions losing value – namely ViacomCBS. What is interesting to note is how this is quite reminiscent to the housing crisis that led to the GFC – namely the similarities in the levels of leverage and the number of other financial institutions that were connected to these trades on a global basis. The investment banks involved, however, are household names such as Goldman Sachs, Morgan Stanley, Nomura, Credit Suisse, and Deutsche Bank. The damage done to each bank will of course differ, but the point remains – the financial system is highly interconnected, and this needs to be respected. Due to the fragility that exists, it can be the slightest wrong movement that throws equity markets off its perch. Be on the lookout for similar events to unfold. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Debt #Inflation #Markets #Bonds #USA #Liberty #Leadership #EndTheFed #bananarepublic #FireCongress #Protests #FoodPrices

Ep. 563 – Jobless Claims Remain Above GFC

The Kapital News

Ep. 563 - Jobless Claims Remain Above GFC

00:00 / 00:29:23

Despite being one full year into lockdowns and restrictions, initial jobless claims remains higher than even during the depths of the GFC. For the week ending 20 March, initial claims came in at 684,000, which happens to be the lowest reading since last year. Last week’s figure was revised upward by 11,000 to stand at 770,000. In aggregate, amongst all unemployment insurance programs, some 18.9 million Americans continue to file claims. This gives a de facto unemployment rate of 13.3 percent, which is more than double the official rate at 6.2 percent.

The Federal Reserve’s balance sheet hit another all-time high to now stand at $7.719 trillion. The Fed remains committed to its policy of QE, by purchasing $120 billion per month of US Treasuries and mortgage-backed-securities. This will likely take the balance sheet above $8.5 trillion by year end, which would be a 10x fold increase to the balance sheet since the GFC! Other monetary measures such as M1 and M2 also hit all-time highs. And lastly, the Suez Canal traffic jam continues into the weekend. Some estimates state that this blockage is costing the global economy $400 million per hour! A staggering figure no doubt and highlights the vulnerabilities that exist within some of these trading routes and the sizes of some of these vessels. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Jobs #SuezCanal #FoodPrices #Protests #Inflation #Leadership #USA #EndTheFed #bananarepublic #FireCongress #Taxes #Gold #Silver #Liberty

Ep. 551 – Stock Market Rotation

The Kapital News

Ep. 551 - Stock Market Rotation

00:00 / 00:32:20

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

Ep. 550 – $1.9 Trillion Mayhem

The Kapital News

Ep. 550 - $1.9 Trillion Mayhem

00:00 / 00:29:45

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

Ep. 548 – February Jobs Report

The Kapital News

Ep. 548 - February Jobs Report

00:00 / 00:33:38

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

Ep. 545 – Market Bubble Blame Game

The Kapital News

Ep. 545 - Market Bubble Blame Game

00:00 / 00:31:22

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

Ep. 388 – The Looting of America

The Kapital News

Ep. 388 - The Looting of America

00:00 / 00:36:47

Coast to coast protests and riots continue across the country as people make their voices known in response to the tragic death of George Floyd at the hands of police, one week ago. Peaceful protests are needed in such times, however, violent riots, doing harm to others and property, and theft are not to be tolerated.

After a week of protests that turned quite violent over the weekend, the President finally came out and made a formal address to the nation from the Rose Garden. His statement was more about being a “law and order” President and using the US military if need be to put down the riots, if cities and states are unable or unwilling to do so. There is no question, that those who do harm to others and/or property need to be held to account for their actions. And while watching on TV, and seeing many police across the country, simply standing idly by while this type of carnage occurs – is shocking to say the least and should not happen. The police are to police and uphold the rule of law and keep their communities safe. Peaceful protests are a right – violence is not. So while there will be many who welcome the President’s message of “law and order,” it must also be noted what was missing. And that’s a true call for unity and for peace. One that transcends the politics and relates to the issue(s) at hand. One that strikes the chords of empathy, sympathy, frustration, and optimism. These unfortunately, are not the strengths of the President and so he resorted to playing the “tough guy” role with threatening military force on the streets of the United States.

We have been saying here for months that the global protests will be coming to a theater near you – well here they are! We’ve also been saying that the only global leaders during these historic times are the people protesting around the world – finally standing up for themselves and against these corrupt and abusive governments. The message from the President tonight was not a message of unity nor a show of strong leadership that this moment demands – not just for the protests but for a whole host of issues that we discuss here daily. A house divided cannot stand.

The looting of America is now on display, but one more than the other – at least from a TV point-of-view. This weekend we witnessed many rioters running into various stores and stealing an untold amount of merchandise. While this is criminal and should not be tolerated – where also is the outrage over the looting of America from the White House, Congress, Wall Street, Corporate America, and the Federal Reserve? Most items stolen over this weekend consist of a lot of cheaper items “made in China.” Well what about the billions and trillions of dollars being printed out of thin air and thrown at Wall Street, Corporate America, and the government to do as they please – with little to no oversight? Where’s the outrage?! People will eventually wake up to this and they’ll pay dearly for it in inflation, stagflation, and possibly hyperinflation in the months and years ahead – there is no free lunch. And to boot, despite Great Depression like numbers, a global pandemic, and now protests and riots across the country and the world, and a breakdown in the US-China Phase I trade deal, the markets are nearing all-time highs. Just wait until Main Street figures out what Washington DC and Wall Street have been doing – these protests and riots are just getting started. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Protests #USA #Bailouts #Depression #Recession #Debt #Gold #Peace

Ep. 378 – No Consumer, No Sale

The Kapital News

Ep. 378 - No Consumer, No Sale

00:00 / 00:30:57

The economic hits just keep on coming with two dismal reports being released. The first was retail sales – plunging 16.4% for the month of April. This is the worst reading ever and was well below market expectations of a decline of 12%. All categories were harshly hit, primarily driven by the lock-downs due to COVID-19. Some of the worst hit, and no surprise, were clothing and accessories, electronics, appliances, and furniture, and restaurants and food service. On the back of this data, we also have JC Penney filing for bankruptcy this evening. This is another blow to the retail sector, as well as commercial real estate, and adds to a list of other big name retailers filing for the protection. Another notable report pertains to industrial production, which collapsed by 11.2% for the month of April – also the largest monthly decline since records have been kept. On a year-over-year basis, the decline is over 15% – this kind of decline has not been seen since the GFC, the end of WWII, and the Great Depression. Nonetheless, the DOW, the NASDAQ, and S+P 500 all closed the day in the green. However, what also had a very strong performance was that of gold and silver. Are the precious metals starting to sniff out the effects of money printing, deficit spending, geopolitical uncertainties, and the realization of the true economic and financial damage that likely lies ahead? Time will tell, but it is most definitely worth the time to pay some attention to the precious metals.

This evening in the House, Nancy Pelosi’s, “HEROES Act,” was passed along party lines and will now head to the Senate where it is all but certain to be voted down. However, it is also likely that there will be another round of spending – the question will be, when, and how much does it cost? Also in Washington, this afternoon, the President announced that the US will have a vaccine ready for use by the end of this year. This blows past all previous comments that the earliest possible would be 12-18 months, which would have taken us into 2021. Nevertheless, “Operation Warp Speed,” as it is to be known, is underway to develop a vaccine in record time and the President has also made comments that the military is to administer the vaccine. We don’t like the sound of that and this is well deserving of further explanation. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Jobs #Bailouts #EndTheFed #Debt #Gold #Recession #Depression #USA #COVID19

Ep. 371 – The Blame Game

The Kapital News

Ep. 371 - The Blame Game

00:00 / 00:24:05

As we continue to navigate this new world during a global pandemic, coupled with a Presidential election in the United States, one thing is certain – the blame game. With all of the fallout surrounding the genesis of COVID19, who knew what when, who knows what now, and all of the societal and economic shifts – somebody is going to be blamed. Never ones to take responsibility, politicians the world over have been slowly starting to point the finger at each other, with most of the blame being hoisted on China. In turn, China has also started a media campaign that is blaming the West, and in particular, that of the United States. Despite the recent signing of the Phase 1 trade deal between the US and China, relations between the two nations may be in for some rough waters ahead. Expect the blame game to heat up.

As we enter the spring and summer months of 2020, there is much hope and anticipation that the US economy, among others, will begin “opening” back up and with it a strong economic recovery. We are very skeptical of a strong economic bounce-back. Nevertheless, this is also a Presidential election year and there is no question that the major candidates, President Trump, and most likely, former Vice President, Joe Biden, will step up their rhetoric against China. This rhetoric will likely lead to further distance between the US and China and may cause both sides to engage in economic and cyber warfare to greater degrees than which is already being conducted. In addition, there is the possibility of stepped up aggression by China in the South China Sea and perhaps responses by the US and regional allies. Other physical disputes could take the form of proxy wars, and we believe Venezuela and Iran to be probable candidates. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #USA #China #Peace #War #Trade #Recession

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