A Tale of Two Cities

December 2, 2022 key news items this week:

1. A Tale of Two Cities: As we enter into the final month of 2022, I like to review and draw conclusions to some of the key events of recent past by looking at competing nations in their strife for world dominance or relevance. We will examine a few situations with a view to hopefully to understand their future trajectories.

(i) War on Covid 19(Washington and Beijing): After 3 years of the pandemic, on December 1, the Joint Prevention and Control Mechanism of China State’s Council held a press Conference and gave a review of the entire mechanism. (Fig. 1)

The purpose of any review is to provide a conclusion or establish a new direction. Very noticeably the Zero Covid Policy was not mentioned. China’s Joint Mechanism for Prevention and Control has a 3 prong objectives, effective prevention, economy to maintain stability and continued development in a safe environment. There were 3 take home points. The 3 data points are omicron turned very mild, no observable long term effect and when infected, young people should have no more than 3 days of fever. Future emphasis will be concentration on seniors protection by vaccination. Research data shows mortality rate is 2.32% with no injection. The rate drops to 0.36% on double jabs of Sinovac, and further drops to 0.14% on triple jabs and at that juncture mortality rate is similar to those of common flu. The fourth jab will reduce mortality to 0.11%. For those over 80, mortality rate is 14.7% with no vaccination, with 3 jabs of Sinovac, the rate drops to 1.58%, a fourth jab will see a drop to 0.87%. With 3 to 4 jabs, the mortality rate for seniors is already lower than the common flu. China targets to have 90% vaccination for 80 years old plus by January 2023 and when achieved, a lot of the social distancing measures will no longer be required.

Why is the Chinese review important? The answer is simple, China has proven to be the definitive authority by virtual of having the lowest infection and mortality per million population in the world. (Fig. 2, 3).

 

In context,The “alleged” first outbreak happened in China and only months later did US “reported” her first Covid case. US was also the first country to roll out Covid vaccines. Despite these time advantages, the end result of the war on Covid between Washington and Beijing is night and day. 30% of US population has been infected and 16% of those infected developed long Covid which impaired the victim’s livelihood and quality of living. Worst still, Senator Rand Paul accused DR Fauci of covertly funded the UN banded “Gainer Function” research, funded super viruses research in an unsecured lab that eventually leaked and 6 million people died.(Fig, 4)

(ii) Puppet War (Kiev and Taipei): After 9 months, Ukraine is on the verge of collapse as Russia had nullified most of its power generation capacity, electrical and rail infrastructure.(Fig. 5).

 A very graphic depiction is provided on the entire Ukraine “lights out” through satellite imagery. (Fig. 6)

In a candid appeal, the European Commission President confessed that 100,000 Ukrainian soldiers had been killed. (This statement was later retracted from the official release, because together with injuries, up to 50% of AFU would have been incapacitated) Fig; 7.

No wonder General Milley (Chairman US Joint Chief of Staff) advised Biden it is time to negotiate for peace, but Milley was met with stiff opposition from the Administration. It has been US’s intention to fight Russia till the last Ukrainian standing. Fig. 8

Nevertheless, the US pledged support for Ukraine’s defense, the new anti-air defense system would be available by November 28, 2025. (Fig. 9).

On the other hand, Russia struck a deal with Iran to manufacture Iranian drones in Russia with drones rolling off the assembly lines as early as 2023. (Slide 10)

I wonder what would a new satellite image of Ukraine would be like on November 28, 2025.

 As reported last week US had hijacked the most valuable asset of Taiwan, TSMC, to Arizona by 6 charter pane load of experts and engineers. In a pan Taiwan municipal election, the ruling Green Party lost big time and Taiwan President quits as Party Leader.(Fig. 11).

 Zelensky of Ukraine and Tsai of Taiwan are both products of US style of Democratic elections. Be careful of what you wish for.

 The past week’s financial markets:

A. Stock Market: Dow gain 82.85 points for the week (+0.24%). (Fig. 12).

Right after a sharp rebound on the release of FOMC minutes last week, the market fizzled out as there was a triple whammy to talk down the Fed Pivot euphoria by Fed officials. (Fig. 13)

A day later, Powell did confirm a slow down could be as soon as December and the Stock Market took off again. (Fig. 14)

Friday came and with higher than expected November payroll, the powers that be tried to use the buoyant employment snapshot to infer caution on account of inflation with covert maneuvering on key indexes.(Fig. 15 and Green Framed Window).

This had not succeed. The frequency of these empty and often contradictory diatribes   indicates the Fed is now truly quadriplegic and only the mouth can move. The Q3 financial results of the Fed showed a loss of $1.25T and owns 48% of the entire outstanding USGGYR30. The Fed is operating in deep negative gearing. Will they or can they push more rate hikes and cause bond prices to fall further.

B. Debt Market: (Fig. 16): USGG10YR ended the week at 3.492% a drop of 10.9 basis points from the previous week. 

Our continued monitoring of Spread between USGGYR2 and Fed Funds Rate indicates the Fed is in no position to push for further rate hikes.(Fig. 17) 

UST Yield Curve continued to be seriously inverted, and in fact steepest inversion for the past 40 years. Rates on all duration had declined with one month rate down by 23 basis points whilst YR30 further down by 18 points.(Fig. 18)

C. FX Market (Fig. 19): for the week ended December 2, 2022, DXY opened at 104.506 and closed at 106.062 (Down -0.3%).

All major currencies improved against USD. Two weeks ago we reported currency war will be taking a breather and two months ago we reported DXY have peaked at the end of September, the evidence is now plain in sight. USD is set to weaken further with a slam towards end of December.

 D. Precious Metals & Crypto :(Fig. 20): Gold price opened at $1754.26, and closed the week at $1797.25, a gain of $42.99 (+2.45%).

The Central Bank for all Central Banks (BIS) has given a very clear signal that a reset for Reserve Asset shall take place. Those who naked short paper gold for USD will soon face judgement day and precisely for that reason BIS has closed its Gold Window and Gold Swaps. You reap what you sow and everyone on your own. We will see a progressive acceleration of this great unwind. In this regard, the resurrection of Silver will be a religious experience. For the week, Silver gained 8.6% and Bitcoin 3.3%. (Slide 21)

Job 4:8  Even as I have seen, Those who plow iniquity And sow trouble reap the same. 9  By the blast of God they perish, And by the breath of His anger they are consumed.