It is the first week of 2023 and may the Lord bless you all with Peace, Joy and Contentment. The interesting news items to look at this week are:
1. The Three Stooges Monkeys - 2023 looks like it is going to be another year of the three stooges monkeys. (Fig. 1).
A wise person listens to what politicians have to say but validate their actions by observation and speak out if their narrative proved untrue. A naive person just takes in verbatim the flavor of the month talking points, and never bothered to validate. A divisive person never listens but scrutinize for faults and then bad mouth. A timid person listens and observes but never warns others. My guess is in most western societies the population is 40% naive, 30% divisive, 20% timid and 10% wise. Sadly when the majority of ranking bureaucrats become naive, disasters are guaranteed. This is particular so when those involved with intelligence gathering and reporting and pander to political correctness and prevailing narratives. (Fig. 2)
In the article, the Defense Intelligence Agency (DIA) and Central Intelligence Agency (CIA) is accused of using one politically driven source as the sole source of intelligence in a major war and advice politicians accordingly. To these practices, the blindness were further reinforced by media reporting using the same material, what good you think may come out, I really cannot fathom. What I learn from Sun Tse’s Art of War is, defeat is a certainty in these cases.(Chapter 3:18 Fig. 3)
One of the try and tested method of intelligence is to follow the money. Allow me to again quote from Larry Johnson (Investigative Journalists and former US Intelligence Professional). “It is money and moneyed interests that is driving the policy train in Washington, especially when it comes to the Department of Defense. Members of Congress are especially eager to line their pockets. The Gateway Pundit published a piece today reporting that members of Congress who invested in Wall Street beat the market by a wide margin in 2022:
The S&P 500 was down 18% in 2022. Democrats were only down 1.76% and Republicans were up .389% on the year.
2. The Big Bust & Hyperinflation by Debouch Currencies: We opened this theme last week as a thing to watch in 2023 and quite a few data pixle continued to appear which keep our radar buzzing.
(i) A video clip from FDIC (The Federal Deposit Insurance Corporation) discussing some financial crisis which they avoid telling the public (Fig. 5)
(ii) Usage of the Fed’s Discount Window creeping up. (Fig. 6)
(iii) The world’s biggest Fund Management Company “BlackRock” with $10 trillion under management suspends withdrawal of its £3.5 billion fund called the BlackRock UK Property Fund.(Fig. 7)
(iv) A continued tightening of credit causing severe US Treasury Yield Curve inversions and breaking down of traditional banking business model. (Fig. 8)
(v) Yet effective quantity of US Monetary Base and the Fed’s Balance Sheet continued to grow (Fig. 9)
3. Ukraine Proxy War and East West Conflict: War is all about logistics and we are glad that we beat the NYT by 3 days to report to you the Ukraine Proxy War is economically unsound for the West due to high cost of US Air Defense Missiles to intercept low cost Russian Iranian Kamikaze Drones. (Fig. 10).
In the NYT article the journalists deliberately under-report the cost differential of 7 times based on Ukraine usage of Soviet S300 missiles, which by and large the inventory have been depleted. The real cost differential is between 25 to 150 times with the US NASAM and Patriot Systems. The take home part is when the journalist concluded that “There is a danger those allies will grow weary of the cost over time.” This is already evident by the downward trend of NATO’s aid to Ukraine.
Last week I highlighted the fallacy of using GDP as a single measure of strength and capability of a nation. In military expenditure terms the US outspend the next 9 countries combined. (Fig. 11)
The force structure of the US Military is spelled out quite precisely by the US Congressional Budget Office in terms of al types of fighting units and associated costs in its annual primer and updates (Fig. 12).
In 2017, the US Think Tank Rank Corporation projected what fighting units would be required when major conflicts broke out with North Korea, China, Terrorism, Russia and Iran. (Fig, 13).
When I just add across the various force structures required for US to take on the Shanghai Cooperation Organization, it simply demonstrate the US needs twice the size of its present military strength to combat the Eastern Alliance. Yet Western politicians continue to poke the bear and the dragon as if they can easily prevail over the East; Rand’s conclusion is plain. “In our games when we fight Russia and China, blue(US Military) gets its ass handed to it”. (Fig. 14).
This view is not Rand’s alone, General Charles Q Brown (US Air Force Chief of Staff) once said the US will face WWII losses against an advance adversary like Russia or China.(Fig. 15).
But why does the US instigate such provocations against Russia and China , if I may use the try and tested method of follow the money. (Fig. 16) is a chart from the World Bank showing Arms Exports from Russia and US. In the year 2014 when Russia catches up to US, the Maiden Revolution happened, Russia is sanctioned for annexation of Crimea and Arms exports fell.
When Huawei mobile phones outpaced Apple, Huawei is sanctioned with a technology embargo on National Security Grounds. The same goes for Tik Tok because Facebook and Instagram could not compete commercially. This is simply 21st Century mercantilism and piracy.
The first week financial markets results as follows:
A. Stock Market: For the first week trading Dow gained 483.36 (+1.46%). (Fig. 17).
During the week, James Bullard, St. Louis Fed President again used hawkish “Open Mouth Policy” to spook the market but by Friday wage growth slows and prompted Dow to power ahead by 700 points on Fed dovish repricing. The US stock market is completely liquidity driven. Economic down turn becomes good news and there were plenty of “good news”
(i) Container Shipping in Great Recession (Fig. 18)
(ii) Samsung Profits Plunge 69% As Global Chip Demand In 'Full-Fledged Ice Age'(Fig. 19)
(iii) Amazon Laidoffs to hit over 18,000 workers, the most in recent Tech Wave (Fig. 20)
B. Debt Market: (Fig. 21): USGG10YR ended the week at 3.56% a drop of 31.9 basis points from year end 2022.
Anticipating looming recession and Fed pivot to dovish, long bonds were bid up in a frenzy. Short term rates rose and the Spread between YR2 and Fed Funds turned positive again, thus giving room for the Fed to increase Fed window rates. (Fig. 22).
The already severely inverted UST Yield Curve further sloped down to long dates making bank credits to main street impossible and a severe recession is written in and banking crisis imminent. Hence the FDIC crisis meeting video clip in the preceding paragraphs.(Fig. 23)
C. FX Market (Fig. 24): for the first week 2023, DXY opened at 103.494 and closed at 103.911 (up +0.40%).
Euro and Yen softened against USD by respectively -0.56% and -0.91% whilst Rmb and Britsh Pond gained +0.88% and 0.14%. Oil declined by over 8% whilst Gold was up 2.4%.(Fig. 25)
D. Precious Metals & Crypto :(Fig. 26): Gold price opened at $1822.79, and closed the week at $1865.49 (+$42.7, +2.4%),
Silver traded down slightly for the week (-0.48%) whilst Bitcoin gained 2.5% along with the stock market. (Fig. 27).
91% of Cryptos since 2014 have died, reasons: Scam or other reasons:\; Joke or No Purpose; ICO Failed or Short Lived; Abandoned or No Value (Fig. 28). Take home one point though, all these Crypto activities have once added hundreds of billions to US GDP.
Ecclesiastes 1:1 The words of the Preacher, the son of David, king in Jerusalem. 2 "Vanity of vanities," says the Preacher; "Vanity of vanities, all is vanity." 3 What profit has a man from all his labor In which he toils under the sun? 4 One generation passes away, and another generation comes; But the earth abides forever. 5 The sun also rises, and the sun goes down, And hastens to the place where it arose. 6 The wind goes toward the south, And turns around to the north; The wind whirls about continually, And comes again on its circuit.7 All the rivers run into the sea, Yet the sea is not full; To the place from which the rivers come, There they return again. 8 All things are full of labor; Man cannot express it. The eye is not satisfied with seeing, Nor the ear filled with hearing. 9 That which has been is what will be, That which is done is what will be done, And there is nothing new under the sun. 10 Is there anything of which it may be said, "See, this is new"? It has already been in ancient times before us. 11 There is no remembrance of former things, Nor will there be any remembrance of things that are to come By those who will come after.
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