The Karma of Humpty Dumpty

Week ended Jan 14, 2023, interesting news items to look at this week were:

1. The Karma of Humpty Dumpty: Quite a few English nursery rhyme has behind it’s fun child's play hide political drama and parodies of historical events, propaganda and veiled criticisms. A Google search of Humpty Dumpty reveals the subject was a huge cannon employed on top of the city wall during the English civil war of 1642-1649. (Fig. 1)

When I read the CIA sponsored Brazilia riots against President Lula and other news data points this week, it suddenly dawned on me that life has a nasty way of coming full circle. The Biblical Principle of “Sowing and Reaping”(Fig. 2).

 Humpty Dumpty symbolizes brute force by King Charles I against the English Parliament in an attempt to suppress the will of the people but failed. It was no less than present day for the Anglo American Empire to dictate the “Rule Based International Order” against the less developed world by color revolutions, financial, economic, trade and technology sanctions and full spectrum military intimidation. With confidence, my conviction is the Western alliance will fail. “Humpty Dumpty had a great fall. All the king's horses and all the king's men Couldn't put Humpty (Big Cannon) together again”.    

 We observed on a monthly basis, Wall Street gyrates around inflation and employment announcements, but momentum traders often ignored longer term employment trends. It is my intention to unpack for the readers in these weekly studies important but often overlooked data points. Last Friday Dow celebrated a 700 point rise because wage growth was soft despite Biden and Powell boast of US robust employment. In all honesty, official unemployed in US, within a very narrow definition of U3 hovered around 5~6 million mark. Unknown to many, every Bureau of Labor Statistics (“BLS”) monthly announcement of unemployment, there are 4 times more working age Americans who have no work and are unable or stopped looking for work. So by just looking at U3, four fifths of the problem is overlooked. Let us unpack the real US employment situation (Fig. 3).

 The US defined its labor force as Non-institutionalized Prime Age Civilians who are actively working or looking for work. In December 2021 the labor force was 164.3 million with 5.7 million or 3.5% unemployed (yellow segment on the Fig. 3 pie chart). This 3.5% gets all the headline attention on monthly BLS reporting. The almost 100 million prime age men and women not working and not actively looking for work (red segment) were left buried in the Labor Participating Rate of 62.3%. This definition is unique for the US. On a uniform basis using the definition of International Labor Organization (“ILO”) US Labor Participation Rate is 61% vs China’s 68%. The difference of 7% of the population aged over 15 in active productivity versus State Welfare makes a tremendous difference to the vitality of a nation.

 Next we look at the Labor Participation Rate of US over the past 70 years. (Fig. 4).

Notice right after WWII, the participation rate was below 60% for 20 years until 1970. The nation simply needs that time to recover from a major war. Labor Participation Rate began to climb steadily thereafter until year 2000 to a high of 67%. From year 2000, it started a decline to around 62% in 2022 (ILO - 61%). There are many reasons for the decline but as explained below the series of wars with Iraq, Afghanistan, ISIS, Syria all had a part to play.

 In looking at the Red Segment in Fig. 3, some would argue that prime aged women not in the Labor Force would principally be home makers taking care of kids and family. That is certainly true, so we further refine our methodology by taking out women in the Not Working Category. (Fig. 5) and plotted a trend line from 1991 onwards.

The unrelenting increase for prime age Americans Males Not Working and not classified as Unemployed is something which cannot be explained by swings in economic cycles alone. (Please note the curvature of the trend line.) Annually BLS surveys the reasons for their absence from work and statistics suggests just under half reported they need to take pain relieve medication on a daily basis because of physical or emotional traumas. This remarkably co-relates to the US Veteran population of 19 million. We all know the US Fentanyl Epidemic. (Fig. 6)

(Fentanyl is a Schedule II prescription drug and it is typically used to treat patients with severe pain or to manage pain after surgery. It is also sometimes used to treat patients with chronic pain who are physically tolerant to other opioids. Fantenyl is legally manufactured and distributed in the United States.). The drug is addictive yet in many cases its first introduction to recipients were through orthodox medical and pharmaceutical channels.In 2020, nearly 75% of all drug overdose deaths involved an Opioid (such as Fentanyl or Oxycodone). The sad saga of wars and opium were all too familiar to our Asian readers.  

 In 1839, the British waged the first Opium War against China followed by the hundred year humiliation of China. At the height of WWII, President Roosevelt on the occasion of the Battle for Britian, used War Plan Crimson to extort the global opioid trade from the British to the US. (Please read my previous report on September 16, 2022 for the history of US involvement with Opium trade).

“On the military front, all branches of the U.S. military are having trouble filling recruitment quotas.Ten years ago, military age kids flocked to join up. No longer. The woke military and the reckless political leadership pursuing endless overseas wars has exhausted the working class in America that previously encouraged their kids to join up.” Quote from Larry Johnson “Is America Crumbling From Within?” https://sonar21.com/is-america-crumbling-from-within/

What goes around, comes around. God is not mocked, a man reaps what he sows.Galatians 6:7

 2. The Gnomes of Zurich and Singapore - Swiss National Bank reported $143 billion loss is the biggest in the regulator’s 116-year history. The loss represented 18% of Switzerland’s projected GDP. (Fig. 7)

A 5% loss in GDP would put most nations into a depression, what happened to SNB? Well unlike PBOC who bought gold as any CB would, SNB bought US Tech and other stocks(Apple, Microsoft, Amazon, Google etc.) So much for wise and prudent Central Bankers. (Fig. 8).

In Singapore, the premier S.E. Asia financial hub, Taemasek (Singapore’s Sovereign Wealth Fund) lost of $275 million on its investment in FTX.(Fig. 9).

Meanwhile, the weekly losses of the Federal Reserve is bleeding like a waterfall (Fig. 10).

During 2022, Reserve Banks transferred $76.0 billion from weekly earnings to the U.S. Treasury, and, in September 2022, most Federal Reserve Banks suspended weekly remittances to the Treasury. In the 18 weeks since September 2022, accumulated losses exceeded $174 billion. If we add “marked to market” valuation on the Fed’s Underwater Bond Portfolio, the loss would be $1.25 Trillion, larger than Japan’s entire US$ FX Reserve and approximately twice of UK’s US$ FX Reserve.

Every Central Bank tied to the Anglo American Empire is underwater. Guess that is what you get with “Rule Based International Order”.

3. Ukraine Proxy War and East West Conflict: The last NATO assault force against Donbas at Bakmut will be completely encircled as Russia had just taken Soledar. (Fig. 11).

For 8 years, The AFU had fortified Bakmut as a launching ground against the Russians and Bakmut is now likely to fall in late January or early February. AFU has began to fortify Kramatorsk as a backup but thereafter there is no barrier to Kharkiv then Kiev. (Fig. 12)

Please also read map at (Fig. 13).

A company of tanks (14 makes a company) from UK and Germany and a battery of US Patriot Missiles (8 launchers of 4 missiles each) is unlikely to change the strategic balance in the battle field.

A friend commented during dinner that Russia will be running out of ammo soon. My reply was Germany only has a few days of ammo. In June 2022, just over 3 months into the Ukraine Conflict RUSI (The Royal United Services Institute is the world's oldest and the UK's leading defence and security think tank) published a research paper titled “The Return of Industrial Warfare” Its conclusion is the West must first radically improve its approach to the production of materiel in wartime to face adversaries such as Russia and China.(Fig. 14).

Yes, MSM continued to deceive many. The link to the RUSI article is reproduced again below for those readers who have not read my June 2022 report. https://www.rusi.org/explore-our-research/publications/commentary/return-industrial-warfare    

 This week financial markets results as follows:

A. Stock Market: For the week ended Jan 14 2023 Dow gained 672 points (+2.0%). (Fig. 15). 

Dec CPI came in as expected at 6.5% lower than 7.1% for November. Market expects next rate hike would at most be moderate. A monthly 9.4% decrease in gasoline prices was “by far the largest contributor” to overall deflation in December, according to the CPI report. (Fig. 16).

The Anglo American propaganda machine again trumpeted the success of the Russian oil price cap. Little mention was made the US Strategic Petroleum Reserve has depleted by more than one third to counter shortages and rising prices.(Fig. 17)   

 B. Debt Market: (Fig. 18): USGG10YR ended the week at 3.498% a drop of 6.2 basis points from the previous week.

Spread between USGG2YR and Fed Funds turned negative again expressing market did not favour nor believe justified large rate hikes again. (Fig. 19).

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.(Fig. 20).

Funny QT accounting continued to dress up Fed “shrinking Balance Sheet” but the Reverse Repo speaks the true story (Fig. 21).

 C. FX Market (Fig. 22): for the week ended Jan 14, 2023, DXY opened at 103.911 and closed at 102.180 (Down -1.67%). 

As the Fed’s rate hike cycle was about to conclude, all major currencies improved against the USD, there was a mad scrambling to unwind the Yen Carry Trade with Yen jumped 3.3% against the USD. Oil and precious metals performed strongly against the weakened dollar. (Fig. 23) with CB switching to gold against USD.

D. Precious Metals & Crypto :(Fig. 24): Gold price opened at $1865.49, and closed the week at $1919.4  (+$53.91, +2.9%), 

Silver had a smaller gain of 1.95% as Hedge Funds took profit midweek but Bitcoin powered ahead by 17%. Te Bitcoin trading pattern looked more like the old trick of pump and dump rather than short covering. (Fig. 25)

^{Matthew 7:15}  "Beware of false prophets, who come to you in sheep's clothing, but inwardly they are ravenous wolves.¹⁶  You will know them by their fruits. Do men gather grapes from thornbushes or figs from thistles? ¹⁷  Even so, every good tree bears good fruit, but a bad tree bears bad fruit. ¹⁸  A good tree cannot bear bad fruit, nor can a bad tree bear good fruit. ¹⁹  Every tree that does not bear good fruit is cut down and thrown into the fire. ²⁰  Therefore by their fruits you will know them.