The Three Stooges Monkeys

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.

https://www.thegatewaypundit.com/2023/01/corruption-members-congress-beat-sp-500-many-made-unusual-trades-resulting-huge-gains/” (Fig. 4)

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 21^st 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. 

Forewarned is forearmed 2023

 It is New Year’s Eve 2022, may the Lord bless you all with Peace, Joy and Contentment as we will surely need God’s presence in what may be a roller coaster 2023. Here’s what I think we can expect:

 1. Continued Lies and Deception by elected leaders: We are in an era of faked news and for insecure political leaders (whether in “democratic” US/UK or tyrannical Ukraine) truth is suppressed via “misinformation” censorship. Half truth fills the MSM because controlling the narrative is political survival. (Fig. 1) headlined “China unveils a surprising new weapon in its information war against the West”.

The weapon is “discursive multipolarity”; In an era of “post-truth” meaning public opinion is shaped not by facts but by emotions, China without overthrowing the West’s “discursive hegemony”. used the West information assets to display an alternative. Since 2018 China stepped up her effort in this regard by not just fighting false accusations but by providing an alternative to the “rule based international order” through “Community of common destiny for mankind,人类命运共同体”.A rule based international order is just a rhetorical device implying China is breaking established rules. These rules were never clearly defined but in fact were made up as and when the Anglo American Empire so chooses. “Community of common destiny” on the other hand is what China has been practising for decades in substance with aids, investment and trade and can be immediately identified and sympathized. The result has been remarkable if we just take a look at the G20 line up between the two camps. But before we do that, one of the greatest deception before us is we have been led to believed that a country’s strength and prowess can be solely judged by its nominal GDP, hence the Anglo American Alliances (“AAA”) is all dominating hands down. (Fig. 2)

 On nominal GDP terms Russia is but 2% of Global GDP vs AAA’s 51% hence given draconian financial and economic sanctions and the combined NATO’s military might, Russia should crumble within months. The thinking the US led NATO was Russia produces 10 million barrels of crude per day and at the pre-conflict price level of $70 per barrel, the global economy of $101 trillion can surely can take an annual $255 billion hit (0.25% of Global Nominal GDP) for one year at most. Sadly Western politicians are mostly lawyers or political science graduates, so very few understand each barrel of oil went missing means energy equivalence of 12.5 years of hard labour hours. With misguided and narrow mind sets, no wonder rule by the West is in such chaos. Now a better measure of comparative strength of nations is Purchase Price Parity, stripping out pricing effect between countries. A simple illustration is using a $3 million Patriot Air Defense Missiles to intercept a $20,000 Russian Iranian Kamikaze Drone in Ukraine will add 150 times more GDP to US than Russia, but is it relevant ? On this basis, the G20 East and West line up indeed looks very different using PPP as a basis(Fig. 3)

 No amount of lies and propaganda can change the course of evolution to a multipolar world and we expect in 2023 the West will continue to fight against this trend and even double down to resist the evolution from happening. So be prepared for a deception galore to come.

2. The Big Bust: My friend and ex colleague sent to our chat group the economic outlook of the top banks from US, Europe and Asia. (Fig. 4)

Whilst I am still reading and digesting the contents, the immediate feeling I got, especially from the Wall Street Big Guns is don’t fight the Fed, interest rate will stay high around 5% for 2023 and recession in US is probable but manageable. For past two consecutive weeks I wrote about the surreal US finances. I did some more homework on 45 Years of US Treasury Yield Curve involving over 60,000 data points(Fig. 5) and found only on 5 occasions did serious yield inversion happened.

Three incidents happened on shorter duration and all related to credit and currency events, 1991 after the Japanese Bubble Economy gone bust, 2000 after the Dot Com bubble and 2008 at the Sub-prime Fiasco. (Fig. 6).

One event was of long duration of 27 months with extreme Yield Curve Inversion. The Event was the USD crisis in full bloom which began in August 1978 and ended in March 1981. This was brought on by a default of the Bretton Woods Agreement. The 2022 deep Yield Curve Inversion has the same shape and depth as the 1978 incident. The market is alerting to a similar credit and currency event of yet another US Default around the second quarter of 2023. So be forewarned.   

If you need further corroborative evidence please take a look at:

(i) (Fig. 7), the waterfall mounting losses at the Federal Reserve, from weekly average earnings of $1.6 billion to weekly losses of $18 billion.

(ii) (Fig.8) the false Quantitative Tapering accounting and covert QE using Reverse Repo. RR conveniently disguised $2 trillion + of printing, and is happening every 24 hours non-stop.

(iii) (Fig. 9), the humongous quantity of Gold purchases by Official Financial Institutions in November 2022 shattering all records for 55 years as reported by the World Gold Council. The historic purchase 55 years ago was in 1967 which led to a collapse of the London Gold Pool and eventual default of the Bretton Woods Agreement by the Anglo American Empire.

 3. Hyperinflation: The causes of Inflation may be cost push, demand pull or supply disruptions but hyperinflation has always been monetary events. (Fig. 10) is a picture of reported inflation of G20 nations.

(Fig. 11) is a similar picture showing effective yield of 10 Year Government Bonds adjusted for inflation. Negative yield are shown in brackets and in red.

With global de-dollarization in full rage the Biden Administration still seemed oblivious to the changing world circumstances and just signed another $1.7 trillion spending bill (Fig. 12).

It is simple arithmetic that the Federal Reserve needs to start printing real soon or the US Government will default. The volume involved is beyond cosmetics and white wash through creative accounting. When that happens, be prepared for cronies of AAA to follow every footstep and a global tsunami of debauched currencies is guaranteed.     

4. Ukraine Conflict: Fig. 13 shows Putin’s intentions for Ukraine.

Ukraine will likely be carved up by Russia, Poland and certain parts to declare Independence but politically neutral. The nation of Ukraine would be reduced to the Oblast of Kiev, denazified, demilitarized, land locked and politically neutral. The white lines on the map depicts what the original Ukraine looks like before the 2014 Maidan colour revolution. It is draconian and will be very bloody. I do not know the future but with Russia facing an existential threat, this war would be long and hard and a prelude to WWIII. I do not expect to see a nuclear contest in 2023 but am certain we are migrating closer by the day. Do remember always the name of our Savior is Jesus Christ.

Revelation 6:1  Now I saw when the Lamb opened one of the seals; and I heard one of the four living creatures saying with a voice like thunder, "Come and see." 2  And I looked, and behold, a white horse. He who sat on it had a bow; and a crown was given to him, and he went out conquering and to conquer.3  When He opened the second seal, I heard the second living creature saying, "Come and see."4  Another horse, fiery red, went out. And it was granted to the one who sat on it to take peace from the earth, and that people should kill one another; and there was given to him a great sword.5  When He opened the third seal, I heard the third living creature say, "Come and see." So I looked, and behold, a black horse, and he who sat on it had a pair of scales in his hand. 6  And I heard a voice in the midst of the four living creatures saying, "A quart of wheat for a denarius, and three quarts of barley for a denarius; and do not harm the oil and the wine."7  When He opened the fourth seal, I heard the voice of the fourth living creature saying, "Come and see." 8  So I looked, and behold, a pale horse. And the name of him who sat on it was Death, and Hades followed with him. And power was given to them over a fourth of the earth, to kill with sword, with hunger, with death, and by the beasts of the earth.