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.

 

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.