R-Word In Pictures

@MarginCallTrade

@MichaelKantro

China and Japan

China is rapidly sliding into all-out depression as the collapse of the property bubble creates intense deflationary pressures. I was amused to see that the government has announced their version of the “Cash for Clunkers” program in the hope of creating demand for cars.

Japan’s years of negative real rates are now turning around to bite them as the currency collapses, reaching a 34-year low this week at 160 to the dollar. This will cause inflationary pressures and an end to the low interest rates.

Watch these two huge economies. Powell mentioned “divergence”. Don’t believe it. If these go down they will take us with them.

History Rhymes

From my 2020 post on inflation: William Greider, in his book, Secrets of the Temple: How the Federal Reserve Runs The Country, reports Nixon (’69-’74) as saying: “We’ll take inflation if necessary, but we can’t take unemployment.” Of course he got both.

Team Biden has apparently given Powell the same instruction. The same result will ensue.

For Fed Chair

Dear Fed Chair Powell. Since you said you did not see the “stag” or the “flation”, I supply a picture. Scraped from Mr. Bloomberg.

Debt Watch

April ended up essentially unchanged from the prior peak on April 1st. as $34.616 trillion. This due to tax collections, especially an unexpected $150 billion in capital gains taxes. This reduced the linear FY24 forecast to $2.5 trillion increase in debt.

Fed Up

Powell’s presser was shameful. He rejected even the concerns in the official statement, dismissed all talk of stagflation and spouted the party line from Team Biden. Nothing but green fields and blue skies. He is no more independent and honest than Adam Schiff.

Naturally this resulted in a substantial rally in stocks (BTFD, FOMO, whatever). In all fairness, the market generally rallies when the Fed speaks, simply because it gets the pre-meeting uncertainty off the table. But this time, somewhere along the line the BS-O-Meter must have blown up in a shower of sparks. When the 3pm bar failed to realize any more gains, there ensued the most spectacular roundtrip I think I have ever seen. In 45 minutes, the boyz took the QQQs from 429 to 421 and the SPX from 5079 to 5017, both more than a roundtrip. And a sound repudiation of Powell’s pander.

Both Sides Now

Here’s the epitome of the two economies. You are either on the receiving end of the government money hose or not.

Fiscal Madness

Santa Monica is now beating LA. At $837,000, Los Angeles has been the leader in homeless housing spending per unit. But now Santa Monica has stepped up its game, spending a million dollars per unit.

No doubt there will be pressure to spend more than that for migrants, since they are more important than Americans.

A Tale Of Two Economies

Charles Dickens’ classic novel, “A Tale Of Two Cities” opens:

It was the best of times, it was the worst of times, it was the age of
wisdom, it was the age of foolishness, it was the epoch of belief, it was
the epoch of incredulity, it was the season of Light, it was the season of
Darkness, it was the spring of hope, it was the winter of despair, we had
everything before us, we had nothing before us, we were all going direct
to Heaven, we were all going direct the other way

On the one hand, we have a government desperate to stay in office, fearing an inquisition that would result from a lost election. On the other hand, we have a confused mass of citizenry, upset and distressed by inflated prices for nearly everything and social upheaval wherever it looks, riven by tribal politics and government assaults. The government is trying a “best of times” by massive government spending, funded by debt that is running at pace for a near $3 trillion in new debt this financial year. This new debt is effectively money printing, as when the government spends the proceeds the net result is added to M2. The well-off – especially government employees and stock investors – party on.

The worst of times is heartless inflation as the rest of us, especially young people, find housing, recreation and even food out of reach. The American Dream is forgotten. We are assaulted on so many fronts – Antifa, racism, DEI, climate change, transgender privileges, migrants, defunded police, rampant crime, futile foreign wars, anti-semitism…. Foolishness, incredulity, darkness and despair reign. There is a hand behind this. And money. For example, the pro-Hamas riots crippling universities are clearly organized and funded – tents, food and drink magically appear. Many participants appear to be non-students. In what America do savage terrorists deserve sympathy?

I continue to expect a deep and brutal economic depression. I hope it will purge some of the poison out of the system.

 

Quiet Part Out Loud

After yesterday’s earnings report from META (good), Zuckerberg said the quiet part out loud:

And I also expect to see a multi‐year investment cycle before we’ve fully scaled Meta AI, business AIs, and more into the profitable services I expect as well.

Analysts are saying, well, multi includes two, doesn’t it. Yes, but GLWT. There was great enthusiasm for augmented reality but so far it is a dud at Meta, and now Apple cuts its sales plan for the Vision Pro by 50%. The tech industry has a long history of developing solutions and then looking for problems.

There is now an X-Prize for identifying applications for quantum computing, another solution looking for a problem. Oops. There is certainly a myriad of applications for simple machine learning (Where’s my self-driving car?). How far can it be usefully pushed? It will take some time and that will not only dent the euphoria, but may well end in disappointment as AGI proves elusive.

Remember the wisdom of Yogi Berra:  “It is difficult to make predictions, especially about the future.”