Buckle Up For The Ride Down

Were you forwarded this email? [Sign-up to Rude Awakening here.]( [Unsubscribe]( [The Rude Awakening] Buckle Up For The Ride Down - Remember when “they” told you inflation was “transitory?” - It seems like ages ago, and they’re hoping you’ll forget by the midterms. - If there’s no recovery before then, it’ll be a Red Tsunami. Recommended Link [Have you heard George Gilder’s latest extraordinary prediction yet?]( [Click here for more...]( He was dubbed the “Tech Prophet” by Forbes… once won the White House Award for Entrepreneurial Excellence… and his work is respected by tech insiders like Bill Gates and former Google CEO Eric Schmidt… And recently, Gilder went on camera to explain how a new tech revolution is about to hit America… one that could unleash up to $15.1 trillion in new wealth. According to Gilder, if you don’t understand this new tech you could miss out on one of the greatest moneymaking opportunities for thirty five years. [Get The Details Here]( Sean Ring Editor, Rude Awakening Happy Friday! I’m so looking forward to a glass of Barbera tonight. This is the last week my good friend and business partner Andy is in Asti. He must fly to Asia for three months to teach there this summer. So he booked his last Airbnb about 200 meters from my apartment. Easy to sneak out for a few cold ones. Next week, I’ll write the Friday Rude from Milan, as I’m seeing Andy off. I’ve never been there and can’t wait to see the Duomo (cathedral). Though Milan was never a priority for me, now I’m excited to see it. You may know that Milan is Italy's business, banking, and fashion capital. So, there’s loads of history up there. Milan is the capital of Lombardy. Lombard banking was one of the earliest ways to circumvent the church’s usury laws to create credit. The Lombards were pawn shops. A borrower would stake his collateral in return for a loan. Once he paid off the loan, he got his collateral back. Incidentally, this structure has many parallels in the Islamic banking world. Economically, it’s equivalent to how the Fed uses repurchase agreements to borrow from and lend to the treasury market. There are many famous Lombard Streets in the world, and the most famous is probably San Francisco’s “crookedest street in the world.” But my favorite is London’s. Of course. I bring all this up because the Fed is frantically scraping to get back ahead of the curve. At least Jay Powell and crew are making an effort. Christine Lagarde and the ECB aren’t even trying… yet. I’ve written about the repercussions of silly central bank policies before. But yesterday, the stock market was hammered. Again. Let’s look at what happened and try to divine what Mr. Market, the famous manic-depressive, is feeling. Yesterday… Before we got smacked yesterday, I thought we might be in the middle of a mini-accumulation structure (the blue lines). Though I’m long-term bearish, I expected the SPX to spring upwards out of that coil. Instead, we had a big down day (blue arrow). This doesn’t mean we can’t go up from here. But the probability of doing so soon is diminished. JC Parets said you couldn’t be short when the SPX is above 4,100. It’s no longer above 4,100. In fact, it’s 2% below that level. Be that as it may, I still point to the fact that recent down days are bigger percentage-wise than up days. That’s not a good sign. Worse, the index was green for the morning and then fell off a cliff in the afternoon, with no recovery. As I write, most Asian and European markets are down pretty hard today. Not a great way to end the week. Yields and the Dollar So what happened? The 10-year yield moved up, remaining above 3.00%. [As Joke Biden gave Powell the political cover he needs to keep increasing rates]( Mr. Market may feel Powell will go through with his hawkish hiking far beyond 2.50%. Right now, the upper bound of the Fed Funds target band is 1.00%. I like to remind people that moving from 1.00% to 2.5% isn’t a 1.5% move. Powell would be increasing rates 2.5 times. And that will hurt weak companies used to operating practically interest-free. This led to the USD surging yesterday. As USD rates increase, USD deposits are more attractive. So, foreign investors tend to move their weaker currencies into USD. As a side note, even though I live in Italy, I keep no savings in EUR. I move money over when I need to pay for things. That’s all. Now, think of it this way: - If your assets are priced in dollars, - And the dollar increases in value thanks to higher interest rates, - You need fewer dollars to buy those assets. - So, dollar-denominated assets fall in price. This dollar rally puts enormous pressure on anything priced in dollars, such as stocks, bonds, and commodities. Even oil was slightly down yesterday. (But don’t get excited, your gas prices will remain elevated for quite some time.) Recommended Link [Rickards: “Dollar doomsday plot” revealed]( [Click here for more...]( Jim Rickards made some spectacular financial predictions in the past… In 2016, Jim predicted Brexit would pass. He was right. That same year, Jim predicted that Donald Trump would win the U.S. Presidential election. Jim was right again! And in 2019, Jim didn’t just correctly predict a pandemic — he also predicted exactly how the government would respond! Now Jim is forecasting a “dollar doomsday plot” you won’t believe. [Click Here To Learn More]( Energy Hits Consumers Hard Let me show you some hard evidence: as the stuff you need (energy) gets more expensive, you spend less on the things you want (consumer discretionary). This is 2022 year-to-date: This is another great chart from the [Chart Report]( Did you see how well Exxon is doing out of Biden’s policies? And how about this peach of a headline from the [WSJ]( Your money is funneled from the stuff you want to the more expensive things you need, thanks to your senile old president’s stupid policies. The frustration consumers feel is palpable. Yesterday, I had a great conversation with Aussie Simon, who still lives in Melbourne, the People’s Republic of Australia. His cost of living is out-of-control. In Europe, gas and food prices are insane. And Asia still hasn’t wholly reopened from the government-induced private sector shutdown. All this just to appease their master in Washington. The rest of the world can’t wake up soon enough. Wrap Up Usually, I like my Friday Rudes to be a bit lighter. But since it couldn’t be light, I kept it short. Yesterday’s moves made me sit up. My long-term downside target for the SPX remains 3,413. Again, the market may rebound in the coming days, but I’m not sure it will. Smarter people than I are looking for a rally here, but I’m not optimistic about that. Let’s see how the market performs today, and I’ll update you on Monday. Until then, grab a lovely glass of something cheerful tonight and enjoy your weekend. You earned it! All the best, Sean Ring Editor, Rude Awakening [Whitelist Us]( | [Archive]( | [Privacy Policy]( | [Unsubscribe]( Rude Awakening is committed to protecting and respecting your privacy. We do not rent or share your email address. By submitting your email address, you consent to Paradigm Press delivering daily email issues and advertisements. To end your Rude Awakening e-mail subscription and associated external offers sent from Rude Awakening, feel free to [unsubscribe](. Please read our [Privacy Statement.]( If you are you having trouble receiving your Rude Awakening subscription, you can ensure its arrival in your mailbox by [whitelisting us.]( © 2022 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. 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