Today’s the Big Day: Does Powell Hike?

And more importantly, what’s the followthrough? A pause or a continuation? [The Rude Awakening] May 03, 2023 [WEBSITE]( | [UNSUBSCRIBE]( Today’s the Big Day: Does Powell Hike? - The Rude’s position has been that Powell and Co. will hike. - More importantly, what does the Fed signal for the next few meetings? - Yesterday was ugly for the stock markets, down over 1% each. [Urgent Income Demo]( Jim Rickards calls him The Banker. He’s a financial anomaly. He doesn’t target 1,000%... 3,000%... or 5,000% gains. Instead, this former hedge fund manager is all about steady – and fast – income. And he’s among the absolute best in the world at that. That’s why YOU should [click here now to learn his strategy](. [Click Here To Learn More]( [Sean Ring] SEAN RING Happy Hump Day from a sunny Asti! Today feels both important and anti-climactic. What the Fed does matters. Unfortunately. I wish for a return to the days when the Fed’s actions were an afterthought. But we don’t live in that world anymore. On the other hand, a rate hike of 25 bps is nearly a certainty and is priced into the market. Well, it looks like the market priced it in yesterday. The SPX and Nasdaq were each down 1.08%, while the Dow fell 1.16%. The likeliest scenario for the drop is that the markets are incredibly concerned about the regional bank situation. You know, the problem the Federal Reserve, Treasury, and FDIC created themselves. And that’s the onion. We know Powell wants to hike more and is not keen on watching stock markets. But he can’t hike to the point that his banks break. Like we said many times, the Fed has painted itself into a corner by not starting the hiking cycle soon enough, and then hiking too quickly once it belatedly started. As Vivek Ramaswamy wrote in his [Wall Street Journal]( piece]( “The global market will hang on every word of every FOMC press conference to see what a dozen central planners have to say. That won’t be because these planners have any special insight. Everyone will listen to see what the Fed may destabilize next.” That’s a swift kick in the gooey bag if I ever read one! Let’s stick with Mr. Ramaswamy as we open today’s Rude. An Op-Ed For the Ages If you haven’t heard of him, Vivek Ramaswamy is an Indian-American entrepreneur running for the Republican nomination in 2024. He’s the one of whom [Don Lemon said, “...whatever ethnicity you are…”]( which led to Lemon’s firing. On that score alone, we like Ramaswamy. Though he graduated from Harvard and Yale Law School, Ramaswamy is refreshingly anti-woke. And he seems to lean toward Austrian Economics over Keynesian. How this miracle took place, in spite of his Ivy League education, is a mystery to me. He is the founder and executive chairman of Roivant Sciences, a biopharmaceutical company that creates and develops innovative medicines. He’s allegedly worth roughly $600 million. Ramaswamy has been recognized as a Forbes 40 under 40 honoree and a World Economic Forum Young Global Leader. Ok, no one’s perfect. But what Ramaswamy wrote in the Journal is worth noting. Most presidential candidates have only a passing knowledge of economics. This guy intimately understands how monetary policy works. [He writes]( (bolds mine): Attempting to balance low inflation and full unemployment—trying to hit two targets with one arrow—has proved to be disastrous since the Phillips Curve cult gained prominence at the Fed around 2000. If elected president, I will return the Fed to a narrower scope: preserving the U.S. dollar as a stable financial unit to help prevent financial crises and restore robust economic growth. Beginning in the 1980s and lasting through most of the 1990s, the Fed governors, including Vice Chairman Manley Johnson and Wayne Angell, used a framework first adopted by Paul Volcker in 1982 to stabilize the dollar. The idea was to consider the dollar’s value in terms of commodities, letting it serve as a reference point for other nations’ floating fiat currencies. This provided financial stability for two decades following the stagflation of the 1970s. Beginning in the late 1990s, the Fed’s scope drifted to include “smoothing out” business cycles.This was a mistake, since business cycles serve a healthy function by transferring the assets and employees of poorly run companies to more capable management. Even worse, the Fed’s actions often exacerbated business cycles by creating transitions that create boom-bust-bailout cycles instead. Business cycles indeed serve a healthy function. But if you’re an overpaid CEO, you never want the party to end. And speaking of boom-bust-bailout cycles, let’s look at another Fed-created problem: the regional bank run. [URGENT! 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But with clientele like Oprah, Harry, and Meghan, the Democrats couldn’t let that happen. And that’s a shame. Because had the Fed just let SIVB go, this regional bank problem wouldn’t exist. When the USG said they’d bail out SIVB, initially, they said they’d cover all deposits in the system regardless of size. (That’s absurd on its own merits.) Useless Yellen later said the Treasury wouldn’t insure all deposits, but would review things on a case-by-case basis. This signaled to the world that there’s a special club, and you ain’t it (a la George Carlin). What was a perfect opportunity to take the froth off the top of the market became a blunder that put pressure on the regionals. Why is that? The question became, “Why would you stick your money in the regionals when they might not be protected?” Of course, we still have a commercial real estate problem. But trust and safety are a far bigger problem, especially when you’re dealing with business deposits. And not only that, the regionals weren’t getting audited worth a good goddamn. Get a load of this. An Auditor Goes 3-for-3 I try to avoid The Financial Times, or as it’s commonly called, The Pinko Paper, because it’s such a lefty Eurotrash rag nowadays. But this article made me sit up. [SJN] Credit: ft.com Can you believe KPMG audited these banks? Look, it’s tough to predict a bank run. But there wasn’t a sniff of “they’re long US 30-year bonds and are unhedged.” Or “They may have problems with crypto.” This was another problem from 2008 that was never addressed, let alone solved. When you pay your auditor to audit you, you’ve had to have done some severe damage for them to raise the flag. So these banks just kept on trucking without a word of warning to their shareholders and customers. It’s ludicrous. Wrap Up The Fed’s rate decision today is almost an anti-climax. What will Chairman Pow do next? Continue to raise rates despite the bank run? Or will the Fed signal a pause to let the US economy and its bank catch its breath? All will be revealed this afternoon. Have a great day ahead! All the best, [Sean Ring] Sean Ring Editor, Rude Awakening In Case You Missed It… April 2023: Monthly Asset Class Report [Sean Ring] SEAN RING Happy Tuesday from the nonstop partying Northern Italy! Sorry that I’m a day late. I got so into the vanadium idea two nights ago, I just woke up yesterday and started typing. It wasn’t… until I noticed the “Mon May 1 11:50” on my Mac that I realized I was supposed to write this report. Well, this report is exactly as it would have been had it been sent yesterday. Except, we’re closer to the FOMC meeting, where I’m sure they’ll raise rates. The market thinks this is the final rate hike, and the Fed will start cutting soon. I think this isn’t the last rate hike, and Powell won’t even think of cutting until January 2024. Many people ignore the Fed dot plot, but I don’t. [SJN1] Credit: [CME FedWatch Tool]( And this plot tells us Fed Fund futures are overpriced. That is, the Fed will keep hiking. Jerome Powell has given us no indication otherwise. So, enjoy the charts. Remember, if the Fed does something unexpected, all bets are off. And if you want something more robust, my friend and colleague Zach Scheidt, Jim Rickards’ “Mystery Banker,” has developed [a tight system]( using three signals to enter and exit market positions. This system has three fantastic advantages: - It uses macro, fundamental, and momentum signals to get into trades. No other system uses different market aspects to enter and exit trades. - Using simple option positions, you use less capital than buying stocks outright. This immediately reduces the amount of initial capital you need to start trading. Compared with buying big stock positions, this is a great way to dip your toes in without getting wet. - You can make money going both long and short. Only hedge fund managers make money this way… until now. Zach shows you how to profit in both up and down. That means you never have to sit on the sidelines. It’s a peach of a system, and [I hope you’ll]( it. It’s entirely up to you, though. [Head here]( to see what all the fuss is about. Now, let’s get to the charts. S&P 500 [SJN2] Looking at the chart, I’d say 4,300 was the next stop. But since the FOMC is meeting tomorrow, and I’m positive Jay Powell and Co. raise rates, I’ll instead say we’ll remain sideways for a bit more. It’s not so much the rate hike that matters today. What Powell says about any future hikes is what matters. Nasdaq Composite [SJN3] I thought we’d rally harder than we have in the Nazzie. If you’re bullish, this consolidation will resolve itself to the upside. The first level is 13,250, and then 14,500. If you’re worried about the Fed, this may look like a resistance level to you, and we head back down to 11,000. The balance of probabilities favors the former scenario, but it is “Sell in May and go away” time. Russell 2000 (Small caps) [SJN4] After last month’s hammering, the Russell has held up well. But it may be the canary in the coal mine. If the Russell falls farther, it may portend a larger market sell-off. (The smaller stocks lead the bigger stocks that way.) Support remains at 162.50. The US 10-Year Yield [SJN5] We’re off only four bps (0.04%) since our last asset class report. My comment from last month remains: This is because the market thinks the Fed is done hiking and will cut soon. I don’t think the Fed is done hiking, nor do I think it’ll cut soon after. There will be a decent interval between the end of the hikes and the beginning of the cuts. So I think we’re going up from here, though the entire market disagrees with me. Dollar Index [SJN6] We’ve come off again as rate expectations have fallen, weakening the spot dollar price. I wouldn’t be surprised to see us staying in the 101-105 range for the next few months. That’s because the market has to get to grips with what Chairman Pow is trying to do with his monetary policy. But… and it’s a big “but”... the longer the USD stays at 101 and above, the stronger this support level gets. And it may just be a lifting point for a higher USD. If that happens, stocks will fall hard. USG Bonds [SJN7] We’ve been rangebound for months now. If rates head higher, TLT will head back down to 90. If rates stay where they are, we’ll have a slight upside bias to 115.00. Investment Grade Bonds [SJN8] Same story here. LQD didn’t move this month. Higher rates mean heading to 97. Flat to lower rates send LQD to 111 and then 116. High Yield Bonds [SJN9] After that big rally last month, we haven’t moved. We got to get comfortably above 76 before we can get bullish. If rates continue increasing, HYG heads to 72 and then 69. [Biden’s WAR on The Middle Class…]( No president has sabotaged America’s hardest workers like Joe Biden has. That’s why I’m urging you to [watch this urgent presentation](. Because Jim Rickards’ legendary financial contact – who he calls ‘The Banker’ – may be the only man who can solve this American Income Crisis. [Click HERE to learn how 'The Banker' made]( in 4 days… $10,617 in 6 days… and $13,203 in 2 days](. [Click Here To Learn More]( Real Estate [SJN10] Again, no movement. We finished last month at 83.04 and this month at 83.30. I expect rangebound moves for the next few months. Base Metals: Copper [SJN11] Down about 20 cents this month, copper’s consolidation zone is starting to sag. Still, it’s too early to call. A break below here, and we’ll head down to 3.60 or so. Precious Metals: Gold [SJN12] We finally broke above $2,000… and then came right back down. I’m still bullish on gold and reckon it’ll hit $3,000 from here. But before then, expect lots of movement around this $2,000 mark. It takes some time to break away psychologically. Precious Metals: Silver [SJN13] On silver, you have my permission to be bullish. We’re (only slightly) above $25, but I think we’ll build a base from here. $26.50 is the next level, followed by $28.00. Cryptos: Bitcoin [SJN14] We hit $30,000 already, though we’re down from there. BTC can coil and rally again, all the way to $42,000. Let’s see… Cryptos: Ether [SJN15] From last month: A good chart, but not as good as Bitcoin’s. I want to see a sustained move above $2,000 before I get excited about ETH. So, so close. It got above $2,000, then headed swiftly back down. Above here, and we head to $2,600. Trad Asset Class Summary [SJN16] All things rely on the USD. As it was slightly down again, the SPX rallied. Commodities followed the dollar down again, indicating the economy is slowing down hard. Bonds were flat on the month. Crypto Class Summary [SJN17] A somewhat subdued month in the typically volatile crypto space. Ether and Bitcoin were up around 4% each. Elon’s favorite, Dogecoin, was up a smidge. Monero, Litecoin, and Ripple all suffered losses. Wrap Up Silver and gold, silver and gold. Perhaps the new Christmas song will be, “Silver and gold, Ether and Bitcoin…” Let’s see what Powell does tomorrow. Expect fireworks when he raises rates… and then doesn’t say if it’s the final rate hike. That’ll be fun! Finally, let’s take a moment to enjoy this meme, courtesy of the Twitterverse: [SJN18] Have a great day! All the best, [Sean Ring] Sean Ring Editor, Rude Awakening [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2023 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. 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