What If Powell Hikes Again in June?

Just a thought experiment here. [The Rude Awakening] May 18, 2023 [WEBSITE]( | [UNSUBSCRIBE]( What If Powell Hikes Again in June? - The market is looking for a pivot. - But what if it gets something completely contrary? - Let’s think out loud for a few minutes. [WATCH: America’s #1 Income Investor]( Let me introduce you to one of my close financial contacts... He might be the most successful investor in America right now. In fact, [his unique income philosophy has allowed him to generate years’ worth of returns – in as little as 2 days](. I have never seen anything quite like it. That’s why I’m urging you to [watch this video]( he made ASAP. He’s agreed to show you how anyone could make rapid ‘income trades’ for themselves. [Watch this video to learn about a trade that could make up to 166% in 10 days](. [Click Here To Learn More]( [Sean Ring] SEAN RING Dear Reader, Good morning from glorious Jekyll Island! I’m about to hop on the shuttle back to JAX for a short flight to Atlanta. Then, I fly directly to Milan on the redeye from here, landing at 09:30 Friday morning. It was wonderful getting back Stateside to meet and greet the Paradigm team. You really have excellent people who genuinely care about your future, writing for you. As I sat around with Jim Rickards’s Managing Editor, Frank DeVechio, and The Banker, Zach Scheidt, we were chinwagging about Jay Powell’s next move. We don’t know, and we haven’t placed any bets yet. But what if Jay Powell hikes again at the June meeting? The Thesis Jay Powell has never said he was going to pause. He’s a man on a mission. Even the market is starting to come around to that. Here’s the latest on the CME FedWatch Tool: [SJN] The market thinks there’s a 26.2% chance the Fed will hike in June. If you remember, most market participants are looking for a pause and a quick pivot. The Rude has never thought this is the case because Jay Powell never said so. Also, the last time we had a huge hiking cycle under Ben Bernanke, he left rates at 5.25% for over a year. Why Wouldn’t You Hike? The issues are plenty, unfortunately. The Stock Market Everyone’s 401(k) plans may go “poof!” all at once. [SJN] As you can see, the SPX just can’t seem to get above 4,200. With another hike, Powell may put the index down quite a bit. And there lies the opportunity. I think some cheap puts are out there to take advantage of the current positioning. The Bond Market The Banker, Zach Scheidt, and I were looking at the TLT chart yesterday. [SJN] Like the SPX, it had a nice recovery last autumn but stalled at 107.5. Another hike, and we will probably head down to 90. The Banks The regional banks especially are crying, “Uncle!” after the latest hike. Silly Valley, Signature, First Republic, and Credit Suisse have all bitten the dust. Many regional banks have one foot in the grave and another on a banana peel. Another hike, and they may slip into the coffin of bankruptcy. And who really knows what’s going on at the “too big to fail” banks? Sure, the US-based ones are fine. The Fed will print whatever it takes to save them. But Europe’s banks don’t give me any hope. The banks over there are not in good hands. Christine Lagarde, the head of the European Central Bank, can’t even define inflation, let alone fight it. [Governors warn of “Biden Blackouts”]( [James Altucher]( A former advisor to the CIA and Pentagon just made this dark prediction: Calamity Joe’s sabotage of the Nord Stream pipeline [His Evidence Here]( was suicide. In the next 75 days, Americans will face fuel shortages… …widespread BLACKOUTS… …empty grocery shelves… …up to $1000 energy bills… …drained retirement accounts, and… …a massive crime wave. [>>Welcome to Biden’s American Energy Armageddon<<]( [Click Here To Learn More]( Why Do It? Well, Mr. Powell, that’s your job, for one. The Federal Reserve, such as it is, is tasked with price stability and growing the economy. It has failed utterly at its first, most important, function. Let’s be frank. The Fed was never really all that good at it. And the world would be better if money, like any other commodity, were subject to the free market. The great Austrian economist Murray Rothbard didn’t think the Fed should exist, let alone be charged with such an important task. By manipulating the money supply and interest rates, Rothbard believed that the Federal Reserve interfered with the market's natural ability to price goods and services, consequently contributing to boom-bust cycles. Over time, Rothbard has been proven logically sound and empirically correct. He wrote in What Has Government Done To Our Money?: I believe that banking is a fundamentally fraudulent activity, and hence that any government guarantees or regulation is bound to fail to stem the tide of bank failures and bank runs. He went on: Like other goods on the market, it [money] is not subject to any 'optimum' supply...The money relation expresses the extent and depth of the influence of money on the economy. An increase in the quantity of money any amount will not confer a social benefit. It will merely dilute the effectiveness of each gold ounce; on the other hand, a fall in the supply of money will intensify the effectiveness of each gold ounce. Therefore, money, the nerve center of the economic system, should be kept as far away as possible from governmental manipulation. The only problem is this: we don’t live in this world. The Federal Reserve’s world mandates it must control the money supply, interest rates, and inflation. So with that in mind, the most significant reason for Powell to hike is this inflation is not only not “transient,” it seems sticky as hell. This is the US Core Inflation rate change, year-on-year: [SJN] Have a great day! This is still too hot for my taste, and for many in the Eccles Building, as well. By removing the volatile food and energy components, core inflation attempts to measure the long-term, sustained price movements that affect the cost of living. Central banks often use this measurement to help set monetary policy. And I think Jay Powell is looking at this and thinking he may hike again. Also, it’ll make Treasury Secretary Yellen’s job much harder. And that’s bound to make Powell happy. Wrap Up We’re not ready to place bets yet. There’s too much data coming out between now and then that’ll dictate the next move. But it’s worth considering the market isn’t positioned for a hike and may be an opportunity to make an outsized profit. Good Hunting! All the best, [Sean Ring] Sean Ring Editor, Rude Awakening Twitter: [@seaniechaos]( In Case You Missed It… The Vacuum Tube in the Coal Mine [Sean Ring] SEAN RING Dear Reader, Good morning from gorgeous Jekyll Island, once again. We’re filming all sorts of goodies for you now. Tomorrow, our livestream will start at 1 p.m. I hope you can join us. Regrettably, some of our team aren’t here with us. But they stay in touch via our Slack channel. I always want to hear — or at least read — what they say. And I came upon the most interesting story from Jonathan “J-Rod” Rodriguez and Erik Kestler. I must warn you I know nothing about music. Singing in my high school choir was as close as I’d get to a band.(And I only did that for the girls…) But with J-Rod and Erik’s help, I’ve seen an invaluable warning signal. The Actual Phrase The title of this piece is a play on the phrase “the canary in the coal mine.” The phrase originates from the former practice of taking caged canaries into coal mines. The birds were early-warning devices for toxic gases such as carbon monoxide, methane or carbon dioxide. The gases would kill the canary before they became dangerous to humans. This is because canaries are more sensitive to air quality due to their faster metabolism and respiratory rate. So if the canary showed signs of distress or died, the miners knew they had to evacuate immediately. In modern usage, the phrase is used metaphorically to refer to a person or thing that serves as an early warning of a coming crisis or danger. It's used to point out risks that aren’t apparent on the surface but can lead to significant problems if ignored. For example, a sudden drop in sales might be the "canary in the coal mine" for a business, signaling deeper issues that must be addressed. So what’s going on with the vacuum tubes? What Happened? When J-Rod is on the Wednesday editorial call, behind him sit three beautiful guitars. Upon seeing them, I imagined him strumming away to entranced ladies and having his way with them afterward. Studmuffin! When I tap on Erik’s Slack pic, he’s jamming on an electric guitar like the late, great Eddie Van Halen. I cannot compete with this kind of coolness. So it was with a quizzical look that I followed their conversation on our editorial Slack channel. It started, as it usually does, with beer. I’ll cut to the chase, though. Friend and colleague Alan Knuckman put up a pic of the beer he drank in high school. It’s Red, White & Blue, costing $4 a case. Impressive. I feel it, as I used to drink Milwaukee’s Best (The Beast), Busch, and, God help me, Natural Light. They were about $8 a case outside Philly in the early to mid-’90s. Erik then wrote how anti-German jingoism led to a backlash against any beer with a German-sounding name during the world wars. As a result, America had crappy beer for 50 years. (Most claim that it lasts until the present day.) J-Rod retorted: Along a similar vein, most medium- to high-end electric guitar amplifiers are powered by vacuum tubes (as they have been since the 1950s). And the best tubes are made in Russia. Thanks to the Ukraine war sanctions, you can’t buy them in the U.S. anymore. What’s on the shelf is all you can get. The above is entirely Greek to me. As Captain Renault said in Casablanca when learning the stolen exit visas were hidden in Sam’s piano, “It serves me right for not being musical.” So I’ll do my best to explain to the non-musicians among us. [Biden to Introduce Social Credit System like China?]( [James Altucher]( If you say the wrong thing on Chinese social media, you are labeled “untrustworthy”. They can then take away your ability to travel, restrict internet access, or deny your family the best jobs. They even confiscate your pets. Thanks to Biden’s new Executive Order 14067, a former CIA and Pentagon advisor predicts America will soon become a total surveillance state like China. [Click here to see our dark future…]( [Click Here To Learn More]( The Tied-up Tubes While it's true that many guitar amplifiers use vacuum tubes, solid-state amplifiers (those using transistors) have been commonplace since the 1970s. Many beginner guitar amplifiers today use solid-state technology, which is generally more reliable, lightweight and less expensive than tube technology. However, because of their distinct sound characteristics, vacuum tubes are still widely used in medium to high-end models. Here's why: - Tonal Characteristics: Vacuum tubes often provide a "warmer" or "richer" tone than solid-state amplifiers. Although this is subjective, nearly all players prefer the sound of tube amplifiers - Overdrive and Distortion: When a tube amplifier is pushed beyond its limits (i.e., overdriven), it produces a type of distortion generally considered musically pleasing. This "tube distortion" or "tube overdrive" is a fundamental part of the sound of electric guitar music in many genres, mainly rock and blues - Dynamic Response: Tube amplifiers have a unique dynamic response due to how tubes handle signals. Tubes react to the strength of the player's touch — playing harder drives the tubes harder and produces a louder, more distorted sound, while playing softly produces a cleaner, quieter sound. This is a characteristic that's hard to replicate with solid-state technology - Tradition and Perceived Quality: Tube amplifiers are associated with the "golden age" of guitar music and many iconic players, so many guitarists prefer them due to tradition and the perceived quality associated with tubes. While tube amplifiers have these advantages, they also have some drawbacks compared with solid-state amplifiers. They're more expensive and heavier, require more maintenance and are prone to technical issues. Since I know nothing about this subject besides what I wrote above, I’ll stick with J-Rod’s assessment. Damn Sanctions! I’ve written [over]( [Rude]( with the word “sanctions”]( in them. I never had a good word for them. They are wars by other means and generally start with hurting the sanctioner rather than the sanctioned. You may be saying, “Sean, come on. These are musical playthings. Who cares?” Ukrainians would say that the least we can do for their country is make a trivial sacrifice. But what if this is just the canary in the coal mine? What if this is merely a taste of what’s to come? I had no idea Russia made this stuff. But I do have a better idea of the stuff Russia has that we don’t have much of. Here are 10 natural resources that Russia has in abundance that are not as abundant in the United States: - Natural gas - Crude oil - Nickel - Palladium - Platinum - Diamonds - Timber - Rare earth elements - Vanadium - Cobalt We’re playing with fire here. Wrap-up Vacuum tubes may be what musicians have a taste for. But their disappearance from our shelves could signal a far greater disaster. Let’s hope this war is over sooner rather than later and these sanctions disappear. Have a great day! All the best, [Sean Ring] Sean Ring Editor, Rude Awakening Twitter: [@seaniechaos]( [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. To end your Rude Awakening e-mail subscription and associated external offers sent from Rude Awakening, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. We welcome comments or suggestions at feedback@rudeawakening.info. This address is for feedback only. 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