May 2023: Monthly Asset Class Report

The USD rose again; stocks were up as well. [The Rude Awakening] June 05, 2023 [WEBSITE]( | [UNSUBSCRIBE]( May 2023: Monthly Asset Class Report - The USD was up over 2%. - The Nasdaq’s tide is lifting the equities boat, save the small caps. - Commodities underperformed, including the shiny stuff. [Send Me Your Mailing Address!]( [Click here to learn more]( The biggest gold bull market in history has just begun. That’s why New York Times best-selling author Jim Rickards has arranged to send his must-read book on gold to any U.S. citizen with a valid mailing address today. [Click here now to see how to claim your copy of The New Case For Gold](. [Click Here To Learn More]( [Sean Ring] SEAN RING Happy Monday from sunny Northern Italy! Sorry that I’m a day late (for the second consecutive month). But, this was actually lucky. While May’s weekly charts ended on Thursday last week, we already know what happened on Friday. So let’s cheat a bit. On Friday, the S&P 500 finally broke the dreaded 4,200 level. In fact, we’re at 4,282 as of Friday’s close. That’s a full two percent above 4,200. My guess is the bots will jump on this and buy like gangbusters. The next resistance level is 4,450 or so. So there’s plenty of room to the upside, from a technical standpoint. But here’s the onion: on May 31st, Nikileaks (Nick Timiraos) wrote a piece in The Wall Street Journal titled, “[Fed Prepares to Skip June Rate Rise but Hike Later]( An independent source of mine has confirmed the same. I think Jay Powell pausing here is utter lunacy. The reason why is that the markets will interpret this “pause” as a “pivot” and rocket the equities markets to the moon. Then, when Powell is forced to raise again, look out below! It’s a recipe for disaster and yet another unforced error. As for commodities, many have asked, “Why is oil so low?” My answer is this: we’re already in a global recession, and if the CBs around the world didn’t print so much needless cash, oil might have been trading around $10 a barrel. Now, let’s get to the charts. S&P 500 [SJN] The Nasdaq’s rising tide is lifting all boats. Though this chart shows us ending below 4,200, we’re now well above that level. If the Fed pauses this month, the next stop is 4,450. Nasdaq Composite [SJN] Two thousand zero zero party over it’s out of time So tonight I’m gonna party like it’s 1999… We’ve rallied nearly 3,000 points this year in the Nazzie. That’s nearly 33%. If this is a sucker’s rally, it’ll be a painful resolution. It’s worth noting 76 of the 101 Nasdaq stocks are in positive territory. Russell 2000 (Small caps) [SJN] I still think this is the canary in the coal mine. The spread between the tech stocks and the small caps is getting too wide here. I’d like some participation from the Russell stocks before I get comfortable with the tech and board market rallies. The US 10-Year Yield [pub] We rose twenty bps (0.20%) since our last asset class report. My comment from two months ago 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 [SJN] The dollar is up hard, but stocks didn’t fall. The important thing to remember is that the euro is 57% of the basket the dollar is weighed against. So no matter what you think about the dollar, you need to take the awful euro into consideration. A pause will send the dollar down… temporarily. USG Bonds [SJN] Last month’s comment still stands: 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 [SJN] Again, from last month: 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 [SJN] Again, from last month: 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. Real Estate [SJN] We resumed the down move, finally. Below here, the first level is 77. Then onto 74. [Warning: Will “Bidenflation” Destroy Your Retirement?]( [Click here to learn more]( If you’re like most Americans, you’ve worked hard for decades to build your financial legacy. And now, as a result of Biden’s disastrous money printing policies, that’s all at risk. According to one top retirement expert, “Bidenflation” threatens to destroy your retirement and make your hard-earned savings worthless. That’s why you must take action right away to protect yourself… [Click here now to get the simple, step-by-step actions to survive “Bidenflation.”]( [Click Here To Learn More]( Base Metals: Copper [SJN] From last month: 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. Yup, copper’s price action is dreadful. Once we get below 3.60, we’re onto 3.35, then 3.25. Precious Metals: Gold [SJN] From last month: 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. If Jim Rickards is right about the new BRICS currency, then you still have time to get in. Precious Metals: Silver [SJN] Just when I told you to get excited, silver fell out of bed. Honestly, I think we’ll turn this back around quickly. It’s just a pause in the upside. Cryptos: Bitcoin [SJN] BTC got thumped on the head and is trading at around $27,000. Again, this looks to be a plateau on which consolidation is building. Cryptos: Ether [SJN] From two months ago: 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. We’re flat this month, but I can see a rally coming here if the Fed loses the plot. Trad Asset Class Summary [SJN] The USD rallied hard for the second straight month. The SPX was slightly up as well. But last Friday, June 1st, which isn’t included on this chart, we have a strong follow-through rally. Bonds were down over 1%, while commodities got crushed to the tune of nearly 5%. Commodities currently suffer from a strong dollar and a weak real economy. Crypto Class Summary [SJN] Ripple, Litecoin, and Ether led the way, while Bitcoin, Monero, and Dogecoin suffered losses. Wrap Up Again, if Jay Powell pauses, we’ll have a huge rally because the market will mistake that for a pivot. And then he’ll rise rates some more before he breaks something. And then, after much pain, he’ll cut. In the meantime, enjoy the rally. Finally, let’s take a moment to enjoy this meme, courtesy of the Twitterverse: [SJN] Have a great day! All the best, [Sean Ring] Sean Ring Editor, Rude Awakening Twitter: [@seaniechaos]( In Case You Missed It… Rickards Says BRICS Cracked Currency Code [Sean Ring] SEAN RING Happy Friday from sunny Northern Italy! It’s the Festa della Repubblica (Republic Day) here in Italy, so Micah is off from school. The day commemorates the referendum held in 1946. The Italians were called to the polls to decide on the form of government they wanted after the Second World War and the fall of Fascism. The Italians chose a republic over a monarchy. Italy has had nearly 70 governments since the end of World War II - a new one every 1.11 years - so maybe we’ll try monarchy next time. It couldn’t be worse, right? Speaking of new systems, let’s get straight to BRICS. [If you haven’t watched the Whisky Bar]( - and no, I won’t spell it “Whiskey” - make some time to do so. While we were in Jekyll Island, Jim Rickards, Matt Insley, Doug Hill, Byron King, Dan Amoss, Zach Scheidt, and I sat around talking about current events and trends in politics, economics, finance, and investing. It was a great time for us… and I hope it was fun and informative for you. Jim and I had a pleasant exchange over the BRICS near the beginning of the telecast. And then, Jim promised to write about a seismic event concerning BRICS in his next issue of [Strategic Intelligence](. One of the perks of being a Paradigm Press editor is getting access to all my most excellent colleagues’ writings. And I must tell you: this edition of [Strategic Intelligence]( may be the best I’ve ever read. You’re probably an SI subscriber already, but you can [sign up here]( if you're not. I can’t give it all away. But I’ll summarize some things I’ve written in the Rude, the background of the BRICS, and why I think Jim is right about the coming BRICS currency. Let’s get to it. The Unipolar World and the Capitalist Manifesto Ah, 1991. When America, and America only, ruled the world. And had she been a benevolent dictator, she’d never have lost her place. But as of this coming August, it’s a new world. Let’s face it, the “Capitalist Manifesto,” better known as the Washington Consensus, written in 1989, looks pretty great. Washington Consensus - Fiscal policy discipline. - Moving public spending toward education, health care, and infrastructure. - Tax reform by broadening the tax base and lowering rates. - Market-determined interest rates, moderately positive in real terms. - Market-determined exchange rates. - Trade liberalization. - Liberalization in inbound direct foreign investment. - Privatization of state enterprises. - Deregulation. - Legal security for property rights. Alas, that time is over. Because the US has been such a poor steward of world security, countries have prayed for an alternative. Now, they have one. And it just started as a marketing gimmick. [America’s #1 Gold Expert Makes Shocking Prediction]( [Click here to learn more]( Is This The Start Of The Biggest Gold Bull Market In History? [Click Here Now For The Details](. [Click Here To Learn More]( Goldman Sachs Outdoes Madison Avenue Jim writes: In 2001, Goldman Sachs Asset Management published a report titled “Building Better Global Economic BRICs” by Goldman Sachs Asset Management (GSAM) Chairman Jim O’Neill. The acronym BRIC was created by a Goldman research assistant named Roopa Purushothaman. It stood for Brazil, Russia, India, and China. Goldman picked the four largest economies in the world (measured by purchasing power parity), excluding the G7. The G7 comprises Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. Those countries were China, India, Brazil, and Russia. CIBR wouldn’t stick, so the letters were arranged to make BRICs. Jim continues: From 2001 to 2006, the term BRICs remained a marketing ploy by Goldman, but the idea of BRICs as a powerful block of developing economies was gaining popularity and was routinely used as a kind of shorthand for the nations included in the name. Then in 2006, the marketing gimmick became a geopolitical reality. At the meeting of the UN General Assembly in New York in September 2006, the foreign ministers of Brazil, Russia, India, and China met in a private discussion. Such multilateral groupings in sideline sessions of larger conferences are not unusual. This one was historic and soon morphed into a more substantial platform. I wonder if Jim O’Neill regrets coining the term. Build It, and They Will Run From Washington Long before the Russia-Ukraine War, BRICS (with South Africa now added permanently, capitalizing the “S” in “BRICS”), the member countries decided to build a new financial architecture. This effort was coordinated from the shiny new BRICS Tower in Shanghai, China. The New Development Bank, a World Bank clone, was founded in 2014. The Contingent Reserve Arrangement, an IMF clone, was founded in 2015. Heck, the BRICS are even building a new undersea cable that the NSA won’t be able to spy on. So successful have the BRICS been in selling the idea of being free from American interference, there are eight formal applicants to join the organization. Seventeen additional countries want in, as well. And why not? Check out some of the stats Jim provides: There’s more to this list than just increasing the headcount at future BRICS meetings. If Saudi Arabia [an applicant sure to get in soon] and Russia are both members, you have two of the three largest energy producers in the world under one tent (the U.S. is the other member of the energy Big Three). If Russia, China, Brazil, and India are all members, you have four of the seven largest countries in the world measured by landmass possessing 30% of the earth’s dry surface, and related natural resources. Almost 50% of the world’s wheat and rice production, as well as 15% of the world’s gold reserves, are in the BRICS. China, India, Brazil, and Russia are four of the nine highest population countries on the planet with a combined population of 3.2 billion people or 40% of the earth’s population. China, India, Brazil, Russia, and Saudi Arabia have a combined GDP of $29 trillion or 28% of nominal global GDP. If one uses purchasing power parity to measure GDP, then the BRICS share is over 54%. Russia and China have two of the three largest nuclear arsenals in the world (the other leader is the United States). And yet, the smartest people in Washington’s room thought it’d be a good idea to sanction Russia, despite all this. Why Sanctions Didn’t Work and Sped Up the BRICS Schedule I’ve written over 50 articles explaining why sanctioning Russia was idiotic. But Jim succinctly writes the three conditions that must be satisfied to sanction a country: - The target country must have a small- or medium-sized economy with little robustness or resiliency to sanctions. - The target country must have limited access to alternative payment channels and few allies in any effort to obtain hard currency. - The target country must have limited hard currency reserves or gold with which to evade or wait out sanctions. I wrote [why Russia would stand up to these sanctions here](. I wrote about [Russia’s alternative payment systems here](. And [here]( where I wrote about how Russia was loaded with gold. In short, sanctions were never going to work, haven’t been working, and will not work in the future. Jim called the sanctions “an across-the-board failure.” Yes. Yes, they are. All they’ve done is make any country with USD reserves realize it’s a target! The Ghost of Wilson: What Will Make the New Currency Work Still think the BRICS can’t create a new currency? I offer you a Hayek quote I mentioned at the Whisky Bar: The curious task of economics is to demonstrate to men how little they know about what they imagine they can design. Maybe. But there’s enormous will here. And I think they’ve found a way. Most people don’t think the BRICS can pull this off because they don’t have a BRICS bond market to rival the US Treasury market. Funnily enough, the ghost of the [worst US President ever]( may have shown them the way. But have they done this? And how? Wrap Up I can’t tell you how much I enjoyed reading Jim’s latest Strategic Intelligence issue. I know most of you are subscribers of Jim’s, and that’s great! Get on this issue if you haven’t already. But if by some chance you don’t already subscribe to Strategic Intelligence, I encourage you to do so. The economics, history, and economic history you learn are worth the price of admission alone. [You can sign up here.]( In the meantime, have a wonderful and restful weekend! 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. For questions about your account or to speak with customer service, [contact us here]( or call (844)-731-0984. 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