August 2023: Monthly Asset Class Report

The USD recovery hurt stocks, bonds, and crypto. [The Rude Awakening] September 01, 2023 [WEBSITE]( | [UNSUBSCRIBE]( August 2023: Monthly Asset Class Report - The US dollar index was up about 1.5%, the same amount the SPX was down. - Tech did okay, as did real estate. - Crypto and bonds got smacked in the mouth. [Urgent “Red Alert” Warning For This Friday]( Due to the controversial nature of the following content, [this urgent “Red Alert” warning]( will be taken down on Friday at 4:00 PM ET. Don’t miss out, otherwise you could get blindsided. [Click here now for access](. [Click here to learn more]( [==> Click here now](. [Click Here To Learn More]( [Sean Ring] SEAN RING Happy Friday from sunny Asti! Asti’s famous Palio (horse race) happens this weekend, and I’m looking forward to it. I didn’t go last year and regretted it. Micah is marching as a little knight in the medieval parade. I can’t wait to see him show off his gold fittings. As far as the market is concerned, the USD had a great month. Stocks and bonds were weak in August. Crypto was eviscerated. Bitcoin, Ether, and the rest of the complex were down by double digits. It was a shambles. The big thing to watch is the Russell 2000 ETF (IWM). Following on from [yesterday’s]( about small and medium-sized businesses coming under pressure first, we can see the lack of refinancing hit those companies first. The IWM had a good week, but it’s not out of the woods yet. Precious metals had a terrible start to the month but recovered. And copper gave away July’s gains last month. Quick reminder: I hope to see you at today’s session of [Rickards Uncensored]( I’ll be there at 10 a.m. ET with Matt Insley, talking about subjects like China, Tucker, and credit card debt. [I hope to see you there!]( Now, let’s dive in… S&P 500 [S&P 500] The SPX took a breather this month as the dollar recovered some ground. The broad market fell about 1.5%, about as much as the dollar gained. After a rough start to August, the last two weeks were positive. If we break above 4,600 again, we look to break the all-time high of 4,796.56 next. Nasdaq Composite [Nasdaq Composite] Nothing goes up in a straight line, I’ve learned (once again) this past month. However, since we’re back above the 50-day moving average, I think the next stop is 14,500 (again). Past there, we’re challenging the all-time highs. Russell 2000 (Small caps) [Russell 2000 (Small caps)] I got this completely wrong last month. And we may have seen the cycle highs already. This chart isn’t nearly as bullish as the first two, and the Russell will fall first in case of economic recession or financial crash. It’s critical to keep your eye on this ETF for the next few months for early warning signs. If we’re entering a down leg, the next level is 172.5 (the previous low). Below that, we’re at 162.5 (the level at which we looked like we put in a double bottom). The last three times we tried to get above 197.5, we failed. I’m not sure they’ll be a fourth time this cycle. The US 10-Year Yield [The US 10-Year Yield] We rose twelve bps (0.12%) since our last asset class report. As they say in Italy, “Piano, piano.” (Slowly, slowly.) My comment from (now) five 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 [Dollar Index] I have my doubts now. I still don’t think the Fed is done hiking. In fact, I think Jay Powell will hike in September at the next Fed meeting. The market currently only assigns an 11% probability of that happening. But that can - and will - change many times between now and September 20th. Technically, we’re at a critical level because we stalled here on the previous rally. Above here, we could - could - get to 111.00, though the probability of that materializing is low. If the rally stalls, we head down to 100 again. USG Bonds [USG Bonds] We got down to 92.5 before a brief recovery. I still hate the long end. I think Chairman Pow has lost control of it, and yields will fly up. That’s bad for TLT. Next stop: 90. Investment Grade Bonds [Investment Grade Bonds] From last month: Investment grade bonds are holding up better. We’ve been rangebound here for the entire year and have traded in a tight range for the past few months. I’d still err on the downside if more rate hikes are coming, but let’s wait for confirmation. High Yield Bonds [High Yield Bonds] This chart looks far healthier than it should. Oh well. Long HYG, it is, then. Next stop: 77.5. Real Estate [Real Estate] This chart has bottomed out thanks to the fiscal spigot being left open. We’ve just had a golden cross last month, and though we fell below that, the lows were higher than the previous low. I’m looking at the 86 level next. Energy: West Texas Intermediate (Oil) [Energy: West Texas Intermediate (Oil)] Up another $2 this month. Interestingly, the US dollar index was up as well. If the dollar keeps climbing, that will put pressure on all asset classes. Still, oil is up about 15% since July. That’s got to be inflationary. [Grid Monitor Warns: Will The U.S. Power Grid Fail Nationwide?]( [Click here to learn more]( The U.S. power grid is under immense stress – [and according to this video]( your area could be set to experience rolling blackouts. They’ve already begun across the country – in Texas, California, Florida, North Carolina and more. The grid monitor just issued a “sobering” report of blackout risks across the U.S. [And research shows rolling blackouts could soon come to your area. Because of that, I encourage you to prepare right away](. This might be your last chance to do so. [== > Click here now for my urgent warning](. [Click Here To Learn More]( Base Metals: Copper [Base Metals: Copper] And right back down we went. After a nice July rally, August was crap for copper. I’ll renew my call for 3.60 here. The world economy isn’t looking that great. Precious Metals: Gold [Precious Metals: Gold] ARGH! Gold shits me to tears! Terrible opening to August, but I’m still bullish. We should be hitting $2,130. And we’re still above both moving averages. Precious Metals: Silver [Precious Metals: Silver] Whore’s drawers,” as my London friends would say. “Up and down. Up and down.” Silver got crushed, then recovered nearly all its losses. Still bullish. But it’ll play possum with us until it’s good and ready to break $30. The bitch. Cryptos: Bitcoin [Cryptos: Bitcoin] It's an ugly month, but it’s still not over for Bitcoin. I don’t like the 50-day moving average pointing south. We need some better news than an ETF opening. We need a sustained rally. I just don’t think there are any buyers out there right now. Cryptos: Ether [Cryptos: Ether] Unlike Bitcoin, Ether is in big trouble. Below $1,700 and its 200-day MA, the 50-day MA pointing south, I’m a seller. Trad Asset Class Summary [Trad Asset Class Summary] The USD reasserted itself this month, moving up 1.47%. The SPX was down by roughly the same amount. Somehow, commodities notched a small gain of 0.38%. And once again, bonds stunk up the joint, moving lower by 1.07%. Crypto Class Summary [Crypto Class Summary] Welcome to the “Everything Sucked” Month. All the big coins were down by double digits. Litecoin performed the worst, falling nearly 32%. Monero, the most secretive of the coins, fell a mere 10.65%. Wrap Up Bonds and crypto sucked in August. Stocks and metals were weak but held their ground. Oil is on the march north, which will pressure the inflation numbers. I don’t think Chairman Pow is done hiking yet. It may not be September, but it could come in October or November. Finally, let’s take a moment to laugh at this meme, courtesy of the Twitterverse: [meme] Have a great weekend! And since it’s a long one, the Rude on Monday will be a replay. All the best, [Sean Ring] Sean Ring Editor, Rude Awakening X (formerly Twitter): [@seaniechaos]( In Case You Missed It… The Great Wealth Migration [Sean Ring] SEAN RING Good morning Reader, Greetings from a gorgeously cool and autumnal Asti. We’ve only had a six-week summer here in Italy. It was cool until mid-June, and as I stand here typing, it’s a mere 69F (20C). The global warming nuts are having a tough time with this. The weather maps are blue and green, even in environMENTAL Germany. Though we’re still three weeks away, autumn is my favorite time of year. I get to cool down and think again. As David Landes wrote in The Wealth and Poverty of Nations: In India and other tropical countries, I have noticed farmers, industrial laborers, and in fact, all kinds of manual and office workers working in slow rhythm with long and frequent rest pauses. But in the temperate zone, I have noticed the same classes of people working in quick rhythm with great vigor and energy, and with very few rest pauses. I have known from personal experience and the experience of other tropical peoples in the temperate zone that this spectacular difference in working energy and efficiency could not be due entirely or even mainly to different levels of nutrition. Weather matters. It really matters. I noticed this when I lived in Southeast Asia's sweltering, humid air. In fact, it was one of the main reasons I wanted to get back to the West. I needed cool air to regain my intellectual and physical vigor. After a long train trip through Europe over the past two weeks, I feel I’ve finally “returned” to the West. A long walk through the Louvre will help that out. Walking through seaside Barcelona, the canals of Amsterdam, pristine Brussels, and the tight alleys of medieval Antwerp will erase the rest of the Eastern residue. Kipling once wrote: Oh, East is East, and West is West, and never the twain shall meet, Till Earth and Sky stand presently at God's great Judgment Seat; But there is neither East nor West, Border, nor Breed, nor Birth, When two strong men stand face to face, though they come from the ends of the earth! What I love about this passage is that the first two lines don’t deny the immense difference between Eastern and Western cultures. But the third and fourth lines of the poem contradict the first two, allowing that individuals of diverse cultures can easily get along, no matter where they’re from. Unfortunately, no one reads Kipling anymore, as he was an unabashed Empire lover. For if they had, they’d know he was no racist. Kipling was a realist. With this in mind, let’s tie together economics and politics to explain why governments, even Italy’s, opt for the intellectually lazy open borders strategy. [9/20: The Beginning Of A Brand-New Inflation Surge?]( Inflation officially peaked in June 2022 at 9.1% -- and ever since, it’s come back down to just 3.2%. But if you think the worst of this crisis is over, think again… Will Sept. 20 mark the beginning of a new – and far more serious – inflation surge? [Click here now to see my urgent warning.]( [Click Here To Learn More]( Ultra-Low Rates and Ultra-High Asset Prices: Ethically Offensive I’ve written about this many times and am sorry to keep beating a dead horse. But sooner or later, we’ve got to learn that a central bank can’t keep its foot on the yield curve for years and expect good outcomes. Even if we allow for the argument that a certain amount of money-printing enables the economy to restart itself, there’s simply no excuse for keeping the spigot open for multi-year periods or, in the case of 2008-2021, over a decade. In his masterpiece, The Ethics of Money Production, Jörg Guido Hülsmann writes: The characteristic feature of fiat inflation is that it is done openly and legally. However, official approval does not diminish the pernicious effects of inflation; and it is far from removing its ethical offensiveness. Hmmm… “ethical offensiveness.” Yes, depriving prospective families of the means to have children is ethically offensive. And by that, I mean the ability to have a family in a well-priced house on a single income. I genuinely don’t think that’s too much to ask. In the old days, Dad bought a house for $50,000, Mom stayed at home until at least the third kid was in grammar school, and the family wasn’t left wanting. How people try to say we’ve “progressed” on that front is beyond me. You simply can’t progress when a couple needs both people to work and still can’t afford a down payment, let alone a house, because they’re still paying off their student loans. This is because central banks hold rates on the floor far after their stimulating effects have been extinguished. And it transfers wealth from the poor to the already wealthy in the stealthiest way possible. As a result, demographics are disastrous. Not Mass Migration, But Forced Integration And what’s the answer to this demographic disaster? Politicians think it’s mass migration. Unfortunately, politicians also think these migrants will easily fit into their new societies. This clearly isn’t the case. And while France has a terrible integration problem because they were horrific colonial overlords — see Niger and Gabon (currently) — the UK has had similar issues integrating its immigrants. This “forced integration,” as Hans-Hermann Hoppe calls it, is where the demographic project falls. As Sean Gabb writes in [Property, Freedom, & Society]( [Hoppe] regards the mass immigration of the past half-century into Western countries as an instance, not of libertarian open borders, but of “forced integration.” It is different from free trade in goods and services so far as it is not a free choice of individuals to associate as they please. Instead, it is a product of anti-discrimination laws and state welfare policies. In a democracy, politicians will have an interest in importing those most likely to vote for big government, or those most likely to lend themselves to an electoral balkanization that puts an end to the accountability of rulers to ruled. Given enough pressure by the majority, these politicians will make immigration laws that look tough. But these will lead, at best, to random acts of oppression against the sorts of immigrant who, in any rational order, might be welcomed. The policies of indiscriminate welfare that attract paupers into the country, and of political correctness and multiculturalism that prevent the majority from resisting, will continue unchecked. Hoppe wrote about this in 1999 in his now-famous essay, [On Free Immigration and Forced Integration](. Despite all this, the latest country to fall for this codswallop is my very own Italy. They Like Me! They Really Like Me! Once upon a time, Giorgia Meloni was one of the most ardent anti-migration voices in the European Union. As an opposition politician, she warned the New World Order would substitute native Italians with ethnic minorities. She even promised to put in place a naval blockade to stop migrants crossing the Mediterranean. Someone’s pants are on fire. Now that her EU colleagues have shown her some respect, Meloni has presided over a spike in irregular arrivals. She also introduced legislation that could see as many as 1.5 million new migrants arrive through legal channels. From [Politico]( Meloni is presiding over a country that is economically stagnant and in demographic decline. Over the last decade, Italy has shrunk by some 1.5 million people (more than the population of Milan). In 39 of its 107 provinces, there are more retirees than workers. It’s numbers like these that prompted Italy’s Economy Minister Giancarlo Giorgetti to warn earlier this month that no reform of the pension system would “hold up in the medium-to-long term with the birth rate numbers we have today in this country.” Meloni’s legal migration decree estimates Italy needs 833,000 new migrants over the next three years to fill in the gap in its labor force. It opens the door to 452,000 workers over the same period to fill seasonal jobs in sectors like agriculture and tourism as well as long-term positions like plumbers, electricians, care workers, and mechanics. Meet the new boss. Same as the old boss. Wrap Up It’s the same story all over the developed world. Central banks stomped on the yield curve, lowering interest rates to artificial levels. That goosed the asset market for far too long, which made housing, cars, and children too expensive. To clean up the mess, governments didn’t interfere with central banks’ stupid decisions but opened the borders to mass migration and forced integration. In a few years, Italy may be experiencing the same problems France, the UK, and the rest of the developed world face now. Where’s Kipling when you need him? All the best, [Sean Ring] Sean Ring Contributing Editor, The Morning Reckoning feedback@dailyreckoning.com X (formerly 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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