September 2023: Monthly Asset Class Report

The USD recovery hurt stocks, bonds, and crypto. [The Rude Awakening] October 02, 2023 [WEBSITE]( | [UNSUBSCRIBE]( September 2023: Monthly Asset Class Report - The US dollar index was up about 1.5% for the second consecutive month. - The stock market got monkeyhammered, down over 5%. - Bonds look uglier than a drunk carpenter’s thumb. [New Biden Bucks Follow-Up Available Now]( Since posting the original Biden Bucks presentation online, millions of people have viewed it. Snopes and the Associated Press have even attempted to “fact check” and claim some warnings are false: [Click here to learn more]( Point being, the message has raised a storm and caused a lot of controversy. But in the time between the message and now, a lot of new developments have come to light. That’s why an update to the original prediction was just released… one which will likely be even more controversial. [>> Click here now to access the new 2023 Biden Bucks follow-up](. [Click Here To Learn More]( [Sean Ring] SEAN RING It’ll be Monday by the time you read this, and I’ll be in Vegas by then. But I thought I’d have trouble writing this on Sunday night, so I woke up early on Saturday morning to sort this out before I travel. I’m glad I did. Did gold take it in the nutsack this week, or what? Down nearly $80 on the week and almost $100 on the month? What a mess… Silver, of course, didn’t do much better. But that’s because the market has finally cottoned onto the fact that Jay Powell isn’t pivoting until Jay Powell is good and ready to pivot. The 10-year yield jumped, and the dollar index along with it - that’s not good for precious metals. Stocks also had a crappy time, with both the SPX and the Nazzie down. But the Russell 2000 was - as is - performing worse. And the Russell is the one I’m worried about because those companies don’t get mate’s rates at their global banks. That is, the Fed’s rate hikes will hit them first. And bonds? Another 18-car pile-up. While they finally offer decent returns, do you want to buy them when Jay Powell has his hiking boots on? And how about oil? Think a $90 barrel tells us inflation is gone? Me, neither. Without further ado, let’s get into the charts. S&P 500 [RUDE 1] There were four consecutive down weeks for September for the SPX. It was an ugly month. While trading below the 50-day moving average, the 200-day moving average is still upward-sloping. I’m not sure we’ve got much more downside from here, especially if we bounce off the 200-day MA in the next couple of weeks. I’m not saying the economy is good. But I’m no longer sure Jay Powell will be happy to see the SPX fall off a cliff. Nasdaq Composite [RUDE 2] We had another few down weeks for tech stocks. As my friend and colleague Dan Amoss has been saying, there’s a rotation out of tech and into safer stuff like US Treasuries. Those USTs are yielding a decent return. However, I’m unwilling to write off tech yet, especially if the AI revolution firmly takes hold. Russell 2000 (Small caps) [Rude 3] This is still the chart to watch. Since most of these companies couldn’t refinance when rates were near zero in the capital markets, they’ll be the first to feel the pain of Powell’s harsh rate hikes. Last week may have been a respite… or a turning point. The probability lies with respite. If we continue the 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 US 10-Year Yield [RUDE 4] Okay, the 10-year continues its rise, and I don’t think it’ll go anywhere but up for the time being. The Fed has lost control of the long end of the yield curve, as most central banks do during hiking cycles. Why? Because they go too hard for too long. This time is no different. Until Powell signals his pivot, yields will continue to rise, and bonds will continue to be routed. Dollar Index [RUDE 5] While I was incorrect about Powell hiking in September, I still don’t think he’s done hiking yet. And neither does the market, methinks. We’re now above the previous cycle highs. Next stop: 108. Above there, 111, and then onto the 114 highs. But if Powell signals a pivot this month, we’ll be below 100 quicker than you can say, “quantitative easing.” USG Bonds [Rude 6] I called 90 last night, but off the cliff we went. There’s a real issue here: bonds now offer good returns for the risk. But why would you want to own longer-dated bonds when the Fed has long control of the long end? This may be the bottom here (for a while, at least). If not, see you at 80. Investment Grade Bonds [RUDE 7] After being rangebound between 103 and 108 for the entire year, we finally got our break to the downside. Next stop: 96. High Yield Bonds [Rude 8] I got this wrong last month. We didn’t head up to 77; we got crushed back down to 73.72. The HYG bounced off its 200-day MA, which is a good sign. The odds favor a down move in the short term. 71.5 it is. Real Estate [Rude 9] Wrong on this one, as well. The real estate market doesn’t like Powell’s hawkish talk. The VNQ got crushed that week, down nearly 8%. We could reach 72, but the damage is done for now. We’ll see a bit of a recovery, but not much. [Urgent Notice From Paradigm CIO Zach Scheidt!]( Hi, Zach Scheidt here… I’m the Chief Income Officer at Paradigm Press. With inflation raging (and showing no signs of coming to an end any time soon), almost everyone in America is feeling the pain in a big way. Which is why, several months ago, I set out on a big mission… my goal was to create a [complete, step-by-step plan to surviving and beating inflation]( one that anyone could take advantage of. Today, after hundreds of hours of research, I’m revealing all of my findings. [Simply click here now to see how to survive America’s deadly inflation crisis](. [Click Here To Learn More]( Energy: West Texas Intermediate (Oil) [Rude 10] A big move in oil, up to $90, as inflation is still with us, and the Russians and Saudis tighten up the oil spigots. I can easily see a move to $120, even with dollar strength. But first, 107.50. Base Metals: Copper [RUDE 11] I had 3.60 in my call. It got close but rallied to 3.74 in the month's final week. The price looks depressed, so I’ll keep my 3.60 call. Past there, 3.35. Precious Metals: Gold [Rude 12] Seven consecutive days of crushing selling to close out the month. This is the second-worst month of the year for gold. February was the worst month. We were down $79.50 this week and $99.80 in September. The technical outlook has now changed. I expect a further fall to $1,820 before rebounding. As the Fed keeps hiking rates, it makes holding gold less attractive. Precious Metals: Silver [Rude 13] As with gold, silver got crushed in the last week of the month. While rates make holding precious metals unattractive, the silver chart doesn’t look as dire as gold. Yet. Cryptos: Bitcoin [Rude 14 ] Bitcoin was up a bit this month. But that’s not enough to move the needle into the firmly bullish camp. The 50-day MA says down. The 200-day MA says up. Let’s see. Cryptos: Ether [Rude 15] Even though Ether had a nice week to close up the month, I’m still unimpressed. Probably heading down from here. Trad Asset Class Summary [Rude 16] The USD was up again this month, moving up 1.56%, nearly the same as in August. Commodities were pancake-flat, up just 0.06%. The SPX was pole-axed, registering a -5.04% return. And once again, bonds stunk up the joint, getting crushed to the tune of -5.48%. Crypto Class Summary [Rude 17] Most big coins recovered somewhat after the abysmal month crypto had in August. No one shot the lights out, but the returns were solid across the ecosystem. The only coin we tracked that was down was Dogecoin, Elon’s favorite. Though, it only fell 2.66%. Wrap Up Gold and silver fell off a cliff, thanks to the market finally believing Jay Powell. Stocks and bonds got hammered. Crypto was up small. Oil is ripping higher. Enjoy those inflationary price hikes. Finally, let’s take a moment, in memorandum, courtesy of the Twitterverse: [Rude 18] Credit: [@SallyMayweather]( Have a wonderful week ahead! All the best, [Sean Ring] Sean Ring Editor, Rude Awakening X (formerly Twitter): [@seaniechaos]( In Case You Missed It… A Big Reason the Dollar Is Up [Sean Ring] SEAN RING Happy Friday from sunny Il Piemonte! Just a quick, final reminder that I’ll be on [Rickards Uncensored]( with Dan Amoss and Matt Insley today at 10 a.m. ET. I hope to see you there! Also, I’ll be writing from Lost Wages - I mean Las Vegas - next week, as I’ll be speaking at the 2023 Paradigm Shift Summit. Yes, I’m traveling fifteen hours to see you! I’m already looking forward to the 5:30 pm cocktail hour… That means Monday’s Rude will be the Monthly Asset Class Report, as it should be. But before that, I still want to discuss the resurgent dollar. Or, more precisely, the diving euro. What’s Going on Lately? The dollar is running, that’s for sure. Maybe it’ll stop soon. But perhaps it won’t. I’m firmly in the camp of “mathematically speaking, the dollar has to run higher because the euro is toilet paper.” Look at the last three months’ worth of movement in the dollar index: [USD] Sure, the last two days weren’t great. But we’ve had a sustained, rip-roaring 2 ½ month rally. It’ll continue because the feckless euro makes up 63% of the dollar index’s basket. Now look at the euro’s performance against the dollar: [EURUSD] As Liar’s Poker author Michael Lewis once wrote, “It’s going down faster than an 18-year-old on prom night.” I may have a few good days here and there, but ultimately, it will get crushed. You may think the reasons would be Europe’s vassalage, Germany’s deindustrialization, or soaring energy prices. And you’d be right on all counts. But the problem is much deeper than that. The euro’s weakness comes from first principles, ultimately leading to its demise as a currency altogether. [America no longer a superpower because of Biden?]( [James Altucher]( [Ever heard of America’s “Doomsday Deal”?]( It’s a deal so vital to our country’s wealth and security… Every President for 50 years has defended it at all costs. Until Calamity Joe Biden. [Biden broke the deal](. And I now predict… The America we love is doomed. And the biggest wealth transfer in US history is now underway. [>>See the truth about Biden’s terrible mistake HERE<<]( [Click Here To Learn More]( How the Euro Came to Be. In 2010, as the European Sovereign Debt Crisis was brewing, Philippe Bagus of Universidad Rey Juan Carlos in Madrid wrote [The Tragedy of the Euro](. At the time, he was under Professor Jesus Huerta de Soto, the legendary Austrian School economist and author of [Money, Bank Credit, and Economic Cycles](. Bagus’ book posits that the Euro was designed as a political tool to further European integration rather than as an economically sound currency. This has led to a "tragedy of the commons" situation, where individual member states have incentives to run high deficits and engage in reckless spending, knowing that the costs will be socialized among all Eurozone countries. Bagus also points out that the European Central Bank (ECB) is caught in a bind. It can either bail out those profligate governments, risking inflation and moral hazard or refuse to intervene, risking the collapse of the Euro and the political project of European integration. Over the last 13 years, the ECB has chosen the latter course. But Bagus shows his hand in his introduction: The real reason the German government, traditionally opposed to the socialist vision, finally accepted the Euro, had to do with German reunification. The deal was as follows: France builds its European empire, and Germany gets its reunification. It was maintained that Germany would otherwise become too powerful, and its sharpest weapon, the Deutschmark, had to be taken away—in other words, disarmament. The Euro is more than a financial disaster; it's a cautionary tale of what happens when political ambitions trump economic realities. Let’s look at the meaty middle of Bagus’ book for more answers. The Socialization of Money. The Tragedy of the Euro delves into the "socialization of money." Specifically, the socialization of money is when monetary policy and control have been centralized and detached from market forces. The socialization of money began in earnest after World War I when countries abandoned the gold standard to finance their war efforts. This shift allowed governments to print money at will, leading to inflation and economic instability. The Bretton Woods system attempted to bring some order by pegging currencies to the U.S. dollar, which was, in turn, pegged to gold. However, this system fell apart in 1971 with the Nixon Shock. In the new fiat system, money was - and still is - a social construct backed by government decree rather than a tangible asset like gold. This centralization gives governments and central banks enormous power to manipulate the money supply, interest rates, and, by extension, the economy. While this might sound good in theory, it leads to moral hazards, inflation, and economic cycles that wouldn't occur in a more market-driven system. The socialization of money is particularly problematic in the context of the Euro. Unlike the United States, where a centralized government controls both fiscal and monetary policy, the Eurozone has a centralized monetary policy through the European Central Bank (ECB) but decentralized fiscal policies managed by individual member states. This disconnect creates a system ripe for abuse. Countries like Portugal, Italy, and Greece (the original PIGS) run up their national debts without facing immediate consequences, knowing that the ECB will step in to prevent a total collapse. The Maastricht Treaty. The Maastricht Treaty was signed in 1992 with the primary goal of furthering European integration. It listed the criteria for joining the Eurozone, such as low inflation and debt levels. However, Bagus points out that these criteria were more like guidelines than strict rules. [SJN Meme] There needed to be an enforcement mechanism to ensure that countries maintained fiscal discipline once they adopted the Euro. This lack of enforcement was not an oversight but a deliberate feature designed to make the treaty more politically palatable. The Maastricht Treaty created a system where the benefits of joining the Euro were immediate and tangible—lower interest rates, increased trade, and the prestige of being part of a unified Europe. In contrast, the costs—giving up monetary sovereignty and the risk of bailouts—were distant and abstract. This imbalance of incentives set the stage for the "tragedy of the commons" that the Euro has become. The Tragedy of the Commons. The "tragedy of the commons" is an economics and environmental science concept. It describes a situation where individuals, acting in their self-interest, deplete or ruin a shared resource, leading to the detriment of the entire group. Think of a shared fishing pond where everyone takes as many fish as possible, leading to the depletion of the fish stock for everyone. (Funnily enough, that mirrors the situation with the EU’s Common Fisheries Policy. The Med is practically empty of fish compared to the vital, abundant sea it used to be.) The Euro is a financial common. Each member state is incentivized to exploit the shared currency for short-term benefits, such as running high deficits and accumulating debt. Why? Because the immediate benefits accrue to the individual state, while the long-term costs - like inflation and financial instability - are socialized across all member states. Wrap Up The euro is like a joint bank account where one partner is frugal, and the other is a spendthrift. The frugal partner will eventually get tired of bailing out the spendthrift. But by then, the damage is done. The account is drained, and both are worse off. It's a glaring example of how good intentions - European unity in this case - can lead to disastrous outcomes when the economics don't add up. A friend of mine often says, “You can ignore the laws of economics. But the laws of economics won’t ignore you.” And that’s why, ultimately, the dollar will continue to soar. Have a great weekend! All the best, [Sean Ring] Sean Ring Editor, Rude Awakening 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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