Optimism Attacks!

Biden’s Bi-Focaled Geeks Have the Numbers Right Where They Want Them. [The Rude Awakening] March 11, 2024 [WEBSITE]( | [UNSUBSCRIBE]( Optimism Attacks! [Sean Ring] SEAN RING Dear Reader, Paradigm Press’s Options Expert and self-appointed Head of the Department of Optimism, Alan Knuckman, relentlessly streams good news over our Slack editorial channel. Like Malcolm McDowall in A Clockwork Orange, my eyelids feel taped open as I read puff piece after puff piece Ivy League-educated interns write for the mainstream media, such as The Wall Street Journal. And I laugh and think of Dr. Pangloss. If you haven’t read Voltaire’s Candide, get yourself a copy. It’s only about 150 pages of some of the best literary hilarity ever committed to paper. Dr. Pangloss is a fictional character from the satirical novella Candide, ou l'Optimisme (Candide, or Optimism), first published in 1759. Pangloss is Candide's mentor and a staunch optimist, famously asserting that “all is for the best, in the best of all possible worlds." Voltaire wrote Candide and its optimism to send up the ideas of the German philosopher Gottfried Wilhelm Leibniz. I’m more familiar with Leibniz from his work on calculus, but there’s a reason he’s known as the “last universal genius.” Throughout the story, Pangloss maintains his optimistic outlook despite experiencing and witnessing a series of calamities and misfortunes. His unyielding optimism serves as a satirical device to criticize the optimistic philosophy of the time, implying blind optimism is both unrealistic and unhelpful in the face of the world’s harsh realities. I bet Voltaire is spinning in his grave as we speak. The Journal Alan Pangloss Knuckman posted a WSJ article over the weekend titled “[Jamie Dimon and Ray Dalio Warned of an Economic Disaster That Never Came. What Now?]( The article names such luminaries as Dimon, Dalio, and DoubleLine’s Jeff Gundlach as experts who got it wrong. One sympathizes. (To be fair, for nearly all of 2022, I targeted an SPX level of 3,213. The article states, "Gundlach recently predicted a recession this year and a drop to 3200 for the S&P 500.” I just don’t see it happening yet.) But this particular passage got my goat: The experts were way off. They underestimated the impact of government stimulus and the resilience of consumers and businesses. And they were too skeptical of the Federal Reserve’s ability to push inflation lower without sparking a recession. The economy continues to grow at a steady clip. Inflation is getting closer to the Fed’s goal of 2%, unemployment remains near a half-century low and the stock market is near record highs. In response, I wrote on the Slack channel: - There’s no recession because of the fiscal spending. That’s the G in the GDP formula. GDP ain’t gonna shrink when the government blows out the deficit. It’s mathematically impossible. - The inflation story isn’t over yet, not by a long shot. - Unemployment looks good. How about the labor force participation rate being at mid-70s levels? - Stock market is up, yes. So is margin debt. Was I correct… or hasty? [CRYPTO ALERT: 5 Coins to Skyrocket on March 13th?]( [Click here to learn more]( Crypto Millionaire James Altucher has pinpointed 5 tiny coins set to explode from an imminent “Trigger Event” on March 13th, precisely at 08:55:35 am EST. This event could generate gains 20X bigger than Bitcoin by the end of the decade, minting 1000’s of crypto millionaires over the coming years. [Click here to get the full story: 5 Tiny Coins Set To Skyrocket.]( [Click Here To Learn More]( The Numbers “There’s no recession because of the fiscal spending. That’s the G in the GDP formula. GDP ain’t gonna shrink when the government blows out the deficit. It’s mathematically impossible.” I went to the Bureau of Labor Statistics to get the numbers: [pub] Recall that GDP = C + I + G + (X - M) if you’re an unreconstructed Keynesian. Note that consumption indeed makes up nearly 70% of the US economy. This is much higher than in other developed countries, where consumption is circa 60%. Notice that consumption and investment grew 2.4% and 2.3%, respectively. Those categories make up nearly 87% of GDP. So the “G,” as in “Government consumption expenditures and gross investment,” makes up the rest (as the trade balance is negative). G grew by 4.10%, much higher than C and I. It’s fair to say that Biden’s Booming Stimulus goosed the official GDP number by 50 basis points or a half percent. How much the knock-on effects of this stimulus caused C and I to increase is beyond my analytical ability. Incidentally, Jim Rickards mentioned, "The Federal Reserve has not been printing money for years, but rather reducing the money supply… the inflation is not from monetary policy but from fiscal policy and government spending.” I completely agree with Jim. And if you haven’t seen his latest YouTube video with Matt Insley, [catch it here](. “The inflation story isn’t over yet, not by a long shot.” I’ve got one chart for this: [pub] This is the percent change from a year ago. Yes, we’ve had disinflation. But we’ve had no deflation. And the Fed may still cut later in the year. Let’s revisit this later. “Unemployment looks good. How about the labor force participation rate being at mid-70s levels?” Yes, unemployment is still near the floor. But the civilian labor force participation rate isn’t so hot. [pub] The unemployment rate is the unemployed / labor force. The labor force participation rate is the labor force as a percentage of the civilian noninstitutional population. In the United States, the civilian noninstitutional population refers to people 16 years of age and older residing in the 50 States and the District of Columbia who are not inmates of institutions (penal, mental facilities, homes for the aged) and who are not on active duty in the Armed Forces. The good news is the people in the labor force are working. The bad news is that much less of the population is a part of the labor force. November 1977 was the last time the numbers were this bad. “Stock market is up, yes. So is margin debt.” This is another one where I’ve got one chart. [pub] Margin debt is on the rise after a significant falloff in 2022. We’d expect that. I conclude that a bunch of private and public debt is holding up this economy. Larry Summers Speaks Again! But the big shock came when I watched Bloomberg’s [Wall Street Week]( YouTube](. Looking like he just came off a keg stand at a frat party, Larry Summers claimed that the neutral, or natural, interest rate is much higher than previously thought. The neutral interest rate is the short-term interest rate that would prevail when the economy is at full employment and stable inflation. It’s the rate at which monetary policy is neither contractionary nor expansionary. So, in his backhanded fashion, he accused the Fed of being too accommodative (loose) already. Summers thinks the neutral rate is “closer to a 4-handle” and that we are already “at the foothills of bubbles.” It’s worth knowing the market still expects three rate cuts this year. Wrap Up Looking at the stock charts, there’s no reason to be short here. However, the market is starting to look a bit wobbly. But in this case, Leibniz, Pangloss, Knuckman, and their optimism win the day. Voltaire can sulk in his silk stockings. But I prefer to look at it like General Sir Harry Flashman, VC would: “Courage. And shuffle the cards.” Have a fabulous week ahead. All the best, [Sean Ring] Sean Ring Editor, Rude Awakening X (formerly Twitter): [@seaniechaos]( In Case You Missed It… Iteration After a Violent Government Intervention [Sean Ring] SEAN RING After landing in Italy early Friday morning after an overnight flight from Riyadh, I thought I’d rerun a Rude piece from almost exactly two years ago. First, we’ve been proven correct… and this piece proves it. Second… I really miss Russian vodka. Enjoy this! And I’ll see you Monday with a fresh Rude. —— I’ve been shaking my head at the stupidity of the sanctions the West has imposed on Russia. Like a testosterone-filled teenage jock who’s just dumped his girlfriend, the West doesn’t think Russia will survive this. It’s lunacy to think Russia is going to starve. They’re going to adjust by iteration. I’ve got anecdotal evidence that’s already underway, as there are too many options these days for getting paid. Will there be immediate disruptions to Russian enterprise? Sure. Finding solutions will cost time and money. But once they’re found, Russian companies will have essentially de-risked themselves from the arbitrary Western banking system. And, like I’ve said many times before, the only people who’ll get hurt by these idiotic sanctions, in the long run, are Westerners. Let me start by returning to a lovely metropolis way up north. [Offer Pending: Please confirm your address…]( Your name is on a list of people eligible to claim the [“most dangerous book in America.”]( We with only 500 copies left, we may run out of stock soon. So, here’s how to claim your copy: - [Click this link]( watch Jim's short message.]( - Review your account information. - Confirm you’d like to accept Jim’s offer. And I’ll get your copy of the most dangerous book in the mail right away. [Simply click here and learn how to claim your copy.]( [Click Here To Learn More]( Moscow, 2008 When I was a single man living in London, teaching the banking grads every summer, my hand was the first to go up when a foreign assignment came up. I loved the travel, and I got to teach in San Francisco, New York, Dublin, Paris, Abu Dhabi, and Moscow. Once I got to Asia, I expanded that list to include all the fantastic eastern hemisphere cities, such as Tokyo, Singapore, Hong Kong, Kuala Lumpur, and Melbourne. I even got to Lagos and Abuja in Nigeria for a couple of trips. It's pretty wicked stuff. Most of my colleagues weren’t interested in making the trips. Some disliked travel; some had families they didn’t want to leave for a week or two at a time. Me? I was always up for it. I taught in Moscow four times between 2007 and 2008 before the world learned what “Lehman” really meant. My favorite watering hole in Moscow was at the top of the Swissotel at a bar called CityScape. It was the highest bar in Moscow then, boasting a panoramic view of the city. I loved looking out at the Seven Sisters, a group of skyscrapers built in the best Stalinist style. And my bartender was a gentleman of particular taste. Inevitably, his name was Vladimir, and he taught me the proper way to make a martini. If you want the best martini in the world, you’ll probably have to rush to the store to get the last bottles of Russian vodka. Most like Russian Standard vodka, but my favorite is Imperia Standard vodka. [Vodka] You’ll never look at vodka the same way after drinking this martini. Ingredients: Imperia Standard Vodka Noilly Prat vermouth Lemon peel Ice First, put ice cubes in your martini glass to chill it. Then, fill your mixing glass with ice. If you’ve got a proper American bottle top (the one with the hole in it), this next step will be more straightforward. Pour a twelve-count (or three shots) of Imperia over ice. Then add one drop of Noilly Prat vermouth. [Vermouth] To get one drop, hold your finger over the hole in the bottle's top and let the drop fall out. Do NOT rinse the martini glass out with the vermouth. You’ve got ice in right now, and it makes the drink too sweet. Trust me, you’ll fall over after a few. Then, take your stirring spoon and gently stir the mixture. Real. Slow. Do NOT shake the martini. When Ian Fleming wrote James Bond, he wanted Bond to be imperfect. Shaken martinis are a faux pas, not a sign of sophistication. Then, dump the ice out of your now-chilled martini glass. Strain your stirred mixture into the martini glass. If you’ve measured correctly and have the right-sized martini glass, you should fill the glass perfectly. Finally, garnish with a lemon peel. (Olives go better with gin.) Et voila! You’ve got the cleanest, simplest, and best cocktail on earth in your hand. Funny that. An American-designed cocktail with Russian and French ingredients. Numero Uno. I ran up an $800 bar tab with my buddy on the martinis and caviar one night in that bar. Vladimir was impressed with my American-born liver. Iteration The vodka, seafood, and diamond ban will [cost Russia a grand total of $1 billion.]( I don’t mean to be sarcastic, but most Americans think Absolut and Grey Goose taste good. My God! So, those exporters will feel some pain, but it’s more like Dr. Evil’s pain than world-ending pain. [1 billion dollars austin powers] And that’s where iteration comes in. My good friend and mentor, Hunter Hastings, runs the Economics For Business podcast. It’s a treasure trove of excellent business advice. And it’s free! [Hunter’s recent podcast with Rory Sutherland]( the Vice-Chairman of Ogilvy UK, is unmissable. I was on Hunter’s podcast a few years ago when we talked about [iteration](. The key point I made was that entrepreneurs learn that they’re wrong daily. Every fork can be re-taken. Every initiative can be improved. Every left turn can be rethought as a right turn. Keep iterating. And that’s what every Russian entrepreneur with international exposure is doing right now. One particular writer I subscribe to proved it’s pretty easy to do. Club Orlov I discovered Dmitry Orlov on Russia Insider a few years ago and read his articles occasionally. I didn’t realize he had a subscription-based writing business until a month ago. But when I found Club Orlov, I immediately subscribed via SubscribeStar, a platform similar to Patreon. I always disliked Patreon, especially when they started deplatforming writers I follow. But any centralized platform is a risk these days. (Is substack next?) Anyway, Dmitry sent a message via Club Orlov saying he was leaving Patreon and SubscribeStar because he couldn’t get his USD revenue into Russian banks, thanks to the sanctions. So, what did this innovative writer/entrepreneur do? He left detailed instructions on canceling my SubscribeStar subscription and resubscribing via Boosty, a platform I had never heard of before. And so I did. Boosty took my credit card just fine, and now I have access to the new [Club Orlov](. Sanctions evaded. Yes, it was *that* simple. Wrap Up If a St. Petersburg-based writer can change directions on a dime, you can bet bigger organizations will figure it out sooner or later. And with China, Iran, and India not playing Washington’s game, there will be much more of this. I know it’s only one anecdote. But if he’s doing this, so are many others. So, let’s hope Washington, London, and Berlin wake up. The only people whom these sanctions will hurt are their people. In the meantime, get on the [Economics For Business]( podcast, try some [Club Orlov]( and buy some real [vodka]( while you still can! Have a great weekend! All the best, [Sean Ring] Sean Ring Editor, Rude Awakening Twitter: [@seaniechaos]( [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2024 Paradigm Press, LLC. 1001 Cathedral Street, Baltimore, MD 21201. 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. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. 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