Holiday Trading Week

Frigid Northern Hemisphere and EU Trillion dollar Tab

The damage was done last week as the mega options expiration saw the markets continue their post FOMC slide. We expect Powell to continue the harsh rhetoric and the markets to be on the defensive. Many continue to call for a soft landing and maybe even the chance that we do not even see a recession in 2023. You know we are in the camp that sees a massive credit and leverage destroying recession ahead. Sorry you can’t print that much debt, give out that much fiscal stimulus and then raise rates 425bp without a few dead bodies being uncovered. The system doesn’t work that way, its a fractional reserve system which has continued decade after decade to support asset prices and the concentration of wealth. THAT IS OVER.

Its not over because the global central banks are unwilling to continue their monetary stimulus. NO, its over because the natural equilibrium of global markets and the case for global cohesive continuity or global game of cooperation, that is over.

We don’t believe the United States can be the worlds protector/aggressor (Depending on your view) and still maintain its US Dollar hegemony. We know that the BRICs are creating Yuan based contracts and bypassing the “PetroDollar.” We know that they have been buying and stockpiling gold and we know the old adage well,

He who actually “owns and holds” the gold holds the real wealth and power

We also know that the US Dollar is the United States largest export and its a well known scarcity trade and we believe the rest of the world understands this as well now. This is not the future, at least not in its current form, we believe many things have begun to be unwound and will lead to a whole host of volatility to come and a few of those unknown unknowns…

So let’s get to some of the more recent developments that we feel will cause markets and the FOMC to rethink their “higher rates to come, higher terminal rate level” mentality. First off, last week we saw that Non-Farm payrolls were revised way down from earlier this year. These revisions were by factors and the BLS should be ashamed of their ineptitude, intentional or not: