More pain ahead

Just want to touch base as I haven’t posted in a while. Nothing has changed on the economic and political front. Chaos reign everywhere as hyperinflation ravages the globe and government bodies and leaders repeatedly make things worse with their “solutions” (e.g., price caps). Some folks are experiencing a frog in boiling water effect while others are impacted acutely (truck drivers for examples). Most don’t know what is happening, or think it is transient, and will be destroyed financially in the coming years. The bottom line is the Fed continues to be stuck in a liquidity trap of its own making and is attempting to raise rates into a recession in a mid-term election year. Not an enviable position. The point that most people miss, however, is the Fed is actually more worried about placating markets than controlling inflation, in spite of what they are saying. Consider this. The Fed needed to leak a press release for a 75 bps hike last month instead of 50 bps after headline CPI hit a new cycle high north of 8.6%. If the Fed were serious, they would be hiking at least 100-200 bps each meeting with inflation this high. And nearly everyone knows that with CPI nearly 9%, actually inflation is roughly double that. The Fed is also “slow playing” its balance sheet runoff, selling only 45B a month out of a 9T balance sheet. In spite of that, the bond market had its worst first half since 1788. Wow. All that said, and with the continued backdrop of commodity scarcity, expect more pain ahead. A waterfall decline looks to be imminent (next week or so). Ignore the rhetoric about a Fed pivot. They may pivot at some point, but they have just begun tightening and will lose whatever credibility they have left if they try to pause too early with inflation raging.

Staring Down the Abyss

assume crash positions

After months of crazy headlines and associated nonsense, I believe we are finally at the precipice of dramatic social and economic change. That’s not to say the process isn’t already underway, but my sense is that we are entering a much more acute, accelerated phase. Inflation rages and will get worse as we fail to address the root cause (printing money out of thin air coupled with unsustainable debt and deficits). The war in Ukraine continues to escalate as people slowly come to the realization the war is not about Ukraine, but rather about NATO and the US versus Russia, and even more broadly the BRIC nations versus the G7. Corruption domestically has reached insane levels, with a complicit media turning a blind eye. It has gotten so bad that the current administration has announced a Governing board to address “disinformation” under the Department of Homeland Security. Disinformation of course means anything that threatens the current regime. The proverbial Ministry of Truth and in a word, Psakian (Orwellian). So, it’s no surprise to anyone that I think we are headed to a failure of epic proportions. And it will not be short lived.

After initiating max shorts, a month or so ago at ES (snP 500 futures) 4500, NQ (Nasdaq futures) 14650, YM (Dow futures) 34,675, and RTY (small cap futures), we are currently at ES 4270, NQ13400, YM 33770, and RTY 1908 even after today’s desperate move higher for month end window dressing. Futures levels will not correspond exactly to the index cash levels (reported in the media). I am also long Gold, Silver, and Oil in anticipation of a drop in the dollar and continued currency manipulation coupled with geopolitical chaos.

My thoughts are that a waterfall collapse is imminent. We have much farther down to go.