Pivots, Recessions, and Covid-Zero

Two things happened in the markets this week:

1. The Fed Pivot
2. What’s a Recession Anyway?

First, the Pivot. Which hasn’t happened, insofar as I can see, but the markets appear to believe that the Fed has “pivoted” – setting up to raise rates less enthusiastically than previously thought. Listening to the Federal Open Market Committee statement (Source) I couldn’t spot an actual policy pivot, but prices of many items jumped substantially higher at around five minutes into Powell’s statement, and the rally didn’t stop until trading ended on Friday. Prices of gold, silver, equities, the 10-year bond, and the Euro all moved higher more or less together.

Wolf Richter agrees with my viewpoint, calling it “the most hawkish FOMC press conference I ever watched.” (Source) He doesn’t mention a pivot either.  But what do we know?

• Gold  +39.50 +2.29%
• Silver +1.58 +8.49%
• Crude +1.72 +1.82%
• SPX.N +168.66 +4.26%
• Junior Miners +2.84 +9.23%
• USD -0.38 -0.36%

It sure looks like gold’s curious bullish reversal seen last Friday turned out to be a legitimate signal. Of course, we have no idea how long people will believe in this “Fed pivot” – it could all vanish next week. The less trading I do, the less money I tend to lose. This is what last Friday’s daily reversal plus this week’s “pivot” rally looks like on the monthly chart: the model still shows a downtrend, but it definitely likes the monthly candle print. (Yes, I got my code mostly back working again.)

Now for recessions. President Grandpa’s Handlers got the early word this week from the economic bureaucrats: “real” GDP was going to fall, resulting in a recession (defined as two quarters of negative real GDP), and so the Handlers rounded up their media flunkies to convince us all that two quarters of negative real GDP isn’t actually how recessions are calculated. It reminds me of the CDC and its hasty redefinition of “vaccination” in the post-COVID world: (previously: “The act of introducing a vaccine into the body to produce immunity to a specific disease”; post-mandated mRNA vaccine: “The act of introducing a vaccine into the body to produce protection from a specific disease.”)

This week’s intense not-a-recession gaslighting campaign was an interesting exercise. I was less concerned about recession-or-not (it really doesn’t matter, you’ll see why), and I was much more focused on who played along. We can use this mechanism to detect who has been co-opted and is no longer a reliable, independent source of news. Some examples:

• Barrons (Source)
• Time (Source)
• New York Times (Source)
• Wikipedia (Source)
• Forbes (Source)
• CNBC (Source)
• NPR (Source)
• WAPO (Source)
• Janet Yellen (Source)

Maybe you can find others too. We should keep a list as a site resource and automatically put warning labels on links to these sites saying they’re just a bunch of flunkies working for WEF/Technocracy. Or something like that.

And one more point: can you imagine the reaction by these same actors if the Bad Orange Man tried to redefine recessions? The shrieking would have gone on for weeks. It might have even resulted in yet another Impeachment. We might have seen a collection of pre-dawn raids by the FBI. Democracy would be “Dying in Darkness”.

The actual change in “real GDP” – as calculated by the gang in charge – was pretty small, in truth. But that’s just an artifact of how “real GDP” is calculated. Here’s the percentage change in “real GDP” alongside recessions declared by NBER. Note: the “real” part of GDP involves subtracting their measure of inflation from the raw GDP number. Naturally, they use a particularly lame inflation metric so things always look better than they actually are. Note: the barely detectible drop below zero for real GDP over the last two quarters.

Now here’s real GDP, using my inflation-adjustment, which subtracts change in Producer Price Index by Commodity: All Commodities (PPIACO) from change in nominal GDP. PPIACO is an ancient timeseries that goes back to 1913, and its method of calculation has not changed since then. Using PPIACO is not a perfect adjustment but – do things look a bit different?

To me, it looks like we’ve been in a pretty unpleasant recession since the end of 2021, due to the prices of all the inputs screaming higher (Producer Price Index), while the value of nominal Goods & Services (GDP) just can’t keep up.

Here’s another view, this time Private Wages vs PPI.  Again, using PPI vs. Wages isn’t perfect, but it shows a gap of 12% between what the Plebes get paid, and how much the input costs have risen. That’s a monster gap. Even if total production increased (and my previous chart says it didn’t), the wages chart says the standard of living declined substantially during this time. Note: I didn’t do the subtraction, just put the percentage change in the two series alongside each other.

And in fact, right now, it kinda looks like we’re in mid-2008. See the move in 2008: a huge spike in PPI, alongside a drop in wages and salaries in early 2008, followed by a massive decline in both items soon afterwards. Maybe the big plunge in 2008 is what is in our near-term future?

[If you want to run these at home, use the following Federal Reserve Economic Data series: GDP, GDPC1, A132RC1, and PPIACO].

Here’s also a bearish reversal in the 10-year yield, which is bullish for actually owning U.S. long-dated debt. This strongly suggests long rates have topped out. For July, we see a very strong bearish candle pattern for yield, and the yield model is just about to flip into a downtrend. The 83% value is the highest (most bearish) value I’ve seen for this candle pattern.

Meanwhile, the pillaging of the U.S. emergency oil reserve (the Strategic Petroleum Reserve) continues apace; we have 85 weeks until it is drained dry. If it continues, this will be one of the WEF Grandpa-Handler legacies to America: an empty emergency oil reserve. I have an idea of what my Build Back Better would look like: there would be a flurry of trials for treason, followed by lots of WEF-former-Handlers wearing orange jumpsuits. “To encourage the others.” No More Flying Private For You!  You can attend your Davos-meetings by Zoom from your jail cell for the next 20 years! Seems Better to me.

Perhaps the “emergency” was this; oil is now down $30 from its high, and the model is suggesting a downtrend for crude. (“Price of oil is the new Fed Funds Rate”).  But what happens when the SPR is gone? What then? Perhaps the recession will hit first, and we will have a devastating, demand-destroying recession that will solve the problem before the SPR runs dry.

I have to say, the CCP (happily receiving U.S. SPR oil shipments (Source) sure did get their money’s worth from that whole “10 held by H for the Big Guy” caper.  Should we demand our politicians prostitute themselves for a higher price? Or, maybe, we could employ some more of those orange jumpsuits. Maybe start with Hunter Biden, and give him a break if he throws Pedo Pete under the bus.

Long story short, while I didn’t hear a “pivot” in the FOMC meeting statement, I am definitely seeing a recession happening right now. We appear to be (maybe) halfway through “case 2008.”  This of course would argue for a “pivot” to be coming soon. That CME futures table (Source) is projecting a rate increase of +75 bp (to 3.00%) by November, which is down 25 bp from last week.

I’m thinking now that the banksters are just further ahead than I am; perhaps they didn’t hear anything in Powell’s statement either; they just decided to pull the trigger on their own trades at that moment and the move had nothing to do with Powell at all. Banksters gonna bankster, as they say.

If this really is “case 2008”, gold and silver didn’t do so well until October/November. Just thinking out loud. And some of the banksters got into real trouble back then too. Word of the Day: Texas Ratio (Source).

 

---

Given just how absurd it is to lock down a million people over four asymptomatics, I’m convinced that Covid Zero is Engineer Xi’s way of blaming the plague (and thus blaming Chinese citizens, as well as the U.S.) for the upcoming property market collapse and economic downturn. This way, the CCP can make feeble attempts to build the houses that have already been bought in advance, but the Covid Zero impacts on the economy will see to it that normal Chinese citizens will continue to retreat from the property market due to a contracting economy and falling prices, ensuring a rapid bubble pop. Best of all, the CCP gets to blame the pop on “Save Grandma-Covid Zero.” With this, the 30-year Japan extend-and-pretend-deflation event will be avoided too. I think its a really smart plan. Not sure yet what the CCP will do with the issue of bank collapse; there are more-than-hints of it happening now. But at least the Covid Zero tactic avoids the whole Mandate of Heaven issue.  Assuming the Plebes don’t figure it out, of course.

Meanwhile, the bubble pop (and the elimination of construction from China’s GDP, and from global commodity purchases) will end up reinforcing the global recession, while Covid Zero shutdowns will result in a decline in globalism, and a re-shoring of manufacturing, ending up with more shortages and goods inflation now, but probably more resiliency in the long term.

Germany is ‘on the cusp of a recession’ amid Russia’s natural-gas squeeze and energy inflation, economist says (Source)

Germany and the End of Globalization (Source). “These days, everybody who is anybody is proclaiming the death of globalization.”

This winter, Germany can either turn off manufacturing, or freeze their citizens. I wonder how this will play at the polls? Energy = civilization. Unlike Sri Lanka, this is first-world recessionary. A decline in globalism won’t be good for Germany either. I suspect the German voters will discard “green” faster than you can blink if they don’t get hot showers anymore. The second article is very long (and it prefers to blame Putin, as is popular these days), but the effects sum to “a really big deal.” Xi’s Covid Zero supports this too. The transition to non-globalism will not be pain-free.

---

Technocrat/Orwell:

The Twitter/Epoch Times ban lasted just a day – it caused me to sign up for ET too. Anything that gets Twitter that angry has to be worth supporting. And, the Greenwald article is particularly fascinating, since it means we will get to see (courtesy of Rumble’s discovery process) just exactly how much censorship Google/Technocrat/Oligarchy is engaged in.  Peak Orwell, perhaps?

---

Washington/Taiwan:

Pete Buttigieg ahead of Joe Biden in New Hampshire poll (Source)

Biden Admin To Complete More Of Trump’s Border Wall Project, Closing 4 Gaps (Source)

Controversial Hunter Biden FBI briefing back in spotlight after whistleblower claims (Source)

Former AG Bill Barr To Merrick Garland: Appoint A Special Counsel Already (Source)

Biden & Xi – two hour call: “those who play with fire will get burned.” (Source). My summary headline, not theirs.

Propagandist warns China could down Nancy Pelosi’s plane during Taiwan trip (Source)

Another aide to Kamala Harris leaving post: Report (Source)

It looks to me like someone may be spinning up an effort to remove Grandpa via Hunter prior to November. The issue: Grandpa’s historically awful poll numbers will drag the Technocrats down to a crushing defeat at the midterms that not even a second (monkeypox?) plague vote-cheating-event will be able to evade. Sample: things are so bad, the Grandpa-Handlers have decided to build four sections of Trump’s much-hated Wall.

Now my thinking is, Pelosi might be angling for the top slot in the near term, with her prospective visit to Taiwan being an attempt to look “Strong and Presidential” in advance of November.

Supporting evidence: there seems to be more-than-a-little disagreement between Pelosi and the Biden-Handlers about whether or not she should visit, with the CCP weighing in on the side of Grandpa. The only sticky part about the power transition is what to do with Cackles-Kamala, whose staff continues to flee. Maybe Cackles will resign in order to “spend more time with family?”

Regardless of how this power struggle turns out, it is just a signpost for just how bad the Biden-Handler polling numbers actually are; the U.S. recession is here, and it appears quite severe (at least using the PPIACO as the measure of inflation, with costs rising much faster than goods and services, as well as wages), and the “pivoting” Fed still appears willing to raise rates to reduce the money-printing-caused inflation that is the source of at least half of the trouble. Which of course will make the recession more intense. And so will “Covid Zero” (the popping 20-year China property bubble), as will Germany being cut off from their Russian natural gas supply, along with the end of globalism.

And to pile on, we have the issue of the deliberate, Technocrat-inflicted food shortages (because “Climate Change!”). Gotta cut off that nitrogen to the farmers, and then buy up their land! Every self-inflicted-farming-damage-cloud has its silver lining, amirite Rutte/Trudeau/Gates/WEF?

At some point, some collection of events will push the Plebes right over the edge. Perhaps blatant cheating at the polls this November (“the Bridge Too Far”) will be the spark that ignites the bonfire? If the Plebes aren’t able change rulers peacefully, there’s that statement from Kennedy I dimly recall. How did it go again? The Technocrats should really allow the November election to proceed mostly unmolested. It would be for the best for everyone concerned.

Shorter term, the more severe and rapid-hitting the recession is the faster “the pivot” will turn to reality. That 2008 recession also started with a massive oil price spike too. Curious.

I’m thinking that a fair amount of inflation – but maybe not shortages – could (soon) be a rear-view-mirror event due to recession-caused demand destruction.

Got cash?