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In the U.S. today, the “good” news is that retail sales rose 0.9 percent in April. The guess on The Street was that they would go up 1 percent.
But since the numbers are not adjusted for inflation, which rose 8.3 percent in April and is hovering near a 40-year high . . . did retail sales really rise, or did it just cause consumers to spend more to buy less?
Across the globe, the bottom line is “inflation,” and how much the central Banksters will raise interest rates to combat it.
The results are clear: the higher interest rates rise, the slower economies will grow, and the deeper equities will fall. It’s a sick joke right in front of our eyes for all to see . . . but as is the case of the mindless masses, they are too blind to see.
They are conditioned and propagandized by the arrogance, attitudes, and lies dumped upon them by the “system’s” psychopaths and sociopaths. These “officials” are adorned with high-flying titles in front of their names that prop them up such as “experts.” The plantation workers of Slavelandia follow their “masters” orders and believe what they are told.
Front and center is the Fed Head Jerome Powell, the U.S. central Bankster who bullshitted for a year and a half that the spiking inflation was “temporary,” then “transitory,” before admitting just recently it was real and that rising interest rates will impose “some pain” on the general population.
And the “pain” is being felt. According to a new Pew Research survey, some 70 percent of Americans say inflation is “a very big problem.”
Doubling down on a loser calling out a loser, former Fed Head Ben Bernanke questioned why the Fed didn’t raise interest rates sooner.
Speaking on CNBC’s “Squawk Box,” he said, “The question is why did they delay that . . . why did they delay their response? I think in retrospect, yes, it was a mistake.”
A “mistake”?
There was no “mistake.”
The Fed knew inflation was real. They are not stupid. With the COVID War raging and businesses, lives, and livelihoods locked down by dictatorial politicians, the Banksters and the Government Gangs flooded the world with cheap money to artificially prop up equities and economies . . . just as Bernanke did when he was a Fed Head.
Back in July 2014, Bernanke was defending his cheap money pumping scheme, telling the House Financial Services Committee that “If we were to tighten (monetary policy), the economy would tank.”
This is the Bernanke that was another “mistake” artist.
Back in 2005, when the phony real estate market was being propped up with subprime mortgages, Bullshit Benny was asked in a CNBC interview:
- “Tell me, what is the worst-case scenario if we, in fact, see [real estate] prices actually come down substantially across the country?”
- “Well I guess I don’t buy your premise. It’s a pretty unlikely possibility; we have never had a decline in house prices on a nationwide basis.”
Speaking before Congress 18 months later (28 February 2007), as the subprime mortgage fiasco deepened, Bernanke said: “There is not much indication at this point that subprime mortgage issues have spread into the broader mortgage market which still seems to be healthy.”
Regardless of how many new egregious failures the governmental and bureaucratic nobility add to their old egregious failures, rarely are they held accountable . . . instead they are elevated to higher levels of superiority.
Interest Rate Pain
Yesterday, the Canadian Real Estate Association reported that even though the overnight interest rate increased 75 basis points and interest rates are just off record lows, seasonally adjusted home sales fell 12.6 percent in April and were down 21 percent from last year’s record high.
TREND FORECAST: Again, it is the same “cheap money” game everywhere. Low interest rates pushed up housing sales and prices . . . just as the cheap money pushed up economies and equities. And now with the cheap money pumping slowing down, so too will the sectors that were artificially propped up.
And, since rising interest rates are still historically low but even small hikes brought down home sales, by the time rates rise high enough to bring inflation back to the Central Bankster’s made-up 2 percent range, economies and equities across the globe will have crashed.
LAST WEEK: STOCK MARKET MEETS REALITY. REALITY WINS.
Shortly after it sank with the onset of the COVID virus, the U.S. stock market began a rally that was undeterred by massive job losses and business failures, rising government deficits, and expanding corporate debt.
The U.S. Federal Reserve catered the party, providing cheap money at record low interest rates to keep consumers buying homes and cars and ensure corporations’ continued profits and dividends.
The central bank also bought $120 billion a month in government and mortgage bonds to keep the economy humming.
The U.S. Congress also provided party favors in the form of stimulus checks totaling $3,200 for every American adult. In total, since the COVID War was launched in 2020, Washington flooded the system with roughly $5 trillion to artificially prop up the sinking economy.
Now the party is over. Stimulus checks have been banked or spent. The Fed has halted its bond-buying spree and has begun raising interest rates in a steady climb likely to last throughout this year.
At the same time, the confluence of unchecked inflation, continuing global shortages of food and other essentials, weakening economies around the world, and the Ukraine war and its sanctions have pulled the market back to reality.
The Dow Jones Industrial Average added 466 points Friday but still booked its seventh consecutive losing week, down 1.49 percent. The NASDAQ gave up 0.99 percent for the week, even after gaining 434 points Friday, to close its sixth straight week of losses.
The Standard & Poor’s 500 index shed 2.2 percent for the week, ending the stretch 16 percent below its late December peak and flirting with bear market territory, defined as a 20-percent drop from the most recent high.
“We do not think ultimate lows have been reached,” Bank of America analysts wrote in a research note last week.
The markets’ gloom bodes ill not only for Democrats in this fall’s Congressional elections but also for the economy generally.
As the old saying goes; “It’s the economy, stupid,” and as we have continually noted, with median household income down some 3 percent in 2020 and still falling, while Main Street feels the economic pain, they realize how bad the economy really is when Wall Street crashes.
Indeed, the rich keep getting richer. The wealthiest 5 percent of Americans own 72 percent of the country’s stocks, according to a recent New York University study, but the market has a strong symbolic value, economist Richard Sylla of New York University pointed out.
“It’s the one [economic] story that makes the news every night,” he said.
Yields on the 10-year treasury note fell nearly half a percentage point to 2.866 percent as investors escaped from the stock market’s chaos into safer venues.
The note’s yield falls as its price rises with demand.
Brent crude’s price added 4 percent Friday as U.S. gasoline prices rose, China seemed poised to loosen its lockdown restrictions, and Europe contemplates banning Russian oil.
GOLD: With the U.S. dollar at a 20 year high and fears the Fed will rapidly raise interest rates, COMEX gold ended the week down 2.5 percent at $1,808.
BITCOIN: Bitcoin plummeted with crypto’s selling frenzy to $26,280 on 12 May, then struggled up through the rest of the week to reach $29,905 at 5 p.m. U.S. eastern time on Friday.
Abroad, markets turned up on Friday.
The European Stoxx 600 was up 2.14. Japan’s Nikkei 225 gained 2.64 percent. The South Korean KOSPI index grew by 2.12 percent.
In China, the Hong Kong Hang Seng added 2.68 percent, the SSE Composite rose 0.96 percent, and the CSI Composite perked up 0.75 percent.
TREND FORECAST: In articles from “More Cheap Money Injected into Bailout Fund” (28 Apr 2020) to “Federal Reserve: World’s Cheap Money Baron” (11 Aug 2020) to “Inflation, Rate Fears, Ukraine Jitters Sink Stock Prices” (15 Feb 2022), we have warned since before the COVID era that stock prices were propped up by artificially cheap money.
As we said in the third article cited above, the Fed “knew inflation was real but ignored the inflation statistics to keep the cheap money pumping scheme going to artificially boost the equities market and the economy.”
We also have almost two years that equity markets would sour when the Fed raised its base interest rate to or beyond 1.5 percent . . . and will deeply crash when interest rates rise near the 3 percent range.
That weakness began to show itself in March.
However, we could not have predicted the Ukraine war, which has sharpened a range of other factors driving markets down.
Therefore, the worst of the market’s downward spiral is yet to come.
YESTERDAY: Continued inflation concerns, Zero COVID policy measures in China, and the Ukraine War caused another bumpy day in the stock market on Monday.
After falling for seven straight weeks—its longest weekly slide since 2001—the Dow Jones Industrial Average rose 26.76 points, or 0.1 percent.
The tech-heavy NASDAQ which is 28 percent lower than its all-time high in November, dove another 142.21 points, or 1.2 percent. Coming off a six-week losing streak, its longest dive since the Great Recession in 2011, the Standard & Poor’s index, which is down 16 percent for the year, fell 15.88 points, or 0.4 percent to close at 4008.01.
The S&P index bounced around all day and at one point was up 0.56 percent and down about 1 percent during its session low. The Street was wavering in anticipation of the release of retail sales numbers and industrial production numbers on Tuesday.
Traders have been debating if the market has seen its lowest point or if stocks still have room to fall. Morgan Stanley’s chief U.S. equity strategist told clients in a note Sunday that the firm believes lower prices are ahead and believes the S&P, which posted six straight weeks of losses, could fall another 15 percent before bouncing back next year.
“The bottom line is that this bear market will not be over until either valuation falls to levels that discount the kind of earnings cuts we envision, or earnings estimates get cut,” the note read.
TRENDPOST: Gerald Celente has been critical of Fed Head Jerome Powell for not acting fast enough when it comes to soaring inflation. Celente has pointed out that there are also outside factors that are out of the control of even the most experienced trader, like China’s COVID lockdowns, supply chain disruptions, and the Ukraine War.
The 10-year Treasury note’s yield slipped to 2.877 percent after ending last week at 2.932 percent and the yield on the 30-year Treasury bond sank 1 basis point to 3.103 percent.
Traders are going to be focused on the retail data from the U.S. Department of Commerce set to be released on Tuesday to get a gauge on how Americans are dealing with inflation that has hit a 40-year high.
Total retail sales growth slowed by 0.5 percent last month and the latest data could give investors an idea of how customer habits could be changing under the new financial stress.
Powell is also going to give remarks at a conference hosted by The Wall Street Journal Tuesday afternoon.
Elsewhere, the European Stoxx 600 edged fractionally higher on Monday in a choppy day of trading where stocks slid up to 0.8 percent.
BITCOIN: Bitcoin has lost almost 25 percent of its value in the last month and hovered around $30,000 per coin on Monday.
Ben Bernanke, the former head of the Federal Reserve, told an audience in Toronto on Monday that he does not believe that the cryptocurrency will be able to replace fiat currency “and evade regulation and government intervention.”
“I don’t think that’s going to be a success,” he said. He said bitcoin is a “mostly speculative venture” that “hasn’t shown itself to be a real transactional currency.”
TerraUSD, the crypto made to equal the value of a dollar, was down 36 percent at 11 cents, The Wall Street Journal reported, citing CoinMarketCap. TerraUSD’s market value was down to $1.3 billion from nearly $19 billion earlier this year, the paper said.
TerraUSD (UST) is a stablecoin hosted by the Terra network and created by South Korea’s Terraform Labs, CoinDesk reported. UST “is one of a number of Terra stablecoins pegged to key currencies. (Another example is TerraKRW, pegged to the South Korean won.)”
“The fact that we have this across-market meltdown because of a single stablecoin…should be a lesson for what potentially could happen,” Rostin Behnam, head of the Commodity Futures Trading Commission, told CNBC.
GOLD: After falling Friday to its lowest since 4 February, gold managed to claw back and rise on Monday as the dollar weakened.
The dollar index was down 0.37 percent at 104.16, Reuters reported. The dollar briefly crossed the 105 level on Friday, which marked its highest level since December 2002.
The May gold contract on the New York Mercantile Exchange closed $6.10 higher per ounce at $1813.50. Spot gold increased 0.3 percent to $1,817.12 per ounce by 1:52 p.m. ET, Reuters reported.
“All things considered, gold is holding up, it should be significantly lower… it will find support slightly below the $1,800 level. Also, there is enormous demand for physical gold and silver,” Bob Haberkorn, RJO Futures senior market strategist, told Reuters.
OIL: World-standard Brent crude increased $2.69 to $114.24 a barrel, with U.S. benchmark U.S. West Texas Intermediate crude also gaining $3.71, or 3.4%, to $114.20 a barrel.
Bob Yawger, director of energy futures at Mizuho, told Reuters that some recent moves by the Chinese government could be evidence that COVID restrictions are easing.
An official in Shanghai announced that the city of 25 million will begin to reopen for business by 1 June and says he’s seeing “signals that demand will start returning in that region, supporting higher prices.”
Over in Asia, the benchmark Nikkei 225 Index closed the morning session at 26,492.29, up 64.64 or 0.24 percent. The Hang Seng finished up 51.44 points, or 0.26 percent to finish at 19,950.21. The Shanghai Composite Index fell 0.34 percent on Monday and Shenzhen Component Index lost 0.6 percent.
The big news out of Asia was China’s announcement that retail sales fell 11.1 percent in 2022. Manufacturing in the country also fell by 4.6 percent, Fu Linghui, the Statistics Bureau spokesperson, said. They noted that the “increasingly grim and complex international environment and greater shock of [the] Covid-19 pandemic at home obviously exceeded expectation, new downward pressure on the economy continued to grow.”
TODAY: Stocks in the U.S. were higher after data showed retail sales up 0.9 percent in April. The word on The Street is that despite inflation near 40-year high, Americans will keep on shopping.
The Dow Jones Industrial Average ended the day up 431.17 points, or 1.34 percent and the Nasdaq Composite added 321.73, or 2.76 percent. The S&P 500 rose 80.84, or 2.02 percent, to finish at 4,088.85.
The U.S. Commerce Department showed a seasonally adjusted 0.9 percent increase in spending since March.
The data measures how much consumers spent on everyday goods like cars, food, and gasoline. But as we noted, the data was not adjusted for inflation, which means Americans are buying less by paying more.
Some estimates indicate that when accounting for inflation retail sales were actually down 0.5 percent.
Despite the news, the country’s largest retailer, Walmart, reported a drop in profit in the first quarter. The Arkansas-based company blamed rising costs for fuel, food, and labor for increasing the cost of doing business.
CNBC reported that the company’s net income for the quarter sank to $2.05 billion, or 74 cents per share, “compared with $2.73 billion, or 97 cents per share a year ago.”
Consumer price inflation increased 8.3 percent year-on-year in April. Auto dealers reported a 2.2 percent jump in sales that economists said offset a 2.7 percent decline in gasoline sales.
The 10-year Treasury note rose to 2.986 percent.
Fed Head Jerome Powell made an appearance Tuesday at the WSJ’s Future of Everything Festival and said the Fed has the tools needed to get inflation under control.
“We need to see inflation coming down in a convincing way,” Powell said. “Until we do, we’ll keep going.”
TREND FORECAST: Overall, and across the globe, again, as we have detailed in the Trends Journal, as a result of the sanctions and the Ukraine War—from crude oil to sunflower oil, from wheat to potassium chloride—prices have spiked to record highs.
Therefore, the longer the war rages and the tighter the sanctions get, the higher prices will rise and the deeper economies will decline: Dragflation.
Elsewhere, Europe’s Stoxx 600 was up 5.30 points, or 1.22 percent on Tuesday and Britain’s FTSE 100 added 53.55, or 0.72 percent. South Korea’s Kospi was up 23.86 points, or 0.92 percent. Japan’s Nikkei 225 was up 112.70 points, or 0.42 percent. China’s benchmark Shanghai Composite Index was up 19.95, or 0.65 percent. Hong Kong’s Hang Seng index was up 652.31 points, or 3.27 percent, finishing the trading day at 20,602.52.
“As is often the case with equity markets, when the news simply looks like it can’t get any worse, that is when market participants start seeing less bad as the new good,” David Wong, senior investment strategist at AllianceBernstein, told CNBC on Tuesday. “When we’re looking at China, the fundamental data has been so poor and there has been so much bad news that there is I think a growing sentiment that there is going to be more policy support for the economy, for companies and for markets,” Wong said.
GOLD/SILVER: Gold was down $0.40, to 1,813.60 on Tuesday and silver was up 0.074, or 0.34 percent, to 21.64.
TREND FORECAST: Since gold fell below $1,850 per ounce, we maintain our forecast that the metal could fall below the $1,710 per ounce level. For gold to maintain strength, prices must stay in the high $1,900 per ounce range and when they solidify above $2,200 per ounce, gold will spike to new highs.
The U.S. dollar was a little lower on Tuesday morning and the U.S. Treasury yields fell below 3 percent, which had a positive impact on gold prices.
OIL: Brent crude fell 2.86 points to $111.37 a barrel and West Texas Intermediate was down $2.11 to $112.09 per barrel. AAA reported that gasoline hit an average all-time high of $4.523 per gallon on Tuesday.
BITCOIN: Bitcoin had a choppy day and was hovering around 30,000 per coin. The cryptocurrency was up 0.94 percent, as of 4:36 p.m. ET. Bitcoin is down about 50 percent since its high in the past six months.
TREND FORECAST: The Trends Journal has long forecast that if bitcoin falls below the $25,000 price, it could well fall back to the $10,000 range. As we have been noting for over five years, a major factor in forecasting the future price of bitcoin and other crypto currencies is dependent upon government regulations.
Former Federal Reserve Chairman Ben Bernanke threw cold water on the idea that bitcoin would eventually take over as an alternative means of payment. He told an audience in Toronto that he is convinced that Bitcoin will be mostly used for underground economic activities to buy things that are illegal. He said bitcoin will also likely face more regulation down the road.