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“All things are connected, like the blood which unites us all,” said Chief Seattle.
And when analyzing the socioeconomic and geopolitical connections to the current events forming future trends, unless there is a major movement for peace, the blood which unites us will flow across the planet.
Speaking at a rally this past week, former President Donald Trump said “We have a President who is cognitively impaired and in no condition to lead our country, which may very well end up in World War III.”
Trump is not only some seven months late in making this statement, since we had forecast this on 22 February Trends Journal cover, but he is wrong that “we may very well end up in World War III.”
We have greatly detailed—and continue to do so with numerous articles in this edition of the Trends Journal as well—the United States and NATO are not in a proxy war with Russia, they are at war… and Moscow is now repeating what we had forecast.
In fact, WWIII has begun. Step by step we have been led into it, but it won’t become “official” until there is a nuclear strike or a major false flag. And since “all things are connected,” the economic implications as a result of the war will be as deadly as the loss of human life.
The West’s sanctions imposed on Russia are already killing the European economy and causing starvation and hardship across the planet. And, before the Ukraine War was launched, economies had been devastated by the “cognitively impaired” politicians across the globe—that included Trump who declared a national emergency in the U.S. on “Black Friday” 13 March 2020—to fight the COVID War.
Indeed, the COVID War has destroyed the lives and livelihoods of billions across the planet. The damage is incalculable. In Italy, for example, well over 100,000 Italian businesses are on the verge of closing down and nearly 400,000 jobs will be lost according to the business association Confcommercio.
Again, totally caused by “cognitively impaired” politicians who launched the COVID War and locked down the nation with draconian mandates for a year, they made an already bad situation worse by imposing sanctions on Russia which has caused energy prices to skyrocket.
“In terms of energy costs, our hotels, bars, restaurants, and stores will pay 40-60 percent more on their bills this year than in Germany, and three times that than in France,” Carlo Sangalli, Confcommercio’s leader, told the news outlet Corriere della Sera on Saturday.
Hit by Dragflation—rising inflation, declining economic growth—more than 70 percent of Italians are struggling or cannot afford to pay their energy bills. And because of high energy costs, nine out of 10 plan to cut back on spending in order to pay for energy. Italians plan to cut back on entertainment and holiday shopping to make ends meet.
Bad to Worse
Another chief member of the “cognitively impaired” club is Christine Lagarde, the former head of the International Monetary Fund (aka International Mafia Association) and now leader of the European Central Bank who bullshitted for two years that inflation was not rising and the ECB could keep interest rates in negative territory and keep buying up corporate and government bonds.
An outright scam, as with the United States and other nations, so these Banksters could give a reason to keep pumping cheap money into equities to artificially prop up economies decimated by the “cognitively impaired” politicians approach to fighting COVID.
Last November, while we had long forecast surging inflation, Lagarde said she didn’t see it coming and it would be “wrong” to raise interest rates now because inflation will begin to cool by the time the new rates would have a chance to impact the economy.
On 3 December 2021, she told the Financial Times that inflation was peaking and that the inflation profile looked “like a hump…and a hump eventually declines.” She said at the time that the ECB is “very unlikely” to alter its interest rate—which has remained negative for seven years—in 2022.
About Face
Yesterday, Lagarde told the Economic and Monetary Affairs Committee of the European Parliament that the Eurozone economy may contract in the last quarter of this year and in the first quarter next year, which is, in technical terms, a recession.
Unable to forecast inflation when it was spiking, Lagarde spewed that “It is difficult to predict what the real outcome will be in 2023 but it will certainly be a difficult year of which the first quarter will most likely be negative, as we believe the last quarter of 2022 will likely be negative as well.”
No it is not “difficult to predict what the real outcome will be.” The facts are in the data which we have greatly detailed: Dragflation!
Yet, despite our sending several thousand “Dragflation” press releases to the mainstream media, they refuse to acknowledge them, and keep peddling the “stagflation” bullshit. No, economies will not stagnate, they will decline…drag down as inflation continues to rise.
And now with energy prices in Europe, which imports some 40 percent of its gas from Russia drying up, a bad situation has been made worse with the heavy leaks of Nord Stream 1 and 2 pipelines that bring natural gas from Russia to Europe via the Baltic Sea, which is most likely sabotage.
Today, seismologist Bjorn Lund of Sweden’s National Seismology Centre (SNSN) told public broadcaster SVT that “There is no doubt that these were explosions.”
TREND FORECAST: While there will be contraction of many commodities as economies drag down, others, such as food and energy prices will continue to stay high and move upward. And, the more weapons the U.S. and NATO send to keep bloodying the Ukraine killing fields and the more actions and sanctions taken against Russia, the further the Ukraine War will expand into WWIII.
LAST WEEK: PERFECT STORM OF BAD NEWS TANKS MARKETS
Last Wednesday, the U.S. Federal Reserve added another three-quarters of a point to its key interest, with chair Jerome Powell saying again that economic pain (the little people of Slavelandia will pay) will be the price of controlling inflation.
U.K. markets tanked after Britain’s new government announced a borrowing spree. Europe’s economy has slowed for a third consecutive month and European businesses are turning their backs on China, with its economy still stumbling. Global trade is slowing.
Because the U.S. is faring better than many other parts of the world, the dollar remains strong—which causes prices of U.S. exports to rise abroad, adding to inflation and pushing other economies closer toward recession.
The U.S. Dollar Index has pushed up from 108 on 12 September to more than 113 on Friday, showing the dollar’s value continuing to climb against the world’s other major currencies in what The Wall Street Journal called a “once-in-a-generation rally.”
The British pound and Japanese yen lost value against the dollar again last week.
The stronger dollar also weighs especially heavily on emerging economies, many of which are laden with dollar-denominated debt.
Among the other clouds coming over the economic horizon:
- Last week, the Fed chopped its growth outlook for the U.S. this year from 1.7 percent to 0.2 percent.
- Consumer sentiment in Europe is at its lowest since 1985 when the measure began to be taken, a new survey has found.
- The Eurozone’s retail sales have declined steadily in recent weeks and a European recession is “in the cards,” Chris Williamson, chief business economist at S&P Global Data, told The Wall Street Journal.
- Germany’s economy is declining faster than at any time since 2008 during the Great Recession.
- Export economies across Asia are slowing as Western consumers pare back their purchases of electronics.
“We continue to deal with an exceptionally unusual set of economic disruptions,” Fed chair Jerome Powell said at a Friday “Fed Listens” event, one of a series that brings Fed officials into discussions with business, nonprofit, and community leaders.
“As policy makers, we are committed to using our tools to help steer the economy through what has been a uniquely challenging period,” Powell added. “The insights you share in these events help us home in on the challenges and opportunities that are shaping what we might think of as the new normal of the American economy.”
Investors had nowhere to turn last week to find encouragement.
The Dow Jones Industrial Average sank 4 percent for the week, with the NASDAQ off by more than 5 percent and the Standard& Poor’s 500 index down by almost 4.7 percent.
Over the previous two weeks, the Dow has shed almost 8 percent, the S&P 9.2 percent, and the NASDAQ more than 10 percent, its worst two weeks since the COVID War began in March 2020.
More than 450 of the S&P’s 500 listed stocks lost ground Friday.
The three indexes marked their fifth negative week in the last six, with the Dow setting a new low for the year and closing on Friday below 30,000 for the first time since 17 June.
Stocks that would be damaged most by a recession led the way down.
Consumer discretionary shares lost 7 percent, energy 9 percent as the price of U.S. benchmark West Texas Intermediate crude closed below $80 for the first time since January.
Royal Caribbean Group and Norwegian Cruise Line lost at least 5 percent each.
Big Tech—including Amazon, Apple, Meta, and Microsoft also saw share prices fall on Friday.
“Based on our client discussions, a majority of equity investors have adopted the view that a hard landing”—a Fed-induced recession to whip inflation—“is inevitable,” Goldman Sachs researchers wrote in a client note last week.
“Their focus is on the timing, magnitude, and duration of a potential recession,” the analysts said.
Bonds usually provide a haven for investors escaping from stocks, but last week bonds sold off as well.
The U.S. treasury’s 10-year bond posted a return of 3.695 percent on Friday, marking the eighth straight week of increases. The yield on the two-year treasury note shot to 4.212 percent, its best since 2007.
Yields rise as bond values fall.
December gold contracts ended the week by shedding 1.5 percent to $1,655, bouncing back from $1,646 partway through Friday’s session. It was the contract’s lowest close since April 2020 as the COVID era was beginning.
Share prices of SPDR Gold Trust lost 1.7 percent Friday, iShares Gold Trust 1.8 percent, the Van Eck Gold Miners ETF 5.5 percent, and Van Eck Junior Gold Miners ETF 6.5 percent.
Brent crude was down 5.8 percent for the week to $86.15. West Texas Intermediate, the benchmark for U.S. oil prices, slid 7.9 percent to $78.70, its first close under $80 since January.
Bitcoin surrendered 4.1 percent to $18,761 by 5 p.m. 23 September.
Overseas, equities’ performance was equally dismal.
The pan-European Stoxx 600 dove 4.5 percent. Japan’s Nikkei shrugged off 2.5 percent and South Korea’s KOSPI index lost 2.5 percent.
In China, the Hang Seng gave up 4 percent, the SSE Composite slipped 1.1 percent, and the CSI Composite dropped 1.8 percent.
YESTERDAY: DOW FALLS INTO BEAR MARKET
It was another volatile day for stocks yesterday with the Dow closing down 329.60 points, or 1.1 percent, to 29,260.81 and the S&P 500 benchmark dipping 38.19 points, of 1 percent, to 3,655.04. The Nasdaq Composite was also down 65.00, or 0.60 percent, to close the day at 10,802.92.
Late September is known to be a volatile time for the market, and interest rates and global growth concerns continue to weigh down stocks. The 10-year Treasury yield hit 3.89 percent and the 2-year yield reached 4.31 percent. The 10-year Treasury’s yield is at its highest since March 2020, while the world was concerned about a new virus infecting people in China.
The Dow has also officially entered its first bear market, which was led by declines in energy and real estate. Dow Jones Market Data noted that yesterday marked the S&P’s 48th decline of 1 percent or more in 2022.
The U.S. dollar continued to surge compared to other currencies and was up 0.9 percent to 114.27. The British pound fell to its record low against the greenback.
Michael Wilson, the chief equity strategist for Morgan Stanley, wrote in a note to investors that every 1 percent increase to the ICE U.S. Dollar Index results in a 0.5 percent loss in S&P 500 earnings.
“The recent move in the U.S. dollar creates an untenable situation for risk assets that historically has ended in a financial or economic crisis, or both,” Wilson wrote, according to MarketWatch. “While hard to predict such events, the conditions are in place for one, which would help accelerate the end to this bear market.”
One of the drags on the market on Monday, was also comments made by Susan Collins, the new president of the Federal Reserve Bank of Boston. She said that she is aiming to get a grip on inflation, even if it means the economy needs to slow down.
TRENDPOST: Subscribers of the Trends Journal know that we have been critical of Fed policy since Jay Powell, the head of the central bank, tried to downplay inflation as “temporary and then “transitory.” It was bullshit then and it is bullshit now. There is concern on The Street now that the Fed will try to overcompensate its previous miss by driving the economy into the ground to tame inflation.
The Dow is down 20.2 percent from its 4 January high, the average 30-year mortgage rate hit 6.7 percent, and the Cboe Volatility Index, which is known as the Vix, which gauges fear in the market has increased 3 points to 32.88, which is its highest level since June.
Again, barely mentioned in the mainstream media is that the cause for inflation was the $8 trillion in fake money Washington injected into the economy when it locked it down to fight the COVID War and the Fed’s zero interest rate policy that artificially propped up the equity markets.
Elsewhere, stocks in Europe had a mixed day, with the FTSE 100 increasing 2.35 points, or 0.03 percent, to 7,020.95 and the STOXX 600 fell 1.65 points, or 0.42 percent, to close at 388.75. Asia was in the red, with Japan’s Nikkei dropping 722.28 points, or 2.66 percent, to 26,431.55, and South Korea’s KOSPI falling 69.06 points, or 3.02 percent, to 2,220.94. Hong Kong’s Hang Seng Index was down 78.13 points, or 0.44 percent, to 17,855.14. In China, the Shanghai Composite fell 37.14, or 1.20 percent, to 3,051.23 and the Shenzhen Component fell 0.4 percent.
The big news out of Europe was the bond market’s reaction to the U.K.’s decision Friday to announce the largest tax cuts in 50 years and regulatory reforms. The concern is that the government will need to borrow from the international market to fill the budgetary hole left from the missing revenue, which would impact the U.K.’s inflation rate.
OIL: The dollar’s strength and global recession fears were a drag on the oil market on Monday, with Brent crude dropping below $85 per barrel and West Texas Intermediate futures falling 2.3 percent to hit $76.97 per barrel.
The price of West Texas Intermediate crude oil, the benchmark grade for U.S. oil pricing, fell below $80 on 23 September for the first time since January.
On Friday, the price settled at $78.76, about 36 percent below its June peak.
Brent crude, which sets prices outside the U.S., ended last week at $86.15.
Prices have been driven down by a growing certainty that the world’s economy is unable to avoid a recession.
Also, recent government data showed U.S. demand for oil and refined products is slowing.
Total oil products supplied across the U.S. averaged 19.6 million barrels a day over the previous four weeks, 6.7 percent less than the same period last year, the U.S. Energy Information Administration reported.
In addition, last week key interest rates were raised by the U.S. Federal Reserve, the Bank of England, the Swiss National Bank, and Norges Bank in Norway.
Meanwhile, the U.S. will release another 10 million barrels of oil from the government’s Strategic Petroleum Reserve, which is expected to wear down prices further.
“The market is worried about growth and that is sending commodity prices down,” Ole Hansen, chief commodities strategist at Saxo Bank, told The Wall Street Journal. “It’s a very bad cocktail of this and a stronger dollar.”
Russian oil production may fall further as Western sanctions wear on, which would create a hole in the market that OPEC members might not be able to fill, a situation that could buoy prices, The Wall Street Journal noted.
TREND FORECAST: When oil’s price rose back above $100 last March, U.S. producers hesitated to commit to new drilling, in part out of fear the higher price might not last, as we reported in “Oil Majors Withhold Investment in New Production” (3 Aug 2021) and “Oil Majors Use Cash to Buy Back Stock, Increase Dividends” (10 May 2022).
Therefore, even if demand falls, supply will remain low.
Despite oil’s steady decline, we continue to note that prices will rise in the coming months and years. The EU plans on banning Russian oil products by 5 December. The oil will be rerouted to Asia. Analysts noted that Russian oil exports to Europe usually take seven days, while shipments to Asia take 21 days, Russell Hardy, Vitol’s chief executive officer, said.
And now, with Russia’s Nord Stream pipelines that pump gas into Europe damaged in what is suspected as an act of sabotage, energy prices will continue to rise.
President Joe Biden sent a message to gas companies in the U.S. to lower gas prices at the pump. He cited the fall in oil prices and said, “My message is simple. To the companies running gas stations and setting those prices at the pump: Bring down the prices you’re charging at the pump to reflect the cost you pay for the product. Do it now.”
TRENDPOST: On the downside of oil consumption, the deeper economies decline, the less gas and oil will be used… as evidenced with China’s Zero-COVID lockdown policy which has negatively affected its economy. On the upside, China has benefited from its relationship with Russia and received 8.3 million tons of oil last month alone, which is up over 15 percent from July.
GOLD: The strength of the U.S. dollar continued to take its toll on gold prices on Monday, with the precious metal hitting a two-and-a -half year low.
Spot gold fell 1.2 percent to $1,23.59 an ounce. Gold takes a hit when Treasury yields rise. The safe-haven asset has faced headwinds from these high yields and is down 20 percent from March, when it was selling for $2,000 per ounce during uncertainties over the Ukraine invasion.
The Trends Journal has long noted that gold also becomes less attractive to international investors when the U.S. dollar is surging.
TREND FORECAST: Considering the dire socioeconomic and geopolitical turmoil wracking the globe, safe-haven gold, as we see it should be soaring rather than souring… but it’s not.
There is no question that the world is headed to a recessionary period and investors will be looking to safe-haven assets. There is no sign that the Ukraine War will end any time soon, so if there’s a major escalation, the metal could easily reach its March highs again.
BITCOIN: Crypto traders celebrated despite bitcoin trading in the $19,000 range. The crypto was relatively strong compared to the stock market that has been something of a gauge on the success of the crypto market, especially the tech-heavy Nasdaq.
Traders are optimistic that the relative strength considering the soaring value of the U.S. dollar and Treasuries interest rates, could be a sign that bitcoin is turning a corner and hitting rock bottom.
Bitcoin has lost about 60 percent since hitting its high in November when it was trading at about $69,000 per coin. We have noted that, like gold, the crypto faces headwinds when investors can invest in a product that offers interest.
TRENDPOST: Peter Mallouk, president of Creative Planning, told Bloomberg: “We now know that cryptocurrencies are not an inflation hedge, it’s proven that to us now. It’s a big, big speculative play for anybody that’s interested in it.”
TODAY: STOCKS ON EDGE, ARE THERE NO SAFE HAVENS?
It was another bumpy day on the street today with stocks ending the day lower after shedding some earlier gains. The Dow Jones Industrial Average was down 125.82 points, or 0.43 percent, to 29,134.99 and the benchmark S&P 500 was down 7.75, or 0.21 percent, to 3,647.29.
The tech-heavy Nasdaq Composite was up 26.58, or 0.25 percent, to close the day at 10,829.
Stocks showed signs of life early a day after entering a bear market, but could not keep up the momentum based on rising concerns that the Federal Reserve will continue to increase interest rates that will further slow the economy.
There is a feeling on The Street that investors are willing to hold on to their exposure to equities despite little confidence in these investments.
“There isn’t that safe harbor that investors can go to,” Willie Delwiche, an investment strategist at All Star Charts, told CNBC. “They’re kind of stuck holding equity, even though they don’t like it, and then they pay the price for it.”
Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, told The Wall Street Journal that there will be a lot of tightening in the pipeline and that the Fed is committed to bringing down inflation. He admitted that there is a risk of overdoing it.
There is a general feeling that the Fed will keep raising rates until “something breaks.”
The yield on the 10-year U.S. Treasury hit 3.963 percent, which is the highest level since 2010. At one point, the yield hit 3.98 percent. The yield is expected to hit 4 percent.
TRENDPOST: The rise of the 10-year Treasury yield is evidence that investors believe we are a long way from solving inflation and that there will be more pain ahead.
“Bond yields gravitating toward or above 4 percent means markets are pricing in tighter policies for longer,” Daniel Tenengauzer, head of markets strategy for BNY Mellon in New York, told MarketWatch. “In my opinion, it’s the realization that bond yields are highly unlikely to revert to a lower range in the medium to longer term, given higher inflation and tighter policy for longer, that’s having an impact.”
Despite concerns about inflation and interest rates, consumer confidence rose for a second straight month due to gas prices falling and the prospects that inflation will cool.
The Present Situation Index portion of the Conference Board’s survey increased from 145.3 to 149.6. The short-term economic outlook also rose from 75.8 to 80.3.
Elsewhere, the FTSE 100 was down 36.36 points, or 0.52 percent, to 6,984.59, and the STOXX 600 fell 0.51 points, or 0.13 percent, to 388.24.
Asia was in the green today, with Japan’s Nikkei up 140.32 points, or 0.53 percent, and Hong Kong’s Hang Seng closing the day up 5.17 points, or 0.03 percent, to 17,860.31.
South Korea’s KOSPI was up 2.92 points, or 0.13 percent, to 2,223.86. In China, the Shanghai Composite increased by 42.64 points, or 1.40 percent, to 3,093.86 and the Shenzhen Component Index was also up 212.56 points, or 1.94 percent, to 11,175.12.
Liz Truss, the new British prime minister, is facing intense pressure after deciding to cut taxes in the country that has been facing soaring inflation.
Tim Bale, a professor of politics at Queen Mary University of London, told The New York Times, “It’s entirely possible she could be replaced before the next election. It would be very, very difficult to conduct a full-blown leadership contest again, but I wouldn’t rule anything out.”
Indeed, these tax cuts will only put more pressure on the country’s inflation. The British pound hit a record low against the U.S. dollar on Monday and stabilized today. (See, in this issue, “NEW U.K. STIMULUS PLAN POUNDS DOWN POUND”.)
OIL: Brent crude was up $1.79, or 2.13 percent, to $85.85 per barrel and West Texas Intermediate was up $1.43, or 1.86 percent, to $78.14 per barrel.
Most oil speculators see the price of Brent averaging higher by the end of the year given the tight market and the fact that a slowing China economy has already been priced into the market.
Damien Courvalin and Callum Bruce, Goldman Sachs analysts, wrote in a note to investors that the company is bullish on oil prices and estimates that Brent crude will sell for about $100 per barrel at the end of the year.
The Trends Journal noted that there are a lot of wild cards in the energy market in general. And as we note in this issue, the major leak today spotted in two Russian gas pipelines in the Baltic Sea was most likely sabotage.
TREND FORECAST: Despite slowing economic growth which will lessen oil demand, considering the dire geopolitical turmoil as a result of the Ukraine war and building tensions in the Middle East, we forecast oil prices will stay in the high range.
GOLD: The safe-haven precious metal was up $3.10, or 0.19 percent, to $1,636.70 per ounce.
Gold prices were steady today after hitting a two-and-a-half year low on Monday as investors are considering high interest rates to combat inflation to last for a while. Analysts noticed some safe-haven demand in the precious metal as stocks continued their bumpy ride.
TRENDPOST: The precious metal will continue to face resistance as the Fed continues to raise interest rates and Treasury yields increase. Gold is a non-yielding asset and becomes less attractive to investors. However, considering the tense geopolitical conditions sweeping much of the planet, high inflation and economic instability, we maintain our forecast for higher gold prices since it is, as the most precious of precious metals, the #1 safe-haven asset.
BITCOIN: Bitcoin, the world’s most popular cryptocurrency, had another choppy day, fluctuating between $20,326 per coin to about 19,114 as of 1 p.m. ET.
Glen Goodman, an eToro crypto consultant, spoke to CoinDesk about recent price swings and said – like other markets – bitcoin is struggling to maintain its footing due to the soaring value of the U.S. dollar.
“We’ve got a situation where as much money in the world as possible is going into dollars,” he said. “That means everything else is starved.”
The Trends Journal has long noted that foreign investors tend to shy away from cryptos when the value of the dollar is strong. But bitcoin showed some strength recently and did not follow the equities market down yesterday, which some investors said showed strength. Goodman also said bitcoin is doing fairly well given there was no good news.
“So imagine what a bit of good news like pausing interest rate [hikes] would mean to traders in the stock market and in the crypto market. Because stocks and crypto are so tightly correlated these days, it would be fantastic if opposing interest rates could just cheer everybody up,” he said.
TREND FORECAST: Bitcoin continues to hit resistance at $20,000 a coin. We have long noted that cryptos would be hurt when governments act to regulate these trades. Jamie Dimon, the CEO of JPMorgan, who has his finger on the pulse of policymakers in Washington, recently called cryptos a “decentralized Ponzi scheme.”
We’ve noted that government regulations could negatively impact these currencies.
Christine Lagarde, the head of the European Central Bank, said cryptocurrencies may hinder the role of central banks to carry out their functions as an anchor to the economy.
“We central bankers have been operating as a monetary anchor concerning the commercial banks and the private money,” she said. “If we are not in that game, if we are not involved in experimenting, innovating, or digital central bank money, we risk losing the role of anchor that we have played for many decades.”
That is a signal that governments will find a way to regulate the crypto market to stay relevant.