The Street is surprised, but Trends Journal subscribers aren’t. Ready for this “shocking” Bloomberg headline? “Canada inflation quickens to 4 percent, driven by higher gas prices.”
Since the beginning of this year, we had forecast that the OPEC oil cartel would do all they can to boost oil and gas prices and would bring Brent Crude to around $100 a barrel. As we go to press, it is at $95.25 a barrel.
And remember, earlier this month, because inflation was allegedly tamed, with core inflation at 3.5 percent but Canada’s gross domestic shrank 0.2 percent in the second quarter, the Bank of Canada (BoC) held its key overnight interest rate at 5 percent.
Like the other central banks of the West, the BoC keeps saying they will do all they can to bring the inflation rate down to 2 percent, a fake number the Banksters made up in 2012 during the Great Recession.
Again, we had forecast that following the COVID War, a time when politicians locked down nations and artificially pumped up dying economies with trillions of dollars of fake money and record low interest rates, countries would suffer from Dragflation: declining economic growth and rising inflation.
It’s right in front of the world’s eyes but despite our sending out tens of thousands of press releases to the mainstream media our forecast is ignored.
Need more proof?
Tomorrow the U.K. will report its August inflation data which The Street predicts will rise from 6.8 percent to 7 percent. And for the year, the Organization for Economic Cooperation and Development says U.K. inflation will average 7.2 percent.
Absolutely! Here is a CNBC headline last week: “UK economy shrinks at fastest pace in seven months.”
And while it is ancient history for most that don’t have a clue of what in the world is going on, Germany, which has the fourth largest economy in the world and is #1 in Europe, is now in recession.
The International Monetary Fund and European Union are forecasting more economic shrinkage this year and next, and much of it is a result of German politicians who joined the U.S. to support Ukraine in its war against Russia.
Again, for Trends Journal subscribers this is old news but is now just making the news.
As reported by the Associated Press, Christian Kullmann, CEO of major German chemical company Evonik Industries AG, noted that “The loss of cheap Russian natural gas needed to power factories “painfully damaged the business model of the German economy. We’re in a situation where we’re being strongly affected—damaged—by external factors.”
The AP said after Russia cut off most of its gas to the European Union, it spurred an energy crisis in the 27-nation bloc that had sourced 40 percent of the fuel from Moscow.
And while gas prices are double what they were in 2021, AP got it wrong, is lying, selling propaganda or plain stupid when they say, “after Russia cut off most of its gas to the European Union.”
TRENDPOST: It was the sanctions U.S. President Joe Biden and his allies put on Russia that “cut off most of its gas to the European Union.”
The day the Ukraine War began, on 24 February 2022, Biden said, “Putin is the aggressor. Putin chose this war and now he and his country will bear the consequences.”
“If we don’t move against him [Putin] now with these significant sanctions, he will be in Poland,” Biden said and declared that Putin “has much larger ambitions than Ukraine “If we don’t move against him now with these significant sanctions, he will be emboldened.”
Living up to his sanctions promise, when the White House announced a ban on Russian oil imports in March of 2022, oil prices in the U.S. hit $130 per barrel, their highest levels since 2008.
And like AP who blamed the Russians for high oil prices rather than the sanctions imposed that prohibited the U.S. and its allies from buying Russian oil, Biden also lied saying that “Democrats didn’t cause this problem. Vladimir Putin did. Putin’s gas tax has pushed prices higher.”
Yet, there was little or no denunciation for this moronic statement, since gas prices were rising before the Ukraine War, and Biden, by his own admission, had made a bad situation worse.
In fact, in response to Biden’s claim, Putin said, “Supplies of Russian oil, say, to [the] American market do not exceed 3 percent. This is a negligible amount. We have absolutely nothing to do with it. They just hide behind these decisions to deceive once again their own population.”
TRENDPOST: As we have long noted, the sanctions imposed on Russia by the United States and NATO punished the people, and not Putin, nor would sanctions deter Russia in its war against Ukraine, but America’s narrative was the opposite.
To illustrate the arrogance and duplicity of the Moron Gang in charge of destruction, on 11 February 2022, two weeks before Russia’s invasion of Ukraine, White House National Security Adviser Jake Sullivan said, “the president believes that sanctions are intended to deter.”
And this was a New York Times headline in March 2022: “With Sanctions, U.S. and Europe Aim to Punish Putin and Fuel Russian Unrest—The Biden administration and European officials are crushing the Russian economy and stirring mass anxiety to pressure President Vladimir V. Putin to end his war in Ukraine.”
That week, President Joe Biden warned Americans that not only will Russians pay the price for their invasion of Ukraine, so too will Americans bear the pain of his economic sanctions.
“There will be costs at home as we impose crippling sanctions in response to Putin’s unprovoked war, but Americans can know this: the costs we are imposing on Putin and his cronies are far more devastating than the costs we are facing,” Biden said.
The Trends Journal has reported extensively on the economic impact that European sanctions on Russia over its invasion of Ukraine had on economies throughout the continent, but Germany has suffered due to its reliance on Russian energy to keep its economy rolling. (See “U.S. OIL SANCTIONS HIT THE PEOPLE HARD, BUT NOT RUSSIAN OIL OUTPUT,” “RUSSIA’S ECONOMY RISES ABOVE SANCTIONS AS CENTRAL BANK CUTS RATE,” “GERMANY ON HIGH ALERT: NORD STREAM PIPELINE AND NOW RAILWAY SABOTAGE?” and “DRAGFLATION: GERMANY’S FACTORY OUTPUT SLUMPS AS ENERGY CRISIS TAKES HOLD.”)
Last week the European Central Bank raised interest rates by 25 basis points to 4 percent. With nations such as Germany already in recession and the summer travel season over, we forecast that the major European economies will hit Dragflation in 2024.
High Rates = Low Growth
And now there are expectations that the U.S. Fed, which meets today and tomorrow, may raise interest rates to slow down inflation. According to a Financial Times poll, more than 40 percent of academic economists surveyed expect two or more 25 basis point rate hikes.
Yet, even at their current 5.25-5.50 benchmark level, the high interest rates are taking their toll. As we have noted, trillions of dollars are being pulled out of equity markets and going into money market funds and U.S. Treasuries where investors are getting some 5 percent interest with little risk.
Another downside of high interest rates has hit the U.S. housing market where demand for mortgages hit a 27-year low because the 30-year fixed-rate mortgage is, according to Mortgage News Daily, averaging 7.22 percent.
Along with the high interest rates, because of high inflation, WalletHub reports that U.S. consumers took on $43 billion in additional credit card debt in the second quarter of this year. And now credit card interest rates are more than 20 percent… the highest rates since 1994, when the Feds started to track them.
Yes, 20 percent interest rates at loan shark levels, is now the way of the Bankster Bandits in control of governments that permit these gangland rates.
And thanks to the spending spree by the crime syndicate running the United States, national debt, according to yesterday’s report by the Treasury Department, is now $33.04 trillion. Forty years ago it was around $900 billion. Thus, the higher interest rates rise, the more it costs to service the debt.
According to the Committee for a Responsible Federal Budget, interest payments on the national debt will be the fastest-growing part of the federal budget over the next thirty years. Its president, Maya MacGuineas stated, “The United States has hit a new milestone that no one will be proud of: our gross national debt just surpassed $33 trillion,” and warned that the “Debt held by the public, meanwhile, recently surpassed $26 trillion. We are becoming numb to these numbers.”
LAST WEEK: TECH SLUMP AGAIN BURDENS STOCKS
The tech sector of the Standard & Poor’s 500 index shed 2 percent of its value on Friday, continuing the tech slump and sending all three major indexes lower for the week.
Adobe lost 4.2 percent on weak earnings. Meta and Nvidia each lost 3 percent as the week ended. Microsoft was off 2.5 percent.
“The swoon in [Adobe’s] shares led some investors to take a more cautious stance toward other tech companies,” The Wall Street Journal noted.
For the week, the Dow Jones Industrial Average slipped 0.09 percent. The NASDAQ dumped 1.27 percent and the S&P shed 0.68 percent.
In the University of Michigan’s monthly survey of consumer sentiment, shoppers showed a more pessimistic view of the economic future, although they continue to spend.
Also, new data shows oil’s higher price working its way through the economy and buoying inflation. Last week, Brent crude reached its highest price since November 2022. In the three weeks ending 15 September alone, the price has jumped 12 percent. (See “Oil Supplies Will Remain Short of Demand Through 2023, IEA Says” in this issue.)
“The inflation fight might not be over,” John Cunnison, Baker Boyer’s chief investment officer, told The Wall Street Journal.
Like many other strategists, Cunnison has been buying treasury securities, which now carry some of the highest yields seen in decades. Many bank depositors have transferred their cash to money market funds, which are paying yields as much as ten times greater than bank CDs and passbook savings accounts.
Those options are helping to drain money out of equity markets.
The yield on the 10-year treasury rose for the second consecutive week, reaching 4.321 percent at Friday’s close, close to its highest of the year.
Gold’s continuous contract was flat at $1,945.60 at 5 p.m. U.S. EDT on 15 September.
Brent crude oil shot up 4.0 percent to $94.27 at 5 p.m. U.S. EDT on 15 September. As the week closed, West Texas Intermediate, the benchmark for U.S. pricing, broke up through the $90 mark to reach $90.77 and added 4.1 percent for the week.
Bitcoin was up 2.2 percent on the week, trading at $26,379.80 at 5 p.m. U.S. EDT on 15 September.
Abroad, stocks had a mostly positive week.
The London FTSE 100 gained 3.12 percent. Europe’s Stoxx 600 index grew by 1.53 percent.
The Japanese Nikkei 225 went up 2.58 percent. South Korea’s KOSPI took on another 2 percent.
In Chinese markets, Hong Kong’s Hang Seng index added 1.34 percent. However, the mainland’s CSI Composite dropped 0.85 percent and the SSE Composite gave back 0.06 percent.
YESTERDAY: WAITING FOR THE FEDS
With the S&P 500, the Dow and Nasdaq Composite up less than 0.1 percent yesterday, all eyes are on the Federal Reserve’s interest rate decision that will be made public on Wednesday.
According to The New York Times, “Traders almost universally expect the Fed to keep rates steady at its meeting this week…” According to CME Group, 40 percent of The Street is betting that the Fed will push rates higher in either November or December.
While the yield on the benchmark 10-year U.S. Treasury note settled at 4.318 percent, down from 4.321 percent Friday, the two-year and other shorter-term yields are still higher than longer term yields which has been a signal that recession will be coming soon.
While the Major indexes advanced from April through July, they have now flat-lined. And as we had forecast, we expect them to continue their decline through October.
Europe’s Stoxx 600 fell 1.1 percent yesterday, and while Japan’s Nikkei 225 was down 1.2 percent, most Asian equities were off just a bit.
Thanks to aggressive oil supply cuts by Saudi Arabia and Russia and the terrible floods that have devastated Libya, oil prices keep rising, hitting new highs for the year.
Gold is still holding steady, which like the equity markets, is waiting for what the Fed will do on Wednesday. Should they raise interest rates, gold prices will sink further and not rebound sharply until the Federal Reserve lowers interest rates.
TODAY: STILL WAITING FOR THE FEDS
No surprise, U.S. stocks were down as the gamblers on The Street wonder if the Federal Reserve will keep interest rates where they are tomorrow or raise them.
The Dow fell 106.57 points, the S&P 500 was down 0.22 percent and the tech-heavy Nasdaq fell 0.23 percent… even though CME Group’s FedWatch tool has traders betting that it’s a 99 percent probability that the Feds won’t raise interest rates tomorrow. And as for where the interest rates are heading in the future, only 29 percent are betting they will hike them in November.
Across the globe it is all about interest rates.
Over in Europe the market gamblers are also waiting to see what the Feds will do tomorrow. The pan-European Stoxx 600 index slipped 0.12 percent while gas stocks moved up as prices moved higher and retail stocks had the biggest losses over growing fears of less consumer spending this holiday season.
In Asia, after reading the minutes of Reserve Bank of Australia which said inflation was still “too high,” stocks across the Asia-Pacific markets fell with Japan’s Nikkei falling the most, down 1.09 percent, South Korea’s Kospi slumped 0.74 percent, Australia S&P/ASX 200 fell 0.47 percent, and Hong Kong’s Hang Seng index slipped 0.21 percent.
OIL: After hitting nearly $96 per barrel, Brent Crude settled at $94.34, falling nine cents lower than yesterday’s close. After three sessions of big gains, the gamblers in the markets were grabbing their profits.
As for oil’s future, today Reuters reported that Moscow may impose export duties of $250 per metric ton on all types of oil products.
Putting more upward pressure on oil prices, OILPRICES.COM reported today that,
“The American Petroleum Institute (API) has reported a large 5.25-million-barrel draw in U.S. crude inventories, offsetting last week’s 1.174-million-barrel build.
“Analysts were expecting an inventory draw of 2.667 million barrels for the week. The total number of barrels of crude oil moves so far this year is now squarely in the red, according to API data, and there is a net draw in crude inventories since April of more than 52 million barrels.”
TREND FORECAST: The higher oil prices rise, the higher inflation will rise and the slower economies will grow. And considering that Brent Crude is at a 10-month high and may go much higher; central banks may continue to raise interest rates, which will in turn drive down economies and equity markets.
GOLD: Gold prices were basically flat today. Like the rest of the market, the gold players are waiting to hear what the U.S. Federal Reserve does and has to say tomorrow.
TREND FORECAST: Again, the equation is simple: The higher U.S. interest rates rise, the deeper gold prices will fall. The lower U.S. interest rates fall, the higher gold prices will rise. And we maintain our trend forecast that the Fed will lower interest rates in the run-up to the 2024 race for the White House.
BITCOIN: Up 1.4 percent over the past 24 hours and trading in the $27,000 level, like the rest of the markets, the crypto players are waiting to hear what the Feds have to say. And like others, the higher interest rates rise, the greater the fear of lower bitcoin prices.
TREND FORECAST: As we have long noted, bitcoin is stuck in the current range and has not hit high or low breakout points. On the downside it will be $15,000 per coin range and, on the upside, when it breaks above the $30,000 per coin range.