ISM Hints At Forward Deceleration

As a former manufacturing guy, I am well aware of how monetary policy and the state of the US dollar affects US manufacturers. But I have not been that guy for so long now that I tend not to look at it as closely anymore. But the current time seems appropriate for a review of the manufacturing sector.

I actually used to look down upon the ‘services’ economy as something almost artificial, given that the US had been exporting its manufacturing base (and thus, much of its productivity) for decades and replacing normal economic cycles with monetary chicanery (like the Fed’s ability to regulate the economy through interest rate manipulation) in order to keep the consumerist racket going.

The latest round of monetary manipulation (the post-2020 cycle was driven by the Fed’s latest inflationary operation) is being addressed by the bond market, which is forcing the Fed to raise interest rates. The anticipation of which is a primary driver of the US dollar, which has been diverging inflation for a year. USD is on a heater now much like it was in 2014 when NFTRH caught that bottom in real time amid the post-2011 Goldilocks phase (in the US, while deflationary pressure persisted globally).

USD has retraced 62% of its decline into the 2007 low and is now at a long-term resistance area. Will it ‘sell the news’ of a hawkish Fed just as it bought the news (in 2021, which we also nailed in real time) of terrible inflation permeating the macro? That is for another article, as this one is about the ISM. For the purposes of this article, suffice it to say that a strong USD impairs US manufacturing exports. Continue reading "ISM Hints At Forward Deceleration"

Fed Not Hawkish: Hellflation Or Liquidation Ahead

Is the Fed trying to blow another, more covert asset bubble?

[edit] With a note that another, less viable option is possible as well. That would be a ‘just right’ Goldilocks gently disinflationary option similar to the 2012-2019 phase.

[edit2] A subsequent post notes another reason the Fed may be erring dovish, as the Bank sector negatively diverges long-term yields (30yr has ticked the underside of our target zone of 2.5% to 2.7%, after all) and the yield curve continues to flatten.

The asset bubble that almost ended in Q1 2020 was rescued by two main saviors, 1) unsustainable bearish (no, terrorized) sentiment and, even more so, 2) balls out central bank inflation, led by the US Federal Reserve. The resulting bubble leg was in the bag from the moment the dovish Fed made its first headline about asset purchases and rate cuts.

This latest leg of the asset bubble has been under stress in 2022, as the supposed reflection of ‘good’ inflation, the stock market (SPX), has trended down all year. More recently, commodities and precious metals have gotten dinged as well after spiking upward on the Russia/Ukraine war, which exacerbated the Fed’s inflation (as manufactured in Q1-Q2 2020) after the inflationary effects on commodity prices were already exacerbated by pandemic-related supply chain issues. Continue reading "Fed Not Hawkish: Hellflation Or Liquidation Ahead"

Fed Jawbones Mean Business

3 month T-bill yield is demanding the Fed raise the Funds rate

And the Fed is listening.

Yesterday I made a sarcasm-tinged post about the parade of Fed jawbones in the media and the coordinated and thus comical desperation they seem to exhibit. The stern message is that the Fed Funds rate could be raised at any time (which is possible even before the next FOMC meeting on March 16, in my opinion).

I would not advise you to listen to those who think they know what the Fed is thinking and insist that the Fed will not dare raise the Funds rate. They will dare and they will do it, barring any significant short-term changes to the current macro. In my experience, the Fed has done what the bond market tells it to do almost without exception. Ben Bernanke held ZIRP for a deplorably long time but that was because the T bill on the chart below allowed him to. Continue reading "Fed Jawbones Mean Business"

A Cynical Fed Is A Dangerous Fed

A stroll through recent and not so recent inflationary history. On ‘Fed minutes Wednesday’ the media amplified the noise, the machines are doing what the machines do and running with it, and it’s all eyes on the great and powerful Fed (of Oz).

The Fed created the cyclical inflation (in NFTRH we detailed and managed the process successfully in real-time) and thus the Fed created the cycle. In 2021 the Fed was exposed to the public as the agent of inflation it actually is, and when the inflation threatened to get out of hand they went into damage control mode. Now the Fed is trying to cool the inflation, which means cooling the cycle itself. You can’t have your inflated cake and eat it too. Not when the racket is exposed to the public.

Okay now, that second to last line triggered a memory and sent me to YouTube. Now I have distracted myself with a good laugh.

Moe: “Now look what you did; you deflated it!”

Larry: “Hey, we better blow it up again!”

Moe: “Give it the gas. Larry: “Gas on”. Moe: “Gas on”…. “Gas off!”. Larry: “Gas off”. Moe: “That oughtta be enough…”

Man blows out the candles and BOOM!!!! Classic, and so appropriate. Continue reading "A Cynical Fed Is A Dangerous Fed"

Copper/Gold Ratio At Epic Decision Point

Copper/Gold ratio teases cyclical inflation bulls and bears alike, but… it’s going to break one way or the other soon enough.

If you value gold’s standing in relation to industrial metals as a key market/financial/economic indicator as I do, then you view the ongoing consolidation in the copper price to the gold price as a key indicator (among several NFTRH tools) going forward.

I cannot make the macro do what I want it to do, but I sure can be super interested in an indicator that has made several false moves to the positive and negative sides in 2021 as we head into a year of changes to come (one way or another) in 2022. Cu/Au is making less and less volatile spikes and drops as it is currently pinched between the converging daily SMA 50 and 200.

They call him Doctor Copper because in the post-2000 world of Inflation onDemand © 🙂 (as originally concocted by the Maestro himself, Alan Greenspan and expanded ever so maniacally by Ben Bernanke on through the current Fed regime), the cyclical economic doctor metal is a key foil to the counter-cyclical monetary historian metal. Continue reading "Copper/Gold Ratio At Epic Decision Point"