Greetings from Dubrovnik, Croatia. We recommend it highly.

Nothing but worry. This latest counter-trend, bear market rally lasted 5 days and a strong open. This is quite amazing that since the start of the bear market, the longest rally in days was a whopping 11. It is quite normal to get bear market rallies that last many weeks but so far, not this one.

This latest classic bear market rally came on a classic bear market big gap to the upside on classic fake news. This time, it was the latest stress test for the banks that has no stress. We say that because guess who gives the stress test? Yes…those same geniuses at the federal reserve. Feel better now. The same people that told us that subprime lending was fine, the economy was strong and that housing never goes down are at it again. Yes, that was 07-08. You remember the hear no evil, see no evil, speak no evil central bankers back then that had no clue the financial institutions that they were supposed to oversee were leveraging 10, 20, 30-1, which was guaranteed for disaster. Of course, the federal reserve convinced DC for us marks to bail out all the crooks who became even bigger bazillionaires with the latest round of gargantuan easy money, money printing and rates stuck at 0%. These latest stress tests are a laugher as our central bankers are tied to the hips of the bankers.


A classic big open Tuesday after a 1600 point DOW snap-back led to a classic reversal. That was the end of the rally as institutions used it to say good night to more shares. We urged all to recognize that even though the DOW rallied 1600 points quickly, it was coming off a 3600 point drop in just 7 days. But yesterday made it even worse. On a day where the DOW was up 80:

Advance/declines on both the NYSE and NASDAQ were near 2-1+…a very negative divergence. The Russell 2000 was down the equivalent of 300+ DOW points. But the big matzoh ball was the new yearly lows. With the Dow up 80, new yearly lows expanded markedly. This has been the cue that the market was getting ready for another drop as the average stock has led all the way down. It was just this cue that had us worried starting from the top and on every counter trend rally. The average stock continues to be much, much worse than the indices  as money parks into the biggest, most liquid names that have influence on the big indices.

And then there is this:


That came from Jay Powell as he was talking to someone even worse, Lagarde who runs the European Central Bank, who to this day, remains with negative rates. Just how do these people keep their jobs? But we digress.

We have warned you since Christmas 2018. We have warned you about a man whose only talent was to create another credit card with a higher credit limit to pay for his last credit card. We warned you that at the end of this easy money nightmare was going to be major bubbles popping. We warned you about the massive distortions in the system as one man and his whims printed unimaginable amounts of money without any oversight and any accountability. We warned way in advance to anyone that economics 101 says all this money printing will light the fuse on inflation. And now we find out this man is admitting “how little we know about inflation!” Just know…he lit the fuse. When it was lit, said it wasn’t there. When it worsened, said not to worry. When it become apparent to everyone, they still called it transitory. When it finally got out of hand, did he even start considering doing something about it and since, seems to be dragged kicking and screaming to get tough on what he created. He is still half of the yield on the 10 year…economic and financial malpractice.

But that is not enough. Every central banker that was part of the problem drives to the hoop every day as they do not shut up. Seems they are spending each day trying to save face but are only making things worse. One central banker said the market seems to be taking inflation and their response in stride and functioning well. In stride? Functioning well? Bubbles popped everywhere. Junk bonds crushed. Yields skyrocketing. NASDAQ stocks obliterated. In stride?

How about this line? “We have a path forward to bring inflation down!” They still think they are the God of the markets. To think these people can turn a $20 trillion economy with  their moves is beyond the beyond. They don’t know it yet but they have no tools and no control. They are also saying we have to stop demand and see unemployment rise. Just for that statement, they should be fired. Imagine telling Americans some of you are going to lose your jobs because of what they are doing. They are going to bring down inflation by killing business. Yippee!

Credibility is a gargantuan intangible with markets. We believe they have none. We believe the big institutions are fed up, thus feeding more stock into the market. They have caught on to what we have been saying since Christmas 2018. You are seeing it in droves.

But we could not help but mention one other thing that we saw happen from afar this week. Did you see Macron from France, on a hot mic, tell the President that Saudi Arabia was at capacity on producing oil? This is stunning. This begs the question how is it possible we knew this but the President did not? How is it possible the President’s genius economic advisors were not advising him on this? Again, credibility. Again, confidence. Huge intangibles for the market. We don’t think the market has much confidence right now…and rightly so.

These same central bankers, one by one, are telling us consumers are fine, the economy is sound and the employment picture is strong. They say this as we watch savings rates plummeting, credit card usage skyrocketing and over $30 trillion of global wealth evaporated. Every consumer is paying up for everything while every borrower has higher costs to borrow. Yet they are nonplussed. Everything is fine.

We will give you some good news…fundamentally. Yields have indeed backed down and commodity prices have come down. Some commodity prices have tanked. Corn, wheat, copper, soybeans, lumber and many others are all in differing levels of big, gigantic tops. This is definitely going to help the inflation front but we also worry these moves are telegraphing a tanking economy.

We take no joy in any of this but we here deal in reality. We do not deal in opinion. Just the hard reality. Numbers do not lie. Sorry for the long-winded but we really worry about what we started telling you a while back. That being the next bear market was going to be a whopper because central bank-induced booms always turn to busts. We have already seen a ton of busts in a bunch of bubbles. (crypto anyone) We have to worry about what comes next. You do not know what we think if we go fully bust. Hoping for better days ahead. The June 16 lows had better hold.

Radio show 6/29- Much less than meets the eye

SOURCE: https://www.spreaker.com/user/10863617/ie-06-29-22


Last week, we wrote and stated several times that inflation was peaking but also inflation was peaking because it has flushed out severe weakening of the economy. It is continuing to happen and happening in a big way. We saw it with our channel checks but more importantly, saw it in price movements.

Back in Oct/Nov, everything we bought and paid for…skyrocketed. Yields we borrowed on…skyrocketed. This tanked asset prices, especially growth stocks.

The opposite is now occurring and stunningly quick.

COMMODITIES of all stripes are topped and now heading lower, some heading much lower. Same for the most important commodity…oil. Now down about 15% off the recent highs with oil stocks being crushed after leading since beginning of the year. The move in oil stocks back down has been stunning. If nothing changes, prices at the pump should be down towards 50 cents/gallon soon. As we stated last week, copper, iron, steel, lumber,wheat, corn, soybeans and cotton had all put in tops of differing levels. They are now becoming tops of import. We have no clue what is going on with cotton today but the symbol BAL, a cotton ETF, is down over 11%. Cotton prices look to be down almost 5% today. Yes…cotton matters.

Because of this, yields have continued to back down. The 10 year is under 3.1% when just over a week ago, was almost at 3.5%.

All this is forecasting a recession or quite close. Of course, Reagan had the best line on recessions. A recession is when your neighbor loses his or her job. A depression is when you lose your job. We have no clue yet on whether it will be a deep recession but when you have so much debt and leverage in the system, nothing is off the table.  The hope is that it is shallow and short-lived.

This has everything economically sensitive worsening in the market. This includes energy, commodities, travel-related, heavy machinery, industrials and because rates are coming down, financials remain under pressure. Short rates going up and long rates coming down squeezes financial’s margins. On the industrials and machinery, just go look at Deere, Caterpillar and AGCO croaking into new yearly lows today. This says a bunch. Semiconductors also labor as they are also quite economically sensitive.

Lower yields should help the beaten down housing and housing related names as well as some retail. They have been in a big bear. Lower yields can stanch the bleeding in any number of groups.

The big help and it may be starting right now is in the higher beta growth arena that has been absolutely bombed out with many names down 50-70%+. We are definitely seeing many of those names holding the lows the past few weeks while the indices kept going lower…a potential positive divergence. Watch the NASDAQ versus the DOW every day. If you start to see the NASDAQ up 1% but DOW up only 0.25%, you will know growth is starting to outperform.

If commodity prices stick to the downside, for sure, inflation numbers are going to come down and if they are smart, the fed will recognize it. Of course, they have not been so good at recognizing anything. If they were smart, if these commodity prices stay down, they would come off big rate hikes going forward. They would just let the market forces dictate like they are supposed to. Unfortunately, the fed continues to believe they are smarter than the market.

And of course, everything is a moving target. There is so much out there that can change things.Just know our thoughts of what we started to interpret last week of a change in the inflation complexion is not only coming to fruition but at hand. As always, if we see anything changing, we will let you know.


We wanted to repeat our thoughts from June 17. FOR NOW, WE BELIEVE INFLATION HAS PEAKED!

For now, we believe inflation is in the midst of peaking BUT FROM VERY HIGH LEVELS. This is not saying much considering how high inflation is but any price drop, especially energy is of import. OIL stocks have topped also. Not sure it is for the right reasons but we believe for now, inflation is peaking. Not sure how much it will come down but we think a softening economy softens demand…thus…

Inflation remains ridiculously elevated and will need to come down a ton. But all one has to do is see a chart of copper, iron, steel, lumber for starters to see what we are talking about. Energy prices are now on pullback and if the pullback sticks, will go further in cementing a high for now. Keep in mind, any pullback in inflation is because of how high inflation had become and a back up because of a recession is not such great news but certainly at the pump, maybe some relief to come. 

You can now add wheat, corn, soybeans and cotton to the commodities that also have looked to put in tops of varying degrees. This also goes hand in hand with rates pulling back. So while everyone is still talking up inflation, oil prices have now gone from the $120s and now headed towards $100. Just as the president wants a gas tax holiday, if price just stays where it is this morning, expect a 40-50 cent drop at the pump in the next 2 weeks.

If commodities have indeed topped (at least for now) what is it saying?

We believe we are already in recession. Our channel checks are showing demand heading south in many ways. But we believe in the Reagan thought on recessions. If your neighbor loses their job, it is a recession. If you lose your job, it is a depression.

What will this mean for the easy money, money printing, bubble making fed?

We think it should take some pressure off them. Simple as that. Lower prices for commodities and lower rates should provide them some relief. Whether or not they recognize it is another story as they have been wrong on everything so far.

The important point is that for whatever reason, if price just stays here, energy relief is on the way based on market forces and not silly government intervention. We know this is the commodity market and we also know Russia is still doing its thing. Price will be everything. Right now, price is finally cooperating and that is good news for average Americans. If price changes back to the upside, we will let you know.