March 23, 2024 • 34 mins
Twenty-two global Central Banks held meetings this past week to decide what, if any, changes they would make to their monetary policy stance. More than one-third of those Central Banks (8) voted to CUT their official short-term Policy Rate, TWICE as many as voted to raise rates (4), while 10 of 22 left policy unchanged.
Of those Central Banks that left rates unchanged, the majority of them communicated belief that they would be cutting rates this summer or fall, as global monetary officialdom is starting to ease policy before inflation actually declines to their target rate, thereby "acquiescing" to higher general rates of inflation, via higher lows to be set in year over year inflation rates.
Greg discusses all of this and then some, particularly as it relates to the US FOMC and how their move this week to prepare markets for EASING of "Quantitative Tightening" is the first step towards a full-blown policy reversal, which in turn is supporting asset prices, specifically stock indexes and commodity markets, like Energy. Listen to find out which specific markets to which Greg is allocating his client's money.
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Episode Transcript
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Speaker 1 (00:02):
Hi, greg Weldon, here I'm your host and this is Money
Markets and New Age Investing.
And wow, this one, we're goingto call it Global Central Bank
Monetary Fest 2024.
This was a week when you had 22global central banks meet with
(00:22):
policy decisions hanging in thebalance.
We're going to go through this,but what's interesting here is
from a very heavy preponderanceof rate hikes just a year ago at
this time, we now are moretowards the rate cuts.
Eight out of 22 central bankscut their policy rate this week.
Four hikes, so twice as manycuts as hikes.
(00:43):
Ten central banks left policyunchanged.
A lot of them suggestedinterest rate cuts could take
place in the summer or in theautumn, and then other central
banks said there's actuallystill a chance of more rate
hikes.
Just to go through a few ofthem, because it's kind of
interesting, and then we'regoing to focus on three in
particular.
Before we get to the US and theFed.
(01:03):
We're talking about globally.
You kind of see this skewtowards South America Columbia
cut rates, paraguay cut rates,mexico cut rates, brazil cut
interest rates.
Then you also see countrieslike Mongolia, moldova,
indonesia with left-wing ratesunchanged, but you also had rate
(01:24):
cut from the Czech nationalbank in terms of unchanged, in
addition to the Bank of England.
But in the context of the Bankof England, versus the vote a
month ago which was seven wantedto remain unchanged and two
voted to hike rates.
This month it was eightunchanged and one for a rate cut
(01:46):
.
So that was kind of interesting.
Iceland left late ratesunchanged, hong Kong unchanged,
northern Bank of Norwayunchanged, but also said we see
rate cuts by autumn.
China was unchanged and theyhave record low rates but
they're still high nominally3.45 against the bond market
which have been very bullish on.
I've mentioned.
You can see sub 2% 10-year bondyields in China and that's kind
(02:09):
of on the verge of happeningnow.
So the market's pushing forrate cutting.
They're just not getting it.
So that's kind of interestingto me too.
But in the context of Pakistanwas unchanged, which was really
interesting to me 22%, eventhough you had a decline in
inflation from 28.3 to 23.
So their real interest ratewent from being negative 630
(02:30):
basis points to being negative130, so policy became much less
stimulative and that wouldtheoretically help their fight
to bring inflation down.
Morocco was also unchanged.
Now there were rate hikes thatare interesting.
Of course the Bank of Japan.
We'll talk about that in asecond.
But also Taiwan hiked rates by12.5 basis points to 2% and
Turkey raised rates by 500 basispoints, 5% to 50%.
(02:56):
They continue to try and reinin the lira.
Similar situation in Angola, andI've talked about both these
places.
Why?
Because the currencies havegotten smashed.
Pakistan, argentina, angola,turkey, nigeria I mean the list
is long and when you look at aplace like Turkey and Angola, I
mean, is there a significantplace?
(03:16):
Angola and Nigeria they producepotentially capacity to produce
4 million barrels of oil a day,which would make up the
shortfall you have right now.
So to that degree, 100 basispoint interest rate hiked by the
central bank of Angola, takingrates up to 19%, which is
interesting, but inflation isrunning at 24.7, so they might
(03:37):
have more to go.
So what you have right now isthis polarization is so much
that you have data evidence thatsupports both points.
You have the dovish evidence,you have the hawker's evidence
and it's all over the place.
And when we kind of knock itdown to a couple of key central
banks and decisions made thisweek, you can see how polarized
(03:58):
it is.
We start with the Bank of Japan, who instituted the first rate
hike in like the millennium.
All right, it goes way, wayback now that you've had seven
years of negative policy rate inJapan and they take the rate.
This is the big news.
They take the rate from minus0.1 to plus 0.1 and it's really
(04:20):
only a 10 basis point hikebecause it's a band from zero to
minus 0.1 to zero to plus 0.1.
So you could say it's a 20basis point increase.
It really isn't, it's 10.
So the extent to which, finally, you have a positive interest
rate the one year bondimmediately jumped to 8.5 basis
points.
And they also pull back on QE nomore QE in terms of buying ETFs
(04:42):
or REITs, so they're not goingto be dabbling in the stock
market anymore.
And no more yield curve control, so the long ends kind of
almost free.
I mean they did away withofficial YCC yield curve control
.
Everything needs initials nowto the degree that they also be
watching the 10 year bond yield,so you could say that they
ditched it.
(05:02):
You could say that they didn'tbecause they said they'd be
watching it.
So there was some level wherethey start to feel anxiety and
could potentially intervene andfrankly, they're intervening
already and they have been andthey continue to in terms of QE
buying of JGBs.
So that's really interesting.
The bound sheet continues toexpand.
Although the expansion on arolling 12 month basis is less
than it was a few weeks ago,it's still expanding then.
(05:26):
So, and you kind of look at whatthe Bank of Japan is telling us
, all right, we see the and thisis a quote the virtuous cycle
between wages and prices.
In other words and I have toldyou on this podcast repeatedly
Japan is on fire, the economy ison fire.
Retail sales have been up over5% for 21 consecutive months, at
least the last month that Ilooked at, which was two months
(05:47):
ago.
Price stability has come intosight, they say YCC, and the
quantitative easing to thedegree of buying stocks has
fulfilled their roles.
All right, but and here's thebig but the bank anticipates
accommodative financialconditions will be maintained
for the time being, given thecurrent outlook for economic
(06:08):
activity.
And right after that, they sayeconomic activity is weakening
and while wage growth remainsstrong, it shows the strength is
waning.
All right, so this wasinteresting choice of words.
Now, retail sales above 5%,wage growth has been well above
four, and even higher, dependingon which industry you look at.
Against inflation, that'sbetween 2% and 3%.
(06:29):
So you have some real wagegrowth there, and the latest
round of negotiations were quitepositive for the unions and
wages and so on and so forth.
So it's a pretty rabid economy,pretty robust, and it still has
zero interest rate.
All right.
They're still monetizing debtby buying JGBs.
And what's interesting here,though, is the yen and the
(06:50):
Nikai's at the highest levelsince 1990, and we're long the
Nikai for our clients and thedegree to which all of this is
so bearish for the yen.
Well, the yen fell on the news,but it and it almost made a new
low, but it didn't.
But if you look at the yielddifferentials, whereas when the
yen has made new lows, the yielddifferential is widening the
discount in Japan to the US Well, that's over Now, at least
(07:14):
until the US rates start falling, but even then you're narrowing
the discount right.
So, in that context, the yenmade a new load that was not
confirmed by the ratedifferentials, and a very
egregious and glaring degree.
When you look at an overlaychart and the short position is
through the roof on the end, andthey sold it hard after the
news you have a short-coveringrally setup.
(07:36):
That's going to be prettyinteresting.
You have a dynamic where youhave inflow into the Japanese
stocks, the banks at new highs,almost to short of new highs
that they just made two monthsago and outperforming the US
banks by far.
A call we made last February,february, a year ago, that
Japanese banks wereoutperforming almost 100%
year-over-year outperformance.
(07:56):
But then let's look at the SwissNational Bank, who just cut
rates.
So the bank in Japan raisesrates and, by the way, boj
raises rates just into aninflation report that came out
late Friday that shows a bigjump in inflation in Japan.
We'll talk about that too in asecond inflation.
But the Swiss National Bankcuts rates.
They cut the rate to one and ahalf, down from 175.
Inflation had dropped to 1.2.
(08:18):
I don't know, it was maybe twoweeks ago.
I did a big special on thatbecause it was really
interesting when you see this.
All right.
So in that context, they expectCPI to decline and stay around
1.1% through 2026 and predicatedupon a 1.5% overnight rate,
which is their official policyrate.
I think it's the overnight rate.
(08:38):
Yeah, the overnight rate is theSwiss.
So in that context it's like OK, no more rate cuts first of all
, and here's another kind ofcurrency that has really rallied
, has come all the way back ison a verge of breaking down, but
maybe that's it for rate cutsthere.
But they're out ahead of thegame to get the gold medal for
the major central banks forhaving cut rates first, and then
(08:59):
we go to the even kind of inthe middle.
All right, because we got theyou want to say you know hawkers
bank in Japan, or maybe they'rereally not.
The Swiss National Bank, whichis clearly now easy.
Oh and, by the way, swissNational Bank mentioned the
Frank as too strong.
So that was another thing.
Throw another currency underthe bus.
But in Australia, same nightbank in Japan, half hour removed
(09:19):
from one another.
The RBA did not cut rates, butthey said a further increase
cannot be rolled out.
Service price inflation remainshigh.
Excess demand remains in theeconomy.
They continue to aggressivelyQT the balance sheet down
another 6 billion.
In February it's down to 526,from Ohio 647.
So it's down 120 billion Aussiedollars in just a matter of a
(09:42):
few months.
That's an 18% shrinkage in thebalance sheet which exceeds the
Fed shrinkage which we're goingto talk about in just a minute.
We're having a shrinkage whenthey say shrinkage contest here,
but right now the RBA leads interms of unwinding QE with QT.
But in that context, where doesthe Fed stand on this?
(10:04):
Because this, of course, wasthe big news this week and this
is why we're doing a podcasttoday.
Let's talk about the economyfirst a little bit, because if
this is about okay, we don'twant to cut rates because
economy is strong and there aresome things that suggest the
economy is strong, first of all,housings come back with a
little bit of optimism aroundinterest rate cuts from the Fed,
(10:25):
so housings bounce back prettynicely.
It's got a long way to go, butthe residential, the mortgages,
the permits and buildings I mean, all of this is kind of taking
a turn to the upside.
But of course, you don't haveenough supply.
Inflation will continue to riseand that's an issue.
But in terms of the Fed reallybeing focused on the labor
(10:47):
market, so this is kind of likethat they specifically said a
turn for the worst in the labormarket would be cause for action
.
In other words, this would be acatalyst and actually cut rates
on the fly.
They get a bad employee numberor two and then they could cut
rates without having totelegraph.
It's kind of what he's saying,because we're telegraphing now
(11:08):
by telling you this.
Well, frankly, the labor marketis not as healthy as the press
wants to make it out to be.
I mean, you talk about lastmonth.
You had an increase in January,I should say two months ago
353,000 on a headline payrollemployment.
This most recent month thereport just a couple of weeks
ago for February you had anunemployment, you had employment
(11:30):
.
You know, payroll employmentrose 275,000.
That's like 600 and somethingthousand between the two months.
The problem is the 275,000increase in February came with
167,000 downward revision to theprevious two months.
So net you're only up 108,000if you look at the payrolls.
(11:50):
But the problem is that thehousehold numbers and numbers
that have a wider kind of swatchof input are actually much,
much worse.
U6, which is the totalunemployment rate, is seven and
a half.
That's up 50 basis points froma year ago.
The number of unemployed hasrisen 500,000 in the last 12
(12:11):
months.
All right.
In the most recent monthlysurvey household employment fell
184,000, second month in a rowdeclined.
The number of unemployed rose334,000, second month in a row.
And here's the kicker over thelast 12 months of the job growth
, 921,000 jobs created inpart-time jobs while full-time
(12:37):
jobs down 284,000.
And I can tell you by lookingat the stats.
The number of people Workingpart-time for economic reasons
is up.
But even more telling is whenyou look at the number of people
working two full-time jobs foreconomic reasons.
It is at one of its highestlevels ever.
And when we're at this level,it almost does always in fact it
(12:57):
always has is 100% in the pastpreceded every session.
Now you say, well, earnings aregood and these consumers strong,
right?
No, nothing can be further fromthe truth right now, when we
talk about earnings from thelabor market numbers 3.5
year-over-year and averageweekly earnings.
Well, against core inflation of3.8, your paychecks worth less
(13:18):
the second you cash it, I mean,even if you want to use the
lower inflation numbers, you'reat best flat.
So there's no wage growthreally here, the only wealth
effects coming from the stockmarket.
You don't have savings.
They've been drawn down.
Credit card debt.
The banks are alreadytightening standards and said
they're going to keep standardstight and tightened and
tightening to the entire year.
(13:39):
From the senior loan officersurvey, you know, and you say
well, the retail sales numbers,right, the retail sales numbers,
you know, excuse my language,they suck, they're terrible.
Alright, you're talking aboutso many different things here.
Let's just look at the numbersin dollar terms.
In the most recent retail salesreport from the month of
February, retail sales grewtotal for the month four billion
(14:00):
dollars.
More than half of that wasvehicle sales.
88% of the increase came fromvehicle sales, building material
sales and gasoline sales.
What's down for the month andthe year are discussion items,
clothing, furniture, departmentstores, sporting goods and
(14:22):
garden supplies and, when youlook at this, online sales okay,
non-store retailers down twomonths in a row.
The year-over-year rate hasslowed dramatically from double
digit rates.
That has been at for like threeyears in a row.
This has been the backbone ofthe growth in sales in the
consumer and that is starting toweaken.
(14:44):
It really is.
It's very noticeable.
And when we talk about onlinesales in terms of the rolling
12-month change so let's takethe rolling 12-month change in
monthly sales Alright, we have achannel, very well-defined up
channel that goes back to 2002and runs through now.
We have tested the bottom sideor hit the bottom side of that
(15:07):
channel on four other and fouroccasions up until now since
2002.
2009 crisis was one of them.
2015 was one, when they endedQE in 2014 in the third quarter
of 2014.
In 2019, after the stock marketgot hit late 2018, the pandemic
, and now it's the fifth now.
(15:28):
So you're at the bottom of thischannel in growth in online
sales on a rolling 12-monthbasis, monthly Alright.
Total retail sales 700.7 billionfor the month of February the
same number it was six monthsago.
It's gone nowhere.
The monthly dollar spent hasn'tchanged for six months.
(15:49):
Let's take this one because itdoesn't factor in inflation.
So if you take out inflationand the price increase in all
these things that up that add upto 700 billion dollars a month
in sales, you got a lot lessstuff for that money.
The volume and the actual stuffthat you are buying for that
amount of money is much lessbecause they don't factor in the
(16:12):
inflation to reduce, to comparevolume.
So let's do that and it'spretty simple.
Since April of 2022, 22 months,almost two years okay, the
total increase in retail salestotal increase to 700 billion
from 22 months ago is only 3.7percent.
(16:32):
I mean 0.16 per month onaverage over the last 22 months.
Over that time frame, cpi is up7.7 400 basis points more than
is retail sales in dollar terms,and the average monthly growth
is 0.35.
It's more than double thegrowth in retail sales is the
(16:54):
growth in inflation, month formonth, for almost two years now.
So this is wearing on theconsumer, no doubt.
So where are we in inflation?
Because you know, this is thewhole key to the Fed's kind of
turn and all of these markets,all these asset price rallies,
are predicated upon Fed easingthat, if it doesn't come, will
mandate a correction.
(17:15):
So where is CPI?
Well, I can tell you what'sinteresting about CPI is that
the most recent monthly numberand you've had a couple months
now and we I told you right hereon this podcast you would get
disinflation into the fourthquarter.
I thought it might end a monthor two earlier, but it's kind of
ended to me and now the risk isback to the upside.
And one of the tells,especially specifically in doing
(17:37):
what I do in here anddissecting the micro and the
data and looking for, you know,things that might extrapolate
out into medium-term trends andthen have an influence on prices
, is to look at kind of thedifferences around this CPI
report where the things thathave driven the disinflation
posted huge monthly gains whichsuggest a bottom in those things
(17:58):
, and I've seen this happen, youknow, for 40 years.
So doesn't mean it's happeningagain.
Past performance is notguaranteed future results,
that's for sure.
But in the context of let's lookat a few.
All right, all items less foodand shelter, all items.
Cpi less food and shelter 1.7year over year and that's like
below two.
It's below the Fed's target,but it was a 0.8 for the month.
(18:19):
It's, like you know, 9% yearannualized rate.
That's an acceleration from 1.7to 9%, that's for sure.
Let's look at commoditiesexcluding food, the
year-over-year rates minus 0.8.
You have outright deflation incommodity prices excluding food
for the year.
(18:40):
For the month it was up 1.1,double digit annualized number.
Non-dorable goods inflation 1.1year-over-year up 1.0 for the
month.
The entire year-over-year gaincame in February.
I mean hello, that's huge.
(19:00):
Take non-durables, excludingfood minus 0.2 for the year.
It's down to 10th.
Deflation in non-durables lessfood, except for the month it
was up two full percentagepoints.
I mean that's huge.
But then it's also the thingsthat have been driving inflation
to some extent that also posthuge monthly gains and it
(19:22):
doesn't show up in the headlines.
And this is why it's importantto kind of read down into the
deepest levels of the data.
All items, excluding medicalcare 3.3 year-over-year.
Not like astronomical, but it'swell above target 3.3-over-year
posted 0.7 for the month.
Service inflation is at 5.6%for the month.
(19:45):
Services excluding shelter 3.9,0.6 for the month.
So you start to see it.
And the last one is housing a4.5 year-over-year, a 0.5 or 6%
annualized rate in the month ofFebruary.
These things have acceleratedon a short-term basis.
Will that carry through?
We'll see, but I sure think so.
(20:07):
Now, if we kind of get to wherewe are in terms of also looking
at the Cleveland median CPI,which is one I've always watched
and the Cleveland Fed producedsome pretty good research.
It's not that widelydisseminated.
The monthly number annualizedwas 6.54, and the Cleveland Fed
put out a report about this.
It's a great chart if you lookat it.
(20:28):
The only other time in 30 yearsof this report that you've been
above 6, was 2022 and 2023.
You're back above 6,.
You got to 1.8.
You went from 8 to 1.8, back to6.5.
So hello on that one.
But at the same time, the Fed iskind of trapped, and this is
what I'm saying.
(20:48):
The whole point of this kind ofenvironment is the Fed is being
forced to acquiesce to higherinflation, and I said exactly
those words would be where you'dbe here All right.
Why do I say that?
Because you have stankinflation in the economy and
again, while it's not as visibleas it will be, it's there.
And again the Fed didn't getreally tight with rates because
(21:09):
they lagged the rise ininflation, so rates policy's
only been tight for like a year,so you're starting to see the
effects come in now, except forhousing, which collapsed.
When you took at the SmallBusiness Confidence Index, the
NFIB numbers, they're reallyvaluable.
It's below 90.
That's recession territory.
It's there already.
The only other times it's beenbelow 90, 1990, one of the
(21:30):
biggest recessions ever.
It was really deep.
It was a real natural recession98, 2000.
Oh, wait a minute.
No, it was never below 90 thosetimes.
The only two times that thisindicator's been below 90 was in
2009 crisis and the pandemic.
It wasn't 1990 recession, itwasn't 1998.
Long-term capital management itwasn't 2000.
And tech bubble crash Didn'tget that low.
(21:52):
It's the third worst reading inthis indicator.
And you want to talk aboutemployment?
Most of its small businesses isgoing to make up the margin.
So in that context, thepercentage planning too higher,
the lowest since 2016,.
If you exclude the pandemic.
Not only that, it's the lowestlevel in four years in the
(22:14):
response of unable to fillemployment positions.
So in other words, we're nothaving trouble finding workers
anymore.
Let's take another step becausewe've got to talk about the US
budget.
It's turning into a longpodcast for such good stuff.
I think the budget Okay.
For February, the US governmentfederal budget just put out
Outlays were 567 billion againstreceipts of 270.
(22:36):
567 against 270.
You're spending twice as muchas you're taking in here.
The largest increase came oninterest on the debt 127 billion
was the increase year-over-year.
So security was up there.
One of the largest spends was onincome security, which is a
newbie.
I couldn't even really find toomany details about it and I
(22:59):
went through the entireline-by-line items and it's a
long report.
I couldn't find anything thatkind of linked back to income
security other than some of thesocial media back to income
security, other than some of thesocial programs which we can
imagine where that's going.
It's going to the border and tothe people coming in In the
meantime and that was 90 billion.
In the meantime, spending onHomeland Security, which is only
(23:22):
one third of that, fell for themonth by a billion dollars from
35 points on them to 34 pointson them.
That's atrocious.
The deficit for the month was296 billion for the month, 13%
worse than a year ago.
And when you look at deficits inthis country, in the US, and
you wonder why thede-dollarization is big and you
(23:43):
wonder why the dollar hasn'trisen when all these currencies
are getting whacked and gold isgoing higher and Bitcoin is
going higher, the dollar isgoing nowhere.
It's because of the debts anddeficits.
It's now.
The tipping point has beenpassed.
The deficits you've haddeficits in this country 56 of
the last 60 months.
Think about that 56 of 60months.
Over the last, you've haddeficits.
(24:04):
In 28 of the last 29 monthsYou've had deficits exceeding
200 billion dollars in a monthin 14 of the last 25 months.
You've only had a surplus inthe last 10 years in 24 months.
That's 19% of the time.
Have we posted a surplus in thelast 10 years?
(24:27):
I mean, and the really troublingthing is the means of financing
.
Financing this debt isborrowing from the public.
More than ever.
It's four times what it was ayear ago.
For the first five months ofthe year, borrowing from the
public was 1.03 trillion dollarsversus 290 billion a year ago.
Five months it's three and ahalf times as big.
(24:50):
All right.
Not only that, but the rollingtotal increase in debt over the
last 12 months.
Month to month, over the last12 months you're up 2.65
trillion, the fifth largest ever.
But the other four 12-monthperiods that were higher were
all consecutively during thepandemic.
It's the highest debt growthnon-pandemic in US history.
(25:12):
It's the highest publicborrowing in five months ever.
It's out of control.
You're spending twice as muchas you're taking in a month and
borrowing from the public tofill the gap.
Now the Fed is talking aboutreducing the balance sheet too,
and actually this is reallywhere it gets interesting in
(25:32):
terms of whether our position'shere, because the crux of the
matter is the Fed has actuallychanged policy here this week.
They said they were going tolooking at, exploring and
discussing the options in termsof slowing QT.
All right, the balance sheetwas as high as $8.9 trillion
Actually $8.965, so almost ninejust short of nine.
(25:54):
It's 350 billion short of nine,not even 35 billion short of
nine trillion.
Now they've shrunk it by 1.42trillion over the last, since
April 22 or whatever it was.
You're down 16%, 16.9 to beexact.
All right, and that includes,by the way, the period where you
(26:16):
added money to the balancesheet when AVB went belly up a
year ago, so that was 391billion at over a three-week
period.
That rolls into this thing wherenow you're really?
You have the tightest QT ever,so they're going to start to
loosen the tightening in QT.
And then you wonder why?
Well, because the governmentjust borrowed $1.027 trillion in
(26:40):
the last five months from thepublic.
You have to sell that debt.
Interest cost is the largestincrease in the deficit, so they
have to make sure the bondmarket doesn't blow up from a
supply-demand perspective.
So this is where the Fedincluded and all these central
banks that eased policy eight ofthem cut rates this week alone.
(27:02):
All right, acquiescing to higherinflation, because we know we
have to.
This is a 40-year downtrend.
Inflation has ended and you'vebroken out to the upside.
We had our first wave, we'vehad the correction, we're going
to wave two, it's the next stepand this is going to be dynamic,
really great opportunities hereand the degree to which we're
going to talk a little bit hereat the end about what to do with
(27:23):
this information.
Of course, we sell research onthis.
So sales at weldononlinecom.
Email me.
We can send you all kinds offree reports that you can take a
look at.
But in the context of what I'mtrying to do with helping people
out there, energy is going tobe a place that's going to
benefit from all of this,because at some point the dollar
card gets played.
You're maybe a step away fromthat, but you have a supply
(27:44):
demand dynamic and energy that'sbullish on its own merits and
when the dollar card gets playedit's huge.
Let alone the fact and when Isay dollar card, meaning dollar
down because they're going to beeasing and become acquiescing
to higher rates of inflation.
All right, you've already seen apickup of materials.
You've already seen a pickup inthe base metals, certainly
gold's at a new high, silver'seven below.
You had a rally in platinum andpalladium last week and they've
(28:05):
been dogs.
Dogs would flee, is to quoteGordon Gecko.
So the context that we'reseeing a shift here.
Energy has a fundamental supplydemand dynamic that's bullish.
So does certain commoditieslike cotton, like soybeans, like
coffee, like sugar, cocoa onewe mentioned here on this
program that has exploded inprice.
Energy crude oil inventory isdown 2 million barrels this week
(28:27):
.
They're 7.5% below year agolevels and 3% below the five
year average.
For this time of year You'redown 32 million barrels in crude
oil supplies, not including SPR, which is down huge from a year
ago.
Gasoline's even more bullish.
The gasoline inventories fell3.3 million barrels this week.
(28:47):
They were expected 1.3.
So that's a huge miss on thedownside, which is bullish for
prices.
Gasoline supplies are downseven weeks in a row.
They peaked early on theseasonal and have come down
really hard, exactly as Isuggested they would.
They were down 23.4 millionbarrels in the last seven weeks,
3% below the five year average.
Now they were almost above thefive year high just two months
(29:09):
ago.
You see this in some of themarket action the crude oil
swaps.
The May-October price is almost$3 versus 70 cents in December.
So that's telling you thetightness.
You're going to pay more forthe May month to try and draw
inventory and to meet demand.
So, as opposed to normally, theOctober month would cost more
because you have to store it andinsure it.
(29:30):
So it's what we callbackwardation, when the front
month is a higher price becauseyou're trying to attract that
buying into the market, orrather that supply into the
market.
You're trying to attractsellers by paying a $3 premium
for a five month contract.
I mean that's huge.
And you look at two thepositions in energy People are
not long.
(29:50):
The open interest in crude oilfutures only $162,000 in January
.
It's up to $233,000.
But as far off its high of$526,000.
It could double and that woulddrive prices to, I think,
something $107ish maybe in crudeoil when you start looking at
some of the dynamics around thefact that North Sea Brent is
(30:12):
making new highs here, dubaicrude on Tokom, the Tokyo
Comanche Exchange is breakingout.
You're breaking out in Chineseroom, nimby terms.
You're breaking out in Eurocurrency terms.
Crude oil is breaking out inevery currency.
I like gasoline even better andhere's the interesting thing
about how it ties into inflation.
Gasoline at $2,065 right now inthe futures contract is up 6.6%
(30:34):
from a year ago.
It's going to become a positiveto CPI when this has been the
biggest negative of all.
The long term moving averageshave been cleared.
The long term oscillatorsturned up.
A breakout takes place at 299.
You're not even close yet andthe open interest is one of the
lowest we've seen in the lastcouple of years.
It's $59,000, which is well offthe peak that was almost
$80,000.
(30:55):
So in January you're at $76,200.
The UGA is the gasoline ETF.
A breakout above $69.
$5690 would be a reasonablestop level.
All right, that's a bottom.
That's in the Fibonacci zone.
You have inverted and shouldersbottom there.
The XLE is the energy shares ETF, last at $9030.
(31:17):
Like it here.
$7880 would be kind of a stoplevel.
$94 would be a major breakout.
The USO is the crude oil ETF.
I like that.
But look at the PXE drillingand exploration, because you do.
You need more of the Petro.
I mean, we downplayed it andnow we're paying for that.
And now they're coming back andnote by the way, all right, all
(31:38):
of the solar, the Q clean, thegreen clean, the tan, the fan,
the PWB, anything related toalternative energy is getting
smoked and is making new lowsagainst gasoline stocks, which
are the high fliers.
So Philip 66, sonoco, sun, xom,love Exxon here, all right.
So when you look at somethinglike when WTI crude oil is,
(32:01):
where the XLE is and where Exxonis it, actually the stocks have
led the way and they imply thatyou could have crude oil
between $115 and $122 a barrel.
That's a big gain.
The other commodity I reallylike here is copper.
You've had inventories downfrom $191,000 to $113,000 over
(32:23):
the last several weeks.
That's a 40% decline inwarehouse inventories of copper.
The swaps are way up now, havebeen deeply negative, now
they're positive.
We haven't seen this kind ofaction in the inventories really
since 2005.
You have London Mining andSouthern Coppercore, lun and
SCCO.
Now they've already broken out,they've gone wild.
But they're implying here too,like in energy, implies the
(32:46):
higher crude, the copper sharesimply a higher copper price of
$575 to $6.
So that's interesting too.
Copx is the copper ETF.
Hudbay, a Canadian miner, hasbeen one that's kind of lagged
but is really starting to breakout, so that's one that's
probably still has value here.
But this is the kind of thing wedo every single day here.
(33:07):
We help retail investors.
We help some of the largesthedge funds in the world.
I worked at one of the largesthedge funds in the world and
I've been doing this for 40years, and now it's kind of come
down to.
I see what's happening in termsof the purchasing power of the
dollar.
I see what's coming.
This is the next wave is cominglike right in here, we're here.
This is why we started thispodcast almost two years ago now
, and so in that context I alsoinvite you all to check out my
(33:29):
YouTube channel.
All right, it's Gregory Weldonon YouTube.
You can check out my Twitter,which is at Weldon Live.
Certainly sign up and follow uson the podcast.
It's on Twitter MoneyUnderscore Podcast.
We're also on YouTube and we'realso on Facebook in terms of
the podcast and I thank you justfor taking the time to hear me
speak and I hope that I gave yousome insight and maybe we can
(33:52):
help you keep pace with thedevaluation and debasement of
the purchasing power of yourpaper money, wealth and income.
Till next time.
Hi, greg Weldon, here I'm your host and this is Money
Markets and New Age Investing.
And wow, this one, we're goingto call it Global Central Bank
Monetary Fest 2024.
This was a week when you had 22global central banks meet with
(00:22):
policy decisions hanging in thebalance.
We're going to go through this,but what's interesting here is
from a very heavy preponderanceof rate hikes just a year ago at
this time, we now are moretowards the rate cuts.
Eight out of 22 central bankscut their policy rate this week.
Four hikes, so twice as manycuts as hikes.
(00:43):
Ten central banks left policyunchanged.
A lot of them suggestedinterest rate cuts could take
place in the summer or in theautumn, and then other central
banks said there's actuallystill a chance of more rate
hikes.
Just to go through a few ofthem, because it's kind of
interesting, and then we'regoing to focus on three in
particular.
Before we get to the US and theFed.
(01:03):
We're talking about globally.
You kind of see this skewtowards South America Columbia
cut rates, paraguay cut rates,mexico cut rates, brazil cut
interest rates.
Then you also see countrieslike Mongolia, moldova,
indonesia with left-wing ratesunchanged, but you also had rate
(01:24):
cut from the Czech nationalbank in terms of unchanged, in
addition to the Bank of England.
But in the context of the Bankof England, versus the vote a
month ago which was seven wantedto remain unchanged and two
voted to hike rates.
This month it was eightunchanged and one for a rate cut
(01:46):
.
So that was kind of interesting.
Iceland left late ratesunchanged, hong Kong unchanged,
northern Bank of Norwayunchanged, but also said we see
rate cuts by autumn.
China was unchanged and theyhave record low rates but
they're still high nominally3.45 against the bond market
which have been very bullish on.
I've mentioned.
You can see sub 2% 10-year bondyields in China and that's kind
(02:09):
of on the verge of happeningnow.
So the market's pushing forrate cutting.
They're just not getting it.
So that's kind of interestingto me too.
But in the context of Pakistanwas unchanged, which was really
interesting to me 22%, eventhough you had a decline in
inflation from 28.3 to 23.
So their real interest ratewent from being negative 630
(02:30):
basis points to being negative130, so policy became much less
stimulative and that wouldtheoretically help their fight
to bring inflation down.
Morocco was also unchanged.
Now there were rate hikes thatare interesting.
Of course the Bank of Japan.
We'll talk about that in asecond.
But also Taiwan hiked rates by12.5 basis points to 2% and
Turkey raised rates by 500 basispoints, 5% to 50%.
(02:56):
They continue to try and reinin the lira.
Similar situation in Angola, andI've talked about both these
places.
Why?
Because the currencies havegotten smashed.
Pakistan, argentina, angola,turkey, nigeria I mean the list
is long and when you look at aplace like Turkey and Angola, I
mean, is there a significantplace?
(03:16):
Angola and Nigeria they producepotentially capacity to produce
4 million barrels of oil a day,which would make up the
shortfall you have right now.
So to that degree, 100 basispoint interest rate hiked by the
central bank of Angola, takingrates up to 19%, which is
interesting, but inflation isrunning at 24.7, so they might
(03:37):
have more to go.
So what you have right now isthis polarization is so much
that you have data evidence thatsupports both points.
You have the dovish evidence,you have the hawker's evidence
and it's all over the place.
And when we kind of knock itdown to a couple of key central
banks and decisions made thisweek, you can see how polarized
(03:58):
it is.
We start with the Bank of Japan, who instituted the first rate
hike in like the millennium.
All right, it goes way, wayback now that you've had seven
years of negative policy rate inJapan and they take the rate.
This is the big news.
They take the rate from minus0.1 to plus 0.1 and it's really
(04:20):
only a 10 basis point hikebecause it's a band from zero to
minus 0.1 to zero to plus 0.1.
So you could say it's a 20basis point increase.
It really isn't, it's 10.
So the extent to which, finally, you have a positive interest
rate the one year bondimmediately jumped to 8.5 basis
points.
And they also pull back on QE nomore QE in terms of buying ETFs
(04:42):
or REITs, so they're not goingto be dabbling in the stock
market anymore.
And no more yield curve control, so the long ends kind of
almost free.
I mean they did away withofficial YCC yield curve control
.
Everything needs initials nowto the degree that they also be
watching the 10 year bond yield,so you could say that they
ditched it.
(05:02):
You could say that they didn'tbecause they said they'd be
watching it.
So there was some level wherethey start to feel anxiety and
could potentially intervene andfrankly, they're intervening
already and they have been andthey continue to in terms of QE
buying of JGBs.
So that's really interesting.
The bound sheet continues toexpand.
Although the expansion on arolling 12 month basis is less
than it was a few weeks ago,it's still expanding then.
(05:26):
So, and you kind of look at whatthe Bank of Japan is telling us
, all right, we see the and thisis a quote the virtuous cycle
between wages and prices.
In other words and I have toldyou on this podcast repeatedly
Japan is on fire, the economy ison fire.
Retail sales have been up over5% for 21 consecutive months, at
least the last month that Ilooked at, which was two months
(05:47):
ago.
Price stability has come intosight, they say YCC, and the
quantitative easing to thedegree of buying stocks has
fulfilled their roles.
All right, but and here's thebig but the bank anticipates
accommodative financialconditions will be maintained
for the time being, given thecurrent outlook for economic
(06:08):
activity.
And right after that, they sayeconomic activity is weakening
and while wage growth remainsstrong, it shows the strength is
waning.
All right, so this wasinteresting choice of words.
Now, retail sales above 5%,wage growth has been well above
four, and even higher, dependingon which industry you look at.
Against inflation, that'sbetween 2% and 3%.
(06:29):
So you have some real wagegrowth there, and the latest
round of negotiations were quitepositive for the unions and
wages and so on and so forth.
So it's a pretty rabid economy,pretty robust, and it still has
zero interest rate.
All right.
They're still monetizing debtby buying JGBs.
And what's interesting here,though, is the yen and the
(06:50):
Nikai's at the highest levelsince 1990, and we're long the
Nikai for our clients and thedegree to which all of this is
so bearish for the yen.
Well, the yen fell on the news,but it and it almost made a new
low, but it didn't.
But if you look at the yielddifferentials, whereas when the
yen has made new lows, the yielddifferential is widening the
discount in Japan to the US Well, that's over Now, at least
(07:14):
until the US rates start falling, but even then you're narrowing
the discount right.
So, in that context, the yenmade a new load that was not
confirmed by the ratedifferentials, and a very
egregious and glaring degree.
When you look at an overlaychart and the short position is
through the roof on the end, andthey sold it hard after the
news you have a short-coveringrally setup.
(07:36):
That's going to be prettyinteresting.
You have a dynamic where youhave inflow into the Japanese
stocks, the banks at new highs,almost to short of new highs
that they just made two monthsago and outperforming the US
banks by far.
A call we made last February,february, a year ago, that
Japanese banks wereoutperforming almost 100%
year-over-year outperformance.
(07:56):
But then let's look at the SwissNational Bank, who just cut
rates.
So the bank in Japan raisesrates and, by the way, boj
raises rates just into aninflation report that came out
late Friday that shows a bigjump in inflation in Japan.
We'll talk about that too in asecond inflation.
But the Swiss National Bankcuts rates.
They cut the rate to one and ahalf, down from 175.
Inflation had dropped to 1.2.
(08:18):
I don't know, it was maybe twoweeks ago.
I did a big special on thatbecause it was really
interesting when you see this.
All right.
So in that context, they expectCPI to decline and stay around
1.1% through 2026 and predicatedupon a 1.5% overnight rate,
which is their official policyrate.
I think it's the overnight rate.
(08:38):
Yeah, the overnight rate is theSwiss.
So in that context it's like OK, no more rate cuts first of all
, and here's another kind ofcurrency that has really rallied
, has come all the way back ison a verge of breaking down, but
maybe that's it for rate cutsthere.
But they're out ahead of thegame to get the gold medal for
the major central banks forhaving cut rates first, and then
(08:59):
we go to the even kind of inthe middle.
All right, because we got theyou want to say you know hawkers
bank in Japan, or maybe they'rereally not.
The Swiss National Bank, whichis clearly now easy.
Oh and, by the way, swissNational Bank mentioned the
Frank as too strong.
So that was another thing.
Throw another currency underthe bus.
But in Australia, same nightbank in Japan, half hour removed
(09:19):
from one another.
The RBA did not cut rates, butthey said a further increase
cannot be rolled out.
Service price inflation remainshigh.
Excess demand remains in theeconomy.
They continue to aggressivelyQT the balance sheet down
another 6 billion.
In February it's down to 526,from Ohio 647.
So it's down 120 billion Aussiedollars in just a matter of a
(09:42):
few months.
That's an 18% shrinkage in thebalance sheet which exceeds the
Fed shrinkage which we're goingto talk about in just a minute.
We're having a shrinkage whenthey say shrinkage contest here,
but right now the RBA leads interms of unwinding QE with QT.
But in that context, where doesthe Fed stand on this?
(10:04):
Because this, of course, wasthe big news this week and this
is why we're doing a podcasttoday.
Let's talk about the economyfirst a little bit, because if
this is about okay, we don'twant to cut rates because
economy is strong and there aresome things that suggest the
economy is strong, first of all,housings come back with a
little bit of optimism aroundinterest rate cuts from the Fed,
(10:25):
so housings bounce back prettynicely.
It's got a long way to go, butthe residential, the mortgages,
the permits and buildings I mean, all of this is kind of taking
a turn to the upside.
But of course, you don't haveenough supply.
Inflation will continue to riseand that's an issue.
But in terms of the Fed reallybeing focused on the labor
(10:47):
market, so this is kind of likethat they specifically said a
turn for the worst in the labormarket would be cause for action
.
In other words, this would be acatalyst and actually cut rates
on the fly.
They get a bad employee numberor two and then they could cut
rates without having totelegraph.
It's kind of what he's saying,because we're telegraphing now
(11:08):
by telling you this.
Well, frankly, the labor marketis not as healthy as the press
wants to make it out to be.
I mean, you talk about lastmonth.
You had an increase in January,I should say two months ago
353,000 on a headline payrollemployment.
This most recent month thereport just a couple of weeks
ago for February you had anunemployment, you had employment
(11:30):
.
You know, payroll employmentrose 275,000.
That's like 600 and somethingthousand between the two months.
The problem is the 275,000increase in February came with
167,000 downward revision to theprevious two months.
So net you're only up 108,000if you look at the payrolls.
(11:50):
But the problem is that thehousehold numbers and numbers
that have a wider kind of swatchof input are actually much,
much worse.
U6, which is the totalunemployment rate, is seven and
a half.
That's up 50 basis points froma year ago.
The number of unemployed hasrisen 500,000 in the last 12
(12:11):
months.
All right.
In the most recent monthlysurvey household employment fell
184,000, second month in a rowdeclined.
The number of unemployed rose334,000, second month in a row.
And here's the kicker over thelast 12 months of the job growth
, 921,000 jobs created inpart-time jobs while full-time
(12:37):
jobs down 284,000.
And I can tell you by lookingat the stats.
The number of people Workingpart-time for economic reasons
is up.
But even more telling is whenyou look at the number of people
working two full-time jobs foreconomic reasons.
It is at one of its highestlevels ever.
And when we're at this level,it almost does always in fact it
(12:57):
always has is 100% in the pastpreceded every session.
Now you say, well, earnings aregood and these consumers strong,
right?
No, nothing can be further fromthe truth right now, when we
talk about earnings from thelabor market numbers 3.5
year-over-year and averageweekly earnings.
Well, against core inflation of3.8, your paychecks worth less
(13:18):
the second you cash it, I mean,even if you want to use the
lower inflation numbers, you'reat best flat.
So there's no wage growthreally here, the only wealth
effects coming from the stockmarket.
You don't have savings.
They've been drawn down.
Credit card debt.
The banks are alreadytightening standards and said
they're going to keep standardstight and tightened and
tightening to the entire year.
(13:39):
From the senior loan officersurvey, you know, and you say
well, the retail sales numbers,right, the retail sales numbers,
you know, excuse my language,they suck, they're terrible.
Alright, you're talking aboutso many different things here.
Let's just look at the numbersin dollar terms.
In the most recent retail salesreport from the month of
February, retail sales grewtotal for the month four billion
(14:00):
dollars.
More than half of that wasvehicle sales.
88% of the increase came fromvehicle sales, building material
sales and gasoline sales.
What's down for the month andthe year are discussion items,
clothing, furniture, departmentstores, sporting goods and
(14:22):
garden supplies and, when youlook at this, online sales okay,
non-store retailers down twomonths in a row.
The year-over-year rate hasslowed dramatically from double
digit rates.
That has been at for like threeyears in a row.
This has been the backbone ofthe growth in sales in the
consumer and that is starting toweaken.
(14:44):
It really is.
It's very noticeable.
And when we talk about onlinesales in terms of the rolling
12-month change so let's takethe rolling 12-month change in
monthly sales Alright, we have achannel, very well-defined up
channel that goes back to 2002and runs through now.
We have tested the bottom sideor hit the bottom side of that
(15:07):
channel on four other and fouroccasions up until now since
2002.
2009 crisis was one of them.
2015 was one, when they endedQE in 2014 in the third quarter
of 2014.
In 2019, after the stock marketgot hit late 2018, the pandemic
, and now it's the fifth now.
(15:28):
So you're at the bottom of thischannel in growth in online
sales on a rolling 12-monthbasis, monthly Alright.
Total retail sales 700.7 billionfor the month of February the
same number it was six monthsago.
It's gone nowhere.
The monthly dollar spent hasn'tchanged for six months.
(15:49):
Let's take this one because itdoesn't factor in inflation.
So if you take out inflationand the price increase in all
these things that up that add upto 700 billion dollars a month
in sales, you got a lot lessstuff for that money.
The volume and the actual stuffthat you are buying for that
amount of money is much lessbecause they don't factor in the
(16:12):
inflation to reduce, to comparevolume.
So let's do that and it'spretty simple.
Since April of 2022, 22 months,almost two years okay, the
total increase in retail salestotal increase to 700 billion
from 22 months ago is only 3.7percent.
(16:32):
I mean 0.16 per month onaverage over the last 22 months.
Over that time frame, cpi is up7.7 400 basis points more than
is retail sales in dollar terms,and the average monthly growth
is 0.35.
It's more than double thegrowth in retail sales is the
(16:54):
growth in inflation, month formonth, for almost two years now.
So this is wearing on theconsumer, no doubt.
So where are we in inflation?
Because you know, this is thewhole key to the Fed's kind of
turn and all of these markets,all these asset price rallies,
are predicated upon Fed easingthat, if it doesn't come, will
mandate a correction.
(17:15):
So where is CPI?
Well, I can tell you what'sinteresting about CPI is that
the most recent monthly numberand you've had a couple months
now and we I told you right hereon this podcast you would get
disinflation into the fourthquarter.
I thought it might end a monthor two earlier, but it's kind of
ended to me and now the risk isback to the upside.
And one of the tells,especially specifically in doing
(17:37):
what I do in here anddissecting the micro and the
data and looking for, you know,things that might extrapolate
out into medium-term trends andthen have an influence on prices
, is to look at kind of thedifferences around this CPI
report where the things thathave driven the disinflation
posted huge monthly gains whichsuggest a bottom in those things
(17:58):
, and I've seen this happen, youknow, for 40 years.
So doesn't mean it's happeningagain.
Past performance is notguaranteed future results,
that's for sure.
But in the context of let's lookat a few.
All right, all items less foodand shelter, all items.
Cpi less food and shelter 1.7year over year and that's like
below two.
It's below the Fed's target,but it was a 0.8 for the month.
(18:19):
It's, like you know, 9% yearannualized rate.
That's an acceleration from 1.7to 9%, that's for sure.
Let's look at commoditiesexcluding food, the
year-over-year rates minus 0.8.
You have outright deflation incommodity prices excluding food
for the year.
(18:40):
For the month it was up 1.1,double digit annualized number.
Non-dorable goods inflation 1.1year-over-year up 1.0 for the
month.
The entire year-over-year gaincame in February.
I mean hello, that's huge.
(19:00):
Take non-durables, excludingfood minus 0.2 for the year.
It's down to 10th.
Deflation in non-durables lessfood, except for the month it
was up two full percentagepoints.
I mean that's huge.
But then it's also the thingsthat have been driving inflation
to some extent that also posthuge monthly gains and it
(19:22):
doesn't show up in the headlines.
And this is why it's importantto kind of read down into the
deepest levels of the data.
All items, excluding medicalcare 3.3 year-over-year.
Not like astronomical, but it'swell above target 3.3-over-year
posted 0.7 for the month.
Service inflation is at 5.6%for the month.
(19:45):
Services excluding shelter 3.9,0.6 for the month.
So you start to see it.
And the last one is housing a4.5 year-over-year, a 0.5 or 6%
annualized rate in the month ofFebruary.
These things have acceleratedon a short-term basis.
Will that carry through?
We'll see, but I sure think so.
(20:07):
Now, if we kind of get to wherewe are in terms of also looking
at the Cleveland median CPI,which is one I've always watched
and the Cleveland Fed producedsome pretty good research.
It's not that widelydisseminated.
The monthly number annualizedwas 6.54, and the Cleveland Fed
put out a report about this.
It's a great chart if you lookat it.
(20:28):
The only other time in 30 yearsof this report that you've been
above 6, was 2022 and 2023.
You're back above 6,.
You got to 1.8.
You went from 8 to 1.8, back to6.5.
So hello on that one.
But at the same time, the Fed iskind of trapped, and this is
what I'm saying.
(20:48):
The whole point of this kind ofenvironment is the Fed is being
forced to acquiesce to higherinflation, and I said exactly
those words would be where you'dbe here All right.
Why do I say that?
Because you have stankinflation in the economy and
again, while it's not as visibleas it will be, it's there.
And again the Fed didn't getreally tight with rates because
(21:09):
they lagged the rise ininflation, so rates policy's
only been tight for like a year,so you're starting to see the
effects come in now, except forhousing, which collapsed.
When you took at the SmallBusiness Confidence Index, the
NFIB numbers, they're reallyvaluable.
It's below 90.
That's recession territory.
It's there already.
The only other times it's beenbelow 90, 1990, one of the
(21:30):
biggest recessions ever.
It was really deep.
It was a real natural recession98, 2000.
Oh, wait a minute.
No, it was never below 90 thosetimes.
The only two times that thisindicator's been below 90 was in
2009 crisis and the pandemic.
It wasn't 1990 recession, itwasn't 1998.
Long-term capital management itwasn't 2000.
And tech bubble crash Didn'tget that low.
(21:52):
It's the third worst reading inthis indicator.
And you want to talk aboutemployment?
Most of its small businesses isgoing to make up the margin.
So in that context, thepercentage planning too higher,
the lowest since 2016,.
If you exclude the pandemic.
Not only that, it's the lowestlevel in four years in the
(22:14):
response of unable to fillemployment positions.
So in other words, we're nothaving trouble finding workers
anymore.
Let's take another step becausewe've got to talk about the US
budget.
It's turning into a longpodcast for such good stuff.
I think the budget Okay.
For February, the US governmentfederal budget just put out
Outlays were 567 billion againstreceipts of 270.
(22:36):
567 against 270.
You're spending twice as muchas you're taking in here.
The largest increase came oninterest on the debt 127 billion
was the increase year-over-year.
So security was up there.
One of the largest spends was onincome security, which is a
newbie.
I couldn't even really find toomany details about it and I
(22:59):
went through the entireline-by-line items and it's a
long report.
I couldn't find anything thatkind of linked back to income
security other than some of thesocial media back to income
security, other than some of thesocial programs which we can
imagine where that's going.
It's going to the border and tothe people coming in In the
meantime and that was 90 billion.
In the meantime, spending onHomeland Security, which is only
(23:22):
one third of that, fell for themonth by a billion dollars from
35 points on them to 34 pointson them.
That's atrocious.
The deficit for the month was296 billion for the month, 13%
worse than a year ago.
And when you look at deficits inthis country, in the US, and
you wonder why thede-dollarization is big and you
(23:43):
wonder why the dollar hasn'trisen when all these currencies
are getting whacked and gold isgoing higher and Bitcoin is
going higher, the dollar isgoing nowhere.
It's because of the debts anddeficits.
It's now.
The tipping point has beenpassed.
The deficits you've haddeficits in this country 56 of
the last 60 months.
Think about that 56 of 60months.
Over the last, you've haddeficits.
(24:04):
In 28 of the last 29 monthsYou've had deficits exceeding
200 billion dollars in a monthin 14 of the last 25 months.
You've only had a surplus inthe last 10 years in 24 months.
That's 19% of the time.
Have we posted a surplus in thelast 10 years?
(24:27):
I mean, and the really troublingthing is the means of financing
.
Financing this debt isborrowing from the public.
More than ever.
It's four times what it was ayear ago.
For the first five months ofthe year, borrowing from the
public was 1.03 trillion dollarsversus 290 billion a year ago.
Five months it's three and ahalf times as big.
(24:50):
All right.
Not only that, but the rollingtotal increase in debt over the
last 12 months.
Month to month, over the last12 months you're up 2.65
trillion, the fifth largest ever.
But the other four 12-monthperiods that were higher were
all consecutively during thepandemic.
It's the highest debt growthnon-pandemic in US history.
(25:12):
It's the highest publicborrowing in five months ever.
It's out of control.
You're spending twice as muchas you're taking in a month and
borrowing from the public tofill the gap.
Now the Fed is talking aboutreducing the balance sheet too,
and actually this is reallywhere it gets interesting in
(25:32):
terms of whether our position'shere, because the crux of the
matter is the Fed has actuallychanged policy here this week.
They said they were going tolooking at, exploring and
discussing the options in termsof slowing QT.
All right, the balance sheetwas as high as $8.9 trillion
Actually $8.965, so almost ninejust short of nine.
(25:54):
It's 350 billion short of nine,not even 35 billion short of
nine trillion.
Now they've shrunk it by 1.42trillion over the last, since
April 22 or whatever it was.
You're down 16%, 16.9 to beexact.
All right, and that includes,by the way, the period where you
(26:16):
added money to the balancesheet when AVB went belly up a
year ago, so that was 391billion at over a three-week
period.
That rolls into this thing wherenow you're really?
You have the tightest QT ever,so they're going to start to
loosen the tightening in QT.
And then you wonder why?
Well, because the governmentjust borrowed $1.027 trillion in
(26:40):
the last five months from thepublic.
You have to sell that debt.
Interest cost is the largestincrease in the deficit, so they
have to make sure the bondmarket doesn't blow up from a
supply-demand perspective.
So this is where the Fedincluded and all these central
banks that eased policy eight ofthem cut rates this week alone.
(27:02):
All right, acquiescing to higherinflation, because we know we
have to.
This is a 40-year downtrend.
Inflation has ended and you'vebroken out to the upside.
We had our first wave, we'vehad the correction, we're going
to wave two, it's the next stepand this is going to be dynamic,
really great opportunities hereand the degree to which we're
going to talk a little bit hereat the end about what to do with
(27:23):
this information.
Of course, we sell research onthis.
So sales at weldononlinecom.
Email me.
We can send you all kinds offree reports that you can take a
look at.
But in the context of what I'mtrying to do with helping people
out there, energy is going tobe a place that's going to
benefit from all of this,because at some point the dollar
card gets played.
You're maybe a step away fromthat, but you have a supply
(27:44):
demand dynamic and energy that'sbullish on its own merits and
when the dollar card gets playedit's huge.
Let alone the fact and when Isay dollar card, meaning dollar
down because they're going to beeasing and become acquiescing
to higher rates of inflation.
All right, you've already seen apickup of materials.
You've already seen a pickup inthe base metals, certainly
gold's at a new high, silver'seven below.
You had a rally in platinum andpalladium last week and they've
(28:05):
been dogs.
Dogs would flee, is to quoteGordon Gecko.
So the context that we'reseeing a shift here.
Energy has a fundamental supplydemand dynamic that's bullish.
So does certain commoditieslike cotton, like soybeans, like
coffee, like sugar, cocoa onewe mentioned here on this
program that has exploded inprice.
Energy crude oil inventory isdown 2 million barrels this week
(28:27):
.
They're 7.5% below year agolevels and 3% below the five
year average.
For this time of year You'redown 32 million barrels in crude
oil supplies, not including SPR, which is down huge from a year
ago.
Gasoline's even more bullish.
The gasoline inventories fell3.3 million barrels this week.
(28:47):
They were expected 1.3.
So that's a huge miss on thedownside, which is bullish for
prices.
Gasoline supplies are downseven weeks in a row.
They peaked early on theseasonal and have come down
really hard, exactly as Isuggested they would.
They were down 23.4 millionbarrels in the last seven weeks,
3% below the five year average.
Now they were almost above thefive year high just two months
(29:09):
ago.
You see this in some of themarket action the crude oil
swaps.
The May-October price is almost$3 versus 70 cents in December.
So that's telling you thetightness.
You're going to pay more forthe May month to try and draw
inventory and to meet demand.
So, as opposed to normally, theOctober month would cost more
because you have to store it andinsure it.
(29:30):
So it's what we callbackwardation, when the front
month is a higher price becauseyou're trying to attract that
buying into the market, orrather that supply into the
market.
You're trying to attractsellers by paying a $3 premium
for a five month contract.
I mean that's huge.
And you look at two thepositions in energy People are
not long.
(29:50):
The open interest in crude oilfutures only $162,000 in January
.
It's up to $233,000.
But as far off its high of$526,000.
It could double and that woulddrive prices to, I think,
something $107ish maybe in crudeoil when you start looking at
some of the dynamics around thefact that North Sea Brent is
(30:12):
making new highs here, dubaicrude on Tokom, the Tokyo
Comanche Exchange is breakingout.
You're breaking out in Chineseroom, nimby terms.
You're breaking out in Eurocurrency terms.
Crude oil is breaking out inevery currency.
I like gasoline even better andhere's the interesting thing
about how it ties into inflation.
Gasoline at $2,065 right now inthe futures contract is up 6.6%
(30:34):
from a year ago.
It's going to become a positiveto CPI when this has been the
biggest negative of all.
The long term moving averageshave been cleared.
The long term oscillatorsturned up.
A breakout takes place at 299.
You're not even close yet andthe open interest is one of the
lowest we've seen in the lastcouple of years.
It's $59,000, which is well offthe peak that was almost
$80,000.
(30:55):
So in January you're at $76,200.
The UGA is the gasoline ETF.
A breakout above $69.
$5690 would be a reasonablestop level.
All right, that's a bottom.
That's in the Fibonacci zone.
You have inverted and shouldersbottom there.
The XLE is the energy shares ETF, last at $9030.
(31:17):
Like it here.
$7880 would be kind of a stoplevel.
$94 would be a major breakout.
The USO is the crude oil ETF.
I like that.
But look at the PXE drillingand exploration, because you do.
You need more of the Petro.
I mean, we downplayed it andnow we're paying for that.
And now they're coming back andnote by the way, all right, all
(31:38):
of the solar, the Q clean, thegreen clean, the tan, the fan,
the PWB, anything related toalternative energy is getting
smoked and is making new lowsagainst gasoline stocks, which
are the high fliers.
So Philip 66, sonoco, sun, xom,love Exxon here, all right.
So when you look at somethinglike when WTI crude oil is,
(32:01):
where the XLE is and where Exxonis it, actually the stocks have
led the way and they imply thatyou could have crude oil
between $115 and $122 a barrel.
That's a big gain.
The other commodity I reallylike here is copper.
You've had inventories downfrom $191,000 to $113,000 over
(32:23):
the last several weeks.
That's a 40% decline inwarehouse inventories of copper.
The swaps are way up now, havebeen deeply negative, now
they're positive.
We haven't seen this kind ofaction in the inventories really
since 2005.
You have London Mining andSouthern Coppercore, lun and
SCCO.
Now they've already broken out,they've gone wild.
But they're implying here too,like in energy, implies the
(32:46):
higher crude, the copper sharesimply a higher copper price of
$575 to $6.
So that's interesting too.
Copx is the copper ETF.
Hudbay, a Canadian miner, hasbeen one that's kind of lagged
but is really starting to breakout, so that's one that's
probably still has value here.
But this is the kind of thing wedo every single day here.
(33:07):
We help retail investors.
We help some of the largesthedge funds in the world.
I worked at one of the largesthedge funds in the world and
I've been doing this for 40years, and now it's kind of come
down to.
I see what's happening in termsof the purchasing power of the
dollar.
I see what's coming.
This is the next wave is cominglike right in here, we're here.
This is why we started thispodcast almost two years ago now
, and so in that context I alsoinvite you all to check out my
(33:29):
YouTube channel.
All right, it's Gregory Weldonon YouTube.
You can check out my Twitter,which is at Weldon Live.
Certainly sign up and follow uson the podcast.
It's on Twitter MoneyUnderscore Podcast.
We're also on YouTube and we'realso on Facebook in terms of
the podcast and I thank you justfor taking the time to hear me
speak and I hope that I gave yousome insight and maybe we can
(33:52):
help you keep pace with thedevaluation and debasement of
the purchasing power of yourpaper money, wealth and income.
Till next time.
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