‘The Most Overwhelming Display Of Selling In History’

Jesse Felder – The Felder Report – June 18, 2022

https://mailchi.mp/felder/overwhelming-display-of-selling

Remember this “Drop Gold” commercial from GBTC a few years ago?

It didn’t age well… Bitcoin is not Gold 2.0 😉

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Grayscale Investments – Drop Gold Commercial

https://youtu.be/_BIDcmh_6Es

+1000- Bitcoin is a NO NO Nanette, always has been for me. DT

Hi Larry and thanks for the kind words, and I agree Rick is “certainly a knowledgeable market manager.”

I’m in a bit of rush today, getting reading to do a bit of traveling, but here are a few thoughts.

I believe Rick’s point was simply that the Fed is working on the side of the equation they can influence [demand] as they have no real impact on the other side [supply]. As a result, they are trying to mute demand by “inflicting losses on the general stock markets” and “creating a reverse wealth effect” as former NY Fed chair Bill Dudley promoted. We’ve seen that in the housing market starting to roll over, and the stats around new housing starts drying up (which will have a ripple effect across many markets, but will impact consumers feeling of wealth as their assets go down in nominal terms).

Will all of this impact inflation… it depends on where people believe the inflation came from. As discussed ad naseum on this show over the last few years, and more recently on many of the posts submitted on the Sean Brodrick blog earlier this week, the classic definition and accepted understanding of where inflation comes from is an increase in the money supply.

The Fed was definitely guilty of increasing the money supply with little regard to the inflation it would create, and laughably wanted to see inflation get up to 2% (when it already was well over that on any real metrics like John Williams Shadowstats). BTW, no citizen should have ever been rooting for higher inflation, as it just reduces their quality of life and is an insidious tax on everything – products and services. Only banksters are rooting for higher inflation.

Fed monetary policy creating massive amounts of magical new money from nothing, was one side of the issue, augmented by the wreckless fiscal policy from governments on massive stimulus bills stuffed with pork and SJW programes, and spiked by helicopter money sent out by the government in stimmy checks, PPP business loans that were misused for personal consumption, rebates based on children in the house, extended and expanded unemployment benefits (where people made more to stay home than to go to work), and all other such nonsense we’ve seen over the last 2 years. When there is an increase in money supply chasing the goods and services, inflation is the result. Period.

The popular scapegoats of “supply chain interruptions” and “war in Ukraine” definitely escalated the process and hurt supply, but they are not the cause of the inflation as so often touted. If the Fed wants to really reign in inflation, they can keep hiking, and more importantly go through with reducing their balance sheet and overall liquidity, but all their policies, in their own words, take 6-12 months to take effect. Any reduction in the CPI numbers for the balance of this year will not be because of Fed policy, and will merely be a reduction of trend in inflation due to the year-over-year comparables or Base Effect. This won’t stop the Fed goons from taking a victory lap if we see the CPI figures trend down, but it will not be from their efforts at this early stage.

However, the Fed have actually been very proficient in one area… and that is losing investors confidence and tanking the equity markets. They were wrong about the prior housing bubble in the G.F.C., wrong about how quickly inflation would grow, wrong about claiming they were “not even thinking of thinking about hiking rates until 2023”, wrong about inflation just being transitory in March & April of 2021, and wrong about how far behind the curve they got. It is a true policy error of epic proportions, but not a surprise.

If that failure to act continues, or even if they continue to act at this point, it may affect how enthusiastic consumers are to go out and spend on discretionary items, and this will have an effect of chilling the economy. Sure, they’ll temper demand, but at what costs for everyone else. We see that clearly in the recent lower-than-expected retail sales numbers and record low consumer confidence readings.

With so many consumers in the hurt locker, living off savings, living off home equity lines of credit, or living off credit card plastic, the high prices at the gas pump, grocery store, and for almost all products and services will mean the excessive demand and buying of yesteryear will gradually start drying up. This will be reflected as the Q2 earnings reports come out, with companies seeing lower sales and revenues, and likewise being squeezed by inflationary pressures and higher cost inputs and labor inputs. Look at the kerfuffle from so many retailers in Q1 (like Walmart, Target, etc…) or social media companies like Snap or Facebook showing the pain is starting to show up in the earnings numbers.

The Fed has a choice coming up later this year (after the July and September meetings where they plan on hiking rates 50-75 basis points). This is the “Choke Point” or “Tipping Point” or “Gotcha Moment” or “Check Mate Moment” where we find out if the central banksters will stay firm with continuing to raise Fed funds rates up to where inflation is (and likely incite a true recession), or if we see a “Powell pause” where they do nothing and try to jawbone the markets into submission, or a “Powell pivot” where they reverse course and eventually start cutting rates again from a higher level, and potentially implement QE once again to try and reliquify the markets.

When one looks at the negative GDP quarter in Q1, and the downward estimates on GDP Now for Q2 from 2% to 1.5% to 1.2% to now 0%… it’s pretty clear we are seeing stagnating and slowing economic growth, and when paired with runaway and persistently high inflation, soaring energy prices, and more recently small business and large businesses shedding workers, we are already headlong into Stagflation. Will this morph into a recession, or inflationary depression? We’ll just have to see how it plays out over the next 12 months or so.

I listened to Rick because of your comment Larry and he’s the first expert I’ve come across that has impressed me across the board on interest rates as well as his current and long term outlook on commodities. I agree with him so completely in this interview that I’m almost shocked. I’d buy his ETF so I hope it gets set up soon.

Some of the points he made that align with my recent comments:
-Fed was forced/had no choice with respect to the .75% hike
-Fed doesn’t care about the stock market (but that myth will live on!)
-Significantly higher rates are coming over time
-Inflation’s gonna get a lot worse
-Just trading bounces from here in the stock market

Being overweight financials is the one thing I disagree with.

Rick’s lightening up his XLE exposure on June 1st was superb timing based on the monthly chart which will obtain a bearish engulfing reversal if it doesn’t improve by the close in less than two weeks from now. The quarterly also currently suggests the “need” for a multi-quarter correction/consolidation.

Let’s get that ETF launched!

Right on, Chris. Gold looks great and silver looks better. Both improved significantly yet again. The caveat is, as usual, that the CoT positioning is no good for short term timing of trades.

If a broad-based significant rally doesn’t start now, it could take until mid August before the whole sector gets going.
https://stockcharts.com/h-sc/ui?s=%24HUI&p=D&yr=1&mn=11&dy=0&id=p65395278147&a=1172579925

Also DT, we now have the grand puba of the World Economic Forum, Klaus Schwab, telling us emphatically that in the future: “You’ll own nothing, and be happy about it.” 😉

https://www.armstrongeconomics.com/wp-content/uploads/2020/10/Schwab-you-own-nothing.jpg

You’ll make more money if you understand what drives the Fed to do what it does.

Their jobs … and their lives. Fed folks are not the ultimate shot-callers.

The problem is, the people behind the debt Ponzi scheme NEVER collapse and never will. The bill will be paid entirely by the clueless masses.

URA looks much worse overall…
https://stockcharts.com/h-sc/ui?s=URA&p=W&yr=3&mn=0&dy=0&id=p43216473994&a=1189651140

It looks quite possible that LIT is finishing up the right should of a head & shoulder pattern. If that’s the case, there could still be a long fall down for the Lithium stocks. Glad I finished liquidating the Lithium stocks held in my portfolio last year, as it seemed very frothy and due for a longer corrective move.

The same goes for the CRB:
https://stockcharts.com/h-sc/ui?s=%24CRB&p=D&yr=1&mn=0&dy=0&id=p23008260524&a=1161404064

Good Copper chart Matthew. It does look like it has pierced down through support now, and could drop quite a bit lower. Steve Penny had a good Copper chart on his Friday editorial with us here on the KER, and he mentioned if $4 gives way that a quick move down to $3 could be in order. He felt that it could go either way, but sounded more bullish than I believe the chart looks. If the economy is slowing down, and if we are moving closer to a recession, and with China all closed down, even though I really like copper longer term based on supply/demand factors, I’m a bit worried in the more short to medium-term.

Right now I just have exposure to a few Copper producers Sierra Metals & Atico Mining (but don’t currently have my COPX exposure). However, I do still have exposure to 2 explorers, Kodiak & Libero, that could still march to the beat of their own drums based on how their exploration seasons go. However I also have exposure to a few multi-metals developers that still have significant copper exposure like Group Ten, Troilus, Metallic Minerals, and even some exposure through McEwen Mining’s Los Azules project. For the most part I’ve continued paring down my overall copper and really most base metals exposure throughout 2021 and early 2022, but if Copper fell out of bed it would still hurt the above positions, and likely it would drag down other base metals like Nickel, Zinc/Lead, and PGMs in sympathy. Bummer…

I could be mistaken, but got the impression from Matthew’s charts that weakness he sees in store for commodities and resources stocks in Lithium, Uranium, Copper, and the CRB index (most heavily weighted to Oil/Nat Gas) is likely more short-term to medium-term weakness possibly over 3-9 months or so.

Personally, I didn’t take away from those charts that they were bearish for the longer term (years), but a further pullback in the commodities space does seem overdue, especially with slowing economic growth, and after many have been on relentless runs higher. That is a similar point that Rick made on the weekend show. Some of the ratio charts could also resolve where commodities pull back some, but in tandem with other asset classes gaining some ground relative to commodities. Seems reasonable to me, and if we see a big corrective move in the commodities, it would knock a bit more froth out of the sector, and provide a better spot to build positions back up in the base metals and energy metals.

Heard rumor that Soros made 75 billion shorting Bitcoin

Hi Terry, markets should never be allowed to close, AGREED! DT

Juneteenth is idiotic.

Agreed Terry, but just as a heads up we have not had the 4th of July holiday yet. (it only being mid-June). 🙂

We just had Memorial Day is likely what you were thinking.

Like commodities, yields have earned a good break from their 2 year run higher…
https://stockcharts.com/h-sc/ui?s=%24UST10Y&p=W&yr=6&mn=3&dy=0&id=p91872311719&a=961446476

Matthew:

RE: the Jeff Snider at The Eurodollar University link above – he is one of the few folks that appears to deeply understands the “plumbing” of the “Eurodollar System” (a phrase that refers to the dollar outside the US and the beyond the control of the FED, a very large market indeed). He argues that things are not as they appear. To say that this is complex is an understatement. But, he is arguing that the Fed really isn’t in total control and that they will be lowering rates sooner than you think. I’m not going to try and distill his arguments because I lack the background to do so but essentially I think he argues that the world has too little quality collateral and that markets are headed to a point where they will seize up. This will happen not because the banks don’t want to lend but because they can’t find creditworthy customers that want to borrow $’s. He also says that the Fed’s control is more of an illusion than anything else – they will have to respond by lowering rates sooner than you think.

He isn’t alone – see: https://www.youtube.com/watch?v=vP6-0V-Hfa4
On this podcast the guest, Frances Donald, says she expect by this time in 2023 the Fed will be lowering rates because they have no choice.

Frankly to process all this I feel I need a degree in Economics but the rumbling we are all sensing aren’t just indigestion from one too many atomic tacos – it is real and will show its face soon.