Jim Jordan Slaps Former White House ‘Disinformation Czar’ With Subpoena After Requests Ignored
The former head of the Biden administration’s short-lived Disinformation Governance Board, Nina Jankowicz, was slapped with a subpoena by the House Judiciary Committee on Monday.
Jankowicz, a huge fan of disinformation peddler Christopher Steele who cast doubt on the Hunter Biden laptop story, resigned from her position last May after the DHS ‘paused’ the disinfo organization. She previously served as a disinformation fellow at the Wilson Center, and advised the Ukrainian Foreign Ministry as part of the Fulbright-Clinton Public Policy Fellowship. She also oversaw the Russia and Belarus programs at the National Democratic Institute.
Jankowicz also makes creepy Disney-themed songs in a fake British accent, leading to the nickname “Scary Poppins.”
The former ‘disinfo czar’ has been ducking requests from the House Committee for months.
“We have repeatedly sought information from you concerning your official actions and duties as a DHS employee and former Executive Director of the Board, including how the Board intended to define disinformation, how it planned to collect information and from what sources, how it anticipated countering disinformation, and how it proposed to protect First Amendment rights,” Chairman Jim Jordan (R-OH) wrote in a letter to Jankowicz. “To date, however, you have declined to comply voluntarily with our request for a transcribed interview.”
Compels her to appear for a deposition relating to Joe Biden’s failed “Disinformation Governance Board.” pic.twitter.com/MzClswwHhV
— Weaponization Committee (@Weaponization) March 6, 2023
According to documents revealed by Sens. Josh Hawley (R-MO) and Chuck Grassley (R-IA), the Disinformation Governance Board would have an expansive reach despite DHS Secretary Alejandro Mayorkas’ claim that the board would “not infringe on free speech… civil rights [or] civil liberties.”
Biden administration officials expressed particular concern about “conspiracy theories about the validity and security of elections,” “disinformation related to the origins and effects of COVID-19 vaccines or the efficacy of masks,” and “falsehoods surrounding U.S. government immigration policy,” in one document released by the senators.
Republican elected officials also expressed concern with DHS’s decision to tap Jankowicz to lead the board. A former fellow at the Woodrow Wilson International Center for Scholars, Jankowicz repeatedly accused GOP officials and activists of spreading disinformation. She claimed that opponents of Critical Race Theory are engaging in “disinformation for profit,” and that Hunter Biden’s laptop was a Republican “campaign product.” -Daily Caller
“There’s never been any indication that Hunter Biden was involved in anything untoward,” she said of Hunter Biden’s lucrative position on the board of Ukrainian energy giant Burisma.”It certainly has nothing to do with Joe Biden’s policies toward Ukraine.”
Catherine Austin Fitts (CAF), Publisher of The Solari Report, financial expert and former Assistant Secretary of Housing (Bush 41 Admin.), says the Central Bank Digital Currency (CBDC) is much easier said than done. There is a monster fight behind the scenes between commercial banks and central banks.
CAF explains, “You have bubbled an entire economy, and now you are bringing out something (CBDC) that could shrink the bubble dramatically, and it can put a lot of banks out of the game and out of the business…”
“If the central banks are going to compete directly for retail accounts, it’s going to shrink the fees and business for a lot of banks. You are talking about cutting their income or putting them out of business. So, CBDC is highly controversial. One reason is people are beginning to wake up and realize, oh, I am no longer an insider. CBDC is going to turn me into a slave, and they are going to be able to take all my assets. You think they could lock you down during the pandemic? The CBDC is the ultimate lockdown tool, and they can lock anyone down whenever they feel like it.”
The Fed’s biggest fear is losing control of the financial system. CAF says,
“The Fed is scared to death of the global debt growth model, and they kept this model going by growing the debt more and more and more. Now, interest rates are accelerating in a way . . . it shrinks your productivity. So, the pie that is supporting the debt, is shrinking….
This is a coup model just like in Ukraine. You push all the people out or you kill them. You have war conditions so you can pick everything up cheap. You can do this with government money to ‘help’ Ukraine. No, it is government money to help the insiders to buy Ukraine, control Ukraine, own Ukraine.”
CAF says if you want to fight against the CBDC, then start spending cash every day instead of electronic payments. CAF started with “Spend cash on Friday,” and it took off. CAF says,
“Cash Friday became cash every day. You know why? It was so successful. We get these incredible stories… hundreds and hundreds of stories of people starting to engage with their local businesses about what are we going to do about all of this? It starts with cash because businesses pay 3% on their credit card fees. . . . This can be the difference between making a profit or a loss if everybody pays cash.”
CAF also talks about more ways coming where you can pay in gold and silver coins. CAF tells us why gold and silver should be core investments and why she likes silver more than gold. CAF tells us why she is not worried about the threat of nuclear war, what the NATO plan is for Russia and why it’s backfiring.
CAF also talks about why the Second Amendment is the biggest block to digital currency prison and why she thinks “2023 is a pivotal year for freedom and opportunity.”
There is much free information on Solari.com. You can search for all the free information CAF talked about by using the search box in the upper right-hand corner on the homepage of Solari.com.
A new nationwide study from the Trafalgar Group and Convention of States Action (COSA) reveals that 43.4 percent of US voters believe the country is on the brink of World War III, considering the war in Ukraine, perceived threats against other European nations, and China’s aggressive posture against the US.
30.3% of those polled do not believe we’re on the brink of another world war, while 26.3% are not sure.
The poll was conducted between Feb 22nd through Feb 26, before USAID head Samantha Power admitted that the US is at war with Russia but that it’s “Ukrainians doing the fighting.”
And then there’s this:
Step by step, the people of the UK are being prepared for war.
“Britain should engage directly in war against Russia ,we are at war in Europe, we need to move to martial law”
When broken down by party, just 26.4% of Democrats think WWIII is imminent, while 56.7% of Republicans, and 47% of independent voters believe we are on the brink of WWIII.
“While the Biden Administration and its allies in corporate media continue to downplay the existential threat posed by China, Russia, Iran, and other enemies of the free world, the American people see clearly that we are at a moment of unprecedented risk for our nation and the world. Our weakness and incompetence–on the border, on energy policy, and on our approach to China–are increasing the risk of international armed conflict in a highly-nuclearized age,” said Convention of States President, Mark Meckler.
China’s new foreign minister, meanwhile, says the United States is heading for “conflict and confrontation” with Beijing, and that Washington needs to change its “distorted” attitude towards China.
“If the United States does not hit the brakes, and continues to speed down the wrong path, no amount of guardrails can prevent derailment, which will become conflict and confrontation,” said Qin Gang. “And who will bear the catastrophic consequences?“
Aussie Slides After RBA Hikes Rates For 10th Consecutive Time, Says Inflation Has Likely Peaked
Overnight, the RBA increased the cash rate for the 10th consecutive time by +25bp to 3.60% at March’s Board meeting – the highest level since May 2012 and in line with expectations.
While the statement maintained a clear hawkish bias, noting that the Board “expects that further tightening of monetary policy will be needed”, the tightening bias was notably softer than February’s alongside the RBA’s observation that “labour market conditions have eased a little”, the risk of a price-wage spiral has lessened, and inflation has likely peaked.
According to Goldman analysts, today’s statement provides the RBA some optionality to pause the tightening cycle in the event that the recent weakness in the monthly labor force reports is sustained. That said, Goldman expects a solid rebound in next week’s employment data as unusually large seasonal distortions unwind. Ultimately, with the unemployment rate near a 50-year low, inflation far above target, substantial excess savings supporting household balance sheets, and the Fed Funds rate likely to rise to 5.25-5.50% – the bank believes that a materially higher RBA cash rate will likely be required to bring inflation back to target on a credible timeframe.
Governor Philip Lowe said in his statement that in assessing “when and how much further” rates need to go up, the RBA will pay close attention to incoming economic data.
Looking forward, Goldman expects the RBA to raise the cash rate +25bp in April and May to a terminal rate of 4.1% – with the risks skewed to a more elongated tightening cycle to a higher terminal rate.
Main Points from the RBA statement:
The RBA increased the cash rate +25bp to 3.6% at March’s Board meeting, in line with expectations (31/31 forecasters surveyed by Bloomberg expected +25bp, including GS). The attending statement reiterated the Board’s priority “is to return inflation to target… if high inflation were to become entrenched in people’s expectations, it would be very costly to reduce later”, but also maintained it wanted to keep the economy “on an even keel”.
The forward guidance in the final paragraph noted the Board “expects that further tightening of monetary policy will be needed”, a marginally more ambiguous statement compared to the previous guidance (“expects that further increases in interest rates will be needed over the months ahead”). The Board also added the words “when and” to the final sentence “in assessing when and how much further interest rates need to increase, the Board will be paying close attention to developments in the global economy, trends in household spending and the outlook for inflation and the labour market.” We viewed this as increasing the Board’s optionality around the timing of future hikes, including the option of a pause, in addition the magnitude of future hikes.
On the domestic economy, the RBA’s comments were incrementally more dovish than the prior month on several fronts. The statement noted that growth in the Australian economy “has slowed”, as did household consumption growth “due to tighter financial conditions”, while the outlook for housing construction “has softened”.
On the labour market, the RBA characterized conditions as “very tight” overall but noted they “have eased a little”, although it caveated that the weakness in January’s employment data “partly reflects changing seasonal patterns in labour hiring”.
On wage growth, the RBA noted “at the aggregate level, wages growth is still consistent with the inflation target and recent data suggest a lower risk of a cycle in which prices and wages chase one another”, although it noted “the Board… remains alert to the risk of a prices-wages spiral”.
On inflation, the RBA noted “the monthly CPI indicator suggests that inflation has peaked in Australia. Goods price inflation is expected to moderate over the months ahead due to both global developments and softer demand in Australia. Services price inflation remains high, with strong demand for some services over the summer”. Going forward the RBA continues to expect inflation to “decline this year and next” to be “around 3 per cent in mid-2025”.
The market clearly took the RBA statement as far more dovish than Goldman, and the AUD sold off after what was seen as a dovish hike, the currency sliding more than 1.1% on Tuesday.
China Threatens US With “Conflict And Confrontation” As Xi Issues “Unusually Blunt” Rebuke Of US Policy
In an unexpectedly sharp escalation of diplomatic rhetoric, China’s foreign minister said that the US should change its “distorted” attitude towards China or “conflict and confrontation” will follow, while defending the country’s stance on the war in Ukraine and defending its close ties with Russia.
Speaking at a news conference on the sidelines of an annual parliament meeting in Beijing, Foreign minister Qin Gang took an uncharacteristically direct swipe at the US, and said that the U.S. had been engaging in suppression and containment of China rather than engaging in fair, rule-based competition.
“The United States’ perception and views of China are seriously distorted,” said Qin, a trusted aide to President Xi Jinping and until recently China’s ambassador in Washington. “It regards China as its primary rival and the most consequential geopolitical challenge. This is like the first button in the shirt being put wrong.”
The U.S. says it is establishing guardrails for relations and is not seeking conflict but Qin said what that meant in practice was that China was not supposed to respond with words or action when slandered or attacked. “That is just impossible,” Qin told his first news conference since becoming foreign minister in late December. U.S. officials often speak of establishing guardrails in the bilateral relationship to prevent tensions from escalating into crises.
Qin’s comments struck the same the tough tone of his predecessor, Wang Yi, now China’s most senior diplomat after being made director of the Foreign Affairs Commission Office at the turn of the year.
“If the United States does not hit the brakes, and continues to speed down the wrong path, no amount of guardrails can prevent derailment, which will become conflict and confrontation, and who will bear the catastrophic consequences?”
Qin also likened Sino-U.S. competition to a race between two Olympic athletes.”If one side, instead of focusing on giving one’s best, always tries to trip the other up, even to the extent that they must enter the Paralympics, then this is not fair competition,” he said, effectively suggesting that Biden is handicapped.
While relations between the two superpowers have been deteriorating for years over a number of issues including Taiwan, trade and more recently the war in Ukraine, they worsened dramatically last month after the United States shot down a balloon off the U.S. East Coast that it says was a Chinese spying craft.
During Qin’s nearly two-hour news conference, he answered questions submitted in advance and made a robust defence of “wolf warrior diplomacy”, an assertive and often abrasive stance adopted by China’s diplomats since 2020.
“When jackals and wolves are blocking the way, and hungry wolves are attacking us, Chinese diplomats must then dance with the wolves and protect and defend our home and country,” he said. Qin also said that an “invisible hand” was pushing for the escalation of the war in Ukraine “to serve certain geopolitical agendas”, without specifying who he was referring to.
He reiterated China’s call for dialogue to end the war. China struck a “no limits” partnership with Russia last year, weeks before its invasion of Ukraine, and China has blamed NATO expansion for triggering the war, echoing Russia’s complaint. Additionally, China has declined to condemn the invasion and has fiercely defended its stance on Ukraine, despite Western criticism of its failure to single Russia out as the aggressor.
While China has vehemently denied U.S. accusations that it has been considering supplying Russia with weapons, Qin said China had to advance its relations with Russia as the world becomes more turbulent and close interactions between President Xi Jinping and his Russian counterpart, Vladimir Putin, anchored the neighbours’ relations.
He did not give a definite answer when asked if Xi would visit Russia after China’s “Two Sessions” event, which goes on for one more week. He did, however, say that the Ukraine crisis has a complex history and cause. In essence, it is an eruption of the problems built up in the security governance of Europe.
“The Ukraine crisis is a tragedy that could have been avoided. But it has come to where it stands today. There are hard lessons that all parties should truly reflect upon.”
The Ukraine crisis is a tragedy that could have been avoided. But it has come to where it stands today. There are hard lessons that all parties should truly reflect upon. pic.twitter.com/orc0koUwWt
Naturally, Qin also mentioned Taiwan, saying that “If the US truly expects a peaceful Taiwan Strait, it should stop containing China by exploiting the Taiwan question, return to the fundamental of the one-China principle, honor its political commitment to China, and unequivocally oppose and forestall Taiwan independence.”
Qin also warned that mishandling of the Taiwan question will shake the very foundation of China-US relations: “Separatism for Taiwan independence is as incompatible with peace and stability of the Taiwan Strait as fire with water.”
“For peace and stability in the Taiwan Strait, its real threat is the separatist forces for Taiwan independence, its solid anchor is the one-China principle, and its genuine guardrails are the three China-US joint communiqués.”
The foreign minister then made several key observations, exposing US hypocrisy:
“The Chinese people have every right to ask: Why does the US talk at length about respecting sovereignty and territorial integrity on Ukraine, while disrespecting China’s sovereignty and territorial integrity on the Taiwan question?”
“Why does the US ask China not to provide weapons to Russia, while it keeps selling arms to Taiwan in violation of the August 17 Communiqué?”
Why does the US keep on professing the maintenance of regional peace and stability, while covertly formulating a “plan for the destruction of Taiwan”?
The bottom line: “The Taiwan question is the core of the core interests of China, the bedrock of the political foundation of China-US relations, and the first red line that must not be crossed in China-US relations.”
Asked whether it was possible that China and Russia would abandon the U.S. dollar and euro for bilateral trade, Qin said countries should use whatever currency was efficient, safe and credible.
China has been looking to internationalize its currency, the yuan, which gained popularity in Russia last year after Western sanctions shut Russia’s banks and many of its companies out of the dollar and euro payment systems.
“Currencies should not be the trump card for unilateral sanctions, still less a disguise for bullying or coercion,” Qin said, clearly referring to the weaponization of the US dollar in the aftermath of the Ukraine war.
* * *
It wasn’t just the foreign minister lashing out at the US: Chinese leader Xi Jinping also issued what the WSJ dubbed an “unusually blunt rebuke” of U.S. policy on Monday, blaming what he termed a Washington-led campaign to suppress China for recent challenges facing his country.
“Western countries—led by the U.S.—have implemented all-round containment, encirclement and suppression against us, bringing unprecedentedly severe challenges to our country’s development,” Xi was quoted by state media as saying on Monday, the WSJ reported.
Xi’s comments marked an unusual departure for a leader who has generally refrained from directly criticizing the U.S. in public remarks—even as his decadelong leadership has demonstrated a pessimistic view of the bilateral relationship. The accusation of U.S. suppression of China’s development over the past five years comes as Mr. Xi faces charges from investors that China’s economy has been damaged by his policies, including the emphasis on national security.
The comments were part of a speech to members of China’s top political advisory body during an annual legislative session in Beijing, according to a Chinese-language readout published by the official Xinhua News Agency.
As the WSJ notes, “while Xi has mentioned the U.S. in critical tones during internal speeches, such remarks have often filtered out through subordinates relaying his messages for broader audiences, within the party and beyond.” In statements made in public settings or directly reported by state media, Xi has typically been more measured and vague regarding the U.S. and other Western countries, referring to them as “certain” countries rather than naming them explicitly.
Not this time: by directly accusing the U.S. of seeking containment, a term loaded with Cold War meaning, Xi appears to be associating himself more closely with nationalist rhetoric—widely used by lower-ranking officials and state media—that attacks Washington, at a time when bilateral tensions continue to simmer over trade, technology, geopolitical influence and discordant views on Russia’s invasion of Ukraine.
The English-language version of Xi’s speech reported by Xinhua didn’t refer to containment or the U.S. Instead, it quoted him telling fellow officials to “have the courage to fight as the country faces profound and complex changes in both the domestic and international landscape.”
The accusations by Xi against the U.S., delivered to an audience that includes politically connected businesspeople, appeared in part to be an effort by Xi to shift blame away from his own policymaking, including tough Covid controls that have weakened the economy and pressure on technology companies that cost the industry some of its dynamism.
US Stocks On Verge Of Reasserting Their Dominance Over EU
Authored by Simon White, Bloomberg macro strategist,
US stocks are poised to outperform their European peers as recession risks in Europe look underpriced.
Like a pendulum, sentiment in markets has a tendency to swing from one extreme to another. It was barely a year ago that the prevailing narrative was a Europe on the verge of an energy-driven existential crisis. The seriousness of the predicament concentrated minds wonderfully, and Europe has so far managed to dodge the most doom-laden predictions.
But the pendulum has swung back too far. The narrative has transformed into a Europe that will avoid a recession, or much of a downturn, altogether. Yet the data tell a different story.
Leading economic data is the most pivotal for markets, which are (or should be) forward-looking mechanisms.
I’ve combined such data into an indicator that leads European growth by about six months. It paints an unequivocally downbeat picture.
So where is the optimism coming from? Most of the reason for cheer in Europe is due to bounces in PMIs, with the Spanish and Italian manufacturing surveys now back in expansionary territory. Also economic sentiment, compiled by the European Commission, has risen, while the ZEW’s expectations of economic growth has bounced hard. Consumer confidence is higher as well.
But recoveries in soft, survey-based data when not accompanied by a similar improvement in hard data are paper thin, and can quickly be reversed. That is where we are with Europe.
Since last summer, economic surprises have been driven by soft data. It is the rise in surprises that has helped propel European equities to their best outperformance of US stocks in almost twenty years.
Labor data have stayed supported, but other hard data such as retail sales, factory orders and industrial production remain weak. Most egregious is the largest fall in real M1 growth on record, surpassing a level that has preceded the last two European recessions.
Some have argued that M1 has lost its forecasting power as higher rates have made overnight deposits less attractive than longer-term ones. But the latter are counter-cyclical, while overnight deposits (whose drop is driving M1’s fall) exhibit a clear relationship with future activity. Ignore the collapse in M1 growth at your peril.
There was a good case to be made for European equity outperformance last year. The market was oversold and underowned, sentiment was very negative and equity returns were broad based. None of those is true today.
After a 30% rally off the October lows, the market is looking overbought. The move higher is now being driven only by revenues, unlike last year when these, along with margins and dividends were all contributing to returns.
US stocks, on the other hand, are beginning to look relatively attractive. Despite a roster of reasons to be skeptical about the resilience of the US market – recession risk, instabilities from zero-day option trading, negative gamma, overvaluation – some technicals are becoming constructive.
The beauty of those is that they are pure – aloof from commentary, opinion or the economy – driven only by price and volume. They may sometimes go against your “common sense” view, but when a weight of them point in one direction, it’s often prudent to drop your current narrative and follow the price.
Of most note is the change in the S&P’s trend this year. One of the simplest and most reliable measures of the stock-market’s medium-term trend is the 13-week versus 26-week moving-average crossover. Very simply, the market is in a downtrend when the 13-week is below the 26-week, and vice-versa.
The 13-week moving average went back above the 26-week about 5-6 weeks ago, suggesting the current upward trend in US stocks could be maintained for several more weeks at least, perhaps much longer.
On top of that, other technicals, such as advancing versus declining issues, number of stocks making new 52-week highs, and the percentage of stocks trading above their 200-day moving average are all constructive for higher prices, with none indicative of extremely overbought behavior that can precede a larger correction.
The Fed is most likely closer to the end of its series of hikes than the ECB. Indeed, the ECB risks amplifying the weakness in the economy that hard data betrays, as it becomes more gung-ho in its hawkishness, emboldened by resilient soft data and sticky inflation.
Europe has had a good run, but the summer tends to be a graveyard for outperformance versus US stocks, with May to September showing a consistently negative trend. Even more, the US on average outperforms global stocks May through November.
It is said life is like a pendulum: the deeper the sorrow, the greater the joy. After several months of sorrow, US stocks may soon be about to experience the joy of pre-eminence once more.
Meta Platforms Inc., the owner of Facebook and Instagram, is preparing to carry out another round of layoffs this week as part of its efforts to enhance organizational efficiency, according to Bloomberg.
The upcoming job cut is part of cost-cutting measures known as “flattening,” as per anonymous sources familiar with the matter. These insiders revealed that Meta had asked directors and vice presidents to compile lists of employees who could be terminated. This comes as the world’s largest social networking company has experienced a decrease in advertising earnings and dialed back investments in the metaverse.
The job cut, which could start as early as this week, will add to the November layoffs of approximately 13% of its workforce (equivalent to around 11,000 employees). Sources said the job cut would be ready before CEO Mark Zuckerberg goes on parental leave for his third child.
Zuckerberg has previously indicated 2023 will be a “year of efficiency.” He told analysts in February he is focused on “cutting projects that aren’t performing or may no longer be crucial” and plans on “removing layers of middle management to make decisions faster.”
According to the Financial Times, Meta team leaders and project managers allegedly have trouble planning their workloads due to the lack of transparency regarding the imminent headcount reduction.
As the prospect of new job cuts looms, workers at Meta have reportedly informed the Financial Times that no work is being completed.
“The year of efficiency is kicking off with a bunch of people getting paid to do nothing,” another employee said, adding that day-to-day work “is a mess.”
Headcount reduction at tech companies continues full steam ahead in 2023. Website job tracker Layoffs.fyi show 461 tech companies have slashed 125,677 jobs so far this year.
Here are the some of the largest tech job cuts over the last several years.
Is the recent correction a “bear trap?” Or is the bounce just a selling opportunity for a return of the bear market?
“A bear trap occurs when there is a bearish correction or reversal amid an overall uptrend. A downward correction sees shorting temporarily overcoming buying pressure, leading to a short-term price fall. The decline may be small or large, potentially failing at recent price highs in the uptrend.
The downward correction may last several trading sessions, giving a false impression that the market has indeed reversed. Traders might take short positions to profit on falling stock prices, but when buyers begin seeing prices drop and increase their buying activity, the market won’t support prices falling further. It then rapidly resumes its uptrend.” –Investopedia
Such will be the center of the debate after the recent market correction that tested support at the 200-DMA. However, as we discussed at the beginning of February, a correction was needed if the bull market was going to continue. To wit:
“If the “bear market” is “canceled,” we will know relatively soon. To confirm whether the breakout is sustainable, thereby canceling the bear market, a pullback to the previous downtrend line that holds is crucial. Such a correction would accomplish several things, from working off the overbought conditions, turning previous resistance into support, and reloading market shorts to support a move higher. The final piece of the puzzle, if the pullback to support holds, will be a break above the highs of this past week, confirming the next leg higher. Such would put 4300-4400 as a target in place.”
Such is precisely what happened with the market testing, and holding, the rising trend channel from the October lows. The market also held the 200-DMA, which, as noted, confirmed the bullish breakout above a level that proved to be resistance in 2022.
Furthermore, as discussed in the past weekend’s newsletter, the MACD “sell signal” is close to reversing to a buy signal.
“Importantly the MACD ‘sell signal,’ which warned of the recent correction, is beginning to reverse. However, that reversal occurs midway through regular oscillation, suggesting that the upside is somewhat limited.”
The chart below is longer-term than what we showed in the newsletter but better indicates the validity of the “sell signal.” The “buy signals” were also good opportunities to trade rallies during last year’s decline.
While there are certainly many fundamental reasons to remain “bearish” on the markets, The technical backdrop continues to confirm and reaffirm a more bullish trend developing.
If this is a “bear trap,” thenJim Cramer may be correct when he says:
“If we’re in a bull market, and I think we are, you have to prepare yourself,” he said, adding,“We have to prepare for the down days now because in a bull market, they’re buying opportunities.” – CNBC
While the short-term technicals are bullish, the longer-term technicals also remain bullishly biased.
Long-Term Technicals Remain Bullish
Daily price charts can provide a short-term view of market psychology from days to weeks. The problem with daily price analysis is volatility can cause short-term swings in the market that can disconnect from the market’s underlying trend or fundamental data.
If we slow that price action by examining weekly pricing data, the volatility gets smoothed out. Such reveals a clearer picture of the market delivering a more bullish message.
The S&P 500 has scored seven weekly closes above its 40-week moving average, which is a positive sign. In addition, the market has cleared the 40-week DMA downtrend line from January and December 2022, suggesting a potential bullish turn in the trend. Assuming supports hold, the next major resistance beyond the post-FOMC peak at 4195 is the August 2022 peak at 4325 (orange dashed line).
Furthermore, the October low held support at the 200-week moving average, which remains support for the market since the 2009 lows.
The weekly 14-period relative strength index (RSI) has also turned sharply positive and is above 50, suggesting markets are back in a bullish trend. That index broke above resistances that capped bear market rallies in April, August, and December 2022.
Lastly, our most critical bullish signals are the short- and intermediate-term Moving Average Convergence Divergence (MACD) indicators. We post this weekly chart in our website’s 401k plan management section. Both sets of weekly MACD indicators have registered buy signals from levels lower than during the financial crisis. The market has also broken above both weekly moving averages and, as noted above, held the long-term bullish trend line.
Bull Now, Bear Later
Given the abundance of bullish signals, we must give some credence to the message and invest accordingly. However, ample fundamental evidence supports the argument that the “bear market” is not yet dead.
The markets have grown “manic,” quickly swinging wildly from extreme pessimism to optimism. Such is not the basis on which investing activity resides but rather where speculation abounds in its purest form.
Over the next 12 months, the “bear market is over” thesis will depend much on the Federal Reserve, Government policies, and inflation. The recent passage of the “Inflation Reduction Act” will increase taxes on corporations and households. Such will reduce growth and profit margins along with stubbornly high inflation. Furthermore, the surge in the money supply will continue to reverse, reducing earnings growth rates further.
Of course, tighter monetary from the Federal Reserve is weighing on economic growth, which will continue later into the year, with a recession become more likely with each rate hike. Notably, there is a high correlation between economic growth and earnings.
Such is an important backdrop. The markets are pricing earnings of roughly $199 per share by the end of 2023, down from $242 in July. However, if the Fed continues its fight against inflation and triggers a recession, earnings could drop to $170/share. At a generous forward multiple of 18x those earnings, you are looking at a fair market calculation closer to 3000 on the S&P 500 index.
Conclusion
While the technicals suggest this is a “bear trap,” the fundamentals do not support that argument. When it comes to equity risk, it is corporate earnings that will drive equity prices. As the Fed hikes rates to slow economic activity and potentially cause a recession, such will translate into slower earnings growth and reduced profit margins. Given that valuations are near 29x earnings currently, such suggests that stocks must reprice lower. The 6-month annual rate of change of the Leading Economic Index (LEI) supports that thesis, meaning earnings will decline over the next two quarters.
Whether the bull or bear trap view wins will only become known in time. However, as noted, while the bulls currently control the technical picture, the Fed still has control of the macro environment. While we will continue to trade the markets tactically in the short term, in our view, there is still a risk of a more profound decline unless the Fed changes course in short order.
We must wait and see who wins the “bull market is over” debate.
The past few decades of unnaturally easy money have created a world of “moral hazard” in which a ridiculous number of people borrowed far more than they should have.
Now, with money getting tighter, not just businesses and individuals but some governments are staring at the “suddenly” part of that old saying about bankruptcy.
Japan is the poster child for this slow walk towards – then quick rush over – a financial cliff.
Here’s how it works for a government, in 10 steps.
Step 1: Build up massive debt. A bursting real estate bubble in the 1990s confronted the Japanese government with a choice between accepting a brutal recession in which most of that debt was eliminated through default, or simply bailing out all the zombie banks and construction companies and hoping for the best. They chose bailouts, and federal debt rose from 40% of GDP in 1991 to 100% of GDP by 2000.
Step 2: Lower interest rates to minimize interest expense. Paying 6% on debt equaling 100% of GDP would be ruinously expensive, so the Bank of Japanpushed interest rates down as debt rose, thus keeping the government’s interest cost at tolerable levels.
Step 3: Continue to borrow at virtually no cost. While interest rates fell, the zombie companies soaking up public funds were joined by a growing number of retirees who began drawing on japan’s versions of Social Security and Medicare. Government spending, as a result, continued to rise and deficits kept growing, further intensifying the pressure to lower interest rates. The BoJ began buying bonds with newly-created yen to force interest rates down to zero and even below (meaning that the remaining private sector buyers of Japanese government paper actually paid for the privilege). Since the government now earned money by borrowing, there seemed to be no reason to stop, and debt soared to the current 262% of GDP, which might be the highest figure ever recorded by a major government.
Step 4: Experience sudden, sharp inflation. In 2022, all that new currency finally caused the inflation that critics of easy money had been predicting. Japan’s official cost of living is now rising at a 4% annual rate, making the real yield on a zero-percent government bond -4%.
Step 5: Experience a plunging currency. With most other central banks tightening to combat inflation, the BoJ kept buying bonds to keep its interest rates low. Investors noticed this yield differential and stopped buying yen-denominated paper, sending the yen’s exchange rate down sharply versus the US dollar.
Step 6: Reluctantly allow interest rates to rise. Also in 2022, the BoJ realized that unless it wanted to buy all the paper the government was issuing, it would have to let interest rates rise a bit. Which they very quickly did, from 0% to .25% and then .5%.
Step 7: Get swamped by interest expense. Now all the debt issued or rolled over by Japan’s government carries a cost. Let’s say the average yield rises to the current 0.5%. On debt equaling 260% of GDP, interest expense equals 1.3% of GDP, a crushing burden that adds to already massive deficits, raising overall debt and therefore interest expense going forward.
Now For The “Suddenly” Part
All of the above has either happened or is happening. The next steps are scheduled for the near future:
Step 8:Desperately try to lower rates. Recognizing that soaring interest expense spells national bankruptcy, the BoJ tries to stop and reverse the trend by buying even more government debt with ever larger amounts of newly created yen. But the world’s other central banks are much slower to ease, so the gap between yields on Japanese paper and that of, for instance, the US and Germany, continues to widen.
Step 9:Watch impotently as the yen craters. With government debt rising parabolically and no one other than the BoJ willing to buy the resulting tsunami of paper, Japan enters the realm of full-on Modern Monetary Theory, where the government just finances itself with newly created currency. The rest of the world, recognizing the inflationary implications, dumps the yen and the currency’s exchange rate goes into free fall. A falling currency raises the cost of imports, which increases inflation, which weakens the yen further, putting upward pressure on interest rates, and so on, in what headline writers call a “death spiral”.
Step 10: Game over. Japan is forced into an official devaluation/currency reset which limits its ability to spend and inflate going forward. Everyone who trusted the government and held the old currency is impoverished while those who recognized the scam and converted cash and government bonds into real assets are enriched. It’s a familiar story. But this time it’s happening to a serious country.
Questions
The possibility of a major country going off a financial cliff raises questions about how widespread the effects might be and how US investors might prepare. And of course: “How do we short Japan”? That discussion is coming in a separate post next week.
Whether it’s a day off in lieu of a national holiday, a religious festival, or simply a mandated minimum for paid vacation days, there are different rules in each country that set the base threshold of paid time off for workers.
Resume.io analyzed the laws on statutory paid leave and paid public holidays in every country around the world and created these graphics to reveal the minimum amount of vacation days employees are entitled to (at least on paper).
Countries With the Most and Least Paid Vacation
The data in the study focuses in on two types of paid leave: public holidays and paid vacation days. Combine them together and you have the total amount of paid leave.
Here’s how the numbers break down on both ends of the spectrum:
Some African, European, and Central Asian countries, including Togo (43), San Marino (46) and Yemen (45), have been extremely generous with doling out vacation days.
At the very top is Iran with a total of 53 vacation days, split almost equally between public holidays and paid time off.
Meanwhile, others including the Oceanic countries of Micronesia (9) and Nauru (10) rank at the bottom of the list. The U.S. is tied with Nauru in second-last place, with employees mandated a minimum of only 10 vacation days a year.
If you’re working full-time and devoting 40 hours per week to your workplace, many nations believe you deserve time off.
In most countries, laws to provide statutory leave to employees are in place. 22 countries have a generous 30-day leave policy, with 10 located in Africa.
However, the amount of paid leave around the world often relies on the employee’s tenure. And not all countries have the same minimums, as the U.S., Nauru, Micronesia, and Kiribati, have zero mandated paid leave days.
It’s important to note that this does not mean that all employees in these countries have zero paid leave. Instead it means that it’s up to the hiring employer, with some companies using generous paid leave to entice skilled employees while others offer none.
Countries around the world celebrate public holidays for numerous different occasions. They honor significant national, cultural, and religious events.
Again, the number of these days can vary worldwide. Iran offers the highest number of paid public holidays in the world with a total 27 days per year including the Islamic Republic Day. It is followed by Bangladesh (24), Azerbaijan (21), and Cambodia (21).
On the other extreme, Libya has no paid public holidays, while Lebanon has only two paid public holidays per year.
And not every celebration is a holiday. For example, despite having a plethora of festivals and days of national importance, India has only three paid national holidays: Republic Day, Independence Day, and the birthday of Mahatma Gandhi.
However, India is also a good example of countries which also offer state-level holidays. Every state is empowered to add to its list of paid holidays based on their religious, cultural and historical occasions.
