It’s probably safe to say that more were paying attention to today’s earnings report from Nvidia than some/all of the other giga caps (which were uniformly solid and beat expectations), if for no other reason than NVDA is viewed as the primary enabler of the current AI-craze which as noted before is solely responsible for all stock market gains in 2023.

And boy were they not disappointed, because moments ago NVDA reported earnings that blew away expectations and also guided some 50% above Wall Street’s forecast! Here is how the company did in Q1:

• Adjusted EPS $1.09 vs. $1.36 y/y, beating estimates of  92c
• Revenue $7.19 billion, -13% y/y, beating estimates $6.52 billion
  • Data center revenue $4.28 billion, +14% y/y, beating estimates of $3.91 billion
  • Gaming revenue $2.24 billion, -38% y/y, beating estimates of $1.98 billion
  • Professional Visualization revenue $295 million, -53% y/y, beating estimates of $246.6 million

Some more details on the revenue breakdown:

• Data Center revenue was a record, up 14% from a year ago and up 18% sequentially, led by growing demand for generative AI and large language models using GPUs based on our NVIDIA Hopper and Ampere architectures. The revenue growth reflects strong demand from large consumer internet companies and cloud service providers. Enterprise demand for GPU platforms was strong, although general purpose networking solutions declined both sequentially and from a year ago.
• Gaming revenue was down 38% from a year ago and up 22% sequentially. The year-on-year decrease reflects weaker demand due to the macroeconomic slowdown and lower shipments to normalize channel inventory levels. The sequential increase was driven by the ramp of our new GeForce RTX 40 Series GPUs for desktops and laptops based on the Ada Lovelace architecture.
• Professional Visualization revenue was down 53% from a year ago and up 31% sequentially. The yearon-year  ecrease reflects lower sell-in to partners to help reduce channel inventory levels. The sequential increase was driven by higher demand for desktop and mobile workstation GPUs. Automotive revenue was up 114% from a year ago and up 1% sequentially. The year-on-year increase reflects growth in sales of self-driving platforms and AI cockpit solutions.
• OEM and Other revenue was down 51% from a year ago and down 8% sequentially. These decreases were primarily driven by lower entry level notebook GPU sales.

• Adjusted operating expenses $1.75 billion, +8.8% y/y, below the estimate of $1.78 billion
  • R&D expenses $1.88 billion, +16% y/y, below the estimate of $1.92 billion
• Adjusted operating income $3.05 billion, -23% y/y, beating estimate $2.57 billion
• Adjusted gross margin 66.8% vs. 67.1% y/y, estimate 66.6%
• Free cash flow $2.64 billion, +96% y/y, below the estimate $2.94 billion

Commenting on the results, CEO Jensen Huang said that “The computer industry is going through two simultaneous transitions — accelerated computing and generative AI,” adding that “A trillion dollars of installed global data center infrastructure will transition from general purpose to accelerated computing as companies race to apply generative AI into every product, service and business process.”

“Our entire data center family of products — H100, Grace CPU, Grace Hopper Superchip, NVLink, Quantum 400 InfiniBand and BlueField-3 DPU — is in production. We are significantly increasing our supply to meet surging demand for them,” he said.

But while the results were impressive, it was the company’s guidance that blew away investors, as the company now expects Q2 revenues of $11 billion (plus or minus 2%) more than 50% above Wall Street’s estimate of $7.1 billion.

Other Q2 guidance:

• Sees adjusted gross margin 69.5% to 70.5%, estimate 66.9%
• Sees adjusted operating expenses about $1.90 billion, estimate $1.82 billion
• Sees Q2 capex between 300 million to $350 million.

In response to the stunning earnings, NVDA stock is up 17% after hours, and has just hit a fresh all time high of $357.

Authored by Matt Taibbi via Racket News,

Saturday, December 24, 2022 was one of the most memorable, and most panicked, days of my life. I spent Christmas Eve last year alone, holed up in the Parc 55 hotel in San Francisco, frantically trying to put together what I thought was the most explosive of the Twitter Files reports, “Twitter and Other Government Agencies.” My wife and children were due to arrive for Christmas the next day, and I spent the morning checking and re-checking a story I knew might make people upset.

It was based on documents passed to Twitter by the FBI-led Foreign Influence Task Force. They showed the company was receiving content recommendations in bulk from an array of federal agencies through the FBI, about a range of topics — from domestic extremist groups in the U.S. to leftist activists in Venezuela to Ukraine, Joe Biden, and the energy company Burisma. Moreover, Twitter was joining Facebook, Microsoft, Verizon, Reddit, and perhaps two dozen other firms in attending regular FITF-led gatherings. At that “industry meeting,” companies often received an “OGA briefing,” usually about foreign policy matters. “OGA” is generally understood to be a euphemism for intelligence services in general, or the CIA in particular.

The FBI had just denounced the Twitter Files as the work of “conspiracy theorists” whose “sole purpose” was “discrediting the agency.” If earlier reports made the Bureau unhappy, what reaction would this story inspire?

Thanks to a just-published letter to IRS Commissioner Daniel Werfel by House Judiciary Chair Jim Jordan, we nformation sent to the House Subcommittee on the Weaponization of Government by the Treasury Department confirms that an IRS investigation of me opened that day, December 24, 2022.

Ostensibly the case was about my 2018 tax return, about which even the IRS doesn’t claim to have contacted me for three years before this new “assign date.” The opening of the investigation preceded a visit to my home by an IRS agent on March 9, when I testified in Congress about the Twitter Files and government censorship.

Even more unnerving are other details in Jordan’s letter:

On January 27, 2023, the IRS assigned an agent to Mr. Taibbi’s case to initiate face-to-face contact. The IRS documents reflect that the case agent performed an extensive investigation of Mr. Taibbi, using publicly available search engines and commercial investigative software such as Anywho, Consumer Affairs, LexisNexis Accruint, and Google. The IRS’s dossier about Mr. Taibbi included information such as Mr. Taibbi’s voter registration records, whether he possessed a hunting or fishing license, whether he had a concealed weapons permit, and his telephone numbers.

When the IRS checks to see if you have a carry permit and visits your home, at a time when they owe you money, it’s time to worry.

Subscribers to Racket News can read the rest here…

Florida Governor Ron DeSantis has officially filed his declaration of candidacy for president, entering the 2024 race as former President Donald Trump’s top GOP rival, the Associated Press reports.

An elections bill passed by the Florida legislature in its recently concluded annual session, stating DeSantis does not have to resign his governor’s post to run for president, reached DeSantis’s desk yesterday. He has 15 days to sign it or allow it passively to become law. Florida House Speaker Paul Renner said he does not believe the original law would have required it in any case, and called the language a “clarification.”

It should be no surprise that former President Trump would have an opinion about DeSantis’ official candidacy, and as The Epoch Times’ Samantha Flom reports, he unleashed a fury of criticism via social media, targeting everything from the governor’s electability to his personality and character.

“Ron DeSanctus can’t win the General Election (or get the nomination) because he voted to obliterate Social Security, even wanting to raise the minimum age to 70 (or more!), voted to badly wound Medicare, and fought hard and voted for a 23% ‘tax on everything’ sales tax,” former President Donald Trump wrote on Truth Social on May 24.

“He was, and is, a disciple of horrible RINO Paul Ryan, and others too many to mention,” Trump added.

“Also, he desperately needs a personality transplant and, to the best of my knowledge, they are not medically available yet. A disloyal person!”

In several other posts, Trump criticized DeSantis’s character, noting that the former congressman had come to him in 2018 seeking his endorsement for governor.

“Look, Rob DeSanctimonious came to me asking for help,” he wrote in one post.

“He was losing badly, by 31 points, to popular Agriculture Commissioner Adam Putnam. He was getting ready to drop out of the race—Ran a terrible campaign!

“Ron told me he had one last chance, my Support & Endorsement, which Putnam, and everyone else, wanted also. I gave it to Ron, and the race was over. In one day, he went from losing badly, to winning by a lot. With 3 large Trump rallies, he won the general election in an upset. Disloyal!!!”

When reached for comment about Trump’s remarks, Bryan Griffin, a DeSantis spokesperson, pointed to his previous assertion that Trump views the governor as a threat.

“These are the largest ongoing expenditures against a non-candidate in Republican primary history, and that’s all you need to know to draw the obvious conclusion,” Griffin wrote in a May 22 tweet, sharing financial reports from Trump’s Make America Great Again, Inc. super PAC showing more than $15 million in ad buys opposing DeSantis.

“@RonDeSantis presents the greatest threat to Donald Trump.”

The last month has seen DeSantis’ odds of being nominated rise considerably as Trump’s have stalled, but DeSantis remains the clear laggard…

Despite the recent trend, such a lead for Trump will be difficult to unseat, but former White House press secretary Kayleigh McEnany said Wednesday that the Florida governor should steer away from personal attacks and focus solely on “policy distinctions” to defeat her former boss.

“If I’m on the DeSantis campaign, I’m looking at this, and I’m saying, ‘Where am I to the right of Trump? I’m to the right of him on Disney and corporate America and fighting for children. I’m to the right of him on abortion. I’m to the right of him on vaccination mandates,’” McEnany said.

“Trump’s not for mandates, of course, but he did call himself the father of the vaccine. If I’m DeSantis, I’m going to ignore the name calling, knock it in the mud and I’m going to cleave to the right on policy.”

DeSantis’ wife Casey shared the first ad released by his presidential campaign ahead of an official announcement tonight, saying: “America is worth the fight.”

America is worth the fight… Every. Single. Time. pic.twitter.com/lWNQ3DIXgp

— Casey DeSantis (@CaseyDeSantis) May 23, 2023

Meanwhile as we detailed yesterday, Ron DeSantis will announce his 2024 presidential campaign in a Twitter Spaces livestream tonight with Elon Musk at 6 pm ET

Watch/Listen to the Spaces here (due to start at 1800ET):

Why is DeSantis doing this?

The audience will be big and largely under 45, one assumes.

To capture the older demographic, he will appear on Fox later in the evening.

Additionally, as Jeffrey Tucker explains, there is some symbolic importance to going first with Twitter Spaces.

After three years of censorship, Elon Musk showed up to Twitter, having massively overpaid for the property, and emancipated it from the censors. He fired 4 out of 5 employees, many of whom were feds. The financials are still suffering from the ad boycott of the major corporations in bed with the usual suspects.

After cleaning up the staffing mess, Musk gradually restored many banned accounts, particularly those of credible voices who had been saying true things about lockdowns, masks, and COVID shots and had been silenced in the largest censorship operation since World War I. Suddenly the venue was transformed into a haven for free speech, the only high impact social space to have taken this route. The rest remain heavily censored.

The technology of Spaces had a preexistence but never amounted to much before Elon took over. Suddenly it became the place to be on every topic imaginable.

My first exposure to it was truly alarming in a good way. People were speaking their minds, without censorship. Moderators let people speak and debate. It felt extremely strange, at least to me.

It served as a reminder to me, and perhaps to others, just how used to censorship and controls we had become. It felt almost incredible to hear major experts on important topics freely speaking their minds. I can recall thinking: how is it possible that this is allowed? I kept having to remind myself that this is how it is supposed to be. Even I had forgotten what freedom feels like.

The most salient and shocking fact of the last three years has been the manufactured consensus on the most radical and extreme attack on liberty and rights in our lives. It was particularly spooky because the entire machinery of oppression was blessed by the mainstream media, the corporate elite, the scientific establishment, plus government. It was the triumph and full hegemony of the corporate biomedical cartel in a massive fascistic flex of power.

…

This will be a fantastic election for testing out whether and to what extent the power of the people really can prevail against the corruption that has taken control of the commanding heights. Any outcome is possible. A battle between the two for the general election would be a wonderful sign of defeat for the whole establishment.

As Tucker concludes, this is why DeSantis’s choice for announcing on Twitter Spaces really matters. He is putting his confidence in freedom and free speech on display, anxious to help anyone and anything that stands in opposition to the control freaks.

Ugly inflation data in the UK was shrugged off by BoE officials (who likely don’t suffer from the cost of living crisis), but overall, today was thin on economic data and fat on economic crisis potential as markets woke up to the reality that the idiots in Washington are going to take this down to the line (or even just maybe cross it).

June 1st T-Bill yields exploded above 7% today,

Source: Bloomberg

…sending the spread to 5/30 bills to a mind-blowing record high…

Source: Bloomberg

That’s a 430bps yield premium for 2 days (theoretically) more maturity.

USA CDS spiked back near record highs again…

Source: Bloomberg

That level of anxiety appeared to finally trigger some cash-hording as everything was sold at the margin…

Stocks were dumped with Small Caps hardest hit (as financials were sold). With an hour to go in the day, ahead of NVDA’s earnings, markets decide to go panic bid

We note that 0-DTE players tried to spark a rebound twice today (and succeeded in the late one)…

Source: SpotGamma

The 0-DTE move triggered enough squeeze action in ‘most shorted’ stocks…

Source: Bloomberg

Gold was puked back to recent lows…

Source: Bloomberg

Bitcoin was battered again back near $26,000…

Source: Bloomberg

Bonds were hit too after solid gains overnight. The belly was worst (3Y-5Y +5-6bps) while short- and long-ends were up around 2bps on the day…

Source: Bloomberg

But, despite plenty of vol, oil managed some gains after Saudi comments yesterday and a huge crude draw today…

Finally, if you think you had a bad day, consider Bernard Arnault – the world’s richest man still – who lost over $11 billion (and more today) in the last couple of days…

Source: Bloomberg

As the luxury bubble looks like it just burst…

Source: Bloomberg

Somebody do something!!!

What could go wrong?

Given the ‘transitory’ snafu and endless blind bubble-creation – and the accompanying banquet of unintended consequences – no lesser mortal than Mohamed El-Erian has been highly critical of the Fed for the past year, asserting that the institution “has slipped in its analysis, forecasts, policymaking and communication” and has made “one mistake after another.”

“The Fed’s problems should worry everyone. A loss of credibility directly affects its ability to maintain financial stability and guide markets in a manner consistent with its dual mandate of maintaining price stability and supporting maximum employment.”

So, how do they plan to help regain that credibility?

Fed researchers have developed a new measure of real-time credit and financial market sentiment from Twitter data that they say can help forecast changes in the stance of monetary policy, and can help estimate next-day stock-market returns.

“Twitter sentiment after the first day of the FOMC meeting can predict the size of restrictive monetary policy shocks in connection with the release of the FOMC statement the following day,” economists Travis Adams, Andrea Ajello, Diego Silva and Francisco Vazquez-Grande said.

As they conclude:

“We show that the TFSI correlates with indexes and market gauges of financial conditions at monthly frequency. We also show that overnight twitter sentiment can help predict daily stock market returns. Finally, we show that Twitter financial sentiment can predict the size of restrictive monetary policy surprises.”

Just imagine the reflexive group-think circularity that this kind of sentiment indicator could enable – “see we should keep cutting because everyone loves it…”?

Read the full paper below:

Ahead of today’s 5Y auction, we pointed out the massive short overhang in the tenor which would most likely lead to a painful squeeze.

squeeze pic.twitter.com/FeX7VA1NTM

— zerohedge (@zerohedge) May 24, 2023

That’s precisely what happened, because while some cluelessly warned that “real money demand was lacking,” demand for today’s auction was off the charts, with stellar metrics driven not just by a powerful short squeeze but also by near-record foreign demand.

Starting at the top, the high yield of 3.749% up from 3.500% last month and the highest since February (when we saw a 4%-handle for the last time) but 1.4bps stop through the When Issued, which was the 3rd consecutive stop through in a row.

While the Bid to Cover jumped from 2.54 to 2.58, and above the 2.50 six-auction average, it was relatively “middle of the road” for the auction.

The internals were much stronger, however, with Indirects surging to 72.7%, the second highest on record, and only January’s 75.7% was higher (in this regard it was similar to yesterday’s 2Y auction which also saw the 2nd highest Indirects on record). And with Directs taking down 18.0%, or just on top of the recent average of 17.9%, Dealers were left holding just 9.3% the second lowest on record.

In summary, this was a stellar, blowout 5Y auction, the second strongest in history, and lagging only to the record demand for 5Y paper in January 5Y.

Via The College Fix,

The Hunter College (part of the City University of New York) art adjunct who earlier this month trashed a student group’s pro-life table has now threatened a journalist by putting a machete to his neck.

When New York Post reporter Reuven Fenton showed up at Shellyne Rodriguez’s apartment in an attempt to ask her some questions, she responded in much the same way she did with the Hunter College Students for Life earlier in the month.

According to the Post, Fenton was greeted with “Get the f**k away from my door, or I’m gonna chop you up with this machete!” (Pictured)

She reiterated: “Get the f–k away from my door! Get the f–k away from my door!”

Fenton and his accompanying photographer left after the encounter, but Rodriguez followed them out of the building, threatening them further while still wielding the blade: “If I see you on this block one more f–king time, you’re gonna … Get the f–k off the block! Get the f–k out of here, yo!”

Rodriguez ended up kicking the Post photographer in the shins before going back inside her apartment building, according to the report.

Hunter College spokesman Vince DiMiceli told the Post that Rodriguez “has been relieved of her duties at Hunter College effective immediately, and will not be returning to teach at the school.”

In the process of wrecking the Students for Life display on May 2, Rodriguez had claimed the exhibit was “violent” and was “triggering” her students. She told the male student manning the table that “you can’t even have a f—ing baby. So you don’t even know what that is. Get this sh** the f*** out of here.”

PROFESSOR GONE WILD: Pro-abortion professor Shellyne Rodriquez curses at pro-life students and vandalizes table at Hunter College. pic.twitter.com/QNspuXB4KK

— Students for Life of America (@StudentsforLife) May 17, 2023

The group CUNY For Abortion Rights stood by Rodriguez, claiming she “constructively critiqued” the exhibit and “correctly assessed the damage” it was doing to Hunter’s “learning environment.”

A petition created in Rodriguez’s defense said the adjunct’s actions “to shut down the tabling were fully justified, and are part of a long and celebrated CUNY legacy of confronting groups such as military recruiters who disseminate misleading information.”

It also said that Students for Life “and other far-right groups are not welcome on our campuses. Anti-abortion propaganda actually endangers people’s lives, and incites other far-right views and actions to emerge.”

Hunter College is a public institution.

Ahead of today’s FOMC Minutes release, the most important thing to note is that the text will likely reveal that during the Fed’s May 2-3 meeting, concern over credit conditions convinced most Fed officials to signal an impending rate pause. Even so, some might have been more reluctant than others, worried that inflation is coming down too slowly. The diverse reads on the economy suggest the consensus for a wait-and-see approach could be fragile.

The second most important thing is that one can safely ignore the minutes since they are already quite stale, given the more recent Fedspeak we have heard. As Newsquawk reminds us, at the May meeting, the FOMC raised rates by 25bps to 5.00-5.25%, in line with expectations, while also hinting at a ‘pause’ (more on that in a moment) by dropping the language about anticipating more policy firming.

The Fed will determine further policy firming based on tightening to date, policy lags, and other developments, Fed Chair Powell said, adding that the central bank remains committed to bringing inflation back down to target, and will take a data-dependent approach to determine further rate hikes, while there will be an ongoing assessment of whether the Fed has reached a sufficiently restrictive level.

The Senior Loan Officer Opinion Survey was consistent with banks tightening lending standards and the pace of lending slowing, while the Committee has a view that inflation is not going to come down so quickly. Powell also said that they are much closer to the end than the beginning, and feels like they are close or maybe even there.

However, since the May meeting, officials have been emphasizing that their latest policy actions should not be read as a ‘pause’, and the Committee is prepared to act further to tame inflation pressures. Post-FOMC, Fedspeak has become more nuanced in terms of the differences in view over the policy outlook, and some divergences are emerging. In the outright hawkish camp,

• In the hawkish camp, Logan (current voter) argued that the data does not yet show that skipping a rate hike in June is appropriate, and Governor Bowman (also 2023 voter) said additional rate hikes were likely appropriate.

• In the neutral-but-with-hawkish elements camp, Bullard (non-voter) said he will keep an open mind going into the June meeting, but was inclined to support another rate hike.

• Kashkari (voter) said the Fed has more work to do.

• Bostic (2024) said there was still a ways to go to beat inflation.

• Vice Chair nominee Jefferson has spoken about how inflation remains too high, and a year is not enough time to assess the full impact of hikes thus far. In the circumspect camp,

• Williams (perma voter) has advocated a wait-and-see approach on rates.

• Goolsbee (voter) said it is too soon to be talking about the Committee’s next decision, but he was cautious about the May 25bp hike.

Analysts will be looking to see the extent to which the minutes reflect these divergent views. Here are some other things markets expect today, courtesy of Bloomberg, which is focusing on the “fragile rate-pause” consensus.

• “Many” participants likely supported the decision to signal an impending pause because of concerns over tightening credit conditions, and even though “some” may be disappointed at the slow progress of disinflation, uncertainty about the outlook likely convinced them to agree to a wait-and-see approach.

• That likely contributed to the decision to tweak the clause in the previous policy statement that “the committee anticipates that some additional policy firming may be appropriate.” Instead, in the May statement the committee said it will take into account cumulative tightening to date, among other factors, in determining the extent to which additional policy firming may be appropriate.

• At the post-meeting press conference, Fed Chair Jerome Powell appeared to downplay the role of wage growth in driving inflation. The minutes may reveal why – perhaps more officials now believe wage growth is a lagging inflation indicator. If so, the Fed may be more amenable to cutting rates in a downturn, and markets may not be wrong to price in some rate cuts this year.

• Powell said at the press conference that wage growth and inflation are both high, but no wage-price spiral has taken root. It is likely that “many” FOMC participants share that view.

• Fed staff will likely forecast a recession this year, even though Powell disagrees. The staff likely interpret the data as showing a secular downdraft to business investment, while household spending remains resilient.

• Since the May meeting, some hawkish participants – Jim Bullard, Michelle Bowman, Loretta Mester, and Lorie Logan — have voiced support for more hikes.

• As the committee continues deliberating on the future rates path, Governor Lisa Cook and Chicago Fed President Austan Goolsbee are most likely to break from the hawkish consensus.

Looking ahead, Bloomberg economists expects the Fed to hold rates steady when it next meets June 14–15, as their baseline is that a last-minute deal on the debt ceiling will raise financial volatility ahead of the meeting and weigh on the economic outlook. Odds favor a prolonged pause thereafter. If the debt-ceiling impasse is resolved uneventfully — with a comfortable margin before the X-date and only small spending cuts — a 25-basis-point hike will be on the table in June.

Authored by Michael Maharrey via SchiffGold.com,

We’ve talked about the recent selloff in gold. On the other side of the coin, the NASDAQ has made a string of 52-week highs. What is driving these market dynamics?

The Fed.

The markets generally believe that the Federal Reserve is finished hiking interest rates, or at least close enough to being done that a rate cut is on the horizon.

And they’re wrong.

In the short run, we may well see one more rate hike in June. The Fed has ratcheted up the hawkish talk. But in the long run, even if the central bank delivers another 25 or 50 basis points of hiking, the thinking is that the tightening cycle is 90% complete. That means more of the easy money drug will be coming soon.

Tech investors are anticipating that the next round of easy money will be just as good for tech stocks as the earlier rounds of quantitative easing.

The markets also seem to believe that inflation is going to come down. They expect the same Goldilocks environment that the tech stocks were operating under for the last decade or more. In other words, an accommodating Fed, cheap money, low interest rates and relatively low price inflation. That’s the environment these more speculative tech stocks need to justify their valuations. It’s not the earnings that will power them, nor the dividends. It’s the momentum of money chasing them. And that is a byproduct of monetary policy.

The markets are getting it partially right. The Federal Reserve is likely getting close to the end of the tightening cycle. They are also correct in thinking a recession is on the horizon — another reason the markets think the Fed will start cutting rates again sooner rather than later. But they are wrong to think this recession means a return to 2% inflation.

It doesn’t.

The next recession will likely be the catalyst for a dollar crisis and a resurgence in consumer prices.

Ultimately, we’re talking about stagflation with rising CPI coupled with and tanking economy. This is an outcome virtually nobody is prepared for.

The disconnect seems to be that Fed officials and economists in general think the looming recession will be relatively mild.

After the May FOMC meeting, Powell still insisted the Fed could get price inflation to the 2% target and bring the economy to a “soft landing.”

Blue Line Futures chief market strategist summed it up this way.

The tough pill to swallow is that the US economic data continues to come in line with expectations. It shows a greater outcome for a soft landing. At the same time, foreign economic data is coming out weaker than expected. That is why the dollar index is catching a bid right now.”

Bank of America chief US economist Michael Gapen also echoed this mainstream thinking.

In our view, rather than lean against a mild recession, the Fed would view it as an acceptable price for bringing inflation back down to target.”

The markets are buying into this line of thinking.

The question is why should anybody think the recession will be short or shallow?

If a bust is proportionate to a boom, we’re in for one heck of a bust.

The Federal Reserve and the US government pumped trillions of dollars of stimulus into the economy during the pandemic. This was on top of the trillions of dollars it pumped into the economy after the 2008 financial crisis. It held interest rates artificially low for well over a decade. This created all kinds of malinvestments and bubbles in the economy. In a nutshell, the Fed has screwed up everything that is a function of interest rates.

The economy and the markets are addicted to this easy money. That’s why the NASDAQ is getting a boost based on the anticipation of the next rate cut. The addict is looking forward to his next fix.

But over the last year, the Fed has pushed rates to the highest level since before the 2008 financial crisis. While it still hasn’t gotten price inflation anywhere near the 2% target, there is no way that this isn’t going to break things in an economy that depends on a low interest rate environment. We’ve already seen cracks in the system with the ongoing financial crisis. The Fed managed to paper over it with its bailout, but it’s only a matter of time before something else breaks.

When you take away the addict’s drug, the addict goes into withdrawal.

Right now, everything basically seems fine. Sure, we’re seeing some contraction in the economic data. The Leading Economic Indicators dropped for the 13th straight month. But the labor market is still strong (based on the cooked government data) and consumers are still spending (themselves into record levels of debt). Until there is a crisis, nobody is going to believe there’s going to be a crisis. It’s easy to believe that while there might be a recession, it’s going to be short and shallow.

In fact, that is exactly what everybody was saying in 2007.

It’s also important to remember that the 2008 financial crisis happened over a year after the Fed stopped raising interest rates. In fact, it was already cutting rates when the Great Recession kicked off. There is always a lag between changes in policy and the impacts of those changes. Since the Fed has gotten rates to over 5% and nothing bad has happened (if you consider three major bank failures nothing) people seem to believe that nothing bad is ever going to happen.

History tells us otherwise.

Russia’s Wagner Group founder Yevgeny Prigozhin has given a rare and revealing interview with pro-Moscow blogger Konstantin Dolgov, fresh off the weekend declaration of victory over Bakhmut in Ukraine’s east. 

“PMC Wagner completely liberated Artyomovsk [Bakhmut],” Prigozhin said, and for the first time made public how many Wagner fighters both participated and died in the campaign, which he previously said was 224 days of fighting. He revealed that the mercenary group lost 20,000 fighters in total at Bakhmut, half of which were convicts who had been recruited from prisons. 

Prigozhin said in the interview which was published late Tuesday, “Throughout the [entire combat] operation, I recruited 50,000 prisoners, of which about 20% died. Exactly the same number died as those who signed up through a contract.” He described that an equal number of the Wagner deceased at Bakhmut had signed up with the St. Petersburg-based firm through regular means, or had already long been under contract.

He also continued to make remarks which will be seen as hugely provocative by the regular Russian military command and inside the Kremlin. “If PMC Wagner cannot hand the positions because the Russian army is not ready to take them over, then this means that PMC Wagner has risen to a level higher than the Russian army,” he said, also reaffirming that his forces will hand captured territory over to the military on June 1st.

“If they [the army] cannot take over [the positions], then the persons concerned must shoot themselves,” Prigozhin added. “There was only Wagner here [in Bakhmut],” he had early declared in a video posted to Wagner channels on Saturday.

“We fought not only the Ukrainian army here, we fought Russian bureaucracy,” Prigozhin asserted, which is a similar them he echoed from the fight for nearby Soledar.

But sure to unleash more controversy and commentary inside the Kremlin is his strongly suggesting in the interview that Putin’s war in Ukraine has backfired. Below are Prigozhin’s remarks in this section as presented in Newsweek:

Russia sought to “demilitarize” Ukraine, but has instead militarized it with some of the best weapons in the world, Prigozhin said, echoing the justifications Russian President Vladimir Putin gave when launching his full-scale invasion against the neighboring country on February 24, 2022.

“The special military operation was done for the sake of denazification and demilitarization. Thus, the denazification of Ukraine, which we talked about, we made Ukraine a nation that is known to everyone all over the world…Ukraine has become a country that is known absolutely everywhere.”

“Now, with regard to demilitarization…if they had 500 tanks at the beginning of the special operation, [now] they have 5,000 tanks. If they had 20,000 people able to fight skillfully, now 400,000 people know how to fight. How did we demilitarize it? It turns out that the opposite is true—we militarized her hell knows how,” the Wagner chief said.

Yevgeny Prigozhin says that Russia’s objectives of “denazifying” and “demilitarising” Ukraine have failed miserably

“F*ck knows how, but we’ve militarised Ukraine!” pic.twitter.com/ZBIyo0Vd3A

— Francis Scarr (@francis_scarr) May 24, 2023

While holding up his Wagner forces as being “in first place in the world” in terms of military effectiveness, he conceded that at this point with the West’s backing Ukraine now has “one of the strongest armies.”

“They have a high level of organization, a high level of training, a high level of intelligence, they have various weapons, and moreover, they work on any systems, Soviet, NATO, anything, equally successfully,” he described of Ukraine’s armed forces.

It’s become clear that Putin has long tolerated Prigozhin’s negative commentary, giving him a remarkably wide berth, likely due to Wagner’s indispensability on the battlefield. For example, what Prigozhin said in this latest interview alone would be enough to get other Russian commentators or public figures arrested, killed, or at least severely censured.