April 2025 DDD

[ducati916]

Long story short: buying pressure low, because liquidity is low.

Prepare for weak markets and/or more downside.


jog on
duc

 

[ducati916]

With the U.S. economy shifting toward stagflation, the central question for the Federal Reserve will be which half gets worse: the stag- or the -flation. Why it matters: The central bank faces challenges on both sides of its dual mandate — the responsibility to seek both stable prices and maximum employment. Fed officials say they will assess on which side of the mandate they are most coming up short. The big picture: Most forecasters think a recessionary impulse in the economy will be powerful enough (and trade war-driven, inflation-temporary enough) that the Fed's next move will be rate cuts to support the job market — even if those cuts won't come quickly enough for Trump's taste. But Fed officials have avoided committing themselves to that approach, leaving open the possibility that the next move could be a rate hike to combat inflation. Indeed, modeling of the trade war's effects points to 2025 inflation being considerably further from the Fed's goals than the unemployment rate. What they're saying: "We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension," Powell said last week. "If that were to occur, we would consider how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close," he said. Zoom in: Some simple math shows how those numbers may look by the end of the year. The unemployment rate was 4.2% last month, which is also the level that the median Fed official sees as its long-term rate. So the maximum employment mandate is, for the moment, being achieved. The Yale Budget Lab estimates that the tariff policies currently in place, if sustained, would raise the unemployment rate by 0.6 percentage point by year-end, which implies a 4.8% jobless rate. The impact on inflation would be considerably higher in the Yale group's models, fueling a 1.6 percentage point rise in the price level. That's even after adjusting for "substitution effects," in which activity shifts toward lower-tariff and domestically made goods. The intrigue: Inflation is already running above the Fed's goals, with the Personal Consumption Expenditures Price Index up 2.5% for the 12 months ended in February. Even if you use a more generous baseline, assuming that in a non-trade-war world inflation would be 2% this year, tariffs are on track to push the economy further from the Fed's price stability mandate than its maximum employment mandate, at least temporarily. Reality check: There's a lot going on aside from trade — particularly a volatile financial market environment, as well as slumping business and consumer confidence — that could change the landscape over the years ahead. Moreover, as Powell's quote above indicates, the Fed won't be exclusively using some mechanical analysis of how far it is from each goal, but rather will factor in how persistent those divergences are likely to be. The bottom line: "Our modeling suggests the Fed should look through" a one-time shift in prices due to tariffs, Martha Gimbel with the Yale Budget Lab tells Axios. "But that doesn't account for changes in expectations or contagion from financial markets," she adds. "Expectations are the ballgame right now, and that makes it particularly important that the Fed is able to signal that it's going to keep inflation under control."

A summary from CNBC

Stocks fell again on Monday as President Donald Trump ramped up his attacks on Federal Reserve Chair Jerome Powell, raising questions about the central bank’s independence, while traders received little signs of progress on global trade talks.

The Dow Jones Industrial Average traded 1,170 points lower, or 3%. The S&P 500 shed 3.1%, and the Nasdaq Composite lost 3.3%.
“Magnificent Seven” tech titans dragged the major indexes lower, with Teslaand Nvidia respectively losing 7% and 6%. Amazon shed 4%, as did Advanced Micro Devices and Meta Platforms. Equipment manufacturer Caterpillar declined 3%.

In a Truth Social post, Trump claimed that the economy would slow unless Powell — who he referred to as “Mr. Too Late, a major loser” — lowered interest rates immediately. This follows another post last week in which Trump also called for the Fed to lower rates, even hinting at Powell’s “termination” — something White House economic advisor Kevin Hassett said the president’s team was studying.

The dollar was also under pressure, hitting a three-year low as the threats ramped up. Gold, meanwhile, soared to record highs above $3,400 per ounce.

“One of the things that is becoming very clear is the underlying tension between the Fed and the administration,” said Michael Green, chief strategist of Simplify Asset Management. “We are effectively in a replay of COVID. The uncertainty has meaningfully disrupted trade ... I think most people anticipate that there will be some form of stimulus that ultimately emerges to offset the effects of the tariff.”

Lack of progress on trade​

Investor confidence was also hurt by a lack of progress on global trade. If anything, tensions seemed to increase with China with the country warning other nations not to strike any deal with the U.S. that would hurt China.

The S&P 500 is down more than 8% since since April 2, when Trump announced a raft of levies on imports from other countries. The Nasdaq has lost nearly 10% in that time, and the Dow has fallen 9%.

“We’re really thinking about this as a bit of an endless environment in terms of direction ... and that’s in particular because we just don’t know where tariffs end up,” said Robert Haworth, senior investment strategist at U.S. Bank, in an interview with CNBC. “This is a market trying to get clarity on direction, and not getting a lot of conclusions.”

Haworth added: “If uncertainty continues for an extended period of time — meaning multiple quarters — I think that becomes more challenging for corporate earnings and decision making, and we’ve seen some of that in the earnings season so far.”


So what do I think?


Investors’ comments (broad media) reveal that they do not realize that what they see as a flaw of Trump policy is actually the goal.

Trump (Miran, Bessent) closed the USD financial asset window (capital flows) two weeks ago with a goal of weakening the USD to make the US more competitive globally and reshoring the US defense industrial base by redirecting capital flows out of US financial assets into gold and eventually, US infrastructure.

They have begun taking steps to do exactly this. Force foreigners to redirect US deficits out of US equities and bonds into gold and eventually, US infrastructure. Markets have begun reacting as if this has begun happening, but most investors do not realize it yet.

In the short run, this is good for gold, T-Bills, and volatility, and bad for the USD and equities. Ultimately, what the Trump Administration is attempting to pull off is great for America and the global economy but bad for the real value of LT USTs and other bonds.

If it works.

If it does not work (and there are starting to be very disconcerting signs of supply chain breakdown in the US. The only assets I would have positions in as long positions, would be gold and T-Bills.

Of course the difficulty is that as has been said many times before: bear market rallies (volatility) are vicious, come out of nowhere and can really hurt short positions.

Being short in a bear market is not the same as being long in a bull market. If you are going to be short, be short via the Options market and hold Puts. Do not short stock directly. Far too risky.

I have also noticed a number of 'guru's' who advocated selling 'naked Puts' are no longer with us. They will be missed. Selling naked Calls is the same mistake, just even more dangerous in a bear. Your life expectancy will be lower.

jog on
duc

 

[ducati916]

Trump unleashed a global trade war that taps into many Americans' frustrations about the negative economic effects of free trade. The IMF's chief economist says it isn't quite that simple. What they're saying: "In many advanced economies, there is an acute perception that globalization unfairly displaced many domestic manufacturing jobs," Gourinchas wrote in a blog post. "There is some merit to these grievances, even if the share of manufacturing employment in advanced economies has been in a secular decline in countries running trade surpluses, like Germany, or deficits, like the United States," he added. Technological progress and automation is the "deeper force behind this decline" of manufacturing employment, Gourinchas wrote. In both the U.S. and Germany, employment has withered, but each nation's share of manufacturing output has held steady. What to watch: "This requires that policymakers think well beyond the reductive lens of compensating transfers between 'winners' and 'losers,' be it of technological revolutions or globalization," Gourinchas wrote. There has been a "zero-sum worldview" that the gains of some countries come at the expense of others, he says. The bottom line: The IMF says Trump's attack on globalization is not totally baseless. But steep protectionist policies — like tariffs — risk permanently undoing the gains from more trade.

Oil News:

The start of trade negotiations between the United States and Asia Pacific countries has been marked by evident interest in US LNG projects, whilst the likes of South Korea and Japan kept relatively mum about crude.

- Taiwan’s President Lai Ching-te announced that Taipei would seek to increase the share of US LNG imports from the current 10% to 33%, potentially discontinuing some term supplies from Australia and Qatar.

- South Korea, too, is considering a 20-25% increase in US LNG imports, currently accounting for 12% of its liquefied gas needs, seeking to wind down Qatari contractual commitments that are linked to Brent rather than traded against JKM or Henry Hub.

- China is moving in the opposite direction, completely halting its imports of US LNG in March and signing three long-term deals with the UAE for the supply of liquefied gas over the next 10 years, seeking further term options in the region.

Market Movers

- US investor James Cameron has offered $5 billion to buy Kazakhstan’s mining giant Eurasian Resources Group, 40% part-owned by the Kazakh government, as the miner intends to expand into rare earths.

- UK energy firm BP (NYSE:BP) has become the only foreign oil company to bid in India’s OALP-IX bidding round, landing the most coveted GS-OSHP block alongside Indian partners Reliance and ONGC.

- US oil major Chevron (NYSE:CVX) is reportedly looking to divest some of its upstream interests in Angola, potentially exiting Block 14K that currently produces some 42,000 b/day across Angola and Congo.

- Argentina’s second-largest oil company, Vista Energy (NYSE:VIST), bought Petronas’ 50% stake in the La Amarga Chica shale play in the country’s Vaca Muerta basin for a total of $1.5 billion.

Tuesday, April 22, 2025

Oil producers are preparing for another external shock to oil markets as Brent futures took some collateral damage from Monday’s equity sell-off and remain pressured by the prospect of a potential US-Iran nuclear deal. For the time being, the $66-67 per barrel price for ICE Brent seems to be a temporary resting place for crude before the next big thing happens.

Rome Hosts High-Level Nuclear Talks. Negotiators from the United States and Iran met in Italy’s capital, Rome, over the weekend to continue negotiations started a week ago in Oman over Tehran’s nuclear programme, with both sides lauding the progress the talks had made over the past week.

US Wants to Make the Gulf Great Again. As the US Bureau of Ocean Energy Management recently upped the Gulf of America’s untapped reserves to 5.77 billion barrels, the Trump administration has launched a new 5-year offshore oil and gas leasing plan, which might include blocks in the Arctic.

Gold Continues to Edge Higher. Amidst widespread speculation of Donald Trump wanting to fire US Fed chair Jerome Powell, gold prices touched $3,500 per ounce for the first time on record in Tuesday’s intraday trading, up 32% since the beginning of the year.

China Loads Up On Middle Eastern LNG. China’s state-controlled oil majors CNOOC and Zhenhua Oil, as well as privately owned ENN Natural Gas, have all signed term deals with the UAE’s state oil company ADNOC, ranging from 5 to 15 years and coming into effect as early as 2026.

Egypt’s Hyped Exploration Boom Fails. An array of international energy firms have exited their respective concessions in Egypt’s offshore zone in the Red Sea after US oil firm Chevron relinquished its stake in Block 1, with rumours also suggesting Shell is set to give up on the adjacent Block 3.

P66 Fights Back Against Activist Investor. Leading US refiner Phillips 66 (NYSESX) has issued a letter demanding that activist investor Elliott Investment Management back down from its push to break up the company due to a conflict of interest, as it is separately seeking to buy distressed Citgo.

India Slaps Tariffs on Chinese Steel. The government of India announced a 12% tariff on some steel imports from China that would be valid for the next 200 days, arguing that a flood of cheaper Chinese steel products put domestic mills under immense pressure and forced job cuts.

South Korea Dreams Big to Impress Trump. South Korea’s leading steel manufacturer, Posco Holdings (NYSEKX), is reportedly planning to join its peer, Hyundai Motor Group (KRX:005380), to build a $5.8 billion steel mill in the US, expected to start operations in 2029 in Louisiana.

Using Oil, Russia Seeks to Stay in Syria. The ouster of former Syrian President Bashar al-Assad has led to a complete halt in Iranian oil deliveries to the Levantine nation. In its stead, Damascus has opted for Russian crude and diesel deliveries as Moscow wants to keep its Tartus naval base.

China’s Copper Grows Despite Low Profits. Chinese production of refined copper surged to 1.25 million tonnes in March, up 8.6% from a year ago and hitting a new all-time monthly high, with minimal profitability somewhat cushioned by higher gold prices, a co-product of copper smelting.

Saudi Aramco Eyes Automotive Roles. Saudi Aramco, the national oil firm of Saudi Arabia, inked a deal with China’s leading EV producer BYD (SHE:002594) to develop new energy vehicle technologies, seeking to benefit from the proliferation of battery-powered cars across Asia.

Heavy Rains Resuscitate Rhine Shipping. Easter precipitation has finally allowed German shippers to transport full cargoes along the River Rhine, the country’s main energy transportation artery, with water levels in Kaub rising by 40% to 125cm.

Morocco to Build an LNG Import Terminal. The North African country of Morocco is preparing to begin tendering procedures for its first-ever liquefaction terminal, to be located in the port of Nador, as its gas requirements are expected to soar from 1 Bcm currently to 8 Bcm by 2027.


From JC's team:

One of the things you always hear Allstarcharts Chairman JC Parets talking about is that we don't have bull markets around here without Financials. This is a key sector for markets, not just in the United States, but all over the world. It starts with credit. If there is real credit risk out there, you're going to see it impacting the Financials stocks. Here's a look at the S&P500 Large-cap Financials Index, which is dominated by names like Berkshire Hathaway, JP Morgan, Goldman Sachs, Visa, Mastercard, Bank of America and others.

​

This 47 - 47.50 level is a big one. We call this "Overhead Supply", meaning that so far, the sellers have proven that they're overwhelming the buyers near those prices. In other words, there is more "Supply" for this Index ETF at these prices than there is "Demand" for it. As long as that remains the case, I would expect the choppiness across the major indexes to persist. The ability for markets to take Financials higher from here, would be a major development for the bulls, and would likely mean that we are, in fact, out of the proverbial woods. We'll be monitoring these levels closely, and we would encourage you to do the same!

Time-capsule headline: "The Dow Jones Industrial Average shed almost 1,000 points on Monday and is headed for its worst April performance since 1932," The Wall Street Journal reports (gift link).

• "The S&P 500's performance since Inauguration Day is now the worst for any president up to this point in data going back to 1928 [the year before the Great Depression began], according to Bespoke Investment Group."
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VWAP's:

Monday, April 21, 2025 ​ First of all, congrats to Goldman Sachs, now the largest component in the Dow Jones Industrial Average. The last time a bank headlined the Dow was JP Morgan back in 1998. That’s pretty cool, but that’s all it is. Just a fun fact. I would say it’s a sign of the times that a tech stock didn’t fill the shoes of UNH, but the Dow is a bit funky in the sense that it is price-weighted instead of cap-weighted. Speaking of Papa Dow, let’s talk about what’s next for the major averages following the latest beating for US equities. All the large-cap indexes violated their VWAPs anchored from the April 7 pivot lows this morning. They all tested these levels and held just last week. That’s been the line in the sand for me as far as a retest of the lows is concerned. With every day the S&P, Nasdaq, and Dow are below these VWAPs, the higher the likelihood we’re headed back to the lows from a few weeks ago. In fact, it probably happens pretty fast. On last week’s live stream, we discussed our broader market outlook and pounded the table on the importance of the VWAPs from the pivot lows holding. We said if they get taken out, we’re heading lower. That happened this morning, and stocks tanked all day before recovering a bit in the final hour. Here’s a zoomed-in look: ​ If this damage isn’t repaired immediately, expect the selling to continue with the next stop at the early April lows. And it’s actually a lot more than just a short-term low. These are monster levels as they also represent the prior-cycle highs. You need to zoom out a bit to show the true significance of these polarity zones. 370 in the Dow $DIA 405 in the Nasdaq $QQQ 480 in the S&P $SPY It’s where these indexes peaked and rolled over back in early 2022. This would mean another 6-7% of downside left in SPY & QQQ, but only about 2.5% for DIA. Without a swift reclaim of those VWAP levels, that’s where things are headed. And the real test is what happens when we get there. Not only is there serious price memory from the prior-cycle highs, but the primary trend VWAPs also line up there for all the major averages. This means that the average buyer since the beginning of the bull market will be underwater, or losing money, on their position. It is as important of a level as you will find. Here’s a look at the S&P 500 with the VWAP anchored from the bear market low in 2022: ​ Notice how this VWAP put a floor in the corrective waves from Q1 and Q3 2023. Can it do it again this time? If not, I expect the current selloff to get much worse before anything gets better. This kind of price action would jive with a much deeper and darker bear market than the one we’re in now. Hold onto your seats and obey your VWAPs. They never let us down. And don’t worry about the bear market. In the event that’s where we’re going, we’ll get short at these big levels just like we did in early March when the August VWAPs gave way.

• The S&P 500 ($SPX) is down -8.1% in April with seven trading days remaining, putting it on pace for its worst month since September 2022.
  
• Steve points out that when the S&P 500 falls -5% or more in April, the rest of the year has historically been challenging. This has happened 13 other times since 1950.
  
• Over the next three months, $SPX was higher just 23% of the time, with an average loss of -4%. One-year returns were only slightly better than a coin toss, with $SPX higher 54% of the time for an average gain of just +3.2%.
  

The Takeaway: When the S&P 500 has dropped -5% or more in April, the remainder of the year has historically leaned bearish.




China:


China’s electricity production and road traffic congestion data have already been signaling a strong economic slow-down in China over the last 6 months.

However, the current sudden reduction in China’s exports due to its tariff battle with the US is going to have an outsized impact on China due to the sudden removal of a benefit that China has received from the West for decades.

China exports $3.6 trillion (T) of goods annually generating an annual trade surplus of $820 billion (B).

However, the export figures hide one vital factor - the vast majority of China’s exports are manufactured goods and manufacturing provide a tremendous economic benefit through the manufacturing multiplier effect.

Every dollar of manufactured goods generates another 3 dollars of economic activity in the local economy in support of manufacturing.
Thus, including this multiplier effect, China’s $3.6T of exported manufactured annually drives a total of $14T of economic activity. That’s the lion’s share of China’s $18.5T economy.

But today, the bite of tariffs are hitting China in a very real way:

“Just days before the new tariffs took effect, Chinese ports, including Shanghai’s Yangshan and Waigaoqiao terminals, were flooded with activity as cargo ships rushed to complete shipments before the deadline.

However, with the deadline passed, these once-bustling ports have seen operations come to an almost complete standstill.

Similar disruptions have been reported in Guangdong’s Yantian terminal, a critical shipping hub in Shenzhen.

Local business owners, including one from Guangdong who witnessed the slowdown firsthand in Shanghai, reported containers piling up at port facilities.”

China’s Cheaper Products Enabled The Central Bank Bubble Economy​

Through the increased supply of cheap manufactured goods from China over the past 35 years, China played an important role enabling central banks to run loose monetary policy while proclaiming there was almost no inflation even as central banks inflated numerous asset bubbles.

The second element enabling loose monetary policy was the rigging of gold and silver prices by the Bank of England which prices had historically served as a warning of monetary inflation thereby limiting central bankers’ actions.

In trading economic wealth and higher paying US jobs for cheap imported consumer goods prices, low interest rates, and asset bubbles, the US working class was left in the lurch with a declining standard of living by successive administrations.

For a period of time, declining interest rates allowed access to cheaper credit and continuation of the US’s consumption patterns, that had previously been supported by a highly productive economy, even as vital economic activity was being hollowed-out.
Low interest rates and low gold and silver prices have now come to a close but the $102T mountain of accumulated US debt remains - and the accumulated debt cannot be sustained even at current levels and interest rates.

While China faces onset of an immediate economic upending, the US faces its own approaching credit, bank, and currency crisis that was always inevitable when the central banking loose money fraud met its end.

China’s Last Card May Be Its Best Card​

It is believed that China has accumulated 20,000+ tonnes of gold since David Rockefeller’s scores of visits to China in the 1970s - far beyond China’s 2,300 tonnes it has officially declared.

As economic conditions deteriorate, China will likely face a rapid decline in the value of its yuan and thus a rapid increase in food prices. As an importer of 30% of its food and 75% of its daily oil consumption, China will face numerous challenges in purchasing these essential goods in a currency crisis.

This would likely pressure China to move to either a ‘gold yuan’ or a ‘BRICS gold unit’ medium of trade allowing China to round-up by spurring a knock-on crisis in the US dollar as gold was remonetized globally.

Of China’s 36 Stratagems, 'Remove The Fire From Under The Pot’ comes to mind.

https://truthsocial.com/@realDonaldTrump/posts/114372102982066647

​

The New York Fed vaults 204M oz. of gold as custodian for other countries.

President Trump’s April 20 tweet is intriguing.







jog on
duc

 

[ducati916]

The big lesson of the last 24 hours is that financial market reality remains a constraint on Trump's most aggressive impulses. But that doesn't mean the economy is out of the woods. The big picture: Yesterday brought a presidential climbdown on both his threats to fire Federal Reserve chair Jerome Powell and to slam Chinese imports with tariffs so high as to virtually shutter trade between the world's biggest economies. It is an indication that for all his administration's talk about being willing to tolerate pain in order to restructure the economy, the kinds of abrupt sell-offs in U.S. assets — stocks, bonds, and the dollar — seen in the last few weeks get the president's attention. However, plans to negotiate sweeping deals with dozens of major trading partners over the next 76 days create a risk of further market volatility and economic pain. Catch up quick: Yesterday, as first scooped by Bloomberg, Bessent told a private audience of investors that the status quo — a 145% tariff on Chinese imports — amounts to essentially a trade embargo, but that the U.S. and China will de-escalate. Later in the day, Trump confirmed that, saying China tariffs will "come down substantially" and that he did not expect to play hardball with the country. He also said that he had "no intention" of firing Powell, after days of social media posts pillorying the Fed chief and demanding rate cuts. Between the lines: Those developments — paired with the decision April 9 to pause reciprocal tariffs for 90 days in hopes of seeking deals with 75 other countries — show that the "Trump put," named for a financial contract that protects against losses below a certain point, remains alive. The president may be willing to tolerate some market and economic pain to enact his agenda, but there is a limit to that tolerance. The change in tone on China and Powell came followed steep market drops. It also came after an Oval Office meeting with top retail CEOs where, our colleague Marc Caputo reports, Trump was warned that his tariff policies would lead to higher prices and empty store shelves. Yes, but: That doesn't mean that looming negotiations over the reciprocal tariffs will be all sunshine and rainbows. As Apollo chief economist Torsten Slok notes, it typically takes 18 months for the U.S. to negotiate a trade deal, a grinding process of give-and-take. The administration is seeking to rewire the U.S. relationship with pretty much the entire world in a relative instant, something trade negotiators view as implausible. Business lobbyists anticipate something along the lines of simple memoranda of understanding between the U.S. and trading partners, perhaps sharing a common template across nations. In the meantime, importers face tariffs on imported goods — from nearly every nation — higher than in generations plus deep uncertainty about where they will go from here. What they're saying: "While markets wait for trade negotiations with 90 countries at the same time, global trade is grinding to a standstill with problems similar to what we saw during Covid," Slok wrote. Namely, "growing supply chain challenges with potential shortages in US stores within a few weeks, higher US inflation, and lower tourism to the US." The bottom line: While most hard data on the economy has held up fine so far, the uncertainty generated by the trade war is hitting manufacturing and other sectors in ways that will play out across the economy in the coming months. The pullback on Powell and China provides some relief to markets, but doesn't change that underlying dynamic.

The trade war with China is "unsustainable" in its current form, Bessent told reporters this morning — but the U.S. will not move unilaterally to reduce tariffs.

Why it matters: As recession worries grow, the Trump administration is signaling intentions to tamp down trade tensions with China.

• The steep tariffs threaten to all but shutter commerce between the world's two largest economies.

What they're saying: "I think both sides believe that the current status quo is unsustainable," Bessent said after a speech at the Institute of International Finance in Washington, D.C.

• "I think at this point there would have to be a de-escalation by both sides," he added. "I would not be surprised if they went down in a mutual way," though he said there is "no unilateral offer from the president to just de-escalate."

The intrigue: Bessent shed some light on what new tariff deal talks might look like: "A satisfactory arrangement does not necessarily mean the actual trade document," he said.

• "It means that we have reached agreement in principle, and then we will start implementing those."

The backdrop: In a speech, Bessent demanded fixes at IMF and World Bank — the strongest hint yet that the administration will try to nudge groups to better align with the Trump agenda.

President Donald Trump’s statement last Thursday that Jerome Powell’s “termination” as chairman of the Federal Reserve “couldn’t come soon enough” set off another does of market turmoil. He now seems to have cleared up the critical question of the moment in comments to reporters: The press runs away with things. No, I have no intention of firing him. I would like to see him be a little more active in terms of his idea to lower interest rates. So that’s all right then? It certainly drove instant relief among traders, who had been expecting to focus on Tesla Inc.’s results. This is what happened to the dollar against the yen, and to the S&P 500, in after-hours trading: However, it would be unwise to think of this as a true turning point. Raising the possibility of firing Powell was an unforced error in the first place, and the messaging suggests chaos. The White House press secretary had amplified Trump’s criticism only hours earlier, while the actual announcement of hugely important market-sensitive information came ad hoc in response to a reporter’s question. Would the issue have been cleared up without a question? A further reason this shouldn’t do much to restore confidence that the administration knows what it’s doing is that there’s a clear alternative waiting in the wings. Powell has to go next year anyway. The obvious replacement is Kevin Warsh, a former Fed governor and investment banker. Would Warsh make that great a difference? It’s possible. Over the years, few have been much more critical of the Fed than Albert Edwards of Societe Generale, famous as a perma-bear on the stock markets but also as someone who correctly foresaw the extended bull market in bonds. He isn’t prone to be kind about anyone in the official economics establishment. Attention turns to Warsh. Photographer: Samuel Corum/Bloomberg I now proffer a piece that Edwards published in October 2016, shortly before Trump was elected the first time. He’d seen Warsh speak at a BCA conference in New York, and his judgment was: Much to my own regret I had never familiarized myself with the views of Governor Warsh, who was at the Fed from 2006-11, and played a key role in navigating the Fed through the crisis. He talked a lot of sense – in particular on how the Yellen Fed has lost its way and current policy is deeply flawed. He explained that the Fed has been “captured” by a groupthink of academics led by the ‘Secular Stagnation’ ideas of his friend, Larry Summers. Rather than admitting they are wrong, this group, who failed to predict the current economic malaise, have constructed this theory to explain why ever more stimulus is required. In particular, Warsh warned that the Fed had become the slave of the S&P. This was before Covid, the massive money-printing that followed, and the return of inflation. Back then, Jay Powell was a Fed governor, and Trump would decide to take him over Warsh late in 2017. Presumably, Trump now believes this was a mistake, even if he won’t admit it. But such a positive summation from one of the most famous market curmudgeons should establish that Warsh would represent that rare combination of genuine change with the stability of continuity. And he probably wouldn’t meekly cut rates just because the president asked him to. Which is good. With such an obvious candidate in the wings, it was absurd for Trump to make such a fuss over the last few days. He should get no credit just for not doing something incredibly stupid. But it’s reassuring that the people who advise him seem to have been persuasive that provoking an unnecessary crisis would have been a bad idea. If the administration really wants to change the Fed, it can wait until next year with a new man in place.

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Today’s Points:​

Great news! Trump isn’t going to fire Jay Powell! Scott Bessent expects a big trade deal with China — “in two to three years.” Tesla announced terrible results — and Musk will spend more time there. The dollar, gold and US stocks all bounced back to Friday’s levels. AND: A tip for politicians and executives with news to impart.

No One Needed This Drama​

President Donald Trump’s statement last Thursday that Jerome Powell’s “termination” as chairman of the Federal Reserve “couldn’t come soon enough” set off another does of market turmoil. He now seems to have cleared up the critical question of the moment in comments to reporters: The press runs away with things. No, I have no intention of firing him. I would like to see him be a little more active in terms of his idea to lower interest rates. So that’s all right then? It certainly drove instant relief among traders, who had been expecting to focus on Tesla Inc.’s results. This is what happened to the dollar against the yen, and to the S&P 500, in after-hours trading: However, it would be unwise to think of this as a true turning point. Raising the possibility of firing Powell was an unforced error in the first place, and the messaging suggests chaos. The White House press secretary had amplified Trump’s criticism only hours earlier, while the actual announcement of hugely important market-sensitive information came ad hoc in response to a reporter’s question. Would the issue have been cleared up without a question? A further reason this shouldn’t do much to restore confidence that the administration knows what it’s doing is that there’s a clear alternative waiting in the wings. Powell has to go next year anyway. The obvious replacement is Kevin Warsh, a former Fed governor and investment banker. Would Warsh make that great a difference? It’s possible. Over the years, few have been much more critical of the Fed than Albert Edwards of Societe Generale, famous as a perma-bear on the stock markets but also as someone who correctly foresaw the extended bull market in bonds. He isn’t prone to be kind about anyone in the official economics establishment. Attention turns to Warsh. Photographer: Samuel Corum/Bloomberg I now proffer a piece that Edwards published in October 2016, shortly before Trump was elected the first time. He’d seen Warsh speak at a BCA conference in New York, and his judgment was: Much to my own regret I had never familiarized myself with the views of Governor Warsh, who was at the Fed from 2006-11, and played a key role in navigating the Fed through the crisis. He talked a lot of sense – in particular on how the Yellen Fed has lost its way and current policy is deeply flawed. He explained that the Fed has been “captured” by a groupthink of academics led by the ‘Secular Stagnation’ ideas of his friend, Larry Summers. Rather than admitting they are wrong, this group, who failed to predict the current economic malaise, have constructed this theory to explain why ever more stimulus is required. In particular, Warsh warned that the Fed had become the slave of the S&P. This was before Covid, the massive money-printing that followed, and the return of inflation. Back then, Jay Powell was a Fed governor, and Trump would decide to take him over Warsh late in 2017. Presumably, Trump now believes this was a mistake, even if he won’t admit it. But such a positive summation from one of the most famous market curmudgeons should establish that Warsh would represent that rare combination of genuine change with the stability of continuity. And he probably wouldn’t meekly cut rates just because the president asked him to. Which is good. With such an obvious candidate in the wings, it was absurd for Trump to make such a fuss over the last few days. He should get no credit just for not doing something incredibly stupid. But it’s reassuring that the people who advise him seem to have been persuasive that provoking an unnecessary crisis would have been a bad idea. If the administration really wants to change the Fed, it can wait until next year with a new man in place.

​ ​ The Dollar Does a W​

Putting the brief Powell tempest to one side, is this a turning point for the dollar? And if so, in which direction? This week has already brought plenty to support any narrative you wanted. The DXY dollar index has spent two days sketching out a broad W to end almost where it closed on Friday. I drew this chart just before the Powell comments: It’s conceivable that this is a turning point, but it could easily be in either direction. We’ve explored the logic behind the fear of a drawn-out fall for the dollar and US assets at length. The rest of the world is heavily “overweight” the US, and the effect of pulling money back home could lead to a self-fulfilling reversal of US exceptionalism. But it’s ever-important in markets to guard against our innate tendency to extrapolate any trend before us into a straight line into the long-term future. Adam Parker, who heads Trivariate Research, makes the point that near-term price movement has typically impacted sentiment: The US markets have been performing worse than every major market so far this year. After the fact, many investors are now saying this is the beginning of a new long-term trend. We disagree, and our view is that this dynamic of US underperformance likely lasts less than one year. There are a number of points to his analysis. First, the dollar isn’t that weak. It’s had a sharp fall, but it remains close to its average for the last five years (and if we take inflation into account, it’s still almost as strong as in 1985, when central banks felt it necessary to coordinate to weaken it): Further, US exceptionalism was due a correction. This is how MSCI’s index for the US has performed compared to the rest of the world since 1990: Terminal users might press the button to open this chart in G, so you can view it on a log scale. Even then, the length of US dominance and the brutal way it’s been interrupted stands out. To view this data another way, this is how much the US/Rest of the World ratio has varied from its own 200-day moving average over this time. It’s now at the biggest downward departure from the long-term trend in 16 years: It’s the persistence of US outperformance since the Global Financial Crisis that stands out as unusual, more than the current interruption. But this does look like a massive bout of underperformance by standards that go back decades. By Parker’s reckoning, since World War II only the 1972-74 and 1976-78 stagflation episodes and the 1987 crash have been worse. So it’s reasonable to doubt that it will go on much longer. In part, the US stock market has been so exceptional because money has been flowing in from investors using it as a piggy bank. But there’s also a fundamental reason: US companies are more profitable. Here is how operating profit margins compare for the S&P 500 and the Stoxx Europe 600: According to Parker, if tariffs were to cause profit margins to shrink back to 2018 levels, “that could cause enough multiple contraction for the US market to continue to underperform.” That’s not a given. It’s certainly possible, but it would be remarkable if the administration were to persist with the a policy doing that much damage. It’s also not an issue that can be resolved quickly. In the last quarter, tariffs caused many purchases to be brought forward, so this earnings season won’t be a good guide to their eventual impact. To a greater extent than usual, how CEOs predict the future matters more. The defense groups RTX (formerly Raytheon) and Northrop Grumman both announced results better than expected Tuesday, but briefed that they expected tariffs to affect their profits. This is what happened next: (Incidentally, the way the US arms manufacturers have counterintuitively lagged their European counterparts since the invasion of Ukraine is stupefying): Another reason for optimism, Parker points out, is the US concentration in companies well positioned to benefit from the growth trends of the next decade, such as artificial intelligence, the power technologies to fuel it, and life sciences. One final concern is the way that this selloff has happened. Away from the stock market, there’s been a rare combination of rising bond yields and a falling dollar. As higher yields generally attract money into a currency, that’s a bad sign that confidence is dwindling, and it can signal trouble for equities. For a potent example, one reader pointed that the great Black Monday crash of 1987 was preceded by just that combination: If the divergence persists much further, it will provide more evidence that investors really do require a bigger risk premium to invest in Treasuries. But overall, Parker’s arguments are well taken. There’s good reason to fear that the policy missteps of the last few months have ended US exceptionalism, but it’s way too soon to be sure.

In a masterpiece of parliamentary disdain, a minister under pressure to resign once heard this statement from the Westminster back benches: “I have nothing against his wife and children, but I think he should spend more time with them.” Similarly, investors don’t have anything against Tesla’s workers and executives, but they think that Elon Musk should spend more time with them. It’s hard to find any other explanation for Tuesday, when Tesla Inc. announced objectively awful results after the market closed — bad in absolute terms and worse than expectations — and its stock exploded upward 90 minutes later when CEO Musk told the earnings call that he’ll return to spend most of his time at the company next month: Liam Denning has taken a typically ruthless scalpel to the results. The company isn’t even prepared to say it will return to growth this year. Musk’s big message on the call was to ignore electric vehicles (which already exist), and instead focus on robots and robotaxis (which don’t, at least in a form that can safely be sold to the public). Musk’s return is also not full time, as he said he expects to spend a day or so per week at DOGE for the rest of Trump’s term. And he still sounded to me (and Liam) as though he was far more preoccupied with the government than with the great company he runs. Despite the share price reaction, analysts’ immediate views were negative. The market response shows that a lot of very bad news was in the price, and that the CEO’s loss of interest for the last quarter was a real problem. If in five years we’re taking robotaxis and being waited on by robots, Musk will get the last laugh. He may find that getting there is a full-time job.

Today's Chart of the Day was shared by JC Parets (@JC_ParetsX).

• It's only Tuesday, but Bitcoin is on pace for its best week since November, bouncing +7.5% over the past two days.
  
• JC points out that it reached a six-week high today and reclaimed $90k. At its current price of $91k, Bitcoin has recovered about half of its -30% drawdown.
  
• Since the election, $90k has been a key battleground. If this breakout sticks, Crypto winter may finally be over. Bulls want to see $100k next, but the ultimate test will be all-time highs at $110k.
  

The Takeaway: Bitcoin reclaimed a key inflection point at $90k today. If the breakout sticks, the next upside target will be all-time highs at $110k.



jog on
duc

 

[ducati916]

Actual business activity — sales, employment, and so on — is holding up just fine for now. But a profound worry about the future has settled in among America's corporate leaders, making them reluctant to invest or hire. The big picture: That picture of corporate paralysis comes through in the latest Beige Book, in which Fed officials try to discern what's happening beneath the surface of the U.S. economy by calling up businesspeople and asking them. It points to a risk that, even if March and April data suggest economic stability — and it has so far — corporate behavior is shifting in ways creating high odds of a downturn later in the year. At turning points in the economy, anecdotal compilations like the Fed's eight-times-a-year Beige Book can be good guides to how things are changing in ways that haven't yet shown up in the data. State of play: The report's top-line summaries of current conditions sound perfectly fine. "Economic activity was little changed since the previous report," it says. "Employment was little changed to up slightly" in most of the country. It's one layer down that the signs of trouble emerge. When it comes to future planning, the trade war is creating profound uncertainty that looks to already be translating into restrained hiring and capital spending. Contacts in several Fed districts "reported that firms were taking a wait-and-see approach to employment, pausing or slowing hiring until there is more clarity on economic conditions," the report said, along with "scattered reports of firms preparing for layoffs." "Business leaders indicated recent strategy discussions shifted away from capital investments aimed at innovation and efficiency toward a focus almost entirely on mitigating tariff-related risks," reported the Kansas City Fed. By the numbers: The document used the word "uncertainty" 80 times, up from 45 times in the early March edition and 11 times a year ago. In the edition released in April 2020 — the early days of the pandemic — the word appeared only 19 times. In October of 2008, during the free fall phase of the global financial crisis, 16 times. In other words, by this (admittedly imperfect) measure, businesspeople are more unsure of what lies ahead than they were even in some of the most traumatic moments in modern economic history. Of note: There are many mentions of trouble in the tourism business. The Boston Fed, for example, reported that "travel from Canada declined noticeably, and contacts feared that summer travel from Europe and China could suffer as well because of negative reactions to U.S. tariff policies."

Earnings for 29 April:



I have a position in KO. This has been a bit of a problematic trade.


How US spends $1



The discussion around how the U.S. government spends money is clouded by the jargon of budget nerds, like "discretionary" versus "mandatory" spending. But what would it look like if you converted spending data into plain language?

The big picture: That's what centrist think tank Third Way has done, taking the thousands of lines of federal spending data and categorizing them using plain language.

• It shows that most of what the government spends money on boils down to payments directly to Americans (Social Security, most prominently), directly paying medical bills or helping people buy health insurance.

By the numbers: In Third Way's analysis, 31 cents of each dollar the government spends consists of checks to Americans.

• Some 14 cents went to help people buy health insurance or manage their benefits and 12 cents toward medical bill payments.
• Another 13 cents went to interest on the national debt. Spending on wages for the military and federal law enforcement is a small sliver, a combined 3 cents.
• Meanwhile, everything else the government does adds up to 26 cents.

What they're saying: "Most people think there's tons of waste in the budget, but that's often because the spending feels like a black box," Zach Moller, director of Third Way's economic program, tells Axios.

• "Once you see that 60% of every dollar is spent on health care or direct payments, it flips a switch in how you think about what government does."

Global markets have enjoyed something of a relief rally, as we now reach three weeks since Donald Trump launched his Liberation Day tariffs on an unsuspecting world. It seems to be about two things: The news that Trump has no intention of firing Fed Chair Jerome Powell, and that he intends to be “very nice” to China on trade.

There is much to debate over exactly how much the president conceded, but the key point as far as Mr. Market is concerned is that he’s shown that there is indeed a “Trump Put” — an option that allows investors to limit their losses if shares fall. The strike price is lower than had been hoped, but the key is that Trump has shown that when challenged, he blinks.

If that seems unfair, the circumstantial evidence from the performance of the S&P 500 since Liberation Day looks damning. The gentleman, it seems, is for turning:


Actions matter more than words, so this is a big deal. However, the underlying behavior of markets suggests that this wasn’t much of a relief rally. Since Liberation Day, the only sector of the S&P 500 that has actually risen is consumer staples, the traditional destination for the nervous. The performance of staples relative to consumer discretionary companies, and of stocks relative to bonds, confirms ongoing savage negativity following the optimism of the post-election Trump Bump:


And there’s one particular harbinger of concern. Walmart Inc. was the only stock in the S&P 500 that rose between the market peak in 2007 and the low in 2009. When it is beating the overall market, it’s a clear sign that investors don’t think much of the economy. And Walmart is doing well of late, hitting an all-time relative to the market:


So the market is reassured that it seems to have the power to pull the president back from the brink of making a major mistake. That’s important, but it doesn’t mean everything is great. Particularly, the retreat from US stocks to other markets is ongoing. The turnaround this year to date is spectacular:


Despite the relief at signs that they can bully the president, investors are still plainly unhappy, and the direction of travel for the market from here is not clear. That’s in large part because the U-turns could be more complete.

Trump wants tariffs on China to be “substantially lower,” but not negative, while Scott Bessent then assured everyone that the cuts won’t be unilateral. In other words, the administration wants to make a deal to reduce tariffs from their current absurd level, which we knew already. The shift in rhetorical tone is important; far more precision is needed before we can lift the uncertainty.

That’s problematic because uncertainty in itself inhibits economic activity and money-making. The Federal Reserve’s regular Beige Book, a collation of anecdotes and observations from the different branches’ contacts with business, illustrates the problem neatly. The latest, published Wednesday, is dominated by the uncertainty created by tariffs. Oxford Economics keeps this handy breakdown of the themes that dominate each edition. It speaks for itself:


Source: Oxford Economics
While tariff uncertainty persists, the risk is that it will so inhibit businesses as to drive the economy into an unnecessary recession. Once that possibility can be ruled out, then a consistent market advance could happen.

​

​

​

Investors would rather have better defenses. Trump looks as though he is movable, but you wouldn’t want to bet that any given level in the market will turn him around. And nothing else works. To quote Viktor Shvets of Macquarie: Capital markets are proving to be the only guardrail with sufficient power to defang the most extreme outcomes. Neither legislature, corporates nor judiciary seem able to restrain the surging executive power that recognizes few checks and balances. He added that while the selloffs had forced the president to dial back the rhetoric, his most recent words run counter to his lofty long-term aims of remaking American society and the economy by changing the world. With decision-making evidently erratic, Shvets predicts “rolling chaos over years to come.” If you can’t rely on a Trump Put with a fixed strike price, then predicting a change in policy requires knowledge of, first, the Kremlinology of who has the president’s ear at any one time (should we listen to Bessent? Navarro? who?), and, second, the state of the president’s mind. Investors know virtually nothing about either. That shrouds future moves with uncertainty and effectively forces them to show more caution, or in more technical terms to demand greater risk premia and therefore lower prices. As Hubert de Barochez of Capital Economics puts it, with some diplomacy: The fact that the rally was sparked largely by conciliatory remarks from US President Trump – whose rhetoric is notoriously volatile – raises questions about its durability. A firmer guardrail involves the electorate, not the market. Bankim Chadha of Deutsche Bank AG has reduced his target for the S&P 500 for the year, citing doubts over whether tariff policies will be abandoned before they have already driven the economy into a recession. The latest market-driven U-turns don’t guarantee a positive outcome, but there is hope the president’s approval numbers suggest a clearer turning point ahead: Chadha’s base case remains “a significant rally on a credible relent on trade policies, with a target of 6,150 by year-end” (a 14% gain from here). But that credible relent would, he thinks, require a much lower approval rating, perhaps in the low 40s or mid-30s. By then, it may be too late: “The risk to our view is we don’t get a relent before the nonlinearities of recession kick in.” Approval tends to move with consumer confidence which, as Chadha shows, was really bad for Joe Biden. Trump’s rating remains well above Biden’s when he left office, but falling confidence suggests it has further to drop. Markets see ending the current virtual embargo on China, and the removal of practically all tariffs announced this year on everyone else, as the ultimate put. The risk, still not vanquished, is that it doesn’t come until too late.

Survival Tips​

This section normally goes without a chart, but it’s time for an exception. All journalists live in fear of becoming a contrarian indicator. Most notorious is the “cover curse” when a magazine hypes some trend, and thereby brings it to an end. A BusinessWeek cover proclaiming the “Death of the Equity” shortly before the 1980s bull market is particularly notorious. It’s normally journalists who impose the cover curse. This time is different, because it’s not just news people anymore, nor is it real magazines. This social media post came from the White House on Feb. 19: What’s the significance of that date? It was the day the market peaked: You really, truly couldn’t make it up. The things that go on at market turning points are fascinating. My other favorite is this brilliant, scaldingattack on CNBC and the financial crisis by Jon Stewart in March 2009. It was broadcast a few hours after the market had hit its low. It’s never returned to the level that aroused Stewart’s ire. For now, a tip to my colleagues at what is now Bloomberg Businessweek. If you want to make a lot of people very happy, run a cover that says something like “Death of the Dollar.”

With gold in another secular bull market, I'll run an extended explanation as to the 'why'.


"A nation's exchange rate is the single most important price in the economy. It will influence the entire range of individual prices,imports,exports and the level of economic activity."

The above quote is from Paul Volcker.

The exchange rate is the price that communicates to the entrepreneur the distinguishing factors in what should be produced at home and that which should be priced abroad.

The luminary that thought really deeply about exchange rates was Jacques Reuff, advisor to de Gaulle and the man that arguably created the mess that the US find themselves in today through breaking Nixon and the US in 1971.

That was shock #1

Shock #2 was the fall of the Berlin Wall, which arguably initiated the second great wave of globalisation which is now ending, which is shock #3.

jog on
duc

 

[ducati916]

The Fed doesn’t set the tone — it reacts to it. Always has. Always will. Waller’s comment this week was clear: “A serious drop in the job market could prompt more cuts, sooner.” Translation? The Fed is laying the groundwork. And the bond market already knows it. Look at the chart. The 2-Year Treasury Yield (blue) has already rolled over. The Effective Federal Funds Rate (brown) just follows behind it, every cycle.

​

This is why we watch the 2-year so closely — it’s the market’s real Fed Funds forecast. Now, with Fed speakers getting more dovish and June cut odds jumping to 58%, the message is simple: The bond market isn’t asking for cuts. It’s demanding them. Don’t trade off speeches. Trade off structure. And right now, that structure says easing is coming. The 2 year always whispers before the Fed finally listens.

The percentage of stocks in the S&P 500, S&P 400, and S&P 600 with their 50-day moving average above their 200-day moving average have declined to levels not seen since the 2022 market downturn.
Here’s the chart:

Let's break down what the chart shows:

• The black line in the top panel shows the price of the S&P 500 index.
• The blue line in the bottom panel represents the percentage of S&P 500 stocks with a 50-day moving average greater than their 200-day moving average.
• The gray line in the bottom panel represents the percentage of S&P 400 stocks with a 50-day moving average greater than their 200-day moving average.
• The red line in the bottom panel represents the percentage of S&P 600 stocks with a 50-day moving average greater than their 200-day moving average.

The Takeaway: When we look beneath the surface, it's evident that most stocks are in downtrends.
Only 38% of S&P 500 stocks are experiencing uptrends, while just 29% of S&P 400 stocks and a mere 22% of S&P 600 stocks are in uptrends.

The trends of these breadth readings rolled over in December 2023 and have been declining ever since, and have now fallen back to levels not seen since the 2022 bear market.

When the majority of stocks are in downtrends, this is normal behavior when the overall market is in a bear market. This persistent weakness in the market could lead to further downside action if the bulls do not address this issue soon.

Currently, there are no indications that these downtrends are reversing, as the weight of the evidence remains in favor of the bears.
Therefore, it's hard for me to be optimistic about the market at this time.

Is this the right environment for allocating capital, or should we wait for bullish data points that shift the weight of the evidence?
What are your thoughts?

Friday, April 25, 2025 ​ The Secret Mid-caps. Where to find them? Mid-caps are the "Jan Brady's" of the world. The forgotten one of the bunch. People love to talk about the mega-cap stocks and things like the Mag 7. On the opposite end of the spectrum, they love debating about rotation or lack of rotation into Small-cap stocks. But what about the ones in the middle? - the Mid-caps! Traditionally, Mid-caps are between $2B - $10B in market-cap, with Large-caps being categorized by the stocks above $10B and the Small-caps are below $2B. But we changed the rules around here years ago, when it became quite obvious that we had to. You have multi-trillion dollar companies now. With market-cap inflation like this, we need to adjust accordingly. So for us, $4B - $30B makes more sense for the mid-caps. And not just the American ones, but specifically the ones around the world are being ignored by most investors. This is where our Jr. International Hall-of-Famers comes in. Foreign stocks, that trade on U.S. exchanges that are mostly in that "mid-cap" category that we created. Here's the current list categorized by proximity to new 52-week highs: ​ Once we organize the data and sort them correctly, we dive in and hand select the best opportunities to put money to work from the long side. There are a few that stand out in this week's scan.

Elon Musk arrived in Washington as the most powerful political outsider ever, brimming with Silicon Valley swagger and bipartisan buy-in for the goal of streamlining the federal government. He's leaving with his reputation wounded, relationships severed, companies in crisis, fortune diminished — and little to show for it. Why it matters: The disruption he unleashed inside the federal government — for better or for worse — will reverberate for decades, Axios' Zachary Basu writes. Zoom in: Musk's favorability ratings have plummeted. Tesla, battered by boycotts, protests and even firebombings, saw its net income plunge 71% in the first quarter. Musk's net worth has declined a staggering $122 billion this year — nearly matching the $160 billion in government savings claimed by DOGE, which budget experts believe is wildly inflated. Wedbush Securities analyst Dan Ives, a longtime Tesla bull, celebrated the end of "this dark chapter," but warned: "The brand damage caused by Musk in the White House/DOGE over the past few months will not go away." ​ President Trump and Elon Musk attend a UFC fight earlier this month in Miami. Photo: Matias J. Ocner/Miami Herald via Getty Images Musk did take a wrecking ball to many parts of the federal government. DOGE shuttered USAID and has since gone agency by agency, infiltrating sensitive IT networks — including the Treasury Department's centralized payments system — in the name of rooting out "waste, fraud and abuse." But the savings it produced were nowhere near the $2 trillion Musk set as a target. And the DOGE team's credibility has been undermined by mistakes, duplications and false assumptions uploaded — then quietly deleted — on its online "wall of receipts." The other side: "I can't speak more highly about any individual," President Trump told reporters Wednesday, heaping praise on his billionaire adviser and top donor. "He was treated very unfairly by — I guess you'd call it the public, some of the public," Trump added. "He loves the country. He doesn't need to do this." ​ ​ Defense Secretary Pete Hegseth attends an Oval Office meeting yesterday between President Trump and Norway's Prime Minister, Jonas Gahr Store. Photo: Chip Somodevilla/Getty Images "I'll hook you up to a f--king polygraph!" Defense Secretary Pete Hegseth shouted at the acting chairman of the Joint Chiefs of Staff last month, according to The Wall Street Journal. Hegseth suspected the acting chairman, Christopher Grady, of leaking his plans to give Elon Musk a classified briefing about China. The SecDef's suspicions later turned to other officials, whom he also threatened with a polygraph. ️ Behind the scenes: President Trump has stood by his embattled Defense secretary as controversies have mounted. Hegseth has fired several institutional fixtures, including his office's scheduler and multiple generals. But he has also booted many of the close allies who helped him through the confirmation process and came with him to the Pentagon. The turmoil has left him without a chief of staff, deputy chief of staff or senior adviser, frustrating both Pentagon officials and GOP congressional offices who need to work with his office, per the Journal. ​ Data: National Association of Realtors. Chart: Axios Visuals The housing market is still in a major funk: Sales of existing homes fell by 5.9% in March, which is typically the beginning of the busiest home-buying season. That's the biggest one-month drop since 2022, and a sign that 2025 may be the third straight year of sluggish sales. Between the lines: Prices are high, interest rates are still at 6.8% and the economic volatility of the past few months has either wiped out some buyers' savings or scared them away from making a big move.

America's status as the top global investment magnet is in doubt. Why it matters: Companies had been eager to spend billions to stand up factories, warehouses and more on U.S. soil, with confidence that political stability would make such investments worthwhile for decades to come. But President Trump's trade policies have made the economic backdrop more erratic and businesses are hitting pause, with new questions about whether executives can make a multiyear bet on America. The big picture: It is an unintended consequence of the on-again, off-again tariff policy out of the White House. Multinational corporations are not sure what the world will look like in less than 90 days, when Trump's freeze on reciprocal tariffs expires. There has been assurance that negotiations may lead to de-escalation among major trading partners. But that is no guarantee. What they're saying: "Overall, a tendency to take big bets — two- to three-year investments, or five- to 10-year investments with a new manufacturing location — all of those are on pause," Aparna Bharadwaj, a global consultant at Boston Consulting Group, tells Axios. "Any business that wants to make those kinds of big investments will need to have certainty behind it," Bharadwaj says. Between the lines: Trump hoped the tariffs would result in foreign dollars pouring into America, in the form of intentions to build factories and manufacturing sites. While there have been isolated announcements of such investments touted by the White House, there are new questions about the sustainability of the policies that would make the investments worthwhile. What to watch: This problem goes beyond the current trade environment. Many businesses realize that America's economic cycles are newly aligned with political cycles. Huge legislation like former President Biden's Inflation Reduction Act risks disappearing in the years it takes companies to break ground on the investments made under the law. "The swing between the blue and the red has become wider," Bharadwaj says. For decades, "it was a slight switch to the left, or slight switch to the right, but business could continue as usual." The intrigue: The questions about capital expenditures are mirrored in financial markets, where foreigners are questioning the status of the U.S. as a safe haven. The shakier domestic growth outlook implies a declining dollar and global investors' desire to rebalance their portfolios to be less concentrated in the U.S., Goldman Sachs chief economist Jan Hatzius told reporters this morning. "I'm talking about just an environment in which growth is significantly weaker for a period of time, inflation is higher, and the shine comes off of the American exceptionalism trade," Hatzius said.

​ ​

The great boxer Mike Tyson and once said that everyone has a plan until they’re punched in the face. Similarly, the Trump administration had one for rebuilding the world economy with tariffs. It’s been a rough first round. The plan was Stephen Miran’s A User’s Guide to Restructuring the Global Trading System, which must have been the most-viewed document by the financial world over the last six months. Stunningly ambitious, it helped earn its author a gig as chairman of the president’s Council of Economic Advisers, birthed the concept of the “Mar-a-Lago Accord,” and was widely taken as the road map for Trump 2.0’s bid to reshape the world using tariffs. Approaching the administration’s 100-day mark next Tuesday, the “User’s Guide” reads differently now. Some of it has come to pass, Trump has deviated sharply from important recommendations, and certain assumptions now look tenuous at best. To help navigate where the global trading system is heading, it’s a good time to pull over and return to the map. European Rearmament Countries that want to be inside the defense umbrella must also be inside the fair trade umbrella… Suppose the US levels tariffs on NATO partners and threatens to weaken its NATO joint defense obligations if it is hit with retaliatory tariffs. If Europe retaliates but dramatically boosts its own defense expenditures and capabilities… it will have accomplished several goals. This is coming to pass — with the key difference that the administration needed only to threaten tariffs, as this was combined with outright hostility to Ukraine and western Europe and an intent to annex Greenland. If Europe has already decided that it cannot rely on US protection, as seems likely, then that makes life much easier for the US — but also that the hope to use the defense umbrella as an inducement is unlikely to work. Instead, allies are responding to the notion that commitments once freely given must now be paid for by seeking new allies. There’s a Risk That Long Yields Could Rise If an expected change in currency values leads to large-scale outflows from the Treasury market, at a time of growing fiscal deficits and still-present inflation risk, it could cause long yields to rise. This risk will be somewhat compounded if inflation remains elevated. Miran expected the currency to rise to offset the imposition of tariffs — which he argued would have the effect of putting the burden on to the tariffed country. But he acknowledged that it might not, and that if the dollar were to weaken, then continuing inflation worries and the high budget deficit would put pressure on Treasuries. That has happened so far. The good news is that inflation numbers have improved in the last few months, but they don’t yet take account of tariffs. ​

Proceed Gradually To help minimize uncertainty and any adverse consequences of tariffs, the Administration can use credible forward guidance, similar to what is used by the Federal Reserve across a range of policies, to guide expectations. The US Government might announce a list of demands from Chinese policy — say, opening particular markets to American companies, an end to or reparations for intellectual property theft, purchases of agricultural commodities, currency appreciation, or more. The US can proceed to gradually implement tariffs if China does not meet these demands. Miran’s precise suggestion was to raise tariffs by 2% each month until an agreement was reached. That would have worked very much better than the chosen strategy of hiking the tariff on China to 145% in very short order. The exasperating twists and turns of the last three months mean that any forward guidance cannot be credible. That has had a massive effect on uncertainty, even for the administration’s natural constituency of small business owners. The National Federation of Independent Business has been polling on this for decades, and its members have never before felt so uncertain — but it’s important that their overall optimism still seems relatively healthy: It’s not yet clear how damaging this will be, but the administration has taken a big risk by acting in such an unpredictable way. Don’t Upset the Markets President Trump has shown repeated concern for the health of financial markets throughout his Administration. That concern is fundamental to his view of economic policy and the success of his presidency. I therefore expect that policy will proceed in a gradual way that attempts to minimize any unwanted market consequences. The White House is doing its best to look as unbothered by market selloff as it can. Reversals on the Fed and on “reciprocal” tariffs show that there is indeed a “Trump Put,” but the level to which the market must fall before it’s activated is much lower than many had assumed. Questionable:​ Tariffs Aren’t Inflationary Tariffs provide revenue, and if offset by currency adjustments, present minimal inflationary or otherwise adverse side effects, consistent with the experience in 2018-2019. This looks increasingly like over-learning the lesson from the very different environment of the brief 2018 trade war. That time, as Miran said, the tariffs were imposed gradually and with due warning, against a backdrop of placid inflationary pressure. They’re much higher now, and there is anxiety among the population about another pickup in prices. Demand for Treasuries Is Eternal Much (but not all) of the reserve demand for [dollars and Treasuries] is inelastic with respect to economic or investment fundamentals. Treasurys bought to collateralize trade between Micronesia and Polynesia are bought irrespective of the US trade balance with either, the latest jobs report, or the relative return of Treasurys vs. German Bunds. Demand may not be as inelastic as all that. The week after Liberation Day saw a combined run on both the dollar and Treasuries, which drove the 10-year yield up by the most in a week in more than 20 years. It’s a sign that foreigners have suddenly become much more discerning in their demand for US debt. That said, apart from one shocking week, the Treasury trend is still unclear: Foreigners Will Pay for the Privilege of Lending to the US Treasury can use the International Emergency Economic Powers Act to make reserve accumulation less attractive. One way of doing this is to impose a user fee on foreign official holders of Treasury securities, for instance withholding a portion of interest payments on those holdings. This assertion is beginning to look very questionable. Effectively, the suggestion is that the US should charge foreigners a fee for the privilege of lending to Uncle Sam. Just this month has seen sharply increased interest in alternatives, such as German bunds, Swiss francs, gold, and even Bitcoin. If the US tries to charge a fee like this, the likelihood is that it will just stop the flow of funds into the US — and make it that much harder to fund the deficit. The US Can Beat China in a Game of Chicken Preventing retaliation will be of great importance. Because the United States is a large source of consumer demand for the world with robust capital markets, it can withstand tit-for-tat escalation more easily than other nations and is likelier to win a game of chicken... This natural advantage limits the ability of China to respond to tariff increases. The game is still going on, but it looks at present like this is flat wrong. China retaliated swiftly, and amped up the pressure with extra measures such as blocking exports of rare earths. Trump’s rhetoric is already swerving away from the confrontation, saying he wants to be “nice” to China with a deal that lowers tariffs. The Chinese response is that tariffs have to come down first before talks can begin. It’s true that the US buys a lot from others. But this game will be won by the player who can absorb the most pain. That appears to be China, even though it also stands to lose more. This looks like it was a critical bad assumption, and the error has been magnified by the ham-fisted way in which tariffs were imposed. What Lies Ahead​ So where does this leave us? A hundred days in, Miran’s “User’s Guide” shows that the administration entered the conflict with an inflated view of its own strength, and that it has been handled more abruptly and aggressively than the architects of the policy wanted. The response so far has not been what was bargained for. Maybe it’s time for a revised edition. Photographer: Tierney L. Cross/Bloomberg All of that said, the White House wanted a weaker dollar and has got it. Interest rates haven’t broken above their recent ranges, while lower oil prices very much help its agenda. Equities remain buoyed by good earnings results (most recently from Google-owner Alphabet Inc., which enjoyed a 6% bump in after-hours trading after beating expectations for profits and revenues). A Mar-a-Lago Accord of the kind envisaged in the “User’s Guide,” in which foreigners buy 100-year zero-coupon bonds from the US in return for staying under its security umbrella, now looks unachievable. If such a deal can be made by anyone, it needs to be negotiated with far more finesse than witnessed so far, and the counterparties need to be given good reason to believe that they can trust Washington. For the future, enough remains unclear that it would be unwise to make assumptions about where the dollar and Treasury yield go from here. We’re not keeping to the course laid out by Miran, but that doesn’t mean that we are irrevocably on the road to de-dollarization.

Oil News:


Friday, April 25th, 2025

The oil markets have seemingly tired of trying to anticipate the next move of US President Donald Trump, with ICE Brent settling within a relatively narrow bandwidth of $66.0-67.5 per barrel this week. Such rangebound trading still represents a fall from a week ago, with hopes of potential US-China trade talks quashed by the Chinese Foreign Ministry denying that any bilateral negotiations were taking place.

Trump Signs Deep Sea Mining Order. Bypassing a recently launched United Nations-brokered pilot called the International Seabed Authority, US President Donald Trump has signed an executive order that fast-tracks permitting procedures for deep-sea mining in international waters.

Saudi Arabia Gets Serious About India. Indian Prime Minister Narendra Modi travelled to Saudi Arabia with an official visit and accompanied by Crown Prince Mohammed bin Salman signed a framework agreement to jointly establish two new refineries in India, presumably involving Saudi Aramco.

US Targets Southeast Asia’s Solar Exports. The US Department of Commerce has proposed duties on photovoltaic solar cells produced in Cambodia, Malaysia, Thailand and Vietnam, ranging from 40% on Jinko Solar exports from Malaysia to a whopping 3500% for certain Chinese producers in Cambodia.

EU Wants to Legally Ban Russian Deals. The European Commission is investigatingwhether it would be possible to legislate a continent-wide ban to sign new contracts for Russian fossil fuels, primarily geared to block EU buyers from spot purchases of Russian LNG, still 15% of the continent’s gas needs.

Kazakhstan Shows Its Feisty Side. Currently wielding the worst compliance readings within OPEC+, Kazakh government officials struck back against criticism by stating that Kazakhstan will prioritize national interests over those of OPEC+ as it currently produces some 350,000 b/d above its quota.

Japan Moves to Subsidize Fuel Even More. Japan has announced a revamp of its fuel subsidy policy, providing fixed subsidies from May 22 onwards that seek to lower gasoline and diesel prices by ¥10 per litre ($0.26 per gallon), whilst prices of jet fuel and fuel oil would be cut by half that amount.

China Rejects Indonesia’s New Coal Pricing. Chinese buyers of Indonesian coal continue to boycott Indonesia’s recently launched government-set price for thermal coal, stating that the new HBA pricing benchmark is more costly without any quality improvements and gets updated less frequently.

Tight Asian Stocks Push Copper Higher. Copper producers across China are scrambling to lay their hands on available scrap metal, raising the probability of a short squeeze on copper as buying tilts towards refined copper with total SHFE stocks falling 36% over the past month, seasonally a weak period.

US Senate Mulls Reversal of California Car Sales Mandate. The US House of Representatives is set to vote next week on a measure to derail California’s mandate that all car sales by 2035 be electric, plug-in hybrid or hydrogen, concurrently voting on easing the limits for nitrogen oxide emissions from trucks.

Venezuela Pins Its Hopes on China. Venezuela’s vice president Delcy Rodriguez visited China this week as Caracas seeks to garner the interest of Chinese refiners for prospective crude supplies, with March already showing a month-over-month doubling of China-bound flows ahead of a US sanctions snapback.

Mexico’s Valero Ban Didn’t Last Long. It took less than a month for Mexico’s tax authorities to reinstate the fuel import license of US refiner Valero Energy (NYSE:VLO), its largest gasoline supplier, as a nationwide crackdown on fuel smuggling also led to Pemex buying 9 spot gasoline cargoes in Asia.

US Oil Still Sees a Future in Namibia. Undeterred by the failure of its first exploration well in Namibia (Kapana-1), US oil major Chevron (NYSE:CVX) stated that it is looking to drill a second exploration well in the Walvis Basin in 2026 or 2027, trying its luck closer to the Namibian shore.

India Opens Up Nuclear Investment. The Indian government is set to ease investment requirements into its booming nuclear sector, allowing foreign companies to take stakes of up to 49% in its nuclear plants as New Delhi seeks to expand its capacity 12-fold to 100 GW by 2047.

Iran Seeks Russian Energy Investments. Visiting Moscow this week, Iran’s oil minister Mohsen Paknejad announced that Russian oil companies will invest $4 billionto develop seven Iranian oil fields, concurrently signing a memorandum on the construction of a new nuclear power plant in the country.







Duc's thoughts:

Money:

1. Means of exchange;
2. Unit of account;
3. Store of value.

Reserve Currency:

1. Military dominance;
2. Technological dominance;
3.Sound legal system;
4. Financial centre;
5. Control of the sea lanes.

There are essentially two types of empire: (i) land based and (ii) sea power. The last two empires, Britain and US are sea power empires. The rise of China is a land based empire.

jog on
duc