MAD Macro - Iran, One Word - Don't
Iran, Jill Has One Word For You - Don’t
I Told Them Don’t, I Told Them Don’t, I Told Them Don’t.
Oh no, they did. The nice thing about the Tin Man’s team, they keep it simple. One word, simple. Don’t. The problem is that it never seems to work. Russia did not obey, why would they expect Iran to obey? We have told China, don’t invade Taiwan. We have told North Korea, don’t invade South Korea. Do they think that will work? First, the Tin man wants Israel to stop fighting Hamas. Now he wants them to stop fighting Iran. Defeating Hamas is no longer acceptable to the far left of his party. I guess fighting Iran is also no longer acceptable. I guess the Iran hostage crisis never happened. Markets are not worried. The U.S., U.K., Jordon and Israel shot down almost all of the missiles and drones. Why worry? Plus, Iran thinks this ends things. Really? What about Hamas, Hezbollah and the Houthis? Maybe this is the beginning of a pause in the Mideast war. Or maybe not. The Orange Mad King I thinks it would have been different if he was president. It is true, our enemies might not have tested a crazy person. Nobody knows. I think the bigger picture is what we are all missing. China, Russia, Iran and North Korea are working together to defeat the West and Western values. It’s hard to see the forest through the trees.
The All-In Podcast had an interesting segment this weekend on the U.S. debt problem. Today’s WSJ also has a front page article on the U.S. debt problem, linked here. It’s titled “America’s Bonds Are Getting Harder to Sell”. I included a couple of charts from the article below. The All-In hosts are worried U.S. funding needs will crowd out private investment. Those guys live on private investment, it’s their oxygen. Maybe, but for the moment debt markets are still working. Keeping an eye on the U.S. yield curve is important. If we start to see the U.S. curve steepen sharply, that will be the warning sign that, Houston, we have a problem. Could gold be forecasting a U.S. debt crisis?
Being away from the markets for a week is always interesting seeing what happened to the charts. I have a lot of chart updates today. First, the dollar is very strong. The U.S. dollar and interest rates are higher on the sticky CPI inflation problem. The Japanese yen is very weak. I am never sure if Japanese yen weakness is something we need to worry about. On the charts, dollar/yen has clearly broken out to the upside. Commodities are very strong despite the stronger dollar and higher U.S. interest rates. Copper and aluminum spiked higher overnight on new Russian sanctions, but have pulled back from the highs. The VanEck CMCI Commodity Strategy Index is also breaking out to the upside. Both gold and crude oil rallied in anticipation of the Iran attack but have pulled back on the news. I believe both remain in strong uptrends. U.S. equities broke below the sharp uptrends from the October 2023 lows. They are due to open higher today after last Friday’s sharp selloff on the expected Iran attacks.
I updated lots of charts today. The U.S. Dollar Index, U.S. Dollar Index weekly, Japanese yen, U.S. 10yr yields, U.S. 10yr-2yr yield spread, WTI crude oil, copper, Aluminum, VanEck CMCI Commodity Strategy Index, spot gold, bitcoin, S&P futures and NASDAQ 100 futures charts below.
The dollar and U.S. interest rates continue to rise on sticky U.S. inflation. Personally, I think the Fed will be forced to ease because of the U.S. funding needs, regardless of inflation. In fact, they need inflation to deflate the U.S. debt problem. Watch for a steepening curve.
Commodities are stronger. Copper, aluminum and the VanEck CMCI Commodity Strategy Index are breaking out to the upside. Spot gold and WTI crude oil have pulled back from the highs but remain in strong uptrends. Bitcoin is below the 50 day average but holding in a sideways consolidation.
S&P and NASDAQ 100 futures are both higher this morning. Sell the Iran rumor, buy the news.
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Unless otherwise stated, Bloomberg is the source of all data and charts.
S&P 500 futures are a type of derivative contract that provides a buyer with an investment priced based on the expectation of the S&P 500 Index’s future value. Nasdaq 100 futures are commodities futures products traded within the equity futures sector. West Texas Intermediate (WTI) oil is a benchmark used by oil markets, representing oil produced in the U.S. Brent Crude Oil is a blend of crude oil recovered from the North Sea in the early 1960s, whose price is used as a benchmark for the commodity's prices. The U.S. dollar index (USDX) is a measure of the value of the U.S. dollar relative to the value of a basket of currencies of the majority of the U.S.'s most significant trading partners. UBS Bloomberg Constant Maturity Commodity Index is a total return rules-based composite benchmark index diversified across commodity components from within specific sectors.
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