MAD Macro - Political Hawks and Doves
NATO – We Must Stand-Up and Fight Russia
We Must Ease to Save Democracy
The Next Issue of MAD Macro Will Be Monday 4/15, Tax Day
The world is full of surprises. NATO is celebrating the 75th anniversary of the alliance this week. Surprise! Guess who is the newest political hawk in Europe? Emmanuel Macron. Yes, the French. Who is the biggest political dove in Europe? Olaf Scholz. Surprise, the Germans. Macron says he is tired of telling Putin what NATO will not do. He thinks it’s time to get tough on Putin. I guess no Maginot Line or NATO red lines for this Frenchman. The WSJ has a very interesting front page article today on Macron, linked here.
Speaking of hawks and doves, no one wants to say it, but Jay Powell has become the newest and biggest Fed dove. Yesterday he continued to signal that the Fed will ease this year. He also keeps saying that the Fed is not political. You know how Washington works. They say something but they are actually thinking and doing the opposite. I think he hates the Orange Mad King I and will ease in June to save democracy.
Greg Ip has a good WSJ front page article today, linked here. It’s titled “What’s Wrong With the Economy? It’s You, Not the Data.” Greg should have coffee with Paul Krugman. They have a lot to talk about. Greg makes the good point that at the moment things are great, inflation is falling and the economy is growing. He concludes the article by saying, “The media and the public are negative for the same reason: They are worried about the country. It will take more than lower inflation to change that.” I can think of a few reasons Americans are worried that Greg forgot to mention. Like choosing between the Orange Mad King I and the Tin man for president this November. Oh, and what about the U.S. fiscal problems.? The chart below is simple and frightening all at the same time. The U.S. Treasury, yes, Janet Yellen, the fairy godmother, has paid $1.1 trillion in interest charges on the debt in the last 12 months. Greg also forgot to mention the undeclared WW III between China, Russia, Iran and North Korea vs the West. It’s not a surprise people are negative on the economic outlook.
Equities are a little higher this morning after a mixed day yesterday. Interest rates are a little higher, the dollar is a little lower and the curve is a little steeper. Maybe the market is starting to think Powell will ease in June and risk higher inflation to save democracy. Maybe that’s why gold has been making new all-time highs. Everyone keeps acting so surprised that gold is going higher. The nice thing about being a gold bug is you are never surprised when gold rallies. In fact, the biggest question a gold bug has is why did it take so long? We have Challenger Job Cuts and Initial Jobless Claims this morning and then the monthly unemployment report tomorrow.
I updated the U.S. Dollar Index, U.S. 10yr yield, U.S. 10yr-2yr yield spread, VanEck CMCI Commodity Strategy Index, WTI crude oil, copper, spot gold, bitcoin, S&P futures and NASDAQ 100 futures charts below.
The dollar is a little lower and looks like it might have a double top on the charts. Interest rates are a little higher and the curve a little sTeeper.
Commodities have had a strong rally this week. The VanEck CMCI Commodity Strategy Index made new two year highs yesterday. Crude oil is above $85 and copper is up sharply this week making new two year highs. Bitcoin is a little higher this morning.
S&P and NASDAQ 100 futures are both higher this morning.
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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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