MAD Macro - The Players and the Prosecutors
The Players
The Prosecutors
The Orange Mad King I’s first criminal trial has started. The fun is just beginning. Cue the higher ratings for MSNBC and FOX News. Bill Clinton had some similar problems back in the blue dress era but that was before the #MeToo era. Things are different these days. We all knew Bill had a philandering problem but we also knew Hillary would keep him in line. Sure, the impeachment was a mistake but in the post #MeToo era, it’s called a felony. During Bill’s campaigns Hillary had a name for the people who took care of those kind of problems. It was called the bimbo squad. I don’t think Hillary even needed to pay anyone. They just knew not to mess with her or they might find themselves wrapped up in a white rug. The Mad King I used a paid fixer, all wrapped up in a retainer. Maybe there is a lesson in all of this. Democrats are better. They don’t need to pay for their philandering but Republicans do. Sadly, Ken Starr is not available to appear on FOX News. He passed away in 2022. Alvin Bragg, on the other hand, has a promising future as an MSNBC host. Maybe he will get his own show following Morning Joe or after the Rachel Maddow Show. There is one positive for the Orange Mad King I. He does not need to campaign or go to his son’s graduation.
It should not be a surprise that Israel will not be taking the Tin Man’s win and will retaliate against Iran’s massive direct attack. The Mideast is a confusing place with a confusing history. The WSJ has a good news article today, linked here. It’s hard to find informative news stories these days, so it’s worth highlighting them. The article is titled, “Israel-Iran Confrontation Forces Gulf Powers to Choose Sides”. One of the interesting things about the successful defense of Israel Saturday night was Jordon’s direct involvement, which was not mentioned in the article. Maybe we should not be surprised. Afterall, King Abdullah II of Jordon went to Eaglebrook and Deerfield, two boarding schools in Deerfield, MA. Of course, that was before wokeism changed how U.S. history is taught in schools. We were the good guys back then.
Houston, the markets might have a U.S. debt problem. Interest rates are rising and the yield curve is steepening. So far it’s not a sharp move but the warning lights are starting to flash. Last fall, the curve steepened sharply in September and October, causing a correction in risk assets. Jay Powell is speaking today. I guess he will tow the party line and say that they won’t be easing anytime soon. I still have this suspicion that he and Janet Yellen will find a reason to ease and save democracy. Maybe he will point to the developing World War III, as a reason to ease. If that happens, watch for a sharply steepening yield curve and a risk asset selloff on inflation fears. Markets are unchanged to lower this morning after a sharp selloff yesterday. Both the S&P and NASDAQ 100 have broken below the 50 day averages for the first time since last November. I included charts of the Japanese yen and the Nikkei 225 today. Dollar/yen is making new 35 year highs and the Nikkei 225 may have failed a 35 year upside breakout. Interest rates are making new highs for the year. Oil is holding around the $85 level which means $4 gasoline this summer. Apparently, some analysts think the Tin Man will again sell oil from the SPR. Who needs a strategic petroleum reserve during a World War?
I updated the U.S. Dollar Index, Japanese yen monthly, U.S. 10yr yield, U.S. 10yr-2yr yield spread, WTI crude oil, copper, spot gold, bitcoin, Nikkei 225 monthly, S&P futures and NASDAQ 100 futures charts below.
The dollar is stronger again making new highs for the year. I still think Jay will find a reason to ease and the dollar will decline at some point this year. The yen is making new lows (dollar/yen new 35 year highs). Interest rates are higher, making new highs for the year and the curve is steepening. The U.S. debt warning lights are flashing.
Crude oil is unchanged and copper is lower. Spot gold and bitcoin are also a little lower. The halving is coming in the next few days. I am not sure it’s so bullish this time. The miners will struggle to breakeven if the price declines.
The Nikkei 225 closed back below the 1989 high, possibly a failed breakout. The S&P and NASDAQ 100 futures are both close to unchanged this morning after breaking below the 50 averages for the first time since last November.
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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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