Month: June 2024

General Mills shares plunged nearly 8% at the start of the US cash session, marking its steepest intra-day drop since May 2022. The decline followed the packaged-food company’s report of fourth-quarter sales that missed average analyst estimates, coupled with a full-year sales forecast that also fell short. This disappointing outlook signals more evidence of a consumer pullback amid elevated food prices and builds on our weak consumer theme. 

The maker of Lucky Charms cereal and Yoplait yogurt reported net sales of $4.71 billion, -6.3% year over year for the quarter, below the average estimate tracked by Bloomberg of $4.87 billion. Volumes for the quarter were also lower in its North American retail business and pet segment. Also, retailers were reducing inventory in the quarter.  

Here’s a snapshot of General Mills’ fourth quarter results (courtesy of Bloomberg):

• Adjusted EPS $1.01 vs. $1.12 y/y, estimate $1.00

• Adjusted gross margin 34.9% vs. 35% y/y, estimate 34%

• Net sales $4.71 billion, -6.3% y/y, estimate $4.87 billion

• North America Retail Net Sales $2.85 billion, -6.9% y/y, estimate $2.93 billion

• North America Foodservice Net Sales $589.0 million, +4.4% y/y, estimate $571.1 million

• Pet Segment Net Sales $602.1 million, -8.1% y/y, estimate $627.4 million

• International net sales $667.5 million, -10% y/y, estimate $730.2 million

• Organic net sales -6%, estimate -3.31%

• North America Retail organic net sales -7%, estimate -4.41%

• Pet organic net sales -8%, estimate -4.32%

• Change in North America Foodservice Organic Net Sales +4%, estimate +1.04%

• Change in International Organic Net Sales -10%, estimate -2.58%

• Organic sales volume -2.0 pts, estimate -2.36

• North America retail organic sales volume -6.0 pts, estimate -2.3

• Pet organic sales volume -7.0 pts, estimate -5.27

• International organic sales volume +1.0 pts, estimate -2.67

• North America retail organic sales price/mix -1.0 pts, estimate -2.91

• Pet organic sales price/mix -1.0 pts, estimate +1.05

• North America foodservice organic sales price/mix +1.0, estimate +0.98

For the current fiscal year, the company forecasts organic sales to range between flat and a 1% increase, falling short of the average analyst estimate of 1.18%.

• Sees organic net sales 0% to +1%, estimate +1.18% (Bloomberg Consensus)

• Sees adj. EPS in constant currency -1% to +1%

• Sees Adjusted operating loss in constant-currency -2% to 0%

General Mills Chairman and Chief Executive Officer Jeff Harmening called the macroeconomic landscape “a more challenging operating environment.” 

This comes as elevated interest rates and persistent inflation have triggered a consumer slowdown, mainly affecting the working poor segment, but new evidence of stress has emerged in the middle class.

Consumers have been cutting back on spending in recent months and buying less food. Some consumers are replacing branded goods with cheaper, private label versions, while others are simply making do with less — particularly for packaged foods. The company said it expects consumers to continue seeking value given the economic environment. -Bloomberg

Pro subs have been provided the theme of the consumer slowdown in various notes, the most recent one being titled Goldman Tells Top Clients To Start “Shorting The Middle-Income Consumer.”

In an anonymous effort to help secure Julian Assange’s freedom, an anonymous Bitcoiner donated over 8 Bitcoin, worth around $500,000, to help Assange’s family pay off the debt incurred by his charter jet and settlement expenses, CoinTelegraph reported.

On June 24, Assange was released from the high-security Belmarsh prison in the United Kingdom after reaching a plea agreement with U.S. authorities. Shortly after his release, he departed the U.K. on a private plane from a London airport to Saipan in the Northern Mariana Islands, a U.S. territory.

Assange appeared in a district court in Saipan on June 26, where he pleaded guilty to one charge of breaching the U.S. Espionage Act by leaking classified documents. The journey was planned to prevent Assange from touching foot on American soil.

In an interview, Stella Assange, Assange’s wife, stated that “freedom comes at a cost.” Assange is required to pay $520,000 to the Australian government for the “forced” chartering of flight VJ199 to travel to Saipan and Australia. Stella started a crowdfunding page to help the jailed founder with his debts after his return home to Australia.

The donation link was posted by Stella Assange on June 25, and within 10 hours, an anonymous Bitcoiner paid over 8 Bitcoin to the fund, almost clearing the goal of $520,000. He has also received over 300,000 British pounds ($380,000) in fiat donations so far.

The single Bitcoin donation was the largest donation to the fund, more than all other donations in all currencies combined. As a result, Assange will arrive in Australia debt free.

While everyone – from the most clueless and incompetent Fed president and career economist-cum-fax machine expert, to the local hotdog vendor and Uber driver – now has an opinion on when the Fed will cut rates, few are willing to put actual money where their mouth is. So when someone bets a substantial amount of money on a non-consensus forecast for where rates should go, people talk.

And they are talking a lot right now, after Bloomberg pointed out that a mystery trader has put on a huge bet that Fed will cut rates as low as 2.25% – some 300bps of cuts from here – by March 2025, wagering approximately $13 million that the US economy is about to get rugged in the next 9 months.

As Bloomberg’s Edward Bolingbroke writes, over the past three sessions positioning in the options market linked to SOFR (the Secured Overnight Financing Rate, aka the new Libor), shows a surge in bets that stand to profit if the Fed slashes its key rate to as low as 2.25% by the first quarter of 2025. Some more details from the Bloomberg trader:

• All session 30,000 SOFR SOFR Mar25 96.75/97.75 call spread bought at 4.75, says US trader
• Open interest in the strikes has risen to 106,201 and 112,496 after the same position was bought Friday in 80,000 paying 4.5 to 4.75. Options expire March 14. Monday’s continued buying sets the size of the position to roughly 110,000 over Friday and Monday session for a premium of approximately $13 million
• The dovish hedge sits at maximum profit with a Fed rate at around 2.25%, implying Fed to cut rates by around 300bp between now and the March policy meeting. Fed-dated OIS for the March meeting is currently around 4.57%, implying around 76bp of rate cuts

Such an outcome which envisions at least 300 basis points of cuts from current levels, appears unlikely “unless the US economy tumbles into a sudden recession” according to Bloomberg.

While the Biden administration has been carefully manipulating the data to make it seem that the economy is far stronger than it is, some have started to read between the lines – and our articles exposing the true state of the economy, such as this one and this one –  and are starting to build up bets that hedge tail-risk outcomes, such as rapid and extreme rate cuts.

Of course, since trading in these contracts is anonymous, it is impossible to know just who has put on this bit bet for huge rate cuts.

But it not just bets on a Fed recessionary panic that are rising: traders have also been ramping up buying of August contracts that would pay out if policymakers cut at the July 31 policy meeting. Swaps linked to that meeting date, meanwhile, only price in one basis point of a reduction then.

A dovish stance has emerged in the cash market, too, according to JPMorgan Chase & Co. data. The bank’s latest
survey of clients showed the biggest net long positions in three months in the week ending June 24.

Other markets are also showing telltale signs of increased duration exposure, a signal that many are betting the Fed’s hawkish music is almost over:

In CFTC data through June 18, asset managers extended their net duration by roughly 141,000 10-year note futures, with overall long duration rising to roughly 7.6 million 10-year note futures equivalents. Hedge funds took the other side, adding around 186,000 10-year note futures to net short duration position. Their extension of net short position in 2-year note futures by $5.6 million per basis point in risk put them at a record net short at over 2 million contracts.

In the past week, the largest positioning add seen in SOFR options have been around the March 2025 calls in the 96.75 and 97.75 strike linked to the dovish call spread wager which has been bought over the past three sessions at a price of 4.75 ticks. Other strikes which have been active on the week include the 94.875 and 94.75 strikes following flows including the Dec25 94.875/94.75 put spread

Authored by Michael Lebowitz via RealInvestmentAdvice.com,

The Fed and economists are encouraged because CPI is down to 3.3% from a high of nearly 9% in 2022. Despite the Fed’s “significant progress” in lowering inflation, most citizens are outraged and confused by economists’ relatively rosy inflation observations. Most citizens believe inflation is still rampant.

The Fed and economists are correct in that inflation is now tame. At the same time, citizens dissatisfied with high prices have solid grounds on which to base their disapproval.

Let’s better understand how such contradictory beliefs can both be factual. Furthermore, in the process, we can help Jerome Powell understand why economic sentiment is poor despite a near-record low unemployment rate.

“You know, I don’t think anyone knows, has a definitive answer why people are not as happy about the economy as they might be.”

-Jerome Powell 6/12/2024

Visualizing Divergent Inflation Opinions 

The graph below of the BLS CPI New Vehicles price index, a CPI component, demonstrates why economists and citizens have such grossly contrasting opinions of inflation.

Economists focus on the blue line, graphing the year-over-year change in new vehicle prices. Over the last year, the price index of new vehicles has decreased by .60%. Economists can say the cost of buying a new vehicle is in a deflationary state.

While the chart may warm the hearts of economists and the Fed, most individuals see the orange line, the CPI price index for new vehicles instead. It shows that new vehicle prices are up about 20% since the pandemic. Yes, they may have recently declined slightly, but today’s prices are nowhere close to where they were four years ago. In their minds, there is significant inflation in new vehicles.

Economists Prefer Growth Rates, Not Absolutes

Ask an economist what the nation’s GDP is, and they will quote an annualized growth rate to a decimal point. We bet almost all of them will get the answer correct within one or two-tenths of one percent.

Ask them again, but request the answer in dollars. It would not be surprising if many economists are off by a trillion or even two trillion dollars, representing anywhere from 3.00% to 7.00% of the economy.

Economists prefer to analyze and quote many economic data points in terms of percentage change. For instance, how much did industrial production or retail sales change versus last month or over the previous quarter or year? They vastly prefer growth rates because it gives them a comparable and insightful way of analyzing economic data. Let’s review why this is the case.

Comparative Analysis

Economists are more adept at comparing data from different periods, industries, and countries if they have a common measurement calculation. Instead of absolute change, which doesn’t account for the starting point, a growth rate captures the absolute change and the starting point. Consider the following:

If GDP increases by $1 trillion this year, how would that compare to a $1 trillion increase in 2000? The question is challenging to answer using absolute numbers. However, growth rates allow us to evaluate the two periods quickly. Today, GDP is $28.284 trillion; therefore, a $1 trillion increase would represent 3.50% growth. In 2000, GDP was close to $10 trillion. Adding a trillion dollars of economic growth would have resulted in a 10% growth rate. While a trillion dollars is a trillion dollars in absolute terms, there is a stark difference between 10% and 3.50% growth.

Trend Analysis

Growth rates highlight trends and changes over time more clearly than absolute numbers. They can show whether an economy is accelerating, decelerating, or maintaining a steady pace.

Consider the graph below. The blue line, showing the make-believe production of widgets, starts at 1,000 widgets and increases by 100 widgets annually. The steady growth in absolute terms is a linear upward trending line. However, the annual growth rate steadily declines from 10% to 4% by year 20. An economist looking at the graph would say the rate of the production of widgets is declining despite the upward trend in the number of widgets being produced annually. 

Policy Decision Making

The Fed aims to promote stable economic growth. To do so they balance the level of interest rates with inflation and economic activity. Having like figures to analyze, such as growth rates, makes their task significantly more straightforward. Imagine if the Fed had to determine the appropriate interest rate given that the economy grew by $750 billion last year and the CPI price index rose by 2.45.

Investors prefer growth rates for the same reason. If I can estimate the economy’s growth rate and other critical economic figures, they can better determine a growth rate or interest rate they would accept for taking risks.

The capital asset pricing model (CAPM) is a bedrock for finance. The formula states that an asset’s expected return should equal the risk-free interest rate plus the asset’s sensitivity (beta) times the market’s expected return. This formula can only work with growth rates, not absolute numbers.

Consumer’s Point Of View

Regarding inflation, consumers are less concerned with growth rates and heavily focused on absolute prices. They remember that bread used to cost $4 a loaf and now costs $7. The graph below shows the price of white bread was stable between $1.25 and $1.50 a pound from 2008 to the pandemic. It is now close to $2 a pound.

That is significant inflation. But it doesn’t tell the whole story. If wages also rose similarly, purchasing power hasn’t changed. It is similar to hearing stories from your parents or grandparents about going to the movies and getting popcorn and a soda, all for $1. Did you ever ask them how much money they made at the time?

Summary

We want to make it clear that we do not condone inflation. It accelerates an already wide wealth gap and creates hardships for many citizens. For more, please read our article, Fed Policies Turn The Wealth Gap Into A Chasm.

We analyze inflation data similarly to economists. We accept that absolute prices are much higher today than a few years ago, but we also acknowledge that, in general, wages are higher as well. Just like we can’t realistically compare a 15-cent McDonald’s hamburger to a $3.00 one today, we should be careful comparing prices today to their prices a few years ago.

Prices are not returning to 2020 levels. In fact, any hint that aggregate prices retreat from current levels will cause the Fed to panic and quickly stimulate inflation via lower interest rates and QE. We remind you that the Fed was lamenting that we didn’t have enough inflation throughout most of the period between the financial crisis and the pandemic.

These are the images the world has been waiting for (with the exception of all Neocons, Liberal interventionists, natsec hawks, and Killary types…). “Free at last,” WikiLeaks said in a post on X, upon Julian Assange emerging rom his plane after landing in the Australian capital of Canberra.

Assange raised his fist on the tarmac, and lovingly embraced his wife Stella and his children and family. His guilty plea arrangement with the United States was a success. 

During the Wednesday morning stopover and court appearance in a US district court in Saipan, the 52-year old Assange formally pleaded guilty to obtaining and publishing US military secrets.

REUNITED: Julian Assange embraces his wife @Stella_Assange for the first time as a free man pic.twitter.com/yfgLYa3yWt

— Going Underground (@GUnderground_TV) June 26, 2024

One of Assange’s lawyers, Jennifer Robinson, said after the hearing that the whole ordeal “sets a dangerous precedent that should be a concern to journalists everywhere.”

During the hearing he appeared emotional and there were moments of humor and laughter in interaction with the judge and with the court, according to The Guardian. For example, when the judge questioned whether satisfied with the plea conditions, Assange responded: “It might depend on the outcome.” This immediately drew some laughter in the courtroom.

Chief Judge Ramona Manglona said at the start: “Not many people recognize we are part of the United States, but that is true.” By the end she pronounced: “It appears this case ends with me” and followed with “I hope there will be some peace restored.”

The moment he walked out of the courtroom a free man:

Julian Assange Free At Last!!! pic.twitter.com/Vpzcxr6lbi

— Stella Assange #FreeAssangeNOW (@Stella_Assange) June 26, 2024

Crucially, the judge said something which marks a significant blow to Assange’s and WikiLeaks’ detractors, who have long maintained that the leaks – particularly the Iraq and Afghan war logs – put intelligence officers and foreign assets in danger and may have gotten some killed.

Manglona explained that key to the deal for his freedom was that he already served years in a notorious and harsh UK prison, but also that no actual physical harm was actually caused due to Assange’s actions.

“You stand before me to be sentenced in this criminal action,” the judge said. “I would note the following: Timing matters. If this case was brought before me some time near 2012, without the benefit of what I know now, that you served a period of imprisonment… in apparently one of the harshest facilities in the United Kingdom.”

With his attorney after being pronounced by the US federal judge a free man…

Just a moment – pic.twitter.com/5UDPsGcIYG

— WikiLeaks (@wikileaks) June 26, 2024

Below: Returning home to Australia, where Prime Minister Anthony Albanese’s role in securing his freedom was key. WikiLeaks and Assange’s family have thanked the Australian PM.

The Australian parliament had also begun publicly lobbying for Assange’s freedom starting months ago, and this was also essential in building pressure with the Biden administration.

“There’s another significant fact – the government has indicated there is no personal victim here. That tells me the dissemination of this information did not result in any known physical injury,” the judge continued.

“These two facts are very relevant. I would say if this was still unknown and closer to [2012] I would not be so inclined to accept this plea agreement before me,” Manglona added. “But it’s the year 2024.”

Someone please ask this walking embodiment of mediocrity:

1) How *specifically* did WL endanger US national security?

2) If Assange should be imprisoned for life for publishing these docs, why shouldn’t the NYT and Guardian which partnered with him?https://t.co/eKbDD5zued

— Glenn Greenwald (@ggreenwald) June 25, 2024

Former intelligence officials and national security pundits have been livid and disappointed over the plea deal, claiming Assange’s leaks got people killed and harmed US operations abroad.

This cretin worked for CIA so obviously her tweet about Assange is full of lies.

But what sickens me worse is her cowardice.

The NYT, Guardian, etc. partnered with WL to publish the same classified docs.

But she’ll never call for them to be imprisoned because they have power: https://t.co/xXH7PaSQ3y

— Glenn Greenwald (@ggreenwald) June 25, 2024

“I can’t stop crying,” his wife, Stella, wrote on X soon after.

Importantly, as a condition of the plea WikiLeaks is required to destroy information pertaining to US state secrets that was provided to Assange and his team. While the WikiLeaks site is a large repository of world-wide leaks on various governments, it appears that sections devoted to classified US documents have now been removed.

NEW: All 19,252 DNC emails & 8,034 documents have been scrubbed from the Wikileaks website.

User attempts to access files results in “Internal Server Error.”

Hillary Clinton emails are still available online.

The DNC emails removal follows upon the historic Assange plea deal. pic.twitter.com/VR6OJJsWVk

— Kyle Becker (@kylenabecker) June 26, 2024

Upon Assange’s celebratory landing in Australia, his wife Stella said in a press conference that he “just arrived in Australia after being in a high-security prison for over five years and [on] a 72-hour flight.”

She said it would be “premature” for Julian to address the press and that he “has to recover”. She then declared: “The fact is that Julian will always defend human rights, will always defend victims – that’s just part of who he is.”

“I hope journalists and editors and publishers everywhere realize the danger of the US case against Julian that criminalizes, that has secured a conviction for, newsgathering and publishing information that was true, that the public deserved to know,” she continued in the press conference.

“That precedent now can and will be used in the future against the rest of the press. So it is in the interest of all of the press to seek for this current state of affairs to change through reform of the Espionage Act,” said Stella Assange. “Through increased press protections, and yes, eventually when the time comes – not today – a pardon.”

Crude prices have roller-coastered over the last 12 hours or so as last night’s API (large gasoline build) sparked selling, then buying waves hit during the late-Asia/early-Europe session, then selling returned with a vengance during the early US session as Kanda’s comments sparked dollar strength and sent commodities lower.

The dismal home sales print sparked dollar weakness and sent oil prices back up into the green ahead of the official inventory data.

API

• Crude +914k (-200k exp)

• Cushing -350k

• Gasoline +3.84mm (-900k exp) – biggest build since Jan 2024

• Distillates -1.18mm

DOE

• Crude +3.59mm (-200k exp, whis +800k)

• Cushing -226k

• Gasoline +2.65mm – biggest build since Jan 2024

• Distillates -377k

Confirming API’s report, the official data shows a considerable crude inventory build and the largest rise in gasoline stocks since January…

Source: Bloomberg

The Biden admin added a shockingly large 1.285mm barrels to the SPR last week – the largest since June 2020. Overall this was the biggest weekly increase in stocks in two months…

Source: Bloomberg

US implied crude demand plunged last week…

Source: Bloomberg

US Crude production was unchanged just shy of record highs as rig counts slipped south…

Source: Bloomberg

WTI was trading just in the green ahead of the official data, around $81.20; and dropped back towards the $80 level on the print…

As Bloomberg’s Lucia Kassai reports, it’s hard to see any saving graces in the EIA report of this week.

Overall we’ve seen surprise builds in crude oil and gasoline inventories, softer demand across gasoline, diesel and jet, and refineries reduced utilization rates in all PADD regions.

The Supreme Court on Wednesday tossed a case claiming that the Biden administration unlawfully coerced social media companies into removing content and banning users based on political views.

In a 6-3 decision, the Court found that the plaintiffs did not have standing to sue – as opposed to tossing the case on merit – just like the vast majority of election fraud cases which didn’t make it past lower courts.

Clearly it was easier to punt this one than focus on the mountain of evidence that the Biden administration and US intelligence agencies were directly pressuring social media platforms to censor free speech disfavorable to the regime.

GOP attorneys general in Louisiana and Missouri, along with five social media users, filed the underlying lawsuit claiming that US government officials exceeded their authority by pressuring social media platforms to moderate content. The individual plaintiffs include Harvard’s Martin Kulldorff and Stanford’s Jay Bhattacharya, as well as Gateway Pundit owner Jim Hoft.

Justice Alito wrote the dissenting opinion and was joined by Thomas and Gorsuch.

“For months, high-ranking Government officials placed unrelenting pressure on Facebook to suppress Americans’ free speech. Because the Court unjustifiably refuses to address this serious threat to… https://t.co/qhwL5wGuI3

— Seth Dillon (@SethDillon) June 26, 2024

The laws sought to prevent social media companies from banning users based on their political views, even if users violate platform policies.

The lawsuit included various claims relating to activities that occurred in 2020 and before, including efforts to deter the spread of false information about Covid and the presidential election. Donald Trump was president at the time, but the district court ruling focused on actions taken by the government after President Joe Biden took office in January 2021.

In July last year, Louisiana-based U.S. District Judge Terry Doughty barred officials from “communication of any kind with social-media companies urging, encouraging, pressuring, or inducing in any manner the removal, deletion, suppression, or reduction of content containing protected free speech.” –NBC News

“If the allegations made by plaintiffs are true, the present case arguably involves the most massive attack against free speech in United States’ history,” wrote Doughty. “The plaintiffs are likely to succeed on the merits in establishing that the government has used its power to silence the opposition.”

Dozens of people and agencies were bound by the injunction including President Biden, White House Press Secretary Karine Jean-Pierre, the Food and Drug Administration, Centers for Disease Control, the Treasury Department, State Department, the US Election Assistance Commission, the FBI and entire Justice Department, and the Department of Health and Human Services. 

Bhattacharya and Kulldorff, who are among the originators of the Great Barrington Declaration that denounced the lockdown regime, have been victims of social media censorship. For example, the pair says their censorship-triggering statements included assertions that “thinking everyone must be vaccinated is scientifically flawed,” questioning the value of masks, and stating that natural immunity is stronger than vaccine immunity. 

While the case was dominated by Covid-19 censorship, it also encompasses the Justice Department’s efforts to suppress reporting about Hunter Biden’s “laptop from hell” in the run-up to the 2020 election. Doughty gave credence to that accusation. 

“The evidence thus far depicts an almost dystopian scenario,” wrote Doughty in a 155-page ruling. “During the COVID-19 pandemic, a period perhaps best characterized by widespread doubt and uncertainty, the United States Government seems to have assumed a role similar to an Orwellian ‘Ministry of Truth’.”

“The White House defendants made it very clear to social-media companies what they wanted suppressed and what they wanted amplified,” wrote Doughty. “Faced with unrelenting pressure from the most powerful office in the world, the social-media companies apparently complied.”

Doughty quoted communications from administration officials to social media company employees, saying they represent “examples of coercion exercised by the White House defendants.” Here’s a small sampling:

• “Cannot stress the degree to which this needs to be resolved immediately. Please remove this account immediately.”
• To Facebook: “Are you guys fucking serious? I want an answer on what happened here and I want it today.” 
• “This is a concern that is shared at the highest (and I mean highest) levels of the WH”
• “Hey folks, wanted to flag the below tweet and am wondering if we can get moving on the process of having it removed. ASAP”

The judge also noted that the badgering came simultaneous with threats of changing the social media regulation scheme, and that those threats had extra credibility since they came as the Democrats controlled the White House and Congress. 

On appeal the New Orleans-Based 5th US Circuit Court of Appeals narrowed the scope of Doughty’s injunction, however it still required the White House, FBI and top health officials not to “coerce or significantly encourage” social media companies to remove content considered to be misinformation in a practice known as “jawboning” – in which the government pressures private parties to do its bidding, sometimes with the implicit threat of negative consequences if its demands aren’t met.

US new home sales were expected to dip 0.2% MoM in May… but they didn’t…

New home sales crashed 11.3% MoM (after April’s 4.7% drop was revised up to a 2.0% MoM rise). That is the biggest MoM drop since Sept 2022…

Source: Bloomberg

This is the biggest YoY drop since Feb 2023, taking the SAAR down to the same level as it was in 2016…

Source: Bloomberg

Median new home price fell 0.9% YoY to $417,400 – lowest since April 2023 – (with the average selling price at $520,000) with a big downward revision for April from $433k to $417k!…

Source: Bloomberg

For the first time since June 2021, median existing home prices are above median new home prices…

Source: Bloomberg

As BofA warned yesterday:

“The US housing market is stuck, and we are not convinced it will become unstuck anytime soon. After a surge in housing activity during the pandemic, it has since retreated and stabilized. We view the forces that have reduced affordability, created a lock-in effect for homeowners, and limited housing activity will remain in place through our forecast horizon “

At the same time, the supply of available homes increased to 481,000, still the highest since 2008.

Source: Bloomberg

New home sales are catching down to the reality of mortgage rates continuing to hold above 7%…

Source: Bloomberg

It seems homebuilders finally gave up filling that gap in anticipation of an imminent Fed rate-cut to save the world.

The market is testing Japanese officials… and so far it’s winning…

Reaffirming its constant stance of jawboning over actual intervention, Vice Finance Minister Masato Kanda said late Wednesday that the government is watching the yen with a high level of urgency as he described the currency’s latest moves as “rapid” and “one sided.”

“I have serious concern about the recent rapid weakening of the yen and are closely monitoring market trends with a high sense of urgency,” Kanda told reporters late Wednesday.

“We will take necessary actions against any excessive movements,” he said.

Kanda refrained from commenting if the yen’s latest move was excessive.

This ‘status quo’ sent the yen lower against the dollar…

Source: Bloomberg

…breaking down to its weakest since 1986…

Source: Bloomberg

Earlier this week, Kanda said authorities were ready to intervene in currency markets at any time around the clock if needed.

Finance Minister Shunichi Suzuki said they are closely monitoring developments in the market and will take all possible measures as needed.

“If the moves start to get disorderly north of 160, they may come in to smooth the move,” said Win Thin, global head of markets strategy at Brown Brothers Harriman & Co in New York.

“Buy until the BOJ tilts more hawkish, upside for USD/JPY is the path of least resistance.”

Well, it’s starting to look ‘disorderly’.

“Given quarter-end dollar demand and the fact that the volatility environment remains contained, Japanese authorities might wait a bit more before intervening once again,” said Roberto Cobo Garcia, head of G-10 FX strategy at Banco Bilbao Vizcaya Argentaria SA in Madrid.

“Volatility needs to rise more if they are to step in again.”

The yen weakness sent the dollar higher and triggered selling in Gold…

…and oil…

…and Treasuries…

Japan has acknowledged it spent ¥9.8 trillion ($61.3 billion) intervening in currency markets between April 26 and May 29.

Although specific dates weren’t disclosed, trading patterns suggest major interventions occurred on April 29 and May 1.

Data on foreign reserves suggest Japan sold Treasuries to fund these actions.

Previous action by Japan to support its currency market has raise eyebrows overseas, with the US Treasury Department last week adding the nation to its “monitoring list” for foreign-exchange practices.

Authored by Nick Giambruno via InternationalMan.com,

“You can’t taper a Ponzi scheme.”

Financial commentator and Bitcoin pioneer Max Keiser originally said these simple yet profound words.

A Ponzi scheme is an unsustainable scam that relies on a continuous influx of new money to keep it going. The scheme collapses if the flow of new money slows down or tapers.

Many believe the Federal Reserve is running what amounts to a giant Ponzi scheme.

That’s because the US government’s obscene spending and skyrocketing debt have reached an inflection point where the whole system will collapse unless the Fed pumps an ever-increasing amount of new fake money into the system.

Government spending is the leading cause of the problem. However, the government cannot even slow the growth rate of spending, let alone cut it.

Here’s why.

The biggest expenditures for the US government are so-called entitlements. It’s unlikely any politician will cut these. On the contrary, I expect them to continue growing as the last Baby Boomers enter retirement in 2031.

With the most precarious geopolitical situation since World War 2, so-called defense spending seems unlikely to be cut. Instead, it is all but certain to increase.

Income Security is a catch-all category for different types of welfare. That’s unlikely to be cut too.

Efforts to reduce expenditures will be meaningless unless it becomes politically acceptable to cut entitlements, national defense, and welfare.

Further, interest expense is exploding higher.

The federal interest expense recently exceeded $1 trillion for the first time and is shooting higher. That means the interest expense is already bigger than defense spending and everything else in the budget except for Social Security, which it will also likely exceed soon.

The cost of debt service (interest expense) is taking up a larger portion of the budget, leaving less for other expenditures. That means the government has to borrow increasingly larger amounts to maintain basic functions.

The situation is compounded by the fact that the more the US government borrows, the larger the interest expense on the federal debt, which causes it to borrow even more.

Borrowing money to pay debt service is the inflection point in the debt spiral, and the US is at that point.

Here’s the bottom line with the budget.

Expenditures have nowhere to go but up.

But don’t count on increased revenue to offset these increases in expenditures. Even if tax rates went to 100%, it would not be enough to stop the deficits—and the debt needed to finance them—from growing.

The truth is, no matter what happens, the debt will not stop growing. It’s not even going to slow down. The debt is increasing exponentially.

The only way the US government can continue to finance itself is for the Fed to create ever-increasing amounts of fake money.

If the Fed doesn’t provide more monetary accommodation to lower interest rates, the growing interest expense will bankrupt the US government… and bring down the entire debt-based economy with it.

In short, the Fed must print ever-increasing quantities of fake money, or the system will collapse.

Ludwig von Mises, the godfather of free-market Austrian economics, summed up the Fed’s dilemma:

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

The US government will not voluntarily “abandon credit expansion,” as Mises puts it because Washington is dependent on issuing increasing amounts of debt to pay for the ever-growing costs of Social Security, national defense, welfare, and interest on the federal debt.

As Max Keiser succinctly said, “You can’t taper a Ponzi scheme.”

That means their only choice is to debase the US dollar by ever-increasing amounts until, as Mises puts it, the “final and total catastrophe of the currency system involved.”

That’s why I am convinced extreme currency debasement is the inevitable outcome of the debt spiral.

All the rest is noise.

Michael Saylor captured the essence of the situation when he said, “The road to serfdom consists of working exponentially harder to earn a currency that is growing exponentially weaker.”

I believe rampant currency debasement will be the most important investment trend of this decade, and it will devastate most people.

The worst of it could go down soon… and it won’t be pretty.

It will result in an enormous wealth transfer from savers and regular people to the parasitic class—politicians, central bankers, and those connected to them.

Countless millions throughout history were wiped out financially—or worse—because they failed to see the correct Big Picture as their governments went bankrupt.

Don’t be one of them.

That’s exactly why I just released an urgent new report with all the details, including what you must do to prepare. It’s called The Most Dangerous Economic Crisis in 100 Years… the Top 3 Strategies You Need Right Now. Click here to download the PDF now.