Good morning,
This is the time of the year when the weather becomes bone-chilling, saying to ourselves enough is enough. I stood outside last Friday with a sign, protesting to those Climate Change Fear-mongers that are trying to convince me that the world is warming up to show me real science. Who says Co2 levels are a detriment to our world? I was hoping climate change is real so we could have stopped the snow and freezing temperatures from occurring. Instead, we got walloped and I ended up shovelling 4 driveways. Exhausted, on a Saturday night, I ended up going to bed at 10 pm and then slept for 9 straight hours.
I felt somewhat refreshed, unfortunately, the markets remained uneasy, anticipating the testimony from the Federal Reserve Chairman, Powell, in Congress. Assumptions alone have given rise to the USD Index rebounding from the 104.1 level now testing above the 105.50 level. Meanwhile, the head of the Treasury, Janet Yellen, Powell’s boss continues to approve the expenditure of Billions more to Ukraine. Consequently, there are 42 million Americans on food stamps who will see their benefits drop from $230 to $95 / month in an upward inflationary economic environment. Acknowledging, the fact that the cost of living will become much more expensive but the consequences of out-of-control inflation could be more severe if not brought under control. Something has gone terribly wrong within America as if the Trojan Horse is destroying the country from within.
It was Explosive testimony from the Fed Chairman confirming the direction and path taken. They will continue to defend the USD as the benchmark currency of World Trade. The Fed will continue its aggressive stance to increase interest rates. Mr. Powell stated they would even be more aggressive if necessary without concern for unemployment even though he emphatically denies that they aren’t trying to create more unemployed. Non-Farm Payrolls are out on Friday. This morning a fact was revealed, that 68% of Americans could not cover their living expenses for one month if they lose their job. ADP Employment (Private Sector) rises to 242k vs (200k) expected. The question is why the big jump? I would assume many have lost their employment and have gone on their own. Numbers might not always tell the reality of the situation at hand but the human spirit guides people to do the unthinkable to survive.
Reality check, Inflation is a by-product created by printing too much money. Unless government cuts back spending, inflation is not going away anytime soon, nor get close to the 2% target. Prepare for the worse as the DOW dropped almost <600> points yesterday with more negativity as a prelude of what is to come. Markets want liquidity, and cheap capital to make investments to promote growth. Higher rates stifle investment and growth. The USD Index surged above the 105.50 level and Precious Metals dipped. Gold heads toward $1800 while Silver slips below $20/oz, look to buy on dips. In my opinion alone, the USD will eventually reflect its reality.
As I pointed out in previous writings, the oversupply in inventories is actually causing deflation in many sectors that are on the verge of collapse. When producing or buying inventory, financing is more costly. If not selling, they will have to rid themselves of the product or service, making bankruptcy the order of the day, and mortgage foreclosures resulting. Oil slips below $77/B and presently the Canadian dollar falls below the 0.73 cent level for the first time in months. Basically, it is a reflection of USD strength rather than considering the positive Canadian International Trade Surplus expanding to $1.92B in January. Be prepared for a continued bumpy ride as Canada is not immune. The Mortgage Bubble that was once inconceivable could make Cash King again, that is if it still exists.
I think I love you!