Officially in a recession

Forwarded:

It's hard enough to work with someone on something when dealing with the same set of facts, let alone when you're told your observations are "wrong" because the other party keeps changing the definition of what is "right."

Lately, White House officials have done their best to say we're not in a recession, even though the economy is slowing. And we were told this week that it's not a recession even if negative GDP happens for two straight quarters.

They can't fool us, though. If it's not a recession, then what is it?

First, it's a joke... Even semi-retired comedians like Conan O'Brien have taken notice...

Maybe I'm still too much of an optimist, but what the heck is the point of hashing out the labels? To get a few votes? Can't we just admit what is happening and try to come up with some good solutions (not more spending)?

I hate to get too deep into political details (which we have already done today)... but I suspect more people will vote against the White House and a Democrat-controlled Congress in November if they don't admit we're in a recession.

A critical inflection point

Today's is the last trading day for Jul and the market has mounted a great rally towards this month's end. Has the market been out of the woods and is ready to move up from here or will it resume its downtrend continuing the current bear market? No one knows for sure of course but we probably will know soon.

Actually right now we are at a critical inflection point that may determine which direction the market will go from here. You see, The S&P is sitting right on the 4100ish level. That is the spot of the 20-month exponential moving average line on the monthly chart. It is a critical level – especially since today is the final day of the month. If S&P decisively breaks up through this level, it may mean the market is back on its bull run and will start to move up to its new highs in the months ahead. However, if it cannot and its kiss from below is being refused and kicked back, then the next big move will likely be to the downside.  

And, it could be much, much, lower in the months to come.

You see, if the market starts to sell off again in August, which is typically a seasonally weak month, then the pattern will look more like 2001 and 2008 – and we all know what happened back then. 

Keep your fingers crossed for whichever direction you are looking for. And we will know pretty soon.  For my money, I'm not yet convinced the overall direction has already changed for the market and we may still see a little while for the bear to move around. Make up your own mind!

A bullish sign: hedge fund managers are cornered

Harris Kupperman, a hedge fund founder,  tweeted about some favorable technical factors:

Thread going into the FOMC print – as PMs we all like to talk about global macro, or individual stock picks. Long term, that's what drives price action. Short term, none of that matters. All that matters is fund flows – redemptions, short covering, inflows, sector flows, etc...

Look at 2022, many large hedge funds are down 25%+. Year-end redemption notices start Nov 1. These guys have 3 months to turn it around or get redeemed. Everyone gets redemptions from time to time. Losing half your AUM [because] you were long Ponzi is existential to your career...

Guys will fight like mad to make it back. This isn't about performance for performance's sake, this is about survival. You have to get to flat or your business goes poof. Down 25% and it's poof anyway, so you take a shot. If you guess wrong and end down 40% you were dead anyway.

Therefore, guys are forced to take shots on goal. Fix it by Nov 1, or lose the AUM. How do you fix it?? Certainly not in cash. You can bet big on the short side, maybe use options, but [it's] hard to put up big numbers that way. Instead, they're forced to play long-sided...

Every datapoint shows that funds are massively underweight on long exposure. Huge cash positions, low gross, lower net exposure. These guys will all be forced to pivot long. Relative performance is cute when you're down 5 and [the market] is down 25. It means nothing when down 20 vs. 25.

The FOMC will do its thing, everyone will see a few hours/days of whipsaw action, but in the end, guys need exposure to save their careers. They are gonna have to buy it. Doesn't matter what Fed or economy or DXY or rates or GDP does. Guys have 3 months to stack basis points...

Think we get a sizable rally into the fall and sort it out from then. Guys just have to be long... As for me, I'm pretty damn long. Have highest exposure since the bottom in March 2020. Laid into GDP sensitive assets in late June. Felt so confident that I'm on vacation...

It is amazing just how many dominant, near-monopoly assets are 2-5x run-rate FCF. These are companies with 30%+ ROIC. Good businesses haven't been this cheap except Feb 2009 and March 2020. Difference is that those times were scary. Now isn't scary. We may have a recession. 🤷‍♂️🤷‍♂️

Who cares about recession?? You don't buy amazing companies for the next quarter or three. You buy them because of long-term compounding. When they give away great businesses this cheap, you simply stack them and ignore next [quarter]. They will eventually be valued on stabilized numbers...

I have continually shat on compounders over the years... It should tell you how cheap things are when roughly half of my book is compounders. I tend to think these all revalue soon. Ponzi was the last bubble, this cycle, guys need cash flow...

Anyway, we all like to talk about stuff that makes us look smart (macro/fx/single stocks/etc.). That's fine and good. We don't talk enough about who's screwed and has 100 days to save his career. Cornered animals do crazy things...

Bad news!

Actually, what we saw on the news was not bad at all.

On Jul 19 afternoon, Barron's published an article titled, "Why There's a Chance the Stock Market Has Hit Bottom."

And this one as well. 

With a rather strong positive reaction to the Fed latest rate hike today (a 2.6% jump for S&P 500), one might think the worst has really been over for this bear market. Unfortunately, here comes the bad news. Headline news is generally a contrary indicator. When they report good news, bad outcomes usually follow.

Here is one example with "good news" reported late last year: 

Last December, investment bank JPMorgan Chase (JPM) said a sell-off was nowhere in sight. And then, one week later, the S&P 500 peaked. It's down about 18% since then.

So one thing we need to learn:  The stock market will not bottom when it is all over the mainstream news.

It won't. It can't. The bottom only arrives long after that... when the stock market falls out of the news completely... when most people have forgotten about Wall Street. Until that happens, stocks can continue to fall.

Of course it does not mean we cannot see rallies during a bear market. Quite opposite, we may see rather strong rallies during a prolonged bear market. Some stats about the bear market rallies: 

On the back end of the dot-com bubble, the S&P 500 rallied six times... by 8% and 9% at the start and then 21% twice closer to the bottom. In the financial crisis, U.S. stocks had five rallies, the last of which led to a 24% gain.

Even for this year's bear market, we have already seen 3 good rallies, including the one still ongoing now with today's strong bounce. The current one, we have probably seen the peak of this rally, maybe just a few points away from the ultimate top of this short-lived uptrend. S&P 4050ish is probably the apex. 

I'm gearing up for shorting the market soon!

S&P 500 down to 3000?

As I said, this is a very confusing market at the moment with a lot of unknowns. So here is one very bearish view from a well-known investor Jeremy Grantham. Do I believe we will see another 25% decline for S&P 500? Per its TA, I don't believe so. We may see another 10% or so decline, especially if the market shoots up near its previous peak, then another leg down could be very painful if anyone chases it. But down to 3000? Certainly possible but I'm not convinced yet! In any case, using my special strategy to trade with a high risk/reward ratio with a wide error margin is good for me to trade in this scary market with a lot of unknowns! 

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"It's likely that there will be considerably more pain before this is finished," says legendary British investor Jeremy Grantham per the stock market this year. 

We've been keeping tabs on Grantham's periodic media appearances for several years now, seeing as he's one of the few people who's accurately "called the top" of one bull market after another.

He bailed from Japanese stocks just as they were crashing in 1990. He anticipated the dot-com meltdown in 2000. He was among the lonesome voices — along with our own firm — who said the mid-2000s housing bubble would come to a disastrous end.

And today, Mr. Grantham is pushing against the bear-market-is-over narrative. 

Rather, he pegs fair market value for the S&P 500 "pretty close to 3,000," he says, contrary to where the index stands today, 50 points away from 4,000.

"If Grantham… is right," Fortune says, "it means the S&P 500 has another 25% drop ahead of it from current levels." Which jibes with what's happened after two mid-recession "relief rallies" in the U.S….

Source: First Trust Advisors

According to the chart, the dot-com crash of 2000 took a 3.4-month hiatus, during which the S&P 500 recovered 21.4%. And the Great Recession (2007–09) took a six-week breather, while the S&P rallied 24.2%.

But both "relief rallies" were followed by cliff dives, averaging over 30%... So a 25% drop might be on the conservative side?

"There is absolutely nothing to stop the market from going below fair value," says Grantham. "It's certainly entitled to spend several months below 3,000."

Since last year, Grantham has been calling attention to the bull market's finale, underscoring a "superbubble" that includes a miasma of risky assets, U.S. stocks and housing.

"We have been through one of the great speculative periods" — spurred by stimulus programs and dovish monetary policy — and (voilà!) it created "a perfect environment for speculating," he says. "That kind of [speculative] investing has always turned out to be, for most people, incredibly expensive."

But hey, if you've got 30 more years to invest?

"You should welcome lower prices because the compounding effect will be greater than the pain on your portfolio," Grantham says. "The younger you are, the more you should welcome a market decline." (Conversely, the older you are… Well, you get the point.)

As for the arrival — and duration — of the market's second-leg downturn, he declines to guesstimate. "You can't really know if it's going to be quick or long," he says.

"What is guaranteed," Fortune concludes, "in Grantham's view, is that corporate earnings will fall as recession fears and interest rates rise, leading stocks to take a hit."

If you've been following Jim Rickards' work this year, then you know he agrees with Mr. Grantham's estimation: A day of catastrophic reckoning is heading for the U.S. stock market.

And soon millions of Americans are going to be feeling the pain.

Why I See a Mild and Brief Recession (Doug Kass)

* Consumer 'Cassandras' are multiplying
* But it is important to note the strong position of the U.S. consumer
* Consumers' ratio of liabilities to net wealth is at the lowest level in 50 years!

Over the last five weeks I have argued that there are substantive and underappreciated "buffers" that will likely serve as a ballast to the U.S. economy and are likely to lead to only a mild and brief recession, which would have less impact on U.S. corporate profits than the consensus increasingly expects.

The following factors support my case: 

* The absence, in large part, of the sort of leveraged positions and segments of the economy that have characterized previous deep economic down cycles.

* Unlike previous economic downturns, especially the global financial crisis, our banking system is far less levered and has sizeable cushions of liquidity and capital.

* There is over $2 trillion of excess consumer savings.

* There is a cushion of sizeable unrealized/embedded gains in the nation's housing stock and large unrealized gains in the U.S. stock market:

* The U.S. has a very strong industrial/corporate base that has generally improved their balance sheets by rolling over into inexpensive debt over the last five years, and that have maintained high profit margins.

* We have a robust and tight labor market, with solid wage increases in the last several years. Importantly, in the last 60 years the U.S. has never had a recession without a preceding spike in initial jobless claims:

The job vacancy rate is at an all-time high:

And the U.S. has almost fully recovered the jobs lost in the early months of the pandemic:

* The U.S. unemployment rate is 3.6%, the lowest level since the start of the pandemic and only 0.1% above the 50-year low reached just before the pandemic in February 2020:

* Some important components of inflation are moderating. The prices of most commodities have fallen considerably over the last two and a half weeks. Copper is down 33% from its all-time high in March and at its lowest level since 2020:

Corn, wheat, and soybeans are all down over 25% from their highs and below the levels they were at before Russia invaded Ukraine:

After spiking last year, used car prices are down 7% over the last six months:

Finally, the price of energy products has also fallen precipitously:

* Interest rates may have peaked. The yield on the 10-year U.S. note is about 40 basis points below its recent high.

* Several measures of supply chain health have begun to show signs of improvement. Deep sea freight costs (the black line in the below chart), which have been a good proxy for supply chain disruptions, dropped in June. And the New York Fed economists' Global Supply Chain Index (the red line) has fallen to the lowest level since March 2021: 

Figure 1: PPI for Deep Sea Freight (black, left) and the GSCI (red, right)

* To the many market participants who are focused on prospective consumer weakness due to the fall in mortgage activity and the marked decline in stocks, I offer the following chart, which demonstrates that consumers' balance sheets remain strong and underleveraged:

Indeed, as demonstrated above, the consumers' ratio of liabilities to net wealth is at the lowest level in 50 years!

What to do when there are a lot of unknowns

"There are known knowns - there are things we know we know. We also know there are known unknowns - that is to say, we know there are some things we do not know. But there are also unknown unknowns, the ones we don't know we don't know."

Donald Rumsfeld famously spoke those lines to reporters in February 2002.

This statement perfectly applies to the current market where there are so many unknowns, either known by us or unknown by us. In other words, we will see a lot of surprises in either direction. Needless to say, it is a very challenging market to trade. So what's the best way to trade in such a market? I found a perfect strategy to trade with very limited risk but quite good return potential, often in the order of several times. Here is one example I shared with my DW Family this morning when the market opened high. This trade will allow us to risk each dollar for a $5 potential return for a wide range of margin for errors. I cannot think of a better way to trade in this very volatile market! 

This Tragedy Was Entirely Avoidable (by Jim Rickards)

The war in Ukraine will have huge ramifications for the international system in the coming years. Many will prove negative for the U.S. as sanctions backfire and the world moves more rapidly toward dollar alternatives.

Unfortunately, the war in Ukraine was totally avoidable. Had the U.S. pursued closer ties with Russia years ago, rather than antagonizing it and driving it into a deeper alliance with China, it's highly unlikely the war would have taken place.

But largely because of elites in the U.S. and Europe, hopes of a partnership with Russia were dashed.

I've made the argument before, but sometimes we all need to be reminded of basic facts. We need to remember how we got here.

Three-Handed Poker

There's an old saying in poker: If you're in a three-way poker game and you don't know who the sucker is, you're the sucker.

The idea is that in a three-handed game, two players will disadvantage the sucker by coordinating their betting and not raising each other. Eventually, the sucker is cleaned out and the two survivors can then turn on each other.

The world is in a three-handed poker game today.

Russia, China and the U.S. are the only true superpowers and the only three countries that ultimately matter in geopolitics. That's not a slight against any other power.

But all others are secondary powers (the U.K., France, Germany, Japan, Israel, etc.) or tertiary powers (Iran, Turkey, India, Pakistan, Saudi Arabia, etc.).

The U.S. Is the Sucker

This means that the ideal posture for the U.S. is to ally with Russia (to marginalize China) or ally with China (to marginalize Russia), depending on overall geopolitical conditions.

The U.S. conducted this kind of triangulation successfully from the 1970s until the early 2000s.

One of the keys to U.S. foreign policy in the last 50 or 60 years has been to make sure that Russia and China never formed an alliance. Keeping them separated was key.

In 1972, Nixon pivoted to China to put pressure on Russia. In 1991, the U.S. pivoted to Russia to put pressure on China after the Tiananmen Square massacre.

Unfortunately, the U.S. has lost sight of this basic rule of international relations. It is now Russia and China that have formed a strong alliance, to the disadvantage of the United States.

The war in Ukraine has only deepened their relationship.

Ultimately, this two-against-one strategic alignment of China and Russia against the U.S. is a strategic blunder by the U.S.

The U.S. is the sucker in this three-way game of poker. The fact is Washington has squandered a major opportunity to turn it in America's favor.

A Historic Blunder

When future historians look back on the 2010s they will be baffled by the lost opportunity for the U.S. to mend fences with Russia, develop economic relations and create a win-win relationship between the world's greatest technology innovator and the world's greatest natural resources provider.

China is the greatest geopolitical threat to the U.S. because of its economic and technological advances and its ambition to push the U.S. out of the Western Pacific sphere of influence.

Russia may be a threat to some of its neighbors (ask Ukraine), but it is far less of a threat to U.S. strategic interests. It's not the Soviet Union anymore.

Therefore, a logical balance of power in the world would be for the U.S. and Russia to find common ground in the containment of China and to jointly pursue the reduction of Chinese power.

Of course, that didn't happen. And we could be paying the price for years to come. Who's to blame for this U.S. strategic failure? You can start with the globalist elites…

Poking the Russian Bear

The U.S. and its allies, especially the U.K. under globalists like David Cameron, wanted to peel off Ukraine from the Russian orbit and make it part of the EU and eventually NATO.

From Russia's perspective, this was unacceptable. It may be true that most Americans cannot find Ukraine on a map, but a simple glance at a map reveals that much of Ukraine lies east of Moscow.

Putting Ukraine in a Western alliance such as NATO would create a crescent stretching from Luhansk in the east through Poland in the west and back around to Estonia in the north. There are almost no natural obstacles between that arc and Moscow; it's mostly open steppe.

Completion of this "NATO Crescent" would leave Moscow open to invasion in ways that Napoleon and Hitler could only dream. Of course, this situation was and is unacceptable to Moscow.

Putin didn't just wake up one day and decide it would be fun to invade Ukraine. It was years in the making.

The Orange Revolution

Prior to 2014, an uneasy truce existed between Washington and Moscow that allowed a pro-Russian president while at the same time permitting increasing contact with the EU.

Then the U.S. and the U.K. overreached by allowing the CIA and MI6 to foment a "color revolution" in Kyiv called the "Euromaidan Revolution."

Ukrainian President Viktor Yanukovych resigned and fled to Moscow. Pro-EU protesters took over the government and signed an EU Association Agreement.

In response, Putin annexed Crimea and declared it part of Russia. He also infiltrated Donetsk and Luhansk in eastern Ukraine and helped establish de facto pro-Russian regional governments. The U.S. and the EU responded with harsh economic sanctions on Russia.

The U.S-induced fiasco in Ukraine not only upset U.S.-Russia relations; it derailed a cozy money-laundering operation involving Ukrainian oligarchs and Democratic politicians. The Obama administration flooded Ukraine with nonlethal financial assistance.

Some of this money was used for intended purposes, some was skimmed by the oligarchs and the rest was recycled to Democratic politicians in the form of consulting contracts, advisory fees, director's fees, contributions to foundations and NGOs and other channels.

Hunter Biden and the Clinton Foundation were major recipients of this corrupt recycling. Other beneficiaries included George Soros-backed "open society" organizations, which further directed the money to progressive left-wing groups in the U.S.

Trump Derails the Gravy Train

This cozy wheel of fortune was threatened when Donald Trump became president. Trump genuinely desired improved relations with Russia and was not on the receiving end of laundered aid to Ukraine.

Trump was a threat to everything the globalists had constructed in the 2010s.

The globalists wanted China and the U.S. to team up against Russia. Trump understood correctly that China was the main enemy and therefore a closer union between the U.S. and Russia was essential.

The elites' efforts to derail Trump gave rise to the "Russia collusion" hoax. While no one disputes that Russia sought to sow confusion in the U.S. election in 2016, that's something the Russians and their Soviet predecessors had been doing since 1917. By itself, little harm was done.

Yet the elites seized on this to concoct a story of collusion between Russia and the Trump campaign. The real collusion was among Democrats, Ukrainians and Russians to discredit Trump.

It took the Robert Mueller investigation two years finally to conclude there was no collusion between Trump and the Russians. By then, the damage was done. It was politically toxic for Trump to reach out to the Russians. That would be spun by the media as more evidence of "collusion."

Thanks, Globalists

Whatever you think of Trump personally, and he was far from perfect, the collusion story was always bogus.

So Russia became public enemy No.1 because of politics. Ironically, the same people who were soft on the Soviet Union during the Cold War are often the biggest Russia hawks these days.

And here we are today, fighting a proxy war against Russia in Ukraine. It could still result in direct war with Russia, with the specter of nuclear war looming in the background.

Again, it all could have been avoided. Nice job, globalists!

Cost of Medicare vs Medicare Advantage

I assume many people around retirement ages will be interested to learn more about the Medicare system. Here is good info on the high level cost for Medicare vs Medicare Advantage.

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So you're 65 – what's this Medicare thing?

Once you reach the glorious age of 65, you become eligible for Medicare.

This is the health care program you've paid for all your life through taxes. Now you get to collect the benefits. People that reach age 65 and become eligible for Medicare can expect to live for 21 more years.

Interestingly, Medicare will cover about 65% of your expected health care spending during those 21 years. The other 35% is on you.

How much will that be?

You better know – because it's a lot. It needs to be part of your retirement planning. If not, your plans may need to be revised when it's too late.

On average, people on Medicare for those 21 expected years will spend about $200,000 of their own money on health care.

An alternative is to consider the Medicare Advantage ("MA") program. This is a very successful partnership between the government and private-sector health care companies. This is a way to get all your Medicare benefits plus others not included in Medicare for much less.

Don't take my word for it. About 40% of the Medicare population gets their benefits this way today. And that level has been rising for the last 10 years.

On average, using an MA plan will cost $130,000 out of your pocket during those 21 years.  

Thomas Carroll

Betting on the downside now...

While the market was quite strong on Friday, my crystal ball told me severe weather could be on the way and hit us pretty soon.

That's why I advised my DW Family to bet on a jump of VIX in the next week or two. And today while the market shot up to the moon again early in the day, I again cast my doubt and called for a reversal. I was quite aggressive with adding more positions on the short side. 

Fortunately, I was lucky on the directional bets so far. I think we will see more downdrafts in the days ahead. My crystal ball still tells me the near term turbulence is not over yet. 

I'm staying on my course on the short side for now!!

  

A triple gain within two days

The market is certainly choppy enough that keeps everyone confused which direction the market wants to go. But for savvy traders nimble enough, there are still plenty of opportunities that are good for trading. Here is one example that we bet on a bank earnings response, which rewarded us with a triple gain within two days. It is a combo trade, in which we bet with a naked put and using the put premium we get to fund a call option as well. So a double bet for a reaction to the upside. Well, fortunately we got it right✌💪

Worst is yet to come....

I must say the market is very confusing right now with many conflicting signals pointing to different directions. On one hand, we have seen quite bullish signs from the smart money, which has no interest in selling:

Commercial hedgers in equity index futures keep buying the dip. They are now holding a net long position worth about 0.2% of the market value of all U.S. stocks. Another "smart money" group, corporate insiders, continue to hold off on selling. Insider sales in Technology and Discretionary stocks are at decade lows.

On the other hand, junk bonds that are more susceptible to an economic slowdown than any other part of the bond market are telling us a different story. You see, junk bonds always pay higher yields as they are more risky. Investors demand a higher premium for the risk they're taking. Right now, their premiums are soaring. Specifically, we can see this by examining the high-yield bond spread. It's the interest rate of junk bonds minus the interest rate of investment-grade bonds. And as the chart below shows, it has skyrocketed in recent months...

When this spread rises, it means investors are worried. Notice how it jumped from a little more than 3% in April to nearly 6% earlier this month. That's a multiyear high. And it's a clear warning sign from the bond market. Tough economic times are likely on the way. But according to history, we likely haven't seen the worst just yet. The recent extreme looks a lot different when we zoom out on the chart. We see that the latest move is extreme for the last couple of years. But it's nothing compared to history. Take a look...

History shows what we're seeing now is nothing compared with previous extremes. The junk-bond spread topped 10% during the COVID-19 panic... And it was well over 20% during the global financial crisis. Heck, it even approached 9% in 2016 as crashing oil prices wreaked havoc in the energy sector.

Then, currently, earnings estimates for stocks are not accounting for much slower economic activity. While the "P" in the valuations (P/E) calculation has declined, the "E" has not. During a recession, earnings tend to fall quite significantly, as noted by Bloomberg:

"Outside of recessions, the black line in the chart doesn't stray too far from zero. But during recessions, we see that actual earnings are considerably worse than expected ones.

Per the Street insider I know of, typically analysts won't reestimate the corporate earnings during the first quarter but rather during the 2 quarter earnings season that has just started, they will face the reality and pen down a more realistic earnings estimate for the next few quarters. In other words, there is a high chance we may see a cluster of earnings adjustment to the downside, with which the market won't be happy about. 

We just finished a brutal first half to the year. And it's easy to think (or at least hope) that the worst is behind us. That could be the case. But the bond market is telling us that tougher times could be on the horizon. Based on many different indicators I have seen, I think there is a high chance we may see another brutal selloff to find the ultimate bottom of this bear market, sometime in the next few months. In other words, the real bottom may come towards the end of the year. I'm very excitedly waiting for this moment as that will be a great buying opportunity once in a decade. My parked cash is very itching for the moment to come. 🤓😜

 

The real story why Sri Lanka has collapsed....

You have probably already known by now that Sri Lanka has totally collapsed and fell apart with the president fleeting the country. Not sure if you know the real cause of this epic fallout. Given the current US fake government is very much following the same policy, we could see something similar here as well, if the extreme left policy is not contained. Hope the mid-term election will at least stop some stupid Biden's ESG policies. Otherwise watch your wallet closely as it will collapse quickly as well!

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Almost one year ago, we featured a climate-change study that would have Americans cutting their lifestyles… to the bare bone.

The University of Leeds study was based on energy reductions required to "limit global warming to 1.5 C" per the Paris Agreement of 2015. And according to researchers…

• Americans would need to reduce total energy consumption by 90% to achieve a "low-energy society"

• The footprint of housing for a family of four: no more than 640 square feet

• "With respect to transportation and physical mobility, the average person would be limited to using the energy equivalent of 16–40 gallons of gasoline per year," said an article at Reason

• Air travel would be restricted to one flight every three years

• "In addition, food consumption per capita… would be 2,100 calories per day," Reason noted, cutting about 900 calories from the average American's daily intake

• Researchers even went so far as to set a "clothing allowance" per person, equal to nine pounds annually

• And doing laundry would be restricted to just 20 times per year. Or once every 18.25 days for non-leap years.

Easy peasy, right? Leeds' researcher Jefim Vogel confessed: "No country in the world accomplishes that — not even close," he said.

Nonetheless, "sustainability experts" are determined to push their impractical agenda.

"It's all being driven by massive policy and legal shifts from the top down," said our resident geologist and mining expert Byron King last year, with alarming prescience.

"The U.S. and governments in countries around the world are imposing future bans… without fully thinking it through.

"Meanwhile, politicians have not fully considered the total life-cycle impact of [their] decisions," he said. "They don't factor in the difficulty of sourcing… materials, nor the environmental impact of mining things like exotic metals for batteries.

"The political focus on emitting less carbon from tailpipes" — for example — "is dangerously simplistic," Byron argued. The outcome? "To reverse over 100 years of human progress in the U.S. [and] much of the rest of the world."

And over the weekend, we had a front-row seat to the fallout resulting from "dangerously simplistic" policies in Sri Lanka.

The most glaring throughline from green politics to Sri Lanka's collapse was the president's abrupt command to adopt all-organic farming. With disastrous consequences…

In April 2021: "The government banned the use of chemical fertilizers and banned their importation. The move was pitched as creating a self-reliant economy on the island nation and hailed as a great experiment in green policy-making," says an article at The National Review.

"After the fertilizer ban went into effect, rice production fell by 20% in only six months. The country had to import $450 million worth of rice to make up the difference, and rice prices still went up by 50%. Tea exports plummeted, costing the economy $425 million."

While the government by and large repealed the fertilizer ban in November 2021, the inevitable devastation was done.

Sri Lanka was well on its way to fostering a thriving middle class, according to the World Bank in 2019. "Now millions could return to poverty as gas lines, food shortages and political unrest threaten to undo all that progress."

Says The New York Times: "The economic crisis came to a head this weekend, as thousands of people stormed the official residence and office of the president, Gotabaya Rajapaksa, demanding his resignation. A breakaway mob burned down the private home of the prime minister."

Both the president and prime minister have since resigned. And as we write, they are reportedly trying (unsuccessfully) to flee the country.

"The underlying reason for the fall of Sri Lanka is that its leaders… fell under the spell of Western green elites peddling organic agriculture and 'ESG,'" says author Michael Shellenberger at Common Sense.

ESG "refers to investments" in "higher Environmental, Social and Governance criteria," he adds. And get this: "Sri Lanka has a near-perfect ESG score of 98 — higher than Sweden (96) and the United States (51).

"What does having such a high ESG score mean? In short, it meant that Sri Lanka's 2 million farmers were forced to stop using fertilizers and pesticides, laying waste to its critical agricultural sector…

"To be sure, there were other factors behind Sri Lanka's fall," says Shellenberger. Yes, COVID-19 lockdowns put a huge dent in tourism… as did the war in Ukraine. (Coincidentally, many Russians and Ukrainians vacation in Sri Lanka.)

Plus, the country fell victim to China's "debt diplomacy," leaving Sri Lanka billions in debt via Belt and Road Initiative loans. Untenable inflation — near 60% — was the final nail in the coffin.

"But the biggest problem was Sri Lanka's chemical fertilizer ban, which… was central to the country's effort to comply with ESG," Shellenberger contends.

"Sri Lanka was the first developing country to come undone, but it will not be the last," says The National Review. Laos, Zambia and Lebanon might follow in short order… Not to mention Western nations too.

The Dutch resistance movement, largely ignored by the media…

"Green agricultural policies and exceptionally poor leadership drove [Sri Lanka] to collapse faster than other developing countries, but the basic global factors that affected it will affect other[s] as well."

Of course, this is a story with a long arc — and a lot of loose ends — but we'll stay on top of it…

by 5 Min. Forecast

A falling BBB

If you still think the Alzheimer fake president's bullshit BBB slogan is alive, here is the reality of its breaking and falling status. 

You should expect a worse reality coming your way to pay for rebuilding Ukraine.....What disastrous policies of this fake administration, not only domestically but also foreign ones. 

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Ukraine Needs $750 Billion To Rebuild. Don't Worry, U.S. Taxpayers Will Pay.

One of my favorite T-shirts was worn by a television producer who worked on location filming commercials. Anyone who has been on a live TV shoot knows it can be one disaster after another. Camera's break, lights fail, teleprompters don't work, the weather deteriorates, and so on. Stuff happens. Pros know this and just rise to the occasion. The T-shirt said, "Act like nothing's wrong." That captures the kind of sang-froid it takes to work effectively under pressure. That T-shirt was the first thing I thought of when I read this article. It reports that the Prime Minister of Ukraine has calmly asked an international conference for $750 billion of assistance to rebuild Ukraine after the war. Nice try. There are a few problems with this. First of all, there will be no Ukraine to rebuild, at least not in its current form. Russia will take somewhere between 1/3 and half the country and keep it. The parts that Russia is taking control of include the industrial nexus, the largest natural resource deposits, and the most fertile land. Russia will be able to finance the reconstruction of their conquests using the very industrial capacity, mining, and agricultural output they have captured. Russia will also control the ports and major rivers and will be able to tax the remainder of Ukraine for access. The gradual result will be a prosperous part of Ukraine controlled by Russia and a desperately poor part of Ukraine left to the corrupt oligarchs under Zelensky. When asked how Ukraine will finance the $750 billion demanded, the Prime Minister said they could use assets seized from Russian oligarchs. That's ridiculous. There may be $5 billion or $10 billion in yachts and townhouses, but nothing close to $750 billion. The truth is that this money will be expected to come from the U.S. and EU either directly or indirectly through the World Bank and IMF. In other words, you are going to pay for it. Of course, it's unlikely much reconstruction will get done because Ukraine has long been a money laundering operation for the benefit of U.S. Democrats including the Clintons, Bidens and Obamas. That's something to bear in mind when your taxes start going up to "help" Ukraine.

Jim Rickards

The real story about the Ukraine war

Putin's Not Just Winning The Ground War. He's Winning The Financial War Too

Almost everything you heard about the War in Ukraine from U.S. media over the course of March, April and May was a lie. You heard that Putin was losing the war. You heard that Russians had poor training, low morale and were deserting in droves. You heard that Ukrainians were destroying Russia armor in large numbers to blunt the Russia advance. None of this was true. In fact, Russian troops have achieved major victories in Mariupol, Kherson, Severodonetsk, Lysychans'k and other key targets that control rivers, ports and junctions in Ukraine. Russia's next targets are Slovyansk and Bakhmut, which will consolidate Russia's control over the Luhansk and Donetsk regions. Russia has also deployed anti-drone laser systems that have neutralized Ukraine's ability to target Russian positions with drones. The endgame is the takeover of Odessa which would give Russia control of 100% of Ukraine's coastlines along the Sea of Azov and the Black Sea. Still, the story is even worse from the U.S. perspective. Russia is not just winning the war on the ground. They're winning the global financial and economic war launched by Biden. The particulars are described in this article. Russia's revenues from oil and natural gas exports are at all-time highs. The Russian ruble is much stronger today that it was when the war began. China and India are buying all the Russian oil that Europe is refusing to buy. The economies of the U.S. and EU are in or very near to recession. Inflation is out of control in the West. Commodity shortages will lead quickly to food shortages and more empty shelves in supermarkets. Across the board, Biden's economic sanctions have backfired and are hurting the U.S. and Europe far more than they are hurting Russia. We've been reporting honestly on the war since the beginning. Our readers have not been misled by false reporting because we've been candid about the real impact of sanctions and Russia's brutal but effective battlefield tactics. Even Bloomberg and The New York Times are starting to admit that the war is a lost cause for Ukraine and the U.S. economy is suffering from sanctions aimed at Russia. It's a little late for legacy media to get their story straight. We'll continue to let you know what's going on in an unbiased way. What we know right now is the economic damage to the U.S. economy will get much worse before the economy gets better. Biden won't stop the sanctions soon. That means the trashing of the U.S. economy will continue.

Jim Rickards

Worst start in over half a century

It is a brutal start of the year, the worst first 6 month since the 1970s or even 1930s from a different angle. 

Year to date, the tech-heavy Nasdaq is down 27%... the small-cap Russell 2000 is off 23%... the S&P 500 is down 20%... and the Dow Jones Industrial Average is off 15%.

To broaden this note even further, the conventional 60/40 stock-bond portfolio is down more than 15% so far. That's its worst first-half performance since 1932, according to Ned Davis Research, when the allocation was down 22.5% in the first six months.

This can be largely attributed to the stupid and failed economic policies of this fake administration together with the Fed which is always behind the curve. We will likely continue to see a depressing market for a while before getting sustainably better. In the meantime, doing swing trading is still the best strategy for the short term.

Here is what we did last week for a quick double within days by buying during panicky selloffs.