Game On

Excerpted from the August 23rd edition of Notes From the Rabbit Hole

Before getting to the segment, I just found out that during the same week Bessent announced a stimulative bond market operation, Trump announced plans to manipulate beef prices, pissing off many of his heretofore staunchest supporters. I’ve changed the title to Game On, since it is obvious now that we are in the run-up to the mid-terms.

Shenanigan season is in session with both announcements scheduled to run to November 4th. I’ll give them credit in that they don’t even try to hide their intentions.

NFTRH 929 Excerpt: Impressions of Last Week

As you know, I was 95% removed from the markets on Thursday and Friday [due to travel schedule]. An eventful week it was. But I am forced to play a little ‘catch up’ this (Saturday) morning. So my impressions of what went on:

The Wizard rolled over and exposed himself as the intelligent yet typical Treasury Secretary that he is. Why of course they are going to play politics and rig the thing into the mid-terms.

[pointed and critical opinion omitted for this excerpt]

Subscribers who have been here for a while will recall that I chronicled the Biden admin’s bullshit stimulus activities into the 2024 presidential (the old ‘Powell with a little Yellen in his ear’ shtick). It’s the same thing now, with (very) different players and somewhat altered methods. Warsh, with a little Bessent on his shoulder whispering sweet nothings in his ear.

To boot, they are deregulating the banking industry and that, I am going to continue to speculate, is the primary engine they are setting up. Maybe not in time for the mid-terms, but for the 2028 presidential.

Longer-term, it continues to look like the 2003-2008 game plan with respect to financial markets. In that phase far less regulated banks and financial institutions drove us up to the inflationary heights (via the credit bubble of the time) and into the deflationary crash. The Great Recession.

The Hero; Where Wonderland Really Came to the Fore

“Great Recession” my ass. That was a deflationary liquidation hell bent on ending the debt-leveraged system.

It was also the trigger that launched Bernanke into the most excessive (innovative if you want to paint a positive picture, which I don’t) systemic blight ever; 7 years of ZIRP, bond market manipulation (QE) at will, and oh yes, a little Operation Twist thrown in to “sanitize” (Fed’s word, not mine) inflation signals.

This with a little (TreasSec) Tim Geithner in Bernanke’s ear during the critical years of 2009-2013.

The Hero took us off the charts and into a new realm of monetary adventurism (and risk). To this day, the risk has not been realized, so the beat goes on until the music stops.

While Households have rightly been deleveraging since 2010…

…their government has been trending along like the pig that it is, leveraging the national (the peoples’) debt for every GDP point since the Reagan miracle began in 1980.

[O/T interlude omitted]

So, Bessent rolled over. That’s a position we knew he’d assume when the time is right. A double barrel of the here and now (long-term Treasury bond manip, AKA QE) and the future (commercial banking set free of restrictive laws).

So my view continues to be some representation of the 2003-2008 phase, where we may make a lot of money (funny munny) prior to a terrible liquidation out there somewhere on the horizon. And at $40T in debt and rising, and with the former Continuum broken in secular fashion…

…it really is an ongoing long-term game of musical chairs, with the music stoppage point unknown, but the value of gold, err, known.

Do you know what is (IMO) the scariest aspect of the chart above? The state of monthly RSI and even more so, MACD. They are coiled and ready for more upside. Any wonder why Bessent sprang into action with such immediacy? Nope.

This daily version of the chart shows the clear breakout to new highs that sprang our hero into bond buying action.

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<end excerpt>

Understand that I am no perma-bear. My portfolio is literally at fresh highs and it’s not just due to gold stock positions. I am very negative on the big picture macro and on the last quarter century, especially, of debt-leveraged policymaking. But a game of musical chairs sure can be rewarding until the music stops.

The job of NFTRH is to manage the game while it is on rather than call perma-doom year after year. The job also includes seeing risk ahead, when appropriate. It is surely ahead, but its realization is not yet on the near horizon. What is on the near horizon is a continued regimen of discrete sector selection and a likely oncoming global trade reminiscent of the 2003-2008 phase.

It’s still Game On, as we updated the gold stock sector and discussed others of current interest. Although NFTRH 929 also introduced some caution points about the current situation. On that note, we had a little tin foil hat commentary [omitted] about near-term monetary policy crosscurrent risks to gold bugs…

Hint: “Evil does what it has to do. Just ask Bernanke.”

…and a little fun too. *

That paranoia is a continuing argument for some form of portfolio balance, and the ongoing tracking of market rotations and discrete sector selection.

I plan to do that into the mid-terms. But longer-term, there are bigger fish to fry (and I don’t mean Karps)…

* Well, my kind of fun at least.