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It appears a Fed pause is built into the market now. I think they'll still be cautious because core inflation numbers have not subsided.
I think selling started to get ahead of a larger price drop after the Fed announcement. If we get a nice drop, based on the news, I would be a seller of Puts, about 20-30% below market.
Looks like we are in a waiting mode. Probably until 2 PM or so.
Energy Select Sector SPDR: Pivot points
THE FLY 8:26 AM ET 6/14/2023
The following are the pivot points for the Energy Select Sector SPDR. Pivot High: $81.723, Pivot Low: $80.098. These were calculated using the DeMark method. It is generally believed to be bullish when price breaks out above the pivot high or bearish when price breaks down below the pivot low.
“You have a lot of people there who are working very, very hard, and they’re not getting a lot of sleep. And they’re really focusing on a big country that we have.”
“From Dr. Birx to Dr. Fauci to the vice president who’s worked very hard, the surgeon general, they’re really doing a good job. It’s a tough, tough situation, but they’re working hard.”
Gov Ron DeSantis told reporters at a Florida Covid Update on March 25, 2020
“I think Trump did great for three years, but then he turned the country over to Fauci in March of 2020 that destroyed millions of people’s lives,” DeSantis said Thursday.
“Trump should never have listened to my bone-headed advice, I apologize for that now - I'm just a meat-puppet,” Gov Ron DeSantis should have said.
China spends tens of Billions of US Dollars to buy Hong Kong Dollars in order to defend its crucial peg to the US Dollar
“A large proportion of Asia’s trade and capital transactions are still denominated in US dollars,” he said. “Pegging the Hong Kong dollar to the US dollar encourages such transactions to be carried out in Hong Kong and under Hong Kong law, even if neither party is based in Hong Kong.”
This helps to create jobs and prosperity in Hong Kong, while also benefiting mainland China.
It will not be possible to operate a Hong Kong-style international financial center if the yuan became the de facto currency in the city, John Greenwood said.
In recent months, Hong Kong Monetary Authority (HKMA) has had to burn through a huge chunk of cash buying Hong Kong dollars to maintain the peg to the US currency.
Traders are exploiting uncertainty over Hong Kong’s future as an international financial center and differences in interest rates between the city and the United States. Geopolitical tension and Beijing’s tighter grip, in particular, are denting its long-term outlook as a global financial hub.
Hong Kong’s aggregate balance, a gauge of liquidity levels in the banking system, has declined rapidly over the past year, and is down more than 90% from its peak in 2021. It fell to just 44.76 billion Hong Kong dollars ($5.7 billion) by Monday, the lowest level since November 2008. Beyond this level Hong Kong will need a massive inflow of US Dollars from mainland China's central bank.
The steep fall is a sign that investors are ditching the Hong Kong dollar. The city still has ample foreign reserves that can be used to prop up the currency, according to officials. But that hasn’t quelled market worries. Beyond that point Hong Kong will need hundreds of billions of US Dollars from China's central bank.
Logan Wright, partner and head of China market research at the Rhodium Group, pointed out in March that risks to the Hong Kong dollar peg come mainly from market uncertainty about Beijing’s intentions for the currency. Worries that money might be leaking out of China — despite strict capital controls — via Hong Kong could prompt Beijing to act if the flight of cash intensifies, he added.
Some hedge funds, such as billionaire Bill Ackman’s Pershing Square Capital Management, have reportedly taken large positions against the Hong Kong dollar. Ackman tweeted in November that “it is only a matter of time” before the peg breaks. The most likely alternative to maintaining the link to the US dollar would be to peg the currency to China’s yuan which will be a disaster for Hong Kong's financial centre, Wright wrote.
Hong Kong has had to confront large capital outflows before. About 40 years ago, global investors panicked during negotiations between Britain and China over the city’s future, triggering a sharp depreciation in the value of the Hong Kong dollar.
The plunge was so sudden and severe that officials decided to impose the strongest form of fixed exchange rate systems, the currency board, which locked the fire exit doors until the panic subsided.
That system has served Hong Kong well since, helping the city to navigate successfully through the Asian financial crisis, the outbreak of Severe Acute Respiratory Syndrome in 2003, the collapse of investment bank Lehman Brothers in 2008 and the Covid-19 pandemic.
The Hong Kong Monetary Authority (HKMA) is committed to keeping the Hong Kong dollar between 7.75 and 7.85 per greenback. When the currency reaches either end of the band, the authority will intervene and defend the peg, through buying or selling Hong Kong dollars on the currency market.
By selling US dollars to buy Hong Kong dollars, the HKMA withdraws cash from the banking system, reducing the city’s aggregate balance and causing interest rates to rise. This strengthens the Hong Kong dollar, enabling it to stay within the trading band. The same is true in reverse.
So what’s the problem?
Pressure continues to build on the Hong Kong dollar
Since last May, the currency has touched 7.85, the weak end of the band, more than 40 times, prompting the HKMA to buy nearly 289 billion Hong Kong dollars ($37 billion) from banks to shore up its value, according to statistics released by the authority early last month.
The slump started in early 2021, when there was a decline in the flow of investments from mainland China into Hong Kong stocks as Beijing cracked down on the country’s internet giants and education companies, many of which are listed in the city.
But in the last 18 months, US interest rates have been the main driver for the pressure on Hong Kong’s currency.
Aggressive rate hikes by the US Federal Reserve have encouraged traders to engage in a so-called “carry trade,” borrowing Hong Kong dollars and using them to buy assets in US dollars that earn higher interest.
One key force behind the capital outflows has been the fact that Hong Kong banks have lagged behind US banks in raising market rates, said Chi Lo, senior market strategist for Asia Pacific at BNP Paribas Asset Management, even as the HKMA has raised its official interest rates in lock step with the Fed.
But rising interest rates are hobbling the Hong Kong economy at a time when it’s trying to recover from tough Covid-19 restrictions.
Higher rates also add to headwinds affecting the city’s property market, which was already facing pressure from an exodus of people and capital due to political turmoil. Beijing has tightened its grip on Hong Kong in recent years, sparking mass protests and drawing global criticism. It imposed a sweeping national security law in 2020, which critics fear makes it easier to crack down on free speech and dissent.
“Hong Kong’s best days are behind it. China’s political interference has only risen. The working population, especially higher earners in finance, is shrinking,” wrote Richard Cookson, head of research and fund manager at Rubicon Fund Management, in an opinion piece for Bloomberg late last year.
“It is that huge surge in debt, falling asset prices, and ever cloudier outlook for Hong Kong’s economy which makes defending the peg so much more problematic than during the Asian crisis of the late 1990s, but they have no alternative,” he said.
Ackman, and Boaz Weinstein, founder of Saba Capital Management, have tweeted their support for this view.
The institutional structure that underpins confidence in Hong Kong’s dollar peg may also have started cracking.
“Hong Kong’s legal and institutional structure has changed fundamentally since the implementation of the National Security Law in 2020,” said Rhodium’s Wright in March.
“It is highly unusual in global finance for any one sovereign country to issue two separate currencies, and to run two separate monetary policies.”
One of the primary benefits of Hong Kong’s position to Beijing is the fact that the territory permits capital to flow to and from mainland China, in a legal and institutional system more appealing and understandable to foreign investors and financial institutions.
Authorities may have no interest in changing Hong Kong’s currency system just yet, but “most importantly, financial markets will start looking to Beijing to assess those preferences, rather than the words of the HKMA or other Hong Kong authorities,” Wright added.
Hong Kong align itself instead with the currency used by the rest of China but dealing only in a constantly devaluing currency would kill Hong Kong's financial sector.
Eddie Yue, chief executive of the HKMA, said in early May that even as the city’s overall aggregate balance has fallen, local banks have had no issues with liquidity.
Banks have more than $154 billion worth of collateral they can use to obtain liquidity from the HKMA when necessary, he added. And in an emergency, Hong Kong officials could tap official foreign currency reserves worth $427 billion.
“We continue to expect the HKMA to maintain a pegged exchange rate regime and safeguard financial stability with regulatory measures,” S&P Global Ratings said late last month. The rating agency also affirmed its “AA+” and “A-1+” issuer credit ratings on Hong Kong.
John Greenwood, credited as the chief architect of Hong Kong’s dollar peg after an article he wrote in 1983 provided the basis for the system, said ditching the peg would hurt the city’s role as an international financial center.
“A large proportion of Asia’s trade and capital transactions are still denominated in US dollars,” he said. “Pegging the Hong Kong dollar to the US dollar encourages such transactions to be carried out in Hong Kong and under Hong Kong law, even if neither party is based in Hong Kong.”
This helps to create jobs and prosperity in Hong Kong, while also benefiting mainland China.
It would not be possible to operate a Hong Kong-style international financial center if the yuan became the de facto currency in the city, John Greenwood said.
The Chinese currency is subject to strict capital and exchange controls. Adopting the yuan in Hong Kong would imply adopting some of China’s financial controls in Hong Kong, or at least a far greater convergence of the city’s and mainland Chinese financial systems.
“Hong Kong would not be able to operate a system that was fully and freely convertible to the mainland [currency] without undermining some of China’s financial controls,” Greenwood said.
I'm a little slow so others have likely already figured this out by now; Trump is losing everything so he wants to be a martyr. He really does see himself as some bizarre combination of Putin and Jesus. As the legal noose tightens and Jack Smith prepares to drop J6 charges Trump can see there's no way out. He may escape the New York state charges, his friends in Georgia may remove Fani Willis and end that investigation, he may find one or more true believers on the jury in Florida but he's going down in DC for sedition or worse. He will have no friends in DC when the ~12 other elected seditionists understand they will turn on him or go down with him.
We now know Nixon was a traitor and got away with it, (undercut the Vietnam peace agreement as a candidate in 1968), and it's very likely Reagan was also a traitor and got away with it, (undercut the deal to release Iran hostages in 1980), but maybe we'll turn the corner here and put a stop to this nonsense. We'll see.
That Trump, such a mensch. A last meal before prison for Mr. Nauta and Cuban!
Walt Nauta, Trump's aide who was also indicted on espionage charges, had his arraignment postponed until June 27 because he has no legal counsel.
But after leaving the court house, former president Trump took Nauta out to lunch at Versailles, a popular and inexpensive Cuban restaurant in Miami's Little Havana.
Todd Blanche Law Firm LLC, which is not admitted to the Florida Bar, plead not-guilty for Trump to 37 counts of violation of The Espionage Act this morning, who is still lacking Florida counsel.
White collar defense lawyer Todd Blanche, previously resigned as a partner at Cadwalader, Wickersham & Taft in order to found Blanche Law which represents Donald Trump in the criminal case brought by Manhattan DA Alvin Bragg.
The court has already advised Blanche that his pro hac vice application must “designate a member of the Bar of this Court who is authorized to file through the Court’s electronic filing system, to act as local counsel with whom the Court and opposing counsel may readily communicate regarding the conduct of the case.”
https://storage.courtlistener.com/recap/gov.uscourts.flsd.648652/gov.uscourts.flsd.648652.9.0.pdf
Tim Parlatore, Trump's prior attorney has appeared on a number of television programs complaining that Trump's Russian-fixer, Boris Epshteyn, has made it impossible to represent him.
Seven months ago Boris Epshteyn co-created a cryptocurrency, FJB, with Steve Bannon which has already lost 95% of its value. Crypto market analysts have said it appears the FJB crypto was merely a conduit set-up to transfer funds from Vladimir Putin to Trump's political activities. Epshteyn has previously acted as a senior advisor to the Trump campaign and White House as well as a 'political commentator' for the right-wing Sinclair Broadcasting Group expressing Trump's views.
Two other attorneys dealing with the classified documents, Jim Trusty and John Rowley, put out a statement saying “now that this case has been filed in Miami, this is a logical moment for us to step aside and let others carry these cases to completion.”
Trusty and Rowley may in fact have become material government witnesses when Trump tried to induce them to hide or destroy the classified documents on his behalf.
Yes George, if you want to continue trading with Russia you've got yourself some real problems.
You can't use Euros or Dollars, nor any currency using the international SWIFT money transfer system.
If you want to buy anything from Russia, you're limited to using a limited number of paper currencies, called a "Sack of BRIC" via courier, or you have to barter.
If you sell to Russia you can now accept their new "Sack of Shit" standard which is big hefty bag of paper Rubles losing value at more than 50% annually.
Sacks-of-Shit also have to be hand-carried to a limited number of nations like China or India. Payment in "Sack of BRIC" is sadly limited to priority military purchases.
I completely don't understand the appeal of being a Putin-Trump sympathizer. - It's just so sad.
I am not sure the currencies of the countries mentioned are a stable one. Rubel?
Energy commodities; gasoline, (all types) and fuel oil, fell 5.6% in one month. We'll have to see if this trend continues this month. Spot price for oil this morning is $67.12. Oil prices fell this low in March and in December 2021. Oil contracts a decade out are now below $50.
Backwardation is not the normal state of the oil market but this is the state we find it in today. My chart below based on data from the WSJ.
Heads up --> Gold-linked BRICS currency in August -
>>> The Great Dollar Paradox
BY JAMES RICKARDS
JUNE 12, 2023
https://dailyreckoning.com/the-great-dollar-paradox-2/
The Great Dollar Paradox
The de-dollarization story is everywhere.
You see it in publications from The New York Times to The Economist and in financial media including CNBC, Fox Business and Bloomberg.
The idea is that countries around the world are preparing to ditch the dollar. This takes many forms including efforts by China to pay for imported oil from Saudi Arabia and the UAE with yuan and a major bilateral agreement between China and Brazil that allows each country to pay for exports from the other using their local currencies.
Russia got in the act by agreeing to receive rupees for oil delivered to India and paying for imports from China with rubles. All these efforts will be converging and coming to a head in late August when the BRICS (Brazil, Russia, India, China, South Africa and other invited countries) meet to announce a new BRICS+ currency linked to gold.
With all of that going on, one might expect to find the dollar in freefall. Yet that’s not the case.
The dollar has been strong lately and I expect it to get stronger in the months ahead. What gives? How can the dollar be under global attack and yet be strong at the same time?
Strong Compared to What?
The answer is found in the way you measure value in any currency. Dollar strength or weakness is typically measured in major currency indexes, including DXY (used for futures trading and quoted in The Wall Street Journal) and the Bloomberg Dollar Index.
Other major indexes include those computed by the Federal Reserve (I use the Fed indexes in my own research and analysis). What all these indexes have in common is that they compare currencies with currencies, usually the major reserve currencies.
A typical dollar index will compare the dollar with a basket consisting of euros, sterling, yen, Swiss francs and perhaps one or two others. Because of the importance of the euro in world trade and reserves (second only to the dollar), these indexes tend to be just more complicated versions of the euro/dollar cross-rate.
The emerging markets’ currencies are typically left out of such indexes. Meanwhile, the bilateral currency deals described above do not include dollars. When you look at a bilateral currency deal involving yuan or rubles, the dollar is not included at all.
So it’s entirely possible to have a strong dollar (measured mainly against euros) and a growing de-dollarization trend involving yuan, rubles and rupees. The two trends are talking past each other.
The Golden Ruler
Is there some way to tell if the dollar is actually getting stronger or weaker without making reference to reserve currencies or EM currencies?
Yes. The answer is gold. Think of gold as a ruler that measures dollar strength or weakness.
Gold is not a currency, and the comparison is made by the weight of gold, not currency-to-currency. When the dollar price of gold is lower, the dollar is stronger, and vice versa.
But the new BRICS+ currency may throw a monkey wrench into this market by linking itself to gold. In that case, Russia and China will have a strong interest in higher gold prices because that means their BRICS+ currency will be worth more. And that may trigger the real decline of the dollar.
The BRICS+ gold-backed currency is actually the reflection of a greater trend that’s been going on for over a decade…
The Trend Is Gold’s Friend
The year 2010 marked a major inflection in central bank gold purchases and the overall level of gold reserves held by central banks and finance ministries on a global basis. Let’s back up a bit…
In 1950, the United States held about 20,000 metric tonnes of gold bullion. By 1970, the U.S. gold hoard had shrunk to 9,000 metric tonnes. That gold did not disappear; it was delivered to Germany, France, Italy, Japan and other trading partners to cover U.S. trade deficits under the old gold standard.
Beginning in 1970, gold held by central banks and finance ministries declined significantly. The U.S. sold 1,000 tonnes between 1970 and 1980 and encouraged the IMF to sell about 1,000 tonnes also in a failed effort to suppress the price of gold.
After 1980, the U.S. did not sell any more gold, but encouraged the U.K. to sell over 300 tonnes in 1999. Then Switzerland sold another 1,000 tonnes between 2000 and 2010. The IMF sold 400 tonnes in 2010 also. Canada sold 100% of its gold reserves, which were not that high to begin with.
All of these efforts to suppress gold prices ultimately failed. Gold hit a then-all-time high of $1,950 per ounce in 2011 (that record was surpassed in recent years at $2,060 per ounce in 2020).
Finally, in 2009 the central banks threw in the towel and became net buyers of gold bullion. That trend has been in place ever since.
The increases have been spectacular, resulting in a rise in total official gold holdings from about 32,000 tonnes in 2008 to 35,000 tonnes today. What’s different today is the composition of the gold holders.
BRICS+: The New Gold Bloc
The U.S. has not increased its holdings since the 1950s. Nor have other major gold holders such as France and Italy. Instead, the increases are in Russia, China, Vietnam, Mexico and many other emerging-market countries.
Many of those countries with the largest increases are members of the BRICS+ currency union that will soon announce a new gold-linked currency to challenge the role of the U.S. dollar in global payments and reserves.
Overall, the first quarter of 2023 was the strongest quarter on record for central bank gold purchases with central banks buying a combined total of 228 tonnes.
We actually have a new champion in the gold purchase arena, and it’s not Russia or China — it’s Singapore.
In just the first three months of 2023, Singapore purchased an amazing 68.7 tonnes of gold bullion, making Singapore the world’s-largest central bank gold buyer for the first quarter.
One can speculate about whether this gold buying is an aspect of de-dollarization, preparation for the new BRICS+ gold-backed currency or simple prudence in an uncertain world. But the trend is undeniable.
Central banks generally know more about what is going on behind the scenes in the global monetary system than anyone. If they’re hoarding gold, maybe you should too.
There’s still time to get on the BRICS+ bandwagon.
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BRICS currency in August - will be announced in Durban, South Africa, at the annual BRICS Leaders’ Summit Conference on Aug. 22–24.
>>> Rickards Drops Bombshell
BY JAMES RICKARDS
JUNE 6, 2023
https://dailyreckoning.com/rickards-drops-bombshell/
Rickards Drops Bombshell
On Aug. 22, about 2½ months from today, the most significant development in international finance since 1971 will be unveiled.
It involves the rollout of a major new currency that could weaken the role of the dollar in global payments and ultimately displace the U.S. dollar as the leading payment currency and reserve currency.
It could happen in just a few years.
The process by which this will happen is unprecedented, and the world is unprepared for this geopolitical shock wave.
This monetary shock will be delivered by a group called the BRICS.
The acronym BRICS stands for Brazil, Russia, India, China and South Africa.
This play for global reserve currency status by the BRICS will affect world trade, direct foreign investment and investor portfolios in dramatic and unforeseen ways.
The most important development in the BRICS system concerns the expansion of BRICS membership. This has led to the informal adoption of the name BRICS+ for the expanded organization.
There are currently eight nations that have formally applied for membership and 17 others that have expressed interest in joining. The eight formal applicants are: Algeria, Argentina, Bahrain, Egypt, Indonesia, Iran, Saudi Arabia and the United Arab Emirates.
The 17 countries that have expressed interest are: Afghanistan, Bangladesh, Belarus, Kazakhstan, Mexico, Nicaragua, Nigeria, Pakistan, Senegal, Sudan, Syria, Thailand, Tunisia, Turkey, Uruguay, Venezuela and Zimbabwe.
There’s more to this list than just increasing the headcount at future BRICS meetings.
If Saudi Arabia and Russia are both members, you have two of the three largest energy producers in the world under one tent (the U.S. is the other member of the energy Big Three).
If Russia, China, Brazil and India are all members, you have four of the seven largest countries in the world measured by landmass possessing 30% of the Earth’s dry surface and related natural resources.
Almost 50% of the world’s wheat and rice production as well as 15% of the world’s gold reserves are in the BRICS.
Meanwhile, China, India, Brazil and Russia are four of the nine highest-population countries on the planet with a combined population of 3.2 billion people or 40% of the Earth’s population.
China, India, Brazil, Russia and Saudi Arabia have a combined GDP of $29 trillion or 28% of nominal global GDP. If one uses purchasing power parity to measure GDP, then the BRICS share is over 54%. Russia and China have two of the three largest nuclear arsenals in the world (the other leader is the United States).
By every measure — population, landmass, energy output, GDP, food output and nuclear weapons — BRICS is not just another multilateral debating society. They are a substantial and credible alternative to Western hegemony.
BRICS acting together is one pole of a new multipolar or even bipolar world.
When the new currency launch is announced in August, the currency will not fall on an empty field. It will fall into a sophisticated network of capital and communications. This network will greatly enhance its chances of success.
The BRICS are also developing an optical fiber submarine telecommunications system that would connect its members. It is being developed under the name BRICS Cable. Part of the motivation for BRICS Cable is to foil spying by the U.S. National Security Agency on message traffic carried through existing cable networks.
What’s behind this quest to ditch the dollar? In no small part the answer is U.S. weaponization of the dollar through the use of sanctions.
On numerous occasions from 2007–2014, I warned U.S. officials from the Treasury, Pentagon and intelligence community that overuse or abuse of dollar sanctions would lead adversaries to abandon the dollar to avoid the impact of sanctions.
Such abandonment would lead to the diluted potency of sanctions, unforeseen costs imposed on the U.S. and eventually to the collapse of confidence in the dollar itself. These warnings were mostly ignored.
We have now reached the first and second stages of this forecast and are dangerously close to the third.
For years, the U.S. has used sanctions to punish nations like Iran. But the sanctions the U.S. and its allies imposed on Russia after it invaded Ukraine last year went far beyond previous sanctions regimes. They were unprecedented.
Many other nations began to conclude that they could be next if they run afoul of the U.S. on certain issues. And that fear has greatly accelerated the push to opt out of the dollar system entirely.
This desire is not limited to current targets such as Russia but is shared by potential targets including China, Iran, Turkey, Saudi Arabia, Argentina and many others.
The BRICS+ present a realistic effort to de-dollarize global payments and eventually global reserves.
For years, I’ve argued that the dollar would remain the world’s leading reserve currency for longer than most people think.
But below, I show you why a new BRICS+ currency could greatly accelerate the demise of the dollar as the world’s leading reserve currency.
How could it happen so much faster than I previously thought? Read on.
The Coming Shock to the Global Monetary System
By Jim Rickards
The global desire to move away from the dollar as a medium of exchange for international trade in goods and services is hardly new. The difference today is that it’s gone from a discussion point to a novelty to a looming reality in a remarkably short period of time.
Dubai and China have recently concluded an arrangement whereby Dubai will accept Chinese yuan in payment for oil exports from Dubai. In turn, Dubai can use the yuan to buy semiconductors or manufactured goods from China.
Saudi Arabia and China have been discussing similar oil-for-yuan arrangements but nothing definitive has yet been put in place. These discussions are made complicated by Saudi Arabia’s long-standing petrodollar deal with the U.S. Still, some progress along these lines is widely expected.
China and Brazil have recently reached a broad-based bilateral currency deal where each country accepts the currency of the other in trade. Meanwhile, there’s a growing strategic relationship between China and Russia as the two superpowers jointly confront the United States. In the trading relationship between the two nations, Russia can pay in rubles for Chinese manufactured goods and other exports while China pays in yuan for Russian energy, strategic metals and weapons systems.
Yet all these arrangements may soon be superseded by a new BRICS+ currency, which will be announced in Durban, South Africa, at the annual BRICS Leaders’ Summit Conference on Aug. 22–24.
The currency will be pegged to a basket of commodities for use in trade among members. Initially, the BRICS+ commodity basket would include oil, wheat, copper and other essential goods traded globally in specified quantities.
In all likelihood, the new BRICS+ currency would not be available in the form of paper notes for use in everyday transactions. It would be a digital currency on a permissioned ledger maintained by a new BRICS+ financial institution with encrypted message traffic to record payments due or owing by participating parties. (This is not a cryptocurrency because it is not decentralized, not maintained on a blockchain and not open to all parties without approval.)
The latest information from the BRICS working groups is that this basket valuation methodology is encountering the same problems that John Maynard Keynes encountered at the Bretton Woods meetings in 1944.
Keynes initially suggested a basket of commodities approach for a world currency he called the bancor. The difficulty is that global commodities included in any basket are not entirely fungible (there are over 70 grades of crude oil distinguished by viscosity and sulfur content among other attributes).
In the end, Keynes saw that a basket of commodities is not necessary and that a single commodity — gold — would better serve the purpose of anchoring a currency for reasons of convenience and uniformity.
Based on the impracticality of commodity baskets as uniform stores of value, it appears likely that the new BRICS+ currency will be linked to a weight of gold.
This plays to the strengths of BRICS members Russia and China, who are the two largest gold producers in the world and are ranked sixth and seventh respectively among the 100 nations with gold reserves.
These and related developments are frequently touted as the “end of the dollar as a reserve currency.” Such comments reveal a lack of understanding as to how the international monetary and currency systems actually work.
The key mistake in almost all such analyses is a failure to distinguish between the respective roles of a payment currency and a reserve currency. Payment currencies are used in trade for goods and services. Nations can trade in whatever payment currency they want — it doesn’t have to be dollars.
Reserve currencies (so-called) are different. They’re essentially the savings accounts of sovereign nations that have earned them through trade surpluses. These balances are not held in currency form but in the form of securities.
When analysts say the dollar is the leading reserve currency, what they actually mean is that countries hold their reserves in securities denominated in a specific currency. For 60% of global reserves, those holdings are U.S. Treasury securities denominated in dollars. The reserves are not actually in dollars; they’re in securities.
As a result, you cannot be a reserve currency without a large, well-developed sovereign bond market. No country in the world comes close to the U.S. Treasury market in terms of size, variety of maturities, liquidity, settlement, derivatives and other necessary features.
So the real impediment to another currency as a reserve currency is the absence of a bond market where reserves are actually invested. That’s why it’s so difficult to displace Treasuries as reserve assets even if you wanted. Again, no country in the world can come close to the U.S. in that regard.
But here’s where it gets interesting, and why the dollar could lose its leading reserve status much faster than previously thought.
That’s because the BRICS+ currency offers the opportunity to leapfrog the Treasury market and create a deep, liquid bond market that could challenge Treasuries on the world stage almost from thin air.
The key is to create a BRICS+ currency bond market in 20 or more countries at once, relying on retail investors in each country to buy the bonds.
The BRICS+ bonds would be offered through banks and postal offices and other retail outlets. They would be denominated in BRICS+ currency but investors could purchase them in local currency at market-based exchange rates.
Since the currency is gold backed it would offer an attractive store of value compared with inflation- or default-prone local instruments in countries like Brazil or Argentina. The Chinese in particular would find such investments attractive since they are largely banned from foreign markets and are overinvested in real estate and domestic stocks.
It will take time for such a market to appeal to institutional investors, but the sheer volume of retail investing in BRICS+-denominated instruments in India, China, Brazil and Russia and other countries at the same time could absorb surpluses generated through world trade in the BRICS+ currency.
In short, the way to create an instant reserve currency is to create an instant bond market using your own citizens as willing buyers.
The U.S. did something similar in 1917. From 1790–1917, the U.S. bond market was for professionals only. There was no retail market. That changed during World War I when Woodrow Wilson authorized Liberty Bonds to help finance the war.
There were bond rallies and Liberty Bond parades in every major city. It became a patriotic duty to buy Liberty Bonds. The effort worked, and it also transformed finance. It was the beginning of a world where everyday Americans began to buy stocks, bonds and securities as retail investors.
If the BRICS+ use a kind of Liberty Bond patriotic model, they may well be able to create international reserve assets denominated in the BRICS+ currency even in the absence of developed market support.
This entire turn of events — introduction of a new gold-backed currency, rapid adoption as a payment currency and gradual use as a reserve asset currency — will begin on Aug. 22, 2023, after years of development.
Except for direct participants, the world has mostly ignored this prospect. The result will be an upheaval of the international monetary system coming in a matter of weeks.
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>>> A BRICS Currency Could Shake the Dollar’s Dominance
De-dollarization’s moment might finally be here.
Foreign Policy (Carnegie Endowment for Intl Peace)
By Joseph W. Sullivan, a senior advisor at the Lindsey Group and a former special advisor and staff economist at the White House Council of Economic Advisers during the Trump administration.
APRIL 24, 2023
https://foreignpolicy.com/2023/04/24/brics-currency-end-dollar-dominance-united-states-russia-china/
Talk of de-dollarization is in the air. Last month, in New Delhi, Alexander Babakov, deputy chairman of Russia’s State Duma, said that Russia is now spearheading the development of a new currency. It is to be used for cross-border trade by the BRICS nations: Brazil, Russia, India, China, and South Africa. Weeks later, in Beijing, Brazil’s president, Luiz Inàcio Lula da Silva, chimed in. “Every night,” he said, he asks himself “why all countries have to base their trade on the dollar...”
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Full article -
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=172106191
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May CPI for all items came in at .1% which sounds good but the fall in energy prices accounted for this as the core CPI is still at .4% or 4.8% if extrapolated out to a yearly basis. The chart below from BLS shows how sticky core inflation has been over the last year. I expect the Fed will say inflation is moving in the right direction but the fight is not over.
Changes over the last 12 months
Gasoline down 19.7%
Fuel oil down 37%
Nat gas down 11%
Transportation services up 10.2%
Most of the others on DL's side also failed to read their history books or only read he pages that interested them. Stalin simply eliminated the pages of the history books that he did not approve of. The same for people he did not like.
Energy Select Sector SPDR: Pivot points
THE FLY 8:26 AM ET 6/13/2023
The following are the pivot points for the Energy Select Sector SPDR. Pivot High: $81.635, Pivot Low: $80.275. These were calculated using the DeMark method. It is generally believed to be bullish when price breaks out above the pivot high or bearish when price breaks down below the pivot low.
After touching down in Miami on Monday, Trump spent the afternoon interviewing prospective lawyers who are members of the Florida Bar.
Two of his prior Florida lawyers — Jim Trusty and John Rowley — resigned last week when they became material witnesses after Trump asked them to help hide or destroy the classified documents.
Trump hired veteran Florida litigator and former Republican candidate for the Florida Senate, Chris Kise, has cast a large net leading the search for a Florida barred lawyer, but Kise has declined to take the case himself.
The 11th-hour flurry of action to hire a seasoned trial attorney was a familiar dance for Trump, who has had difficulty hiring and keeping lawyers over the course of numerous federal and state investigations since his 2016 election as president.
Disagreements over legal strategy and Trump's well-known failure to pay have hindered the search for new defense attorneys.
Trump wants to pursue an aggressively partisan strategy in which they would accuse the Justice Department of prosecutorial misconduct and weaponizing the legal system against criminals.
Others urge the former president to put together a traditional defense team focused on jury selection — as only one hold-out juror is all Trump needs to avoid conviction on these charges. These advisors fear a scorched-earth attack on the US justice system would alienate any jury and most of the country.
Chris Kise is canvassing Florida for a Trump-monkey
Owners of the former BofA headquarters, which also used to house McKinsey Consulting, 555 California Street in San Francisco — Vornado Realty and Donald Trump — want more time to pay back their loans. Of course the Donald will whine elude and skirt rather than giving the property back to the lenders.
The building complete with "the Banker's Black Heart" sculpture whose official name is “Transcendence,” sculpted by Masayuki Nagare from 200 tons of black Swedish granite - https://www.atlasobscura.com/places/banker-s-heart
The 52-story carnelian building, 555 California Street, is currently 93 percent leased. But many tenants — which include banks like Morgan Stanley and law firm Kirkland & Ellis — will be up for renewal soon in a city where workers have been slow to return to the office. Co-owners Vornado Realty Trust and the Trump Organization have requested more time to pay back the $1.2 billion loan used to purchase the building, according to loan servicer documents.
"I've never seen it so empty," said a financial worker who has worked in the building for twenty years.
The Lowey family's Westfield, the Bronfman family Brookfield and Uniball of France have stopped paying the mortgage on their posh 1.5 million sq-ft San Francisco Mall on Market Street built in 1988, which replaced the old City of Paris which was a copy of the Galeries Lafayette department store in Paris. The $585 million loan is almost certainly syndicated, with the risk shared by a large number of banks.
The lender is probably Merchant's Capital, an affiliate of Merchant Bank, or similar lender like CBRE (Coldwell-Banker Real Estate finance) who securitized the most of the loan out to pensions funds around the world, like Black Rock. The managing lender will have great flexibility in charging lower rents to attract tenants.
Asked about commercial real estate concerns in a television appearance on Wednesday, Treasury Secretary Janet L. Yellen said she thinks banks are “broadly preparing for some restructuring and difficulties going ahead.”
The banks or their appointees will be managing these properties, but I personally very much doubt major banks actually hold much of these loans for their own account. I bet millions of people don't know they own a part of these loans in their retirement savings.
When I was last in San Francisco the entire city had a very residential feel like Pacific Heights where I used to live. The parts of the city that had once been destinations for commuters and tourists were dead quiet. San Francisco is now just a posh urban suburb for people who work in Silicon Valley or work there from their homes in San Francisco.
I occasionally take a look at the if it bleeds it leads station; CNN. Today I was wondering if they'd be camped out with the Proud Boys looking for some action. Nothing there but I did come across this article which discusses an issue I've been discussing here for some time.
The dreaded return of student debt payments
Beyond the high cost of living, Bank of America said many younger Americans are also likely bracing for the return of a significant monthly expense: student debt.
The bipartisan debt ceiling deal included a provision that specifically prevented the Biden administration from extending the pause on federal student loan payments.
The student debt freeze, in effect since March 2020 when the Covid pandemic erupted, is expected to conclude by the end of August.
That is particularly painful to younger consumers. Americans are sitting on $1.6 trillion of student debt, according to the New York Federal Reserve, and the vast majority of that student debt is held by those under the age of 49.
For millions of Gen Z and Millennials, the return of student debt payments will mean less money for spending on restaurants and vacations.
Some consumers may be starting to pull back on spending ahead of that change, Tinsley said: “It’s coming down the tracks pretty fast now.”
Trump is stoking a J6 reunion in Florida tomorrow. The Proud Boys are organizing several events in honor of Dear Leader. In the meantime DT is having a problem lining up his legal team and may use that excuse to delay his hearing.
In better news, the two yahoos that hatched the 2020 multi-state robo-call scheme to intimidate black voters just got fined $5.1MM by the FCC. The judge ruled these two outstanding citizens had violated the 19th Century Ku Klux Klan Act. The boys must not be students of history.
This market is getting a little frothy, certainly for me. Although the 20ma and 50ma both crossed the 200 day ma, and that is a longer term positive, I feel we are going lower before the week is out. Raised more cash and bought back 20 Puts in SUN.
It will be fun to sell insurance during a market retreat, but not now.
From ChatGPT who's data set is now 18 months old:
Very good points Eric.
So far, this morning more than doubled my cash.
Just posted on the WSJ a few minutes ago. Apparently no one cares about gaming in the new world where it's all about AI. There's no real change in MSFT share price.
As the author said; Altria is a value trap. They have one very successful product, Marlboro and they're massively over charging for it, which is a big reason their sales are dropping. At some point they'll have to do something else right, a skill this management team has never mastered. I owned MO for years but will not buy it again unless they have a viable new product rollout.
That said, as long as they own the exclusive right to sell Marlboro in the US, they'll continue to make money and MO will be a tax advantaged 8% bond. Anyone buying MO should keep an eye on dividend coverage. If they cut the dividend for any reason this could be a $30 stock overnight. The P/E is currently ~15X which is much too high for a company who's revenue is shrinking. A company whose product kills its customers has to recruit new ones. Marlboro is not the choice for Gen Z.
The markets should be quiet today. Tomorrow we get the May CPI report before the market opens, then the PPI report Wednesday before the market opens and after that we get the Fed decision at 2:00PM Eastern and JP speaks at 2:30. If the CPI doesn't wake the market up then Scary Jerry always does.
This morning with fair success, buying back Puts on: MCD 4, RCL 20. Will wait for the market drop at one point to re sell them, also with the IBM 10 Puts.
When you are the criminal class, destroying belief in the justice system is important if you want to control any society. See Russia, Putin and the KGB as a classic example.
The markets likely will be driven by the anticipated Fed News this week.
A recent New York Federal Reserve survey has investigated retail price inflation. Their survey of 700 businesses across New York, Atlanta and Cleveland found that strength of customer demand outranked all other factors that companies weigh when setting prices, including steady profit margins and overall inflation.
Businesses are basically rising prices until demand declines. More than 82% of businesses surveyed said demand factored into their pricing decisions, while only 52% of businesses said they take the overall rate of inflation into account when setting prices.
John Zhang, a professor of marketing at the Wharton School at the University of Pennsylvania said, “As a consumer during inflation, you know the costs for companies are increasing, so, therefore, you become more receptive to a higher price. Approval of price increases could fuel even higher pricing in the future — a cycle that can be hard to break.”
Mr. Mac’s mac and cheese restaurant in Manchester, New Hampshire tried boosting prices a little at a time to keep up with inflation in 2021, but it wasn’t enough to cover the cost increases to the business, vice president of operations Mark Murphy told CNN. Fearing customer backlash, the restaurant accepted smaller margins instead of pricing out their diners.
When the business finally hiked prices, Murphy said the decision was “painful.”
“We were looking at our sales and our orders daily, and we were checking every review to see what people were saying,” Murphy said. “It was very scary.”
Despite those fears, Mr. Mac’s elevated prices did not cut into business.
“What we ended up finding was customers may not have been happy about it, but they were not surprised. I think they kind of understood that prices are increasing. They see it everywhere they go,” he said.
Murphy said the restaurant has since raised prices more than once to keep up with inflation.
The most disturbing thing is the number of prominent Republicans who are calling to defund and dismantle the US Justice Department and the FBI.
Actual traitors. Unbelievable.
Former attorney general Bill Barr told a Cleveland group in early May the many reasons Donald Trump is unfit to be President.
“He does not have the discipline. He does not have the ability for strategic thinking and linear thinking —
— or setting priorities or how to get things done in the system.
It’s a horror show, you know, when he’s left to his own devices.”
https://www.wsj.com/articles/bill-barrs-warning-on-trump-re-election-fed-soc-immigration-democrats-b2ab8b26
I think it's hilarious that CA governor Newsom wants to charge DeSantis with kidnapping. I've a lot of issues with Mr. uber privilege but if he's the only politician willing to take a hammer to fascism, I can live with his indiscretions.
The WSJ is still one of the few papers an investor must read. He doesn't let his goofy friends like the all but senile Alan Dershowitz grace the news pages. The Dersh has let us know that his buddy DT can serve as president from prison. He's also OJ's good friend and fond participant in Epstein's enterprise. Of course so was Billy Boy Clinton. At least that cracker never tried to overthrow democracy. Thankfully Rupert likes money more than he hates democracy.
We'll see how many traitors live in Florida
Busing people to the courthouse now. Where have I seen this before? pic.twitter.com/8OEiTT58Ng
— Ron Filipkowski (@RonFilipkowski) June 11, 2023
Barron's is arguing this weekend that the longest bear market since 1948 has ended. I'm not convinced as I still continue to collect ~5% cash. As much as all the pundit class was negative in January, they're happy today. Makes no sense to me.
These people are not mentally disturbed. They are clear thinking fascists who despise the messiness and goals of democracy. Although much more bright, our 2nd president, Adams, was also a fascist. Jefferson, as flawed as he was, believed, like Washington, in democracy.
Like Jefferson Davis, Trump and Lake are anti-democratic fascists. Given the chance, they will overthrow democracy to gain their own power. Lake is calling for the overthrow of the US government. She's a traitor. I would call her a confederate style traitor but at least they believed in something; slavery. She's more of a Hitler who only believes in power. Trump is the same. They would burn the US to the ground only to own the embers.
While we wait for PCI and PPI reports this week I'm beginning to track PCE more closely, (Personal Consumption Expenditures). You can track that here on the BEA site. It can also be tracked on FRED.
https://www.bea.gov/data/personal-consumption-expenditures-price-index
PCE as reported through April is still robust at an aggregate of over 4.75%. It's fallen to 4.3% in the last two months but still nothing to be concerned about. I'm looking out 6-12 months and I'm concerned that the cost of borrowing will begin to show up as a fall in PCE later this year. That is, high interest mortgage debt, student debt and revolving credit debt. All are much higher than they were a year ago and student debt has been on hiatus for three years while it compounds daily.
I was able to do some on-the-ground research this weekend as we had an open house for our current residence. Our realtor managed the main house while I worked in the guest house, (locally referred to as a casita). The most interesting conversations were with millennial couples. Some just starting out and others with a starter home and a couple of kids who want to move up and closer to their kid's schools. Uniformly they've gotten beaten up by all cash Boomer offers from CA and TX. It's only been two days so we'll have to wait and see if any younger families step up. A couple of them heard horror stories from their parents about the 1970s when rates kept moving up to 18-20%. After these conversations I've decided that you can no more rationalize an explanation regarding the '70s than you can tell a Christian that Noah's flood was simply ice melting from the last ice age. Interesting times.
Wanted to be king, only rose to count. But hey; he did it 37 times. That's got to count for something..:)
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