Risk: Another Idiot Succumbs to Keynesianism

Here we go... the Bank of Japan is going to stimulate the economy in order to address "rising prices." Does this insanity ever end?

Editor’s Note: I’m flying to Puerto Rico this morning, with a board time of 8:15 am. I’ll likely miss the jobs report. That said, I don’t care about the jobs report if Japan plans to print more money and “stimuluate” its economy. They’re fixing something that broke… and that’s Bullish. See you on the other side.

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Equity Strength Signal: 

• With the new global stimulus, I couldn't care less about this jobs report. 

• If interest rates didn’t matter over the last 24 months, they’re not going to matter if Japan and China are printing money out of thin air.

  

Global Capital Watch 

• Japan is now stimulating its economy, which signals that something else broke a few weeks ago. 

• Look for continued monetary expansion between China and Japan. CrossBorder Capital said that global liquidity hit a record this week.

Insider Buying: 

• Insider selling remains very strong, but the number of buying disclosures compared to selling disclosures hit a level we haven’t seen in months. 

• Insiders at the director level are buying small. What should we do with the information that a VP of Helca Mining bought five shares worth $34.75?

Market Outlook:

• Futures are up as investors await the September jobs report

• There's a 68% chance of a 25 basis point interest rate cut in November.

• Hey… the world’s third-largest economy is printing money again… Weeeeeeee!

Oil sector:

• Oil prices are experiencing their strongest weekly increase in two years.

• CNN is now talking $100 oil… which is just adorable. Stay focused on the U.S. midstream names.

• Escalating tensions in the Middle East and short-covering are the story. This afternoon, we’ll look to the Commitment of Traders report for clues on hedge fund buying.

Other market news:

• U.S. East and Gulf Coast ports are reopening after a three-day strike. I told you not to speculate about the port strike, and shipping companies' stocks are dropping.

• Spirit Airlines shares are down 37% amid potential bankruptcy talks. This company competes with Greyhound Bus… would you miss it?

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Dear Fellow Expat:

Look… I just pay attention.

For 16 years, central bankers around the globe have used the same playbook over and over.

Fit to be tied… they continue to pump cheap money into the system to fight deflation. They know that austerity IS needed… but they just can’t bring themselves to let asset prices fall.

This was the Religious Doctrine of former Fed Chair Ben Bernanke after the 2008 Financial Crisis. We engaged in multiple rounds of Quantitative Easing that continue today.

Then, in 2011, Europe faced a crisis. It needed austerity, and it needed to cut its bloated debt systems. What did it do?

They gave up in 2014.

Now… here we are with Japan.

This morning…

Japanese Prime Minister Shigeru Ishiba told his financial ministers “to compile a fresh economic package to cushion the blow to households from rising living costs,” according to Reuters.  

The government is trying to stop deflation… of course.

Now, I want you to read two parts of the Reuters report.

First:

“The step comes as Ishiba, previously seen as a proponent of fiscal austerity, now stresses ahead of a general election…”

He was a proponent of fiscal austerity. Now, he’s a full-blown Keynesian.

That was quick. Good luck, Japan.

Now, read his quote from a speech this morning.

"We would need to support people suffering from rising costs right now until a positive growth cycle with wage increases outpacing inflation and driving capital expenditures is established," Ishiba said in a speech to parliament.

Do you see it?

Do we need to shake these people by the shoulders?

They are printing money… to offset “rising costs?”

They are printing money… at a time when costs are up on things that matter: Food, energy, housing, and the stuff that matters.

THEY ARE STIMULATING THE ECONOMY… WHEN PRICES ARE RISING.

This will likely push the yen to new lows while boosting Japanese Government Bonds and equities. This should also mean a reigniting of the popular yen carry trade. 

This is utterly ridiculous. But what can we do…

I am trying my best not to swear out loud right now.  

California released hundreds of millions in “inflation relief” stimulus in recent years, and inflation got worse than before the pandemic. And yet… they keep doing this.

This philosophy is precisely what has caused inflation globally to explode. They’re debasing the currencies. They COULD engage in supply-side reform and increase the supply of things to help offset prices.

But they don’t. They PRINT money… which will only drive up the price of real goods.

I wish I had a joke for all of this… but I’m not that funny.

The simple question is, “Why.” Why keep doing this when the result is always higher prices?

Because that’s the way the system is designed, deflation comes from technology.

Inflation comes from money printing.

And the things that matter go up in price.

Money printing buys votes. Money printing boosts government control.

Money printing creates dependency and keeps the banks happy (remember, the central banks work for financial institutions… not us).

Oh… and it’s likely that this stimulus is a cover for something much bigger in Japan.

As I noted, it is impossible that something didn’t break back in August during the Nikkei implosion. Impossible – this stimulus will act as cover.

America did this in 2008.

Europe did it to protect certain financial institutions in 2014.

Japan’s next up.

And it will go until it stops.

As I have said… time and time again… you MUST hedge against monetary inflation.

Over the next 12 months, we’ll enter another phase of monetary expansion globally, with Japan and China leading the way. More liquidity means more money spilling into risk assets.

This means this “bubble” that everyone discusses can only inflate more.

I’m expecting a move to 6,000 on the S&P 500, possibly 6,300 next year, thanks to falling interest rates and ongoing fiat destruction.

Play the game.

Let’s get to the market today…