Nikkei Plunges 12 As Carry Trade Unwinds Silver Drops 6 VIX Soars | Arcadia Economics

You’re looking at the Nikkei 225, which is down 12.4% in a day, and has been stopped. Welcome to the Morning Markets & Metals with Vince Lanci where each morning Vince brings you the financial and precious metals news to get you ready for your day. And now, here’s Vince. Good morning, everyone. I’m Vince Lancey, and in today’s Market Rundown, we will discuss the carnage that is reaming the markets globally, with much detail, hopefully. We’re going to answer some questions as well, and I’ll get to those questions in a second. We’ll also go into what we think is going to happen from here on in, or at least give you a framework in discussing that.

Okay, so let’s start with the markets. You’re looking at the Nikkei 225, which is down 12.4% in a day, and has been stopped. Let’s look at the broader markets in general. The dollar is down 77. The 10-year yield is down 8 basis points. The S&P 500 is down 165, down 3%. The VIX is at 53, more than doubling, up 29, over 125%. Gold was weaker, and now is weakening further. Down 2% at 23.90, down $51. If you need to have your hand held on that, it’s $2,400. That’s what’s going on in the world right now. Silver is 26.81, down 6%.

Obviously, that’s very painful for all of us. Well, maybe most of us. Definitely for me, down $1.76. Copper is 394, down 18 cents. That’s 4.37%. WTI is down 224, down 3% at $72.58. Natural gas is $1.88, down 6 cents. Insipathy, down 3%, but really not tied to it. Bitcoin is down over 11% at $51,000, down $6,800. Ethereum is down 391, that’s over 14.5% at $2,200. Palladium is down 50, that’s 5.5%. Platinum is down 38, that’s 4%. Grains, even grains are touched by this. Grains are $10.45, down 1.2%. Corn is down 6 cents at $3.80, down 1.58%, and wheat is down 18 cents at 3.29%.

The quick overview of this. This is not a marketplace discounting war risk. This is a marketplace discounting global recession. With fears of global deflation. If you’re looking at these markets and your knee-jerk reaction is to say, well, what’s good and what’s bad about it? Well, the things that are down the least are the ones that’ll go up the most once they ease. Meaning, to get stocks back to unchanged, gold may be up $50. You follow? From the last couple days. So the cure for what you see on that screen there is either inflationary or stagflationary.

It’s not Goldilocks. That ship has sailed. The soft landing is done. Okay, let’s explore in a little bit more detail to give you hopefully some ideas, some framework on how to handle this going forward. Because you’re going to start seeing a lot of different angles. And approaches to it. And we certainly have our own. This is to help you digest what’s coming out. So let’s try and do that. Carnage breakdown. The commentary will be on the markets currently. And the premium aspect will be moving forward how the markets will act. The homepage.

HeartNet, time to sell the first rate cut. Well, maybe it’s time to buy the first rate cut. If they wait much longer, they may have to cut another 200 basis points, a full two percentage points. Anyway, his point is well taken. Panic begins. Yesterday we put this out. This was free to all because we thought some things were going on there. Gold makes a new all-time high. Slam the stock slumber. That was a couple days ago, actually two days ago. That was the Friday warning. Founders morning update. A must read Goldman Sachs trader gave us the clue that we shared with everyone who attended on Sunday as to why we thought this was just beginning, not ending.

And that was, there are too many longs in the market. Fabulous, innocent one line that he put in there. And there’s commitment to traders. Anyway, we have one more thing. We have five premium articles. That are due to come out. And this is our week to get some personal matters in order. So we intend to put all five of those articles out in one post neatly linked. So you don’t have to scroll over the place. You pick what you want, like off of a menu. And we will post during the week for the morning market rundown, as well as for any market reports that are out of the ordinary.

But in terms of the premium reading that you get analysis, we’re putting it all out today, as well as a very humorous frank outtake from a conversation that I had with Tom Luongo, who he invited me on his show. And we had a great conversation, but frequently the conversations are even better before he starts taping. So he started taping early this time. And there are some choice words about Janet Yellen, Jerome Powell, and Norio Rabini. I’ll be sharing that with premium only. It could get me in trouble based on what I said.

All right. So moving on to what we care about right now. We’re going to answer five questions. These are the five questions you ask when you’re managing a portfolio and you’re trying to figure out what the hell you have to do next. Where are the markets? Why or what caused this? Meaning going into it. What triggered it? What was the most proximate cause? What are the implications? What is next? And how does it end? That’s what we intend to answer to tell you where we are, why we got there, how we got there, and what will likely happen to fix the markets and or the causes of how we got there.

All right. Where are the markets? Well, they’re lower. This is the global equity market. The Nikai was down 12.4% before being stopped. That 0-0-0-1. That is the Shanghai composite down 1.5%. The UK, the Deutsche exchanges, the SX5E, that’s the Euro market. The Euro market is what you want to focus on if you’re looking at all of Europe, is down 2.39%. As of this writing, when we were doing this about an hour and a half ago, actually, the NASDAQ was down 4%. The S&P 500 was down 2.5% and the Dow was down 1.7%.

The VIX at that time was up 26, up 112%. 10-year yields were down 1.4%. Again, a flight to safety, so to speak, but I will comment this, that 10-year yields are not doing as well as you would think given what’s going on. In fact, if you look at the bond yield curve, which we will not, if you’re a bond person, the shorter-term rates are doing much better. So people are buying the two-year and people are buying the five-year. So the bond market is telling you rate cuts are going to come and we think it’s going to help the long bond, but not as much as you would think, meaning it’ll be a little bit inflationary.

So just sticking out louder, the rate cuts probably will not be viewed as entirely positive for the market. There is a price to pay. So there’s the Nikai, there are the markets. Now, working down at the time, gold was down 2%, 1.9% at 46 bucks, silver was down 5.3%. PCC, that’s the put call ratio. That basically reflected a lot of put buying. The S&P 500, why do I have that there? Anyway, that’s stuff that we have there. All right, so that’s where are the markets. Next, why or what caused this? Well, fears of global recession with three points of origin.

The first point of origin is, well, basically you have a four-legged table. In order of proximity to the event, they are leg number one. The Bank of Japan’s attempt, this is, we’re getting what is causing this right now. It may have been triggered from any number of things, but the best way to view the proximate causes are a constellation of events. Here we go. Make that a little bit bigger for you so you can see my wonderful art there. The best way to view the proximate causes are a constellation of events coming together, amounting to basically all four legs of a table being kicked out from under the table that holds up the global economy.

All right, in order of proximity to the events, they are leg one. Japan’s attempt to strengthen the yen, has resulted in a disastrous effect on stocks due to their underestimating the effect of raising rates as their economy was already headed into a recession. Leg number two, the US unemployment is up-ticking and the US Fed seems disinclined to ease until inflation is truly at 2% and or the economy shows official data as being very soft, unemployment up-ticking. And that may have, that just happened. So whether they’re going to react or not is the question.

Leg number three, China has not recovered economically and due to various factors, including but not limited to real estate crisis, which they’re out of but has legacy problems. The drop in exports, no one’s buying stuff anymore, right? Debt increases, they’re putting on more debt to tread water where they are right now and a withdrawal of foreign capital, whether that’s a good or bad thing in the long run for them, it’s not a good thing when the market is still, when you’re still tied to the US in one way or another.

All these things are moving them towards a zombie economy concept reminiscent of Japan. Leg number four, this is actually ongoing. It’s not the fourth furthest away. Geopolitical risks and civil unrest already on the verge of disaster are now taking turns for the worst or put it this way, at least people are noticing them taking turns for the worst in multiple areas like Venezuela, the UK civil unrest and most imminently, the Middle East where Israel is preparing to escalate matters with Iran by proxy and possibly directly. This is all happening at a time when the US is receding as a global policeman.

In part, that is plans, but also in part because the world does not have faith in our current leadership. And can you blame them? What are the implications? Wrong one, we’re getting ahead of ourself. Where is that? There it is. Well, let’s just start with, stay with this. What triggered it? Well, Warren Buffett triggered it. The banks, now I’m gonna go off my script here. The banks have been a warning of a recession for some time, but not really being too vocal about it because stocks were going up.

And then one day, last month, Warren Buffett decides to sell a shit ton of stock. Apple, he’d already been selling Bank of America and Lord knows what else. This time, the banks seeing what they see in the economic pipeline about unemployment mostly and the fact that they actually think we’re gonna go from disinflation to deflation started to sound the bell. So that was Citibank was first seven rate cuts, Goldman Sachs and what have you. And Warren Buffett selling, he didn’t really cause this, but Warren Buffett selling at any time is something that banks pay attention to.

But when Warren Buffett sells with those other four legs that I described, that’s your trigger. And they all started crying uncle. What are the implications? If they had the Fed is who’s in the crosshairs right now. It’s about the Fed right now, right? If it’s handled too early, meaning from pal’s point of view, we would have had a soft landing. If it’s handled too late, you get a global recession. If it’s handed to handle too late, but too heavy handed, which most of us think you get global stagflation. So in a crisis, it helps to boil down things to simplest terms, throwing away the abstractions and just focusing on people’s self-interest.

So therefore, the whole world is looking at the US Fed to help mitigate, if not solve the problem by cutting interest rates. There are opposition forces to this. And they remain silent publicly. Now, who is pro cut? Well, it’s pretty easy. Banks, investors, politicians, nations, all of them neo Keynesians. Who is anti a cut? Well, let’s just say pro not having a cut yet. Believe it or not, Pozar. Now, not directly. I’m going to tell you why in a second. Pozar as a person who studied Volcker, possibly pal himself and Milton Friedman fans, of which I count myself as one.

Okay. The pro cuts are pretty obvious in their thinking. The not yet not as obvious. People like the not yet cuts, like myself, they think that the markets need to come back to reality and deflate an equity bubble that had been fueled by QE for over a decade and more recently refueled by Yellen stealth QE since the Fed had raised rates trying to keep things in check. The only question remains is how much does the market have to deflate? The knock on question from that is before they cut the knock on question.

That is at what point will pal and company decide enough is enough and rescue the world and put a band aid on the deflating bubble to slow the pain. So what is next? Well, a game of chicken is next banks and investors are now going on strike. This started on July 7th, approximately when Citibank announced it thought seven cuts of 25 basis points were in order. Goldman and JP Morgan soon followed suit with their own pleas for lower rates. No doubt the catalyst for their urgency, as I mentioned before, was a problem with Warren Buffett selling at that moment.

The only question is when now, but when they will ease the more important question is, will it be enough? So the game of chicken, right? The answer to that, those slightly cynical is this. Eventually, the sell offs will be enough for the stock market to stabilize, but it will not be enough for the actual economy. They’ll cut, they’ll cut late, they’ll cut hard, and it will stop the stock market from sliding eventually, but it won’t stop the economy. People will get fired. Companies will pull in the reins for expansion.

And the next wave of mercantile manifestation will take hold. There will be shrinking global economies. Why? Well, because they have deceived themselves into believing that they can influence or fool all the people all the time by pointing to higher stock prices as proof of a strong economy. They have exploited every economic indicator that fostered trust and policy by cooking those indicators, unemployment, jobs numbers, the VIX, gold, stocks in general, and in doing so, raking them until finally the only people believing in those indicators are the bureaucrats and the policymakers who manipulated them to begin with.

They believe their own bullshit, and self-deception is the cause of this problem, and we will, unfortunately, pay the price for it. Now, that is why, given the choice between what’s out there and what’s not out there, the only umbrella left to keep you at least partially dry as things evolve right now are gold and silver, and I’m not a salesman. Given the choice, how the Fed’s gonna manifest this, given the choice between recession and inflation, given the prices in the market right now, central bankers have always, since the Great Depression, chosen inflation, which translates to actions that will seek to prevent deflation at some point, which will either cause stagflation as money runs into safe havens like gold and out of stocks, or something bordering on hyperinflation as stocks reflate and the resources we use to keep the economy going explode in price.

That’s what’s going on. They’re gonna cut too late. Question is, are they gonna cut too hard? And the answer is probably, probably. That’s where we are. Data on deck. There you see the data on deck. It won’t matter. It only exacerbates things if they’re worse. Again, bringing you back to the home page. Actually, let’s just go back to the markets. Bringing you back to the markets themselves. We’ll put gold up here. Bringing you back to the markets themselves. It’s okay for gold and silver. Now, if you have a lot of money in a 401k, well, it’s not okay, right? And if the market does rally and interest rates are eased causing that, well, are you going to leave your money in the market or are you going to rotate out of it and put some of it in something safe, like bonds, although I don’t think they are anymore, or gold or silver.

So I think the stock market is in the beginning of a multi-year malaise. And I’ll say why in a second. I mentioned Zoltan Pozar earlier. Two years ago, when he talked about the Fed put being pulled away from stocks and being put at bonds, that made a lot of sense to me. So the Fed was no longer worried about keeping stock prices up. It was just worried about defending bonds from cratering too much. That was the plan. The plan was let stocks go back to a more normal level and let’s just make sure bonds don’t get killed too much.

The problem during that time since he said that was the Fed may have removed the Fed put on stocks, but Yellen added her own put with her stealth QE. And in doing so, in doing so, the market remained fluffed anyway. I don’t think Powell gives a damn about stock prices right now. I think he cares about the bond market. So will he cut? Of course he’ll cut. Will Japan reverse? Probably Japan will reverse. Someone’s going to do something. That’s an easy thing to say. But I don’t think the stock market is going to do well from here on in.

I think you are witnessing what Powell wanted to do in 2022 and Zoltan Pozar suggested happening now. The Fed put under stocks is gone. Yeah, they will ease, but only to save bonds, not to save stocks. The Fed put is under bonds now. We will have a bull steepening with the short-term rates dropping lower and long-term yields dropping lower, but not as much. That will probably culminate in a bear steepening where long-term yields go up. Gold goes even higher 2373. Oh my God. Gold’s down more than 2%.

It’s all good. Just think about your friends that I’ll be calling you up about the stock market. Okay, so I don’t have any words of wisdom except that that’s my risk for the day. My own personal positions. I’ll share with you. I was long bonds. I got out a week ago. I’m an idiot. I was long gold on the recent lows and I got out the day after the market rallied one and then I missed the next hundred dollars. I have nothing else on speculative right now. I’m long gold out my ass.

I’m long silver out my ass and I’m miserable, but I’m unhedged and unleveraged. I will be looking to buy gold when I see signs of the market capitulating and I don’t know when that is yet, but it’s probably going to be a technical level. I also do have the latest from Michael Oliver and I’ll share some excerpts from that with you in those five reports that we’re going to be sending out later on today. I’m Vince. Have a great day. Thanks for watching this morning’s Markets and Metals with Vince Lancy brought to you each day by Miles Franklin Precious Metals who we encourage you to contact for your next gold or silver order.

And Miles Franklin brings us a gold and silver special each week where this week’s special includes constitutional silver half dollars for only $2.50 over spot one of the more popular silver items available and on the gold side we have 10 pounds American gold eagles for only $39 over milk and to place an order or get your questions answered call 833-326-4653 or email us at arcadyatmilesfrankton.com and as always thanks for watching. Please note that this video is not intended as legal licensed financial trading advice and is to be used for informational purposes only.

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