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WHAT YOU NEED TO KNOW!

GROWTH OF GLOBAL GOVERNMENT DEBT

• In 2020 Global Government Debt was ~$62T. Global GDP was ~ $84.96T.
• In 2022 Global Government Debt had grown to ~$82T with Global GDP approximating ~$104T.

This means debt grew by ~$20T while GDP growth grew by a corresponding ~$20T. $1 of debt growth equaling a $1 of economic GDP Growth.

Are we really growing GDP or just Debt?? Or has GDP become become nothing more than a measure of Debt Growth?

RESEARCH

RISING MARKETS BUT SHRINKING STOCK VOLUME?

• From Currencies, Bonds, Commodities; to economic indicators like inflation Swaps; to market measures like volatility - almost nothing doesn't have a leveraged derivative that can now be traded.
• There are some startling & secretive consequences of this that fortunes are being made from.
• The message is that economies and financial markets are not what they appear when you have quadrillions of derivative structures taking place behind the "veil". 

YET ANOTHER 800,000 JOBS REPORTING MISTAKE?

• The labor market is far weaker than conventionally believed. In fact, no less than 800,000 payrolls are "missing" when one uses the far more accurate Quarterly Census of Employment and Wages data rather than the BLS' woefully inaccurate and politically mandated monthly payrolls "data".
• If one looks back the monthly gains across most of 2023, one gets not 230K jobs added on average every month but rather 130K!
• When the issuance of $1 trillion in debt every 100 days only adds 800,000 less jobs it makes you wonder what the money is being used for???
• What is additionally alarming is that the Philly Fed found that the BLS had also overstated payrolls in 2022 by 1.1 million!
• This identifies where a significant part of the mysterious 5M job difference is between the BEA's Establishment Survey and Household jobs.

DEVELOPMENTS TO WATCH

AN INCREASINGLY DESPERATE XI JINPING SUMMONS US EXECUTIVES TO CHINA

• As Chinese Fixed Capital Formation and Foreign Direct Investment (FDI) continues to erode, President Xi Jinping is taking urgent measures to shore up foreign business and investment confidence.

XI JINPING ORDERS PBOC TO INJECT LIQUIDITY

• According to the the South China Morning Post, Xi Jinping has instructed the Chinese central bank to restart treasury-bond trades after a 2-decade hiatus.
• President Xi has told China’s financial cadres that an active monetary policy tool kit must include a controversial means of injecting liquidity into the economy.
• Economist says PBOC has not bought treasury bonds for years because monetary authorities did not want to fuel market speculation of a major stimulus.

GLOBAL ECONOMIC REPORTING

• PERSONAL CONSUMPTION EXPENDITURE (PCE)
• One of The Fed's favorite inflation indicators - Core PCE Deflator - was flat at +2.8% YoY in February (as expected) - the lowest since March 2021.
• The headline PCE Deflator stalled its disinflationary path, rising to +2.5% YoY (from +2.4%).
• Government Wage growth significantly stands out (chart right).

• DURABLE GOODS
• US Durable Goods (which in the US is primarily about Transportation and sporadically about Defense) have begun trending up.

In this week's expanded "Current Market Perspectives", we focus on a Q1 Recap of Winners & Losers, Gold and the Integrated Gold Miners.

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RISING MARKETS BUT SHRINKING STOCK VOLUME?

Markets have been steadily rising in a historic Bull Market since after the bottom was reached during the 2008 Financial Crisis.

With equities rising in such an appreciated fashion you would expect stock trading volumes to also be rising. But that hasn't been the case!

The chart to the right shows the steady drop in trading stock volumes.

One of a number of reasons for this is that there has been a major shift into buying Exchange Traded Funds (ETF).

Exchange funds use derivatives to execute their daily volumes.

EXPLODING USE OF DERIVATIVES

The chart below shows the massive increase in derivative trading volumes on a daily basis

IN THE US ALONE!

THE DERIVATIVE COMPLEX

The trading in derivatives far outstrips just what trades in equities. It occurs in all areas of the financial markets.

From Currencies, Bonds, Commodities to economic indicators like inflation Swaps to market measures like volatility - almost nothing doesn't have a leveraged derivative that can be traded.

There are some startling and secretive consequences of this that fortunes are being made from.

The message is that economies and financial markets are not what they appear when you have quadrillions of derivative structures taking place behind the "veil".

YET ANOTHER 800,000 JOBS REPORTING MISTAKE?

Statistics Don't Lie! But Statisticians Do!

I have been voicing my concern about the obvious Employment and Jobs Reporting games being played by the politically motivated Labor Department's BEA for a year and a half.

My arguments have been primarily targeted within two areas:

• The major difference between the BLS's "Headline" Establishment Survey versus the BLS's much more accurate Household Survey. (Chart Right: See the magnitude of growing 5 Million employment reporting variance from what used to track closely.)
• The incredibly low weekly Initial Jobless Claims report (produced by State Unemployment Insurance offices) versus both the State's "WARNS" reports and actual corporate layoff announcements.

LAST WEEK'S JOBLESS CLAIMS

Last week I outlined the magnitude of distortions occurring in the Jobless Claims reports originating from State controlled Unemployment Insurance offices in California and the week before in New York. Every week it is a revolving distortion from one "Blue" controlled state or another.

Here's what the most recent FOMC Minutes said about this:

"While the recent trends prior to the meeting had been remarkably positive, Fed officials judged that some of the recent improvement “reflected idiosyncratic movements in a few series.”

Even they aren't buying the "Here we go around the Mulberry Bush" routine - and neither should you!

THIS WEEK WE SHOW THE HOLES IN THE ESTABLISHMENT SURVEY

The labor market is far weaker than conventionally believed. In fact, no less than 800,000 payrolls are "missing" when one uses the far more accurate Quarterly Census of Employment and Wages data rather than the BLS' woefully inaccurate and politically mandated monthly payrolls "data".

The separately prepared Philadelphia Fed quarterly report on Early Benchmark Revisions of State Payroll Employment. shows that once again, the BLS has been fabricating jobs, and not just any jobs, but those that make up the all-important monthly payrolls reported by the government The primary purpose of this analysis, in the Philly Fed's own words is:

"to produce timely estimates of state payroll jobs that closely predict the annual benchmark revisions released by the BLS each March. To do so, we incorporate more comprehensive job estimates released by the BLS as part of its

Quarterly Census of Employment and Wages (QCEW) program."

So what happened this time? Well, the analysis, which looked at state-level data, found that the employment changes from June through September 2023 were significantly different in 27 states compared with pre-benchmark state estimates from the Bureau of Labor Statistics’ (BLS) Current Employment Statistics (CES).

Specifically, "early benchmark (EB) estimates indicated lower changes in 24 states, higher changes in three states, and lesser changes in the remaining 23 states and the District of Columbia"

RESULTS:

• If one looks back the monthly gains across most of 2023, one gets not 230K jobs added on average every month but rather 130K!
• When the issuance of $1 trillion in debt every 100 days only adds 800,000 less jobs, it makes you wonder what the money is being used for???
• What is particularly alarming is that the Philly Fed, found that the BLS had also overstated payrolls in 2022 by 1.1 million!, It's truly statistically remarkable how every time the data error is in favor of a stronger, if not fake, economy?
• This identifies where a significant part of the 5M job difference is between the Establishment Survey and Household jobs.

Which is also why nobody in the mainstream media, the government nor the deep state will ever mention this report.

REFERENCES: (If you really want to understand US Labor reality, then read these reports and not the headlines.)



Bureau of Labor Statistics (BLS)

• Monthly: Current Employment Statistics (CES)
• Quarterly: Quarterly Census of Employment & Wages (QCEW)
• Annually: Labor Benchmarks

Philadelphia Federal Reserve Bank

• Quarterly: Early Benchmark Revision of State Payroll Employment Report (Intended as a more accurate assessment of BLS's QCEW).

DEVELOPMENTS TO WATCH

AN INCREASINGLY DESPERATE XI JINPING SUMMONS US EXECUTIVES TO CHINA

I have written many times about the fact that China is so dependent of Capital Formation. The Achilles Heel of the US is being a dependent 70% consumption economy. The Achilles Heel of China is being a dependent ~45.5% Capital Formation economy in 2011, having fallen to just over 41.9% in 2022, according to the World Bank. Chinese Foreign Direct Investment (FDI) has been plummeting over the last two years, as Xi Jinping's policies have become increasingly threatening to foreign corporations and financiers.

When corporations and financiers slow their investment rate in China, or start taking their profits & investments out of China, the economy slows dramatically. This is just one of the problems that President Xi Jinping currently faces.

To stem the issue, Xi Jinping met with 500 US business leaders in San Francisco in November. As the problem worsens, he again summoned a select group of US investors to Beijing last week in an attempt to shore up confidence. Separately, US-China tensions are reported as having recently risen as Washington contemplates labeling Chinese electric vehicles as a "security risk" to Americans. 

State media outlet Xinhua noted the meeting was held at the Great Hall of the People in Beijing. Xi and the CEOs, included:

• Raj Subramaniam, CEO of FedEx Corp.
• Evan Greenberg, CEO of the insurer Chubb Ltd.
• Stephen Orlins, president of the National Committee on US-China Relations
• Craig Allen, president of the US-China Business Council and
• Mark Carney, chairman of Bloomberg Inc.
• Stephen Schwarzman, Partner, Blackstone Inc (According to Bloomberg)
• Cristiano Amon, CEO of Qualcomm (According to Bloomberg)
• ... and others not identified nor reported on?

A Bloomberg source quoted Xi as saying "there is no need for a 'decoupling' between Beijing and Washington". 

XI JINPING ORDERS PBOC TO INJECT LIQUIDITY

According to the the South China Morning Post, Xi Jinping has instructed the Chinese central bank to restart treasury-bond trades after a 2-decade hiatus.

• President Xi has told China’s financial cadres that an active monetary policy tool kit must include a controversial means of injecting liquidity into the economy.
• Economist says PBOC has not bought treasury bonds for years because monetary authorities did not want to fuel market speculation of a major stimulus.

It appears to be just a matter of time before China’s central bank pulls out a controversial monetary policy tool that it has not used in more than two decades, following newly publicized instructions from President Xi Jinping. With the world’s second-largest economy at a critical juncture of fueling growth in its bid to become a global financial superpower, a new book details some of Xi’s thoughts on finance, dating back to late 2012.

"The People's Bank of China must slowly increase the trading of treasury bonds in its open market operations,"

... Xi told a major financial meeting in October in a speech that was not published at the time but was included in a

book this month.

Market expectations remain high for more stimulus to boost the world's second-largest economy, which is showing tentative signs of momentum despite a long-running debt crisis in the property sector, which used to account for a quarter of China's gross domestic product.

NOTE: The chart above right is the current Chinese Credit Impulse prior to the Xi Jinping's address. The dared chart below reflects the critical importance of the Chinese Credit Impulse to the Global Economy.

GLOBAL ECONOMIC INDICATORS: What This Week's Key Global Economic Releases Tell Us

PERSONAL CONSUMPTION EXPENDITURE (PCE)

One of The Fed's favorite inflation indicators - Core PCE Deflator - was flat at +2.8% YoY in February (as expected) - the lowest since March 2021.

The headline PCE Deflator stalled its disinflationary path, rising to +2.5% YoY (from +2.4%).

• Durable Goods deflation slowed and non-durable goods inflation picked up in February.
• The SuperCore (Services inflation ex-Shelter) - remains stalled around +3.33% YoY (up 0.18% MoM)...
• SuperCore M-o-M tumbled significantly (as Healthcare cost inflation fell and Other Services prices deflated).
• Income and Spending both rose in February with spending far outpacing income (+0.8% MoM vs +0.3% MoM respectively). On a YoY basis, spending is once again outpacing income growth.
• Government workers' record wage growth in January was revised lower. Government wages grew 8.1% in Feb, up from a downward revised 7.9% in Jan and below the record high of 8.9% in December.
• Private wages grew 5.4% in Feb, up from 5.3% in Jan and back to their pre-covid growth rates.
• As one would expect with that level of spending, the savings rate collapsed to its lowest since Dec 2022.
• Here's why - government handouts rose significantly once again (+$39BN MoM).
• Finally, while the markets are exuberant at the survey-based disinflation, the vast majority of the reduction in inflation has been 'cyclical'...
• Acyclical Core PCE inflation remains extremely high, although it has fallen from its highs.
• Is The (apolitical) Fed really going to cut rates 4 times this year with a background of strong growth (GDP) and still high Acyclical inflation?

DURABLE GOODS

Headline durable goods rose 1.4% in February, above the 1.1% forecast and rising from the downwardly revised -6.9% (initially -6.2%).



Ex-Defense durables led the upside, rising 2.2% from the prior -7.9% while ex-transport rose 0.5%, above the 0.4% forecast and above the prior revised up -0.3% (initially -0.4%).

• Meanwhile, transportation equipment rose 3.3% after two consecutive monthly decreases. Shipments rose 1.2% after a 0.8% decrease.
• The nondefense capital goods orders ex aircraft rose 0.7%, above the 0.1% forecast and prior -0.4%.
• A rebound in volatile aircraft orders helped support the headline figure but there may be worries ahead with ongoing issues at Boeing with the CFO recently noting they do not know when the 737 production rates will ramp up, noting they have made the decision to keep production below 38/month.
• Since then, the Boeing (BA) CEO Calhoun announced he is to step down at the end of the year.
• Pantheon Macroeconomics highlights that "The only input from the durable goods report into the business equipment investment component of the GDP accounts is nondefense capital goods shipments ex-aircraft, aka core capex shipments".
• This component fell by 0.4%, easing from the prior 0.7% gain in January.
• Pantheon adds that they expect "a further drop of about 0.5% in March, given that shipments continued to run ahead of orders in February, and the ISM manufacturing survey continues to point to weak underlying demand".
• This suggests to the consultancy that real core goods shipments are on course for a 2% Q/Q annualized drop in Q1.
• Nonetheless, PM notes a rebound in heavy truck sales which points to a 2.5% gain in overall equipment investment in Q1, despite the likely fall in core capex shipments.
• The desk continued to expect a 1% drop in real equipment investment this year, contributing to the slowdown in GDP growth.

GLOBAL MACRO

WHAT DOES YOUR SCAN OF THE DATA BELOW TELL YOU? - THE MEDIA AVOIDS BAD NEWS!

We present the data in a way you can quickly see what is happening.

THIS WEEK WE SAW

Exp=Expectations, Rev=Revision, Prev=Previous

EXCITEMENT GROWING IN GOLD, BITCOIN, & ENERGY (ANTI-CURRRENCY PLAYS)

RECORD QUARTER FOR THE HISTORY BOOKS

Click All Charts to Enlarge

GOLD: Continues pushing higher, now trading at levels we have never closed at! The close here or higher risks creating a lot of frustration as we continue holding (and broke through Thursday) the upper part of the trend channel (dip buyers aren't getting filled).

1 - SITUATIONAL ANALYSIS

Q1 RECAP

• Nearly 40% of all trading days in Q1 were record closing highs for the S&P 500. Most since Q1 2013.
• The S&P 500 has had 4 more up days than down days this year (32 versus 28), and those are the difference between the index being up 4 pct rather than its actual YTD price return of 10 pct. Two of those days were driven by NVDA and TSM. One was the day after the January Fed meeting. The last one was 5 days into the new year, a momentum carryover from 2023.
• The Public is Increasingly Getting into Stocks:
• Retail traders net bought $7.7B this past week, +2.4 standard deviations above the last 12M average. (Chart Right Top)
• FINRA margin debt vs NYSE. (Chart Right Bottom)

Q1 WINNERS v LOSERS

Strong start to 2024 with a clear cyclical tilt. Mag-7, US stocks main drivers so far in 2024, while clean energy has disappointed (Chart Below).

MARKET CONFIDENCE BUILT ON EARNINGS GROWTH , FED PIVOT & NO RECESSION

Rising earnings outlooks is assisting in supporting a strong "Risk-On" sentiment (chart right).

Earnings is supported by increasing GDP growth outlooks and improving Leading Earnings Indicators (below left).

Morgan Stanley analysts (below right) are fairly representative of the Sell Side consensus.

2 - FUNDAMENTAL ANALYSIS

RISING S&P 500 PE RATIOS

The aggregate P/E has increased from 17x in late October to 21x and currently ranks in the 90th percentile since 1985. However, the latest leg of valuation expansion has not been confined to the mega-cap stocks. The equal-weight S&P 500 ("SPW") P/E has also increased from 14x to 17x and now ranks in the 92nd percentile. (Chart Right)

The S&P 500's P/E ratio has moved up to 24.4x from 22.3x at the start of the year. That's 32% higher than the historical median P/E going back to 1988 (18.5x). (Chart Below)

CREDIT MARKETS

Since Credit always leads markets, we are watching it closely. This includes:

1. Inverted yield curves
2. Negative swap spreads
3. Collateral shortages
4. Tightening of credit standards by banks and
5. Reduced commercial lending
6. The High Yield Corporate "JNK" Market. (BELOW)

THE HIGH YIELD CORPORATE "JNK" MARKET

It appears that the Credit Markets are approaching the conclusion of their major corrective consolidation. Appears likely to be complete over the next 90 days.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

3 - TECHNICAL ANALYSIS

THE HEADLINE MARKET: MAGNIFICENT 7

• We have reached the vertical lift part of the parabolic (geometric) lift shown by the dashed red line.
• We have Divergence with momentum (bottom pane).
• Momentum appears to be rolling over (bottom pane).

MATASII CROSS: WEEKLY - CONTINUES TO SIGNAL A MAG-7 BUY

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

"CURRENCY" MARKET (Currency, Gold, Black Gold (Oil) & Bitcoin)

CONTROL PACKAGE

There are EIGHT charts we have outlined in prior chart packages that we will continue to watch closely as a "control set".

1. US DOLLAR -DXY - MONTHLY (CHART LINK)
2. US DOLLAR - DXY - DAILY (CHART LINK)
3. GOLD - DAILY (CHART LINK)
4. GOLD cfd's - DAILY (CHART LINK)
5. GOLD - Integrated - Barrick Gold (CHART LINK)
6. OIL - XLE - MONTHLY (CHART LINK)
7. OIL - WTIC - MONTHLY - (CHART LINK)
8. BITCOIN - BTCUSD -WEEKLY (CHART LINK)

INTEGRATED GOLD MINERS

We have a close eye on Gold and the INTEGRATED GOLD MINERS as represented by Barrick Gold. Barrick has broken out of its long term declining overhead resistance trend.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

US EQUITY MARKETS

CONTROL PACKAGE

There have FIVE charts we have outlined in prior chart packages that we will continue to watch closely as a "control set".

1. The S&P 500 (CHART LINK)
2. The DJIA (CHART LINK)
3. The Russell 2000 through the IWM ETF (CHART LINK),
4. The MAGNIFICENT SEVEN (CHART ABOVE WITH MATASII CROSS - LINK)
5. Nvidia (NVDA) (CHART LINK)

S&P 500 CFD

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

S&P 500 - Daily - Our Though Experiment

Our Though Experiment, which we have discussed previously, suggests we have put in a near term top (or very close to it) and will now consolidate before possibly completing one final small impulse higher or put in a 1-2 Wave of a much higher degree.

NOTE: To reiterate what I previously wrote - "the black labeled activity shown below, between now and July, looks like a "Killing Field" where the algos take Day Traders, "Dip Buyers", "Gamma Guys" and FOMO's all out on stretchers!"

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

STOCK MONITOR: What We Spotted

BOND MARKET

CONTROL PACKAGE

There have FIVE charts we have outlined in prior chart packages that we will continue to watch closely as a "control set".

1. The 10Y TREASURY NOTE YIELD - TNX - HOURLY (CHART LINK)
2. The 10Y TREASURY NOTE YIELD - TNX - DAILY (CHART LINK)
3. The 10Y TREASURY NOTE YIELD - TNX - WEEKLY (CHART LINK)
4. The 30Y TREASURY BOND YIELD - TNX - WEEKLY (CHART LINK)
5. REAL RATES (CHART LINK)
6. FISHER'S EQUATION = 10Y Yield = 10Y INFLATION BE% +REAL % = 2.332% + 1.9037% = 4.235%

As rate-cut expectations fell from 6 this year to 3, Treasury yields rose... non-stop... all week with the belly of the curve underperforming (5Y yields up 28bps on the week). Yields all ended back up near their year-to-date highs.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

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THE REGULATORY STATE

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