Follow FREE Research at MATASII.com

PUBLIC EDITION

Any Problems? Notify:  lcmgroupe2@comcast.net

RESEARCH MAILING -- CHANGES / SIGNUP

View Newsletter in Browser (To Archive or Print)

Gordon T Long Research exclusively distributed at MATASII.com

Subscribe to Gordon T Long Research - $35 / Month - LINK

Complete MATASII.com Offerings - $55/Month - LINK

SEND YOUR INSIGHTFUL COMMENTS - WE READ THEM ALL - lcmgroupe2@comcast.net

WHAT YOU NEED TO KNOW!

DISINFLATION IS OVER - INFLATION IS NOT

A diffusion index from TS Lombard illustrates that disinflation (decline in the rate of price rises) is over. The chart to the right shows the proportion of inflation components whose three-month rolling average is above their 12-month rolling average, an indicator of how many are trending upward.

The figure now stands at 50% , which is unremarkable, but it’s doubled since the beginning of the year. That’s hard to square with any notion that progress is still being made towards a 2% inflation target.

RESEARCH

1- WHY DOES TRUMP WANT TO BE THE CRYPTO PRESIDENT?

TARIFFS mean TRADE WARS.

TRADE WARS are CURRENCY WARS!

CRYPTO is CURRENCY.

• The Coming American Funding Renaissance
• Private Equity, M&A and Cryptocurrencies
• An American Investment Magnet

2- HOW TRUMP MUST IMMEDIATELY REALLY TAME INFLATION - Wave 2 Is Coming!

• THE ARGENTINIAN PROOF:

1. Stop The Debt Creation Machine
2. Stop Short Term T-Bill Money Creation
3. Historic Torching of Regulations

DEVELOPMENTS TO WATCH



FOREIGN DIRECT INVESTMENT HAS BEEN EVERYTHING TO CHINA!



THE US IS NEARLY 70% CONSUMPTION ECONOMY

CONTRASTED TO

CHINA IS A 44% CAPITAL FORMATION ECONOMY.

• China's foreign direct investment has turned negative for the first time on record.
• Capital flight from China has become relentless as foreign companies have pulled even more money from China in the last quarter.
• This is a clear sign that some investors are still pessimistic, even after Beijing has rolled out stimulus measures aimed at stabilizing growth.

THE TEN REASONS M&A WILL NOW BEGIN RETURNING:

1. A Material Rebound
2. Both Cyclical and Structural
3. More Fuel to the M&A Fire
4. Animal Spirit on the rise
5. Strategic Buyers
6. Solid Credit Fundamentals
7. The Goldman Sachs M&A Basket
8. A Public/Private Tech Valuation Pap 
9. Get ready for 'The Sponsors Spark'
10. Fundamentals are Supportive

GLOBAL ECONOMIC REPORTING

CONSUMER PRICE INDEX - CPI

• Inflation is still primarily about Services.
• Disinflation has stalled in the core goods sector.
• Overall inflation is still above 3%, which is a problem!

PRODUCER PRICE INDEX - PPI

• Overall, the US PPI data was a touch hotter than expected on the Y/Y prints with upward revisions on the prior report.
• Headline M/M rose by 0.2%, in line with expectations while the prior was revised up to 0.1% from 0.0%.
• The Core numbers rose Y/Y by 3.1%, above the 3.0% forecast and up from the prior 2.9%, which was revised up from 2.8%.
• The super core metrics, ex food, energy and trade, rose 0.3% M/M, up from the 0.1% prior, with the Y/Y rising 3.5%, up from the prior 3.3%, which was revised up from 3.2%.

RETAIL SALES

• The disappointments were likely driven by major upward revisions to the prior month. This is highly unusual - A big outlier of an adjustment for an October?
• It's almost as if they wanted to make the numbers look bad on purpose?

In this week's "Current Market Perspectives", we focus on the signals that Sentiment, Fundamentals and various market Segments (Credit, Bond and Equity) are currently giving us.

=========

1-WHY DOES TRUMP WANT TO BE THE CRYPTO PRESIDENT?

The conventional thinking is that much of the current rally in Bitcoin is fuelled by speculation about potential pro-crypto regulatory changes in the United States.

Bitcoin's value increased by 8 per cent in a day after the election, amid reports that Trump may appoint crypto-friendly figures to key regulatory roles.

We believe there is much more going on than that, which we will get into in a moment.

We have been watching closely the correlation between Trump's probability of winning the US Presidency as well as the corresponding rise in the Dollar, Gold and Bitcoin.

BITCOIN: The

OUR OCT 17th MID-WEEK REPORT

(CHART RIGHT)

WE ASKED AT 66,970 IF YOU 

"GOT BITCOIN"?

We spelled out why in point #2 & #4 below the chart to the right, as we were watching the PredictIt and Polymarket bets quite closely, (which we also reported in our newsletter).

We surged on the red sweep to Bitcoin being the biggest winner with a massive surge to almost $93,500 Wednesday before some late-day profit-taking.

CHART BELOW:

You will note that Bitcoin and DXY are moving in PERFECT TANDEM - both higher! Therefore ....

THIS IS NOT ABOUT DOLLAR DEBASEMENT!

As the chart to the right stunningly shows, since Trump's Red sweep, US Sovereign Credit Default Swaps (CDS) have plummeted! It now appears the market was using short-dated USA sovereign CDS to hedge the possibility of the Democrats and Kamala/ Watz winning! What does this tell us?

The market smells a

Trump Trade Strategy!

Trump's Trade Strategy is about using Tariffs to incent (or more apply stated - FORCE) jobs and factories back into the US!

Trump's economic advisor Scott Bessent, (who is being considered for Treasury Secretary), is already working on this. 

Bessent favors a ‘T+X’ Tariff Plan that gives global firms, say, two years to build factories in the US to avoid sanctions, reducing most of their direct inflation impact, but getting all the Capex, supply-side and trade-deficit narrowing gains.

Leading the pack, Samsung (think South Korea Electronics & Semiconductor) immediately said this is what they plan to do. That might mean new economic models are needed for US tariffs - if economists want to model the world as it is, rather than as they (or their models) want it to be.  

Trump Tariffs will initially likely still elevate prices, but if successful in fostering a "reshoring" renaissance it may be the only way out of the US Economic death spiral.

It is no doubt a calculated gamble, but maybe the only one left on the table for a country clearly headed down a road towards a dismal and inevitable debt crisis?

CHART RIGHT: Bitcoin is nearing a record high in terms of gold. 

WHAT DOES THIS MEAN FOR CRYPTO & BITCOIN?

If you have had involvement in International Investing you are well aware how difficult, complicated and expensive it can be to move through the labyrinth of government hurdles!

As someone who as exposure to this it is as though you are a "Money Launderer" until YOU can prove you are not! it is an endless bureaucrat labyrinth of forms & paid "navigators"! Trump is well aware of the gory details from his international hotel and other business.

Bitcoin as an example of Cryptocurrencies operates out of the purview of many of the artificial government complexities. It uniquely offers two key advantages:

1. A Store of Value
2. A Payment System

This allows individuals, companies and financial institutions around the world to easily make payment (invest) in any country (the US) with the click of a mouse. It doesn't necessarily involve using exchange traded funds with their fees and use of options, but to invest directly into private equity plays - plays like M&A, On-Shoring and Private Equity Funds.

THE AMERICAN FUNDING RENAISSANCE

Bitcoin can facilitate the global gathering of funds to fund American investment! Investment required for Trump to use Tariffs to force manufacturing back to America! To reverse the 54,000 mass migration of manufacturing facilities from America when China joined the WTO in 2002.

Is this in someway why Trump says he wants to be the "Crypto President"? This is part of it, but there is more to it than that!

PRIVATE EQUITY, M&A & CRYPTOCURRENCIES

TARIFFS mean TRADE WARS.

TRADE WARS are CURRENCY WARS!

CRYPTO is CURRENCY.

WHY DOES TRUMP WANT TO BE "THE CRYPTO PRESIDENT" & THE US THE "CRYPTO CAPITAL"?

During the presidential campaign Trump pledged to make the "US the Crypto Capital" and himself the Crypto President.

So what was his motivation and thinking in making these statements?

AN AMERICAN INVESTMENT MAGNET

1- TRUMP WANTS TO REMOVE SEC CHAIR GARY GENSLER & CRYPTO REGULATORY OVERREACH

• The SEC Chairman Gary Gensler’s term ends in June 2026. Trump promised crypto users that he intended to fire Gensler “on day one” if elected, marking a potentially different direction the commission could take on crypto enforcement.
• 18 US states have filed a lawsuit against the Securities and Exchange Commission (SEC) and Chairman Gary Gensler, accusing the financial regulator of “gross government overreach” against the nascent crypto industry.

"The Securities and Exchange Commission (SEC) has not respected this allocation of authority.

Instead, without Congressional authorization, the SEC has sought to unilaterally wrest regulatory authority away from the States through an ongoing series of enforcement actions."

• According to the Blockchain Association, the Securities and Exchange Commission's various legal actions against the crypto industry cost crypto firms a collective $426 million bill to fight against the regulatory agency's enforcement actions and lack of clarity on a coherent digital asset policy.

2- TRUMP WANTS ACCESS TO $1T OF DIGITAL ASSETS

• There is an exploding global Digital Asset base now already over $1T that Trump wants ready access to.
• A central issue is whether Cryptocurrencies are Securities or Commodities. They are each controlled, regulated and taxed in completely different ways. The SEC has no jurisdiction over Commodities - only Securities.

3- TRUMP WANTS AN ALTERNATIVE RESERVE CURRENCY - THE PENNSYLVANIA MODEL

• Trump is being pressured to announce a strategic Bitcoin/Ethereum reserve and allocate a certain sizable number to it (some propose 2mm BTC/10mm ETH). During the Bitcoin 2024 Conference in Nashville, many expected Trump to announce this, but he held back.
•  Fox Business reported that Trump’s imminent return to the White House has prompted Pennsylvania lawmakers to introduce legislation that would enable the state’s treasury to hold the world’s largest digital asset on its balance sheet as part of a broader movement to recognize bitcoin as a store of value.
• The new bill, called the Pennsylvania Bitcoin Strategic Reserve Act, introduced in the Pennsylvania House of Representatives on Thursday would allow the state’s treasury to allocate up to 10% of its roughly $7 billion state funds into bitcoin as a way to help combat inflation and diversify its investments beyond traditional assets like bonds and cash reserves.
• The Pennsylvania Bitcoin Strategic Reserve Act is seen as a step toward securing the state’s financial future. By integrating Bitcoin into our reserves, they see this as protecting Pennsylvania from inflation’s relentless impact and positioning the state as a leader in financial resilience and innovation.
• The legislation comes as pro-crypto senators say they're hoping to push through a bitcoin reserve bill on the national level during the first 100 days of Trump's presidency.
• The strategic reserve act is expected to serve as a model for other states looking to integrate digital assets into their investment portfolios and says that SAF is currently in talks with 10 other states to implement similar legislation.

It appears an increasingly likely announcement by the US that it will formally buy crypto for the US Treasury has prompted speculation that other nations are doing the same in hopes of acquiring the scarce asset before Uncle Sam swoops in and buys it up.

WHY?

• FX Reserve alternative
• Inflation Protection (A Store of Value)
• Protection from DeDollarization

4- TO TRUMP, TARIFFS MEAN TRADE WARS; TRADE WARS MEAN CURRENCY WARS

WHY?

• Circumvent Potential Global Capital Controls that come with Currency and Trade Wars

5- TRUMP WANTS TO INCREASE US TREASURY T-BILL DEMAND

• Stablecoins are cryptocurrencies whose value is pegged, or tied, to that of another currency, commodity, or financial instrument. They strive to provide an alternative to the high volatility of popular cryptocurrencies, making them potentially more suitable for common transactions.
• Stablecoin issuers primarily generate revenue through several mechanisms: Interest Income - By holding reserves in interest-bearing assets, issuers like Circle and Tether earn significant income, especially when these reserves are invested in government bonds or other secure assets. THEY CREATE DEMAND FOR US T-BILLS.
• Top Stablecoins:
• Tether (USDT) holds $84.548 billion in U.S. government debt,
• Circle sourced from BlackRock, shows $11.127 billion in treasury bill holdings. 
• USD Coin (USDC)
• Dai (DAI)
• First Digital USD (FDUSD)
• Ethena USDe (USDE)
• PayPal USD (PYUSD)
• TrueUSD (TUSD)
• Frax (FRAX)

6- TRUMP WANTS TO STOP US MONEY BEING ONLY "LENT INTO EXISTENCE"

• The US Reserve System was conceived by Bankers where money must be lent into existence.
• Money Center Banks must back stop all US Treasury Auctions.
• US Banking Regulations require the holding of US Treasuries for Capital Adequacy regulations.
• Crypto completely circumvents this need on a global basis.

7- TRUMP WANT THE US TO EXPLODE Defi INNOVATION & STRATEGIC ADVANTAGE

• Trump sees this as just the beginning of Global DeFi Innovation for International Flow of Funds which he wants the US to be the leader in.
• Trump sees this as a way of separating US Debt and lending rates from Capital Funding Flows.

THE COMING AMERICAN FUNDING RENAISSANCE

2- HOW TRUMP MUST IMMEDIATELY TAME INFLATION - Wave 2 Is Coming!

I have written in prior newsletters and videos that a second wave of inflation is coming (chart right) and the fight is a long way from being defeated.

This is contrary to the media, government and many of the Wall Street Gurus. It is 'burning and raging in the dying light' of the Biden/Harris days and is not going gently into that dark of night!

This week's CPI and PPI confirms I am right, (see CPI and PPI in this newsletters Global Economic Indicators section), as did Fed Chairman Jerome Powell who was forced to concede Thursday:

The Fed is in "no hurry" to cut rates... and inflation's on a "bumpy path and if the data let's us go slower, it seems like the right thing to do".

Powell's remarks sent rate-cut expectations notably lower - December rate cuts are now less than 50-50! Interestingly, minutes before Powell spoke, JPMorgan CEO Jamie Dimon dropped some tape-bombs of reality:

• DIMON: THINK THE CHANCE OF SOFT LANDING LESS THAN OTHERS THINK.
• DIMON: "NOT SO OPTIMISTIC" THAT INFLATION WILL GO AWAY QUICKLY.
• DIMON: GROWTH IS BEST POLICY TO FIX DEFICIT PROBLEM.
• DIMON: TRUMP INHERITING INFLATION THAT MAY NOT GO AWAY QUICKLY.

Does the chart (above right), showing initial jobless claims (inverted) tumbling to six-month lows and inflation surprise data soaring, support any kind of rate-cutting cycle to you?? We are being played and kept from the hard realities? As Jack Nicholson in a "Few Good Men" so aptly put it: "You Can't Handle the Truth!"

HERE IS THE TRUTH:

The only way out of this inflation mess or at least minimizing it is to follow what Javier Milei did it in Argentina! He took the problem of massive hyperinflation and converted it to low inflation in a year. His is a case study. 

The answer is: 

1. End debt creation by dramatic spending cuts
2. Curb the actions of the central bank, … and 
3. Inspire economic growth through deregulation and agency elimination.  

That’s three distinct steps. Let’s consider each.  

STEP 1 - STOP THE DEBT CREATION MACHINE

The end of debt creation is essential. 

Every time Congress authorizes more spending than is in the bank, the Treasury has to float debt to make it happen. That is the statutory obligation. What that means is that Congress needs to pass a balanced budget, ideally right away.  

That comes down to the commission created by Elon Musk: the Department of Government Efficiency or DOGE. It is not an official department. It works as an outside advisory team. That’s excellent. They will likely push for a “Twitter-style” solution of firing 4 in 5 government workers to reduce costs directly.  

That’s a start, but it is not enough? There also must be sweeping elimination of agencies, each of which can save tens of billions and possibly a trillion or more in total. That needs to happen immediately. It can happen through executive order or through legislation. One way or another, the spending in excess of revenue has to stop.  

Trump is not famous for being a budget cutter. He cared nothing for the topic in his first term. He was vulnerable after March 2020 to believing that multiple trillions could be spent without consequence to keep the economy floating during lockdowns. That was an error. He will never admit to it.  

This time, however, he has a strong reason to dramatically cut the federal budget. This much he can know for sure: every dime cut from the federal budget is likely to end the flow of money to people who are working to undermine his administration. In saying that, I’m in no way promoting the politics of revenge, but rather drawing attention to political realities. Balancing the budget has the side benefit of defunding the opposition.  

STEP 2 - STOP SHORT TERM T-BILL MONEY CREATION

If the Treasury stops the T-bill tsunami, the Fed will not be called upon to sponge up the excess with money creation. 

You can look at the charts over the last year and see how the Biden/Harris administration was spending and working with the Fed to promote more economic illusion going into the election. That was the whole point of the rate cuts. That really must come to an end.  

There is a danger that comes with taking away the punch bowl. It could mean a panic by the bond market and a push by the media to announce the Trump Recession.  

This is why it is imperative that the Trump team move quickly to explain that right now. The economy is in much worse shape than has been advertised. The pit is very deep and it would be good to dial back expectations of a quick recovery.  

We don’t need a falling rate of money growth. We just need stability now. That’s not going to stop the wave of price increases for the next year, but it can stop it from getting worse and end it completely by 2026. There is at this point zero need to worry about “deflation,” despite what the financial press will be screaming. Quite frankly, deflation at this point would be a gift to American consumers in any case. 

STEP 3 - HISTORIC TORCHING OF REGULATIONS

Trump needs to fire up the wealth-creation engine of the American economy through dramatic sweeping historic levels of regulation torching plus the shock and awe of full agency elimination, same as in Argentina. 

The Trump team needs a list of 100 agencies to eliminate immediately, but that should just be a start. Another 100 should be on the chopping block. Without all the regulatory clogging that they cause, investment will soar.  

Tax cuts – income and capital – will assist here too. The crucial point is the focus on boosting supply and jobs as a way of outrunning inflationary forces. Here again, the financial press will scream about the economy “overheating”, but that metaphor is worn out. The effect of economic growth on inflation is exactly the opposite. Economic growth can bury the effects of price increases.  

There is not a lot of time, and it is a bargain that the Trump administration will surely lose if it does not act decisively and quickly. The debt creation and money creation must end and the economic growth through agency elimination and deregulation must become the top priority. All of this has the added advantage of making Trump more popular with the people who elected him.  

There is no incompatibility between political success and economic rationality. In this case, the incoming Trump administration is very fortunate: they go together.   

DEVELOPMENTS TO WATCH

FOREIGN DIRECT INVESTMENT HAS BEEN EVERYTHING TO CHINA!



THE US IS NEARLY 70% CONSUMPTION ECONOMY

CONTRASTED TO

CHINA IS A 44% CAPITAL FORMATION ECONOMY.

China's foreign direct investment has turned negative for the first time on record. Capital flight from China has become relentless as foreign companies have pulled even more money from China in the last quarter. This is a clear sign that some investors are still pessimistic, even after Beijing has rolled out stimulus measures aimed at stabilizing growth.

• China’s direct investment liabilities in its balance of payments dropped $8.1 billion in the third quarter, according to data from the State Administration of Foreign Exchange released late Friday. The gauge, which measures foreign direct investment in China, was down almost $13 billion for the first nine months of the year.
• Foreign investment into China has slumped in the past three years after hitting a record in 2021, a casualty of geopolitical tensions, pessimism about the world’s second-largest economy and stronger competition from Chinese domestic firms in industries such as cars. 
• Should the decline continue for the rest of the year, it would be the first annual net outflow in FDI since at least 1990, when comparable data begins.
• According to Bloomberg, companies that have pulled back some China operations this year include:
• Nissan Motor
• Volkswagen
• Konica Minolta
• Nippon Steel - who said in July it was exiting a joint venture in China
• IBM - who is shutting down a hardware research team in the country, a decision affecting about 1,000 employees.
• The prospect of an expanded trade war and deteriorating relations with Beijing during US President-elect Donald Trump’s second term may further weigh on investment.
• “Geopolitical tension” is the topmost concern for members of the American Chamber of Commerce in Shanghai.

“It makes it difficult to plan big investments, but on the contrary, we see a lot of members making small and medium-sized investment. It’s a much more surgical investment environment”.

Allan Gabor, Chair American Chamber of Commerce in Shanghai

• Still, government efforts, in late September to stimulate the economy, has already benefited one group of foreign investors, with the value of stocks held by foreigners jumping more than 26% from August, according to separate data from the central bank. 
• The Chinese benchmark stock index gained almost 21% in September after the start of a coordinated stimulus effort, although it has since given up some of those gains. 
• By contrast, outbound investment from China has been rising sharply. In the third quarter, Chinese firms increased their overseas assets by about $34 billion, according to the preliminary data from SAFE.  That took outflows so far this year to $143 billion, the third-highest total on record for the period.
• Chinese companies such as BYD Co. have been rapidly increasing their overseas footprint to secure raw materials and build up production capacity in foreign markets. That trend is likely to continue and expand, as more countries put tariffs on some Chinese exports such as steel and the US threatens to impose punitive tariffs on all Chinese goods.

10 REASONS M&A WILL NOW BEGIN RETURNING

There are many reasons to believe that there will be a significant upswing in M&A after the Red Wave sweep. Here are just 10:

1- A Material Rebound

Morgan Stanley: "With YTD announcements +25% versus 2023, cyclical and structural factors support an even larger +50% increase in 2025, driven by the return of sponsors and large cap deals. The US election is a further catalyst."

2- Both Cyclical and Structural

Morgan Stanley: "We continue to see a cyclical and structural rebound of M&A: Adjusted for the size of the economy, 2023 saw the lowest level of global M&A in at least 30 years. With announcements in 2024 trending +25% y/y and accelerating, we forecast an even larger ~50% pickup in 2025. We continue to expect a major, multiyear rebound in activity, aided by record-high stock market levels, an economic soft landing, lower interest rates, open capital markets, greater corporate confidence, and growing pressure on private asset managers to both deploy funds and harvest investments. The regional details also matter; M&A in Europe is +49% YoY."

3- More Fuel to the M&A Fire

Morgan Stanley: "For the first time in decades, central banks are cutting rates because inflation is coming down (rather than growth rolling over). We view this as a major positive for activity, as lower debt financing costs in a soft-landing environment should incentivize sponsors to deploy dry powder and corporates to deploy excess capital. The conclusion of the US election is a further positive catalyst."

4- Animal Spirit on the rise

The Morgan Stanley U.S. Equity Strategists’ composite index of U.S. business sentiment indicators suggests a more optimistic outlook — i.e., a rise in “animal spirits.

5- Strategic Buyers

Strategic buyers remain the overwhelming majority in exits for VC & PE backed companies.

6- Solid Credit Fundamentals

BoA: Based on preliminary data for a median IG issuer, BofA are tracking stable leverage, lower coverage, higher debt growth, and stronger EBITDA margins in Q3, while the average cost of debt has stopped increasing.

7- The Goldman Sachs M&A Basket

GOLDMAN SACHS: Goldman's analysts' List of Companies believe have at least 15% probability of M&A activity.

8- A Public/Private Tech Valuation Pap 

A public/private tech valuation gap has appeared as the Nasdaq100 re-rated post the 2023 trough.

9- Get Ready for 'The Sponsors Spark'

MORGAN STANLEY: "LPs are pressuring GPs to turn over funds and aging dry powder is catalyzing an urge for sponsors to transact to support management fees. Large publicly traded private equity firms are already seeing a large pickup in investment activity, with pipelines picking up."

10- Fundamentals are Supportive

GOLDMAN SACHS: S&P 500 3Q profits grew 8% year/year, better than the expected 3% growth. Goldman Sachs forecast S&P 500 EPS will grow by 11% to $268 in 2025 and by 7% to $288 in 2026.

GLOBAL ECONOMIC INDICATORS:

What This Week's Key Global Economic Releases Tell Us

US

CONSUMER PRICE INDEX - CPI

• US CPI YY (Oct) 2.6% vs. Exp. 2.6% (Prev. 2.4%)
• US Core CPI YY (Oct) 3.3% vs. Exp. 3.3% (Prev. 3.3%)

Disinflation has stalled in the core goods sector...

“October’s CPI report contains no information that would discourage the FOMC from cutting rates again at the December meeting.

Still, we see risks that the key outstanding information for the Fed’s preferred core PCE deflator - medical and financial services in the Producer Price Index, due Nov. 14 - may run hot in October.

That could lead to fears that underlying inflation is stuck at a high-2% level, above the Fed’s target.”

INFLATION IS STILL PRIMARILY ABOUT SERVICES

Energy and goods inflation is now slightly negative, food prices aren’t rising by much, but services — where salaries tend to be a particularly strong driver of prices — remain problematic.

That leaves overall inflation above 3%, and still too high for comfort.

Click to Expand Chart

PRODUCER PRICE INDEX - PPI

• US PPI exFood/Energy MM (Oct) 0.3% vs. Exp. 0.3% (Prev. 0.2%)
• US PPI Final Demand MM (Oct) 0.2% vs. Exp. 0.2% (Rev. 0.1%)
• US PPI exFood/Energy YY (Oct) 3.1% vs. Exp. 3.0% (Prev. 2.8%, Rev. 2.9%)
• US PPI Final Demand YY (Oct) 2.4% vs. Exp. 2.3% (Prev. 1.8%, Rev. 1.9%)

• Overall, the US PPI data was a touch hotter than expected on the Y/Y prints with upward revisions on the prior report.
• Headline M/M rose by 0.2%, in line with expectations, while the prior was revised up to 0.1% from 0.0%.
• The Y/Y headline rose by 2.4%, above the 2.3% forecast, with the September data being revised up to 1.9% from 1.8%.
• The Core numbers rose by 0.3%, in line with forecast but up from the prior 0.2%, while the Y/Y rose by 3.1%, above the 3.0% forecast and up from the prior 2.9%, which was revised up from 2.8%.
• The super core metrics, ex food, energy and trade, rose 0.3% M/M, up from the 0.1% prior, with the Y/Y rising 3.5%, up from the prior 3.3%, which was revised up from 3.2%.
• The focus of this report will be how the PPI and CPI translate into the PCE report.
• UBS acknowledged that some of the PCE components within the PPI report are hot.
• Pantheon Macroeconomics highlight that PPI portfolio management prices rose by 3.5%, while domestic air transportation prices rose by 8.8%, both larger than anticipated.
• Therefore, Pantheon Macroeconomics are revising their forecast for the increase in core PCE to 0.30% from 0.26%.
• Money markets are still pricing in an 80% probability of a 25bps rate cut in December, albeit it is down marginally from the 85% in the prior session.

RETAIL SALES

Hot Headline, Cool Core, Ugly Control Group - take your pick, dove or hawk???

• The headline retail sales print beat expectations rising 0.4% (+0.3% exp).
• Core retail sales (ex-autos and gas) disappointed, rising just 0.1% (+0.3% exp).
• But the Control Group - which is used for GDP calculations - tumbled 0.1% M-o-M (+0.3% exp).

The disappointments were likely driven by major upward revisions to the prior month. This is highly unusual - A big outlier of an adjustment for an October - it's almost as if they wanted to make the numbers look bad on purpose?

• Headline September revised up from +0.4% MoM to +0.8% MoM.
• Core revised up from +0.7% to +1.2% MoM.
• Control Group revised up from +0.7% MoM to +1.2% MoM.
• The driver of the headline beat was all cars and food...
• Core retail sales growth slowed on a Y-o-Y basis...
• On a non-seasonally-adjusted basis, retail sales jumped 6.8% M-o-M...
• The Control Group data is 'noisy' - September was revised up to its strongest M-o-M jump since Jan 2023. (But this was the second monthly decline in nominal retail sales in three months).

GLOBAL

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, Prev. =Previous

PORTFOLIOS ADJUST FOR TRUMP TRADE

NEAR-TERM CORRECTIVE / CONSOLIDATION & SUPPORT TESTS UNDERWAY

NASDAQ has almost retraced the entire Trump bump. Nasdaq saw its worst week in the last ten weeks. We are breaking below the 21 day, approaching the 50 day and the positive trend line. 20400 (futures) is the make or break area.

S&P 500 has so far reversed perfectly on that upper trend line. We are hitting the first supports as of writing, the 5900 area, give or take. This is where the 21 day comes in as well as being half the big post Trump candle. 50 day is still way lower, down at the lower part of the trend channel.

1- SITUATIONAL ANALYSIS

SENTIMENT CAN BE SUMMARIZED AS:

TRUMP WIN (No Corporate Tax Increases + No Unearned Capital Gains Tax + Reduced Regulations)

+

CORPORATE BUYBACKS (WINDOWS OPENS with $5b per day of Open Orders in Q4)

+

FALLING POST ELECTION VOLATILITY (REDUCED COST OF RISK) & SKEW CONVEXITY

+

BIGGEST POST GAP OPEN IN MANY INVESTORS' LIFE TIME

=

FOMO (Fear Of Missing Out)

POST ELECTION PORTFOLIO ADJUSTMENTS

Sectors that will benefit from a Trump administration are likely to be in the following areas:

1. Oil and natural gas drilling, production, and refining: This sector will benefit from Trump’s “drill, baby, drill” policies, including increased leasing on Federal lands, increased offshore drilling, replenishment of the Strategic Petroleum Reserve, new pipelines, and expanded refinery capacity.
2. Mining (gold, silver, copper, lithium): Industrial metals will be in increased demand related to the expansion of U.S. manufacturing. Precious metals will be in demand as a hedge against geopolitical uncertainty and as a non-digital store of wealth.
3. Defense and National Security:  This will especially benefit defense and intelligence contractors with extensive R&D programs. The U.S. does not need more obsolete weapons; we need newer and more sophisticated weapons to keep up with the high-tech systems that Russia is using. AI will be a valuable tool in intelligence analysis, especially from open sources (OSINT).
4. Automobile manufacturing ;  Foreign manufacturers will face huge tariffs. This will include Mexican manufacturers that are fronts for China. The United States-Mexico-Canada Agreement (USMCA) will be modified as needed to accommodate the tariffs.
5. Cryptocurrency plays ;  Trump will ease SEC and other regulatory constraints on cryptocurrency mining, distribution and use.
6. Banking and finance:  As the economy grows, banks profit as intermediaries without the need for high leverage and high risk.
7. Trucking and airlines: These sectors will benefit from lower prices for refined products such as diesel and aviation fuel (basically kerosene).

Sectors that will underperform in a new Trump administration:

• Big Pharma
• Big Agriculture - under the motto of Make America Healthy Again. Robert F. Kennedy, Jr. will lead this effort.
• Elon Musk will also lead an effort at government efficiency, which will:
• Hurt the profits of government contractors in sectors such as:
• Health Care
• Education and
• Green Energy (including EVs and windmill manufacturers).
• DEI initiatives will wither and die.
• Portfolios that invest heavily in China or use ESG metrics will underperform.

SENTIMENT

FEAR-GREED INDEX

Not even extreme greed despite the melt up.

ASSET MANAGERS & HEDGE FUNDS "ALL IN!"

The longer term view shows the crowd is long.

WEEKLY ETF FLOWS (IWM+XLF+HYG)

Recent market behavior indicates a substantial increase in investor optimism, evidenced by notable shifts towards riskier assets including small caps, financials, and junk bonds.

S&P 500 WEEKLY % CHANGES

The S&P 500 posted its best weekly gain of 2024 and its third-strongest Presidential Election week since 1928, rising 4.7% as investors cheered Donald Trump’s victory and the prospect of business-friendly policies.

S&P 500 & COMBINATION OF FORWARD PE,VIX & BULLISH SENTIMENT

Bullish sentiment among investors in the U.S. stock market only continues to soar, reaching new all-time highs.

2- FUNDAMENTALS

HISTORIC S&P 500 PERFORMANCE

The S&P 500 is currently posting its strongest performance of the 21st century, with historical trends suggesting that this momentum MAY continue to drive further gains.

.... especially with Corporate Buyback authorizations so strong between now and the end of the year ($5B/day).

CORPORATE BUYBACKS: The strongest 2 month period of the year for the biggest buyer. The buyback "delta" is huge. Open orders for Q4 are $5B/day.

HOWEVER, JUST A REMINDER - Valuations are extremely stretched!

VALUATION - FORWARD 12-MONTH PE FOR S&P 500

While U.S. equities are trading at a premium to global stocks, this situation reflects both the strength of the U.S. market and economy. But there are potential risks associated with high valuations and market concentration.

VALUATION - S&P 500 NTM P/E

The increasing term premium warrants close attention due to its substantial effects on equity valuations and overall market behavior.

VALUATIONS - REAL S&P 500 INDEX WITH RECESSIONS & S&P 500 SHILLER CAPE RATO

While valuations alone do not guarantee market movements, current elevated valuations of the S&P 500 are a point of concern that investors should be aware of.

NOTE

NEW IMAGE CHANGES ARE LABELED WITH A BLUE TRIPLE ***STAR***

OLD IMAGE CHANGES ARE LABELED WITH A RED TRIPLE ***STAR***

OLD IMAGES REFLECT MINIMAL CHANGE (Wasted Time!) but Narrative is ALWAYS updated.

ALL IMAGES UPDATED WEEKLY (EITHER THE MID-WEEK OR WEEKEND REPORTS)

REMEMBER: SIMPLY CLICK YOUR LIVE SUBSCRIBER LINK TO SEE THE LATEST CHART.

3- TECHNICAL ANALYSIS.

NOTE: A SIGNIFICANT number of the charts below followed similar post Trump victory patterns.

1- Surged (often with a Gap Open) to new price highs,

2- Were stopped by the MATASII Momentum Indicator reaching a major overhead resistance trend line.

The fact they all reached major overhead Momentum Indicator resistance on a gap open is a tell.

3- Expect a minor retracement - corrective / consolidation before seeing major further new highs.

CHART BELOW: 

HE 2016 RED SWEEP COMPARISON – It is hard to trade against the current momentum, but a lot of these red sweep trades peaked in early December. This may be a slight modification to the historical post election seasonal trends?

***THE MATASII BANK INDEX***

• The MATASII Bank Index exploded higher on the Trump win and continued higher before leveling off.
• In the bottom panel the MATASII Proprietary Momentum Indicators' upper resistance level (black dashed trend line) halted further upside movement - at least temporarily - as momentum fell back towards support at the dashed orange trend line..

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

***THE MATASII FINANCIAL INDEX***

• The MATASII Financial Index exploded higher on the Trump win. The Index held its initial movement on Thursday and Friday, but moved higher this week before plateauing.
• In the bottom panel the MATASII Proprietary Momentum Indicator has halted further upward movement by the upper overhead resistance level (dashed black line).
• Both the Banking and Financial Index mirrored each other on the Trump win.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

***IWM - LONG iShare Russell 2000 ETF - Daily***

• The IWM - LONG iShare Russell 2000 ETF has fallen back towards filling the Open Gap.
• The IWM found initial support at the Proprietary Momentum Indicator 's descending orange dotted trendline.

(lower panel)

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

***NVIDIA - NVDA - DAILY***

CHART RIGHT: The Phase 2 trading of Nvidia will mature as earnings growth, rather than valuation expansion, driving prices higher.

Today's Note:

• NVDA fell this week to fill the Trump win gap open and additionally find initial support its prior June 20th high.
• NVDA also found support at its MATASII Momentum Indicator (lower panel) shown by the dotted black trend line.

Longer Term Note:

• At some point, the major unfilled gaps (at much lower levels) must be filled. We anticipate a likely test of the 200 DMA in Q4 2024 or Q1 2025.
• NVDA therefore may no longer become a Short to Intermediate Long Term hold, but rather a position trading stock, as other competitors enter the space, force margins and the earnings growth rate contracts. 

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

CHART RIGHT: The MAG breaking up to new ATHs

This is the number one trend to watch, and make sure to consider buying every dip below the 100 day moving average.

CONTROL PACKAGE

1. APPLE - AAPL - DAILY (CHART LINK)
2. AMAZON - AMZN - DAILY (CHART LINK)
3. META - META - DAILY (CHART LINK)
4. GOOGLE - GOOG - DAILY (CHART LINK)
5. NVIDIA - NVDA - DAILY (CHART LINK)
6. MICROSOFT - MSFT - DAILY (CHART LINK)
7. TESLA - TSLA - DAILY (CHART LINK)

AS GOES NVDA SO GOES THE MAG-7!

AS GOES THE MAG-7 SO GOES THE MARKET!

***MAGNIFICENT 7***

CHART RIGHT: Earnings for both the Magnificent Seven and the Other 493 stocks in the S&P 500 are projected to slow in the third quarter of 2024, reflecting broader economic uncertainties and reduced consumer demand.

CURRENT DAY'S VIEW:

• The Mag-7 fell this week finding initial support at the mid-point of its long term rising trend channel. (dotted black line)
• Meanwhile the MATASII Proprietary Momentum Indicator (lower pane) has yet to reach overhead resistance at the dotted black trend line and has started to turn down, indicating that further weakness might be expected..

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above: SUBSCRIBER LINK

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

10Y REAL YIELD RATE (TIPS)

Real Rates have broken through its upper trend channel line (shown in the chart to the right - as of close 11/15/24). (LATEST)

CONTROL PACKAGE

There are TEN charts we have outlined in prior chart packages, which we will continue to watch closely as a CURRENT 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. SILVER - DAILY (CHART LINK)
7. OIL - XLE - MONTHLY (CHART LINK)
8. OIL - WTIC - MONTHLY - (CHART LINK)
9. BITCOIN - BTCUSD -WEEKLY (CHART LINK)
10. 10y TIPS - Real Rates - Daily (CHART LINK)

***US DOLLAR - DXY - DAILY***

CHART RIGHT: Moving in Tandem

Rising Treasury Yields and a Rising Dollar are currently the same trades!

MATASII CHART BELOW:

CURRENT DAY'S VIEW -

• The dollar exploded higher last Wednesday (Trump win), hitting 12-month highs at its peak overnight.
• This was the dollar's biggest daily gain since Feb 2023.
• The dollar rallied for the seventh straight week top, its highest since Nov 2022.
• The dollar has continued to rise with the DXY decidedly breaking its overhead black dashed trend line shown on the DXY chart.
• The DXY also closed this week above the overhead resistance (large black dashed trendline), as well as in a decisive manner.

THE BREAKING OF THESE TREND LINES SUGGEST POTENTIAL MAJOR CHANGES ARE UNDERWAY IN THE PERCEPTION OF THE US DOLLAR.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:   SUBSCRIBER LINK

***GOLD***

CHART RIGHT:

Gold is waking up to a "new" world where it simply can't take the dollar strength that the Trump win brought to the party. However, Trump also brings major deficit spending (inflationary).

CHART BELOW:

• GDX has crashed around 20% from recent highs, trading very close to the 200 day moving average.

SPOT GOLD

Gold now trades near a two-month low as investors digest Powell’s remarks and adjust their monetary policy outlook. Lower interest rates are less likely to benefit the precious metal.

CHART BELOW:

• The dollar strength has been just too much for gold to handle and it has been monkey hammered lower. Gold suffered its worst week since June 2021, falling back to two-month lows.
• Gold found support Friday at the 100 DMA.
• A lower MATASII Momentum Indicator support line (dotted black line) has been reached. A decisive break of this level for Gold would be a serious development!

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

***SILVER***

• Silver continues to push lower, finding support at the 100 DMA and Triple Top support levels.
• In the lower panel we see Silver is now near a lower support MATASII Momentum Indicator (orange dotted trendline).

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

US EQUITY MARKETS

CONTROL PACKAGE

CHART RIGHT: We have reached our first level of the Cup & Handle at approximately 5930 on the S&P 500.



There are FIVE charts we have outlined in prior chart packages that we will continue to watch closely as a CURRENT "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***

• The S&P 500 cfd moved to a new high on the Trump victory and rose further on Thursday and Friday last week, putting in a new high at 6011.
• This week's prices have weakened, closing back below 6000 and once again finding support at the 21 DMA.
• The MATASII Proprietary Momentum Indicator (middle panel) offered overhead resistance at a longer term overhead resistance trend line (dotted black line) before falling this week to a lower support trend line.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

***S&P 500 - Daily Our Thought Experiment***

OUR CURRENT ASSESSMENT IS THAT THE INTERMEDIATE TERM IS LIKELY TO LOOK LIKE THE FOLLOWING:

CHART RIGHT: In its base case scenario, Goldman Sachs projects a year-end 2024 price target of 5,600 for the S&P 500 index, supported by robust earnings growth and a stable price-to-earnings ratio.

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

• The S&P 500 surged to new highs last Wednesday and achieved our long held 6000 target by Friday closing at 6003. Friday the S&P 500 closed down at 5871 finding support at the 21 DMA.
• The MATASII Proprietary Momentum Indicator (bottom panel) found support at a rising trend line (dotted orange trendline).

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

STOCK MONITOR:  What We Spotted

BOND MARKET

LOWER BOND YIELDS CORRECTLY SPOT A WEAKER MACRO

CONTROL PACKAGE

There are FIVE charts we have outlined in prior chart packages that we will continue to watch closely as a CURRENT "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)

FISHER'S EQUATION = 10Y Yield = 10Y INFLATION BE% + REAL % = 2.339% + 2.111% = 4.45%

CHART BELOW:

Rates have definitely overshot the normal pattern post the first cut.

"...perpetually deeper Deficit spending trajectory with Fiscal policy dominance”—which in a forward “macro vacuum” then risks “sticky higher inflation” = “sticky high nominal GDP” at least in the US—and also then implies a meaningfully higher “Neutral Rate” than is currently being acknowledged by folks at the Fed —and thus, a shallower “Easing Path” / a higher “Terminal Rate” than is currently being assumed by many in the Market".

***10Y UST - TNX - WEEKLY***

CURRENT DAY'S VIEW:

• Yields rose to close Wednesday 4.45% level and up against an overhead resistance trendline (dotted black trendline).
• The Proprietary MATASII Momentum Indicator (lower pane) is now showing momentum broke decisively through its overhead resistance trendline (dotted black line).

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

***10Y UST - TNX - HOURLY***

CURRENT DAY'S VIEW:

• Yields rose to close Friday 4.43% level and up against an overhead resistance trendline (dotted black trendline).
• The Proprietary MATASII Momentum Indicator (lower pane) is now showing momentum having found support at the long term black dashed trendline.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

COMMODITIES

***CRB COMMODITY INDEX - MONTHLY***

• The overall Commodity Indexes, as measured by the CRB Commodity, reflect a Corrective / Consolidation is presently nearing completion.
• However, many of the individual sectors (not shown here) have already completed the Corrective / Consolidation and broken higher over the last 30-60 days.

• Examples:
• Invesco DB Agricultural Fund (DBA)
• VanEck Agribusiness (MOO)
• Food Producers (FT350 Food Producers - NMX45)
• Teucrium Agricultural Fund ETV (TAGS)
• Advisory Shares Restaurant ETF (EATZ)
• Invesco Food & Beverage ETF (PBJ)
• Teucrium Wheat Fund ETV (WEAT)
• Teucrium Corn Fund ETV (CORN)
• Teucrium Soybean Fund ETV (SOTB)
• Teucrium Sugar Fund ETV (CANE)

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

NOTICE Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. MATASII.com does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.

FAIR USE NOTICE  This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a ‘fair use’ of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.  If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use’, you must obtain permission from the copyright owner.

========

2020 VIDEOS OUTLINING THE COMING RISE IN INFLATION, STAGLFLATION & COMMODITY PRICES

THE REGULATORY STATE

RELEASED - 01-17-24 --- 212 Page Paper

$9.99 to Download

Pay-Per-View Page Link