This may be the most important Fake Number Day
Welcome to perhaps the most important ‘Fake Number’ Day—the Non-Farm Payrolls for Friday, September 6th. Since August 5th we had the panic over the unwinding of the Yen carry trade.
During this period, we encountered a weak labor number in August, increasing the likelihood of Fed rate cuts just days after the Bank of Japan raised its interest rates. In a pincer-like movement, the cost of borrowing in Yen was set to increase, possibly even further, just as America's interest yields were set to decline.
This caused panic and led to some degree of unwinding. I do not believe that we have fully unwound the Yen carry trade. This trade involves borrowing cheaply in Japanese Yen, assuming the currency risk, and investing in high-return assets such as the "Magnificent Seven" stocks or Treasuries that pay a higher yield.
Walking back the "red hot labor market" narrative of October 2023’s Non-Recession
At that time, we noted that the U.S. had actually entered a recession, as we stated in October 2023. However, this was denied due to a so-called "red hot labor market." They argued, "One can't be in a recession when employment is this strong!" However, just before the carry trade unwind, we also saw a downward revision of 818,000 jobs for the previous year.
This despite several Non-Farm Payroll numbers being revised downward retrospectively when the new numbers were published, our overall view remained that a recession was ongoing and that the labor statistics were a statistical ‘lie’.
A year later, I would argue this has indeed been proven. The ‘lie’ of the labor stats has now been admitted.
The trade we suggested on August 5th 2024, as the Yen carry trade unwind began, was to short oil and go long on gold. This trade is effective within the commodity complex, meaning the outcome has partial hedge properties. During a Demand-Destroying Event, commodities generally decline if disinflation is on the horizon.
Using our twisted balloon analogy, consider two halves of the global economy: one involving the military-industrial complex, the pharmaceutical-industrial complex, the media-industrial complex, the government, and the "Magnificent Seven," high on the hog of statist expenditure; and the other half involving ordinary people, the retail consumers.
The best trade was to short oil because consumers would be ordering fewer items online. There would be fewer deliveries run by DHL, FedEx, and other providers, less shipping, and less packaging. All of these factors contribute to the inflation numbers, particularly in the oil markets.
Oil is one of the most multifaceted kingpins in inflation, which is why, two years ago, Biden continued to sell off strategic reserves to rather low levels. This was done in an attempt to keep a lid on oil prices at the expense of the country's military readiness and to curb an escalating inflation rate that was embarrassing his presidency.
The short oil position is also in a technical inverted HVF (Hunt Volatility Funnel), as shown in the chart below. This is a long-term chart illustrating both the inverted HVF targets and a possible Head & Shoulders pattern that could lead to an even further collapse in oil markets if events turn disorderly. Although a pattern is not a 100% guarantee that targets will be met, our assessment is that the inverted HVF on oil will, based on the balance of probabilities, will be made at minimum.
CRUDE 2D Inverted HVF
This is despite coordinated production cuts over the last 18 months by both Russia and OPEC nations to manage prices in line with demand. These events took place over the past year, during which we argued that a recession had already begun, as indicated by two negative quarters in the United States in October 2023, meeting the standard definition of a recession. This was before all the if’s and but’s and media connivance in redefining a recession, had occurred.
Since then, in the last 31 days, your gold long would have increased by 6.41%. See the chart below. At the same time, you would have observed a similar decrease in oil. This highlights the value of understanding that consumers are being squeezed, while there is a greater shift toward the ultimate monetary commodity, GOLD, and away from energy and consumer-based commodities.
GOLD up 6.41% since carry trade panic day
Many of our sound money advocates are bullish on commodities, and many have, unfortunately, positioned themselves in gas, oil, and related energy markets like uranium. As I continue to assert, we are experiencing a debt-based collapse that is unfolding and displaying all the characteristics of currency shenanigans, as seen in recent carry trade events.
The only real monetary alternative is the physical holding of gold, and central banks recognize this and are moving in that direction. We are only at the beginning stages because silver is far from reaching a new high, even as gold has achieved a new high. However, gold equities are performing very poorly, despite some major players gaining ground recently.
OIL down 5.65% since carry trade panic day
This suggests to me that we are in a substantial cycle where gold is the optimal hold. It's similar to Bitcoin dominance in the early stages of a crypto bull market, but in this supercycle, gold is the best hold for an extended spell before some rotation.
It will continue to reach new highs. You should not pivot too soon from holding the commodity itself to reallocating into silver or mining stocks. This will be an extended cycle due to the debt and the persistence of inflation in the system, even during disinflationary periods, as a result of manipulated statistics from the BLS, the Fed, and other state-run institutions that aim to understate CPI and manipulate Treasury markets by issuing Debt mostly on the short duration end.
All these tactics and aspects and trickery of the scoundrels running the show cannot hide the fact that the rapid creation of a new trillion of dollars every 96 days represents an immense degree of issuance.
The Dollar is overvalued. See our previous newsletter on GBP/USD, EUR/USD, and our YouTube videos showing that the Dollar is likely to lose ground not only against the Yen amid further unwinding but also against the Pound, the Euro, and other major currencies.
In the long run, this is supportive for commodities and also for crypto. However, in an extreme fear ‘risk-off’ event, there could initially be a sell-off, as people search for liquidity and are forced to sell their holdings in all asset classes.
The asset with the least downside beta, as has been demonstrated multiple times during the carry trade and the events of CV19, is gold. If it dips, it does so briefly and then reverses strongly in the opposite direction, going on to make new highs.
In short, gold, as the monetary commodity, is a buy on any dip and is unlikely to dip significantly. Gold has a lower beta to the downside and a steady, consistent, and firm beta to the upside.
Unlike Bitcoin, which has a high beta to both the downside (potentially losing 30-40%) and the upside (potentially increasing four to five times), the higher volatility of Bitcoin and other crypto assets suggests a smaller allocation should go to these assets. The stabilizing foundation of the financial pyramid should clearly lie in gold.
This will reduce overall portfolio volatility and allow you to time and overweight allocations into the higher-beta assets more effectively. This would be post any collapse, once the usual measures of quantitative easing and liquidity are brought to bear again. We have always maintained that a Demand-Destroying Event could intervene in this Bitcoin bull market at some point.
Remember, CV19 occurred at the very beginning of the last bull market. This current bull market has already begun but could be interrupted partway through. In the long run, though, we are macro bullish on Bitcoin, just as we are macro bullish on gold and commodities. However, do not invest in commodities sensitive to retail consumer demand, such as energies—especially oil used in travel, delivery, and packaging—given the weakened state of the consumer.
This is why a commodity-neutral trade, such as being long on gold and short on oil, is beneficial. It pays off on both ends while keeping you well-balanced within the overall commodities market. Should the market turn and both start to rise, at least you have the gold long position, and you can trim your oil shorts. If the market experiences an extreme sell-off and gold also sells off, this will be reflected in the oil price, which will have a higher downside beta than gold.
It is the asymmetry of gold's lower downside beta combined with its high-conviction, steady upside beta that makes it even more attractive than Bitcoin's high volatility, which affects both its downside and upside.
In other news, I have posted Daniel Priestley's tweets regarding the role of government in society and my response to him.
I have also attached a YouTube video explaining why it is time for you to consider developing optionality and alternatives to the country in which you were born, work, hold a passport, and pay taxes. This video will cover why Western nations are in steady decline, with a trajectory pointing toward an acceleration thereof.
Watching this video will highlight its value and also what I am hearing from those who are reaching out to us. We are a hotspot for the concerns of family men in the Western world, sharing their anxieties and grievances about the direction of their societies. I empathize, and more than that, I have traveled this road myself, having left my home nation—a country I loved, served in the military for, and studied in up to the MBA level—because I was not being treated well in the end.
You can always return, but sometimes the best course of action is to move, cut the ties that bind, and explore places that may initially seem unfamiliar but could provide a better home given the current economic and sociological life cycle of nations.
I am significantly better off for having left my home nation and pursuing freedom in other countries, without any one country ever fully replacing my home in my mind. I have the freedom of movement, a greater retained income, and all this comes from breaking free from being a "slave" to my original "slave master." The video below will show you the benefits of establishing an international presence rather than being confined to the nation of your birth.
The Future of the Western World: Big Decisions in Totalitarian Times
This is not to suggest that you should leave your home right now but to encourage you to consider how prepared you are for a future in which you might need to leave your home. Many people have joined our community and built wealth through the HVF Method and by being correctly positioned at times like these. Over time, they have gradually established tax residencies, obtained new passports, and explored new places during holidays, eventually reaching a point where they chose to leave their home nation. They became familiar with the options available to them and gained the right to remain in these alternative locations.
Enjoy the video and probably the most important Fake Labor Payrolls Number Day—Non-Farm Payrolls. Consider joining us for the live trading session in what is a decaying economic environment for the U.S. and the Dollar. With that downside, there are great opportunities for gains through gold holdings, certain equities, currencies, and other setups that we'll be discussing during the Live Trading Day. You can be a part of this as we receive the official new number for September.
Thank you for being a follower, and we look forward to welcoming you to our Live Trading Day.
Join our Live Trading Day, this Friday to see how
the HVF Method can work for you.
Our Live Trading Day consists of one traditional markets session (90 minutes) where we will analyse the incoming Non Farm Payroll numbers and one Crypto Markets session (90 minutes) where we will analyse the next Bitcoin movement and the current state of Altcoins.
This Friday at 11:30 - 15:00 UTC+0
All attendees will receive a recording of the event
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