Wobbling Weebles

Weebles wobbled, but they didn’t fall down. Neither does this market. June 07, 2024 [WEBSITE]( | [UNSUBSCRIBE]( Wobbling Weebles SEAN RING Dear Reader, I’m awfully nostalgic lately. Yesterday was my parents’ anniversary. The family ate dinner at one of my favorite restaurants in Asti, Il Cavolo a Merenda. That translates to “Cabbage as a Snack,” but it’s anything but. I wouldn’t make you drool in your morning coffee, so I’ll spare you the gustatory details. Every year, my father loves to quip how appropriate it is that he married my mother on D-Day. I don’t blame him. I still refer to the Raffles Hotel in Singapore – where Pam and I got married – as the “Scene of the Crime.” Last night was the first time in years that we had all gone out for a night on the town. It was lovely, and we fondly reminisced about things that happened a lifetime ago. As I drank a delicious glass of Barolo, I felt that this was both the beginning of something new and the end of something old. Of course, we’re starting a new life together in Italy, but the ways of doing things are changing. I’ll show you how. Let me ask you a question: imagine that a few years ago, I told you that… - Three wars were going on simultaneously (Russia/Ukraine, Israel/Palestine, and maneuvering around Taiwan/China); - The Global South is reforming around BRICS and wants nothing to do with the “Washington Consensus” or its sanctions regimes; - We still have supply chain issues from Covid and the Russia sanctions; - We still have too much stimmy out there from Covid and from ridiculous fiscal spending (which we now call fiscal dominance) to the tune of $1 trillion every 100 days; - …and the Suez Canal was closed to all US/UK/Israeli traffic thanks to a bunch of goatherders using cheap Iranian drones… …at what price do you think an oil barrel would be trading? What do you think you’d answer? $150? $200? My friend, right now, we’re trading in the mid-70s… that is how bad the world economy is… all of that stimulus has given us a whopping oil price of $75 (up 2% yesterday). Chew on that for a second. As I thought about that, an old jingle popped into my head. (My brain has a funny way of alerting me to things. It plays music in my head and demands I consciously interpret the meaning.) Weebles wobble, but they don’t fall down! Weebles! Weebles? Where the f*ck did that come from? I never owned any Weebles. I haven’t thought about Weebles since I last watched cartoons in the 80s. But my brain needed to tell me something, and it played that tune. Then I thought about it for a second. The stock market is the Weeble. It wobbles, but it doesn’t fall down. The problem is that the stock market eventually falls, but only when everything else has gone first. Let’s discuss what’s already happened and what may come later. [CRITICAL: U.S. Gov’t Agency To Trigger Massive Move In The AI Market?]( A Nobel Prize winner and doctors from Harvard, Yale, Stanford, and Johns Hopkins have just unveiled a shocking new type of discovery… Due to this similar discovery, this tiny $6-stock AI company might have stumbled upon the biggest cancer discovery in history. And in as little as a few short days, we expect the FDA could deliver a bombshell announcement regarding this company and its work, triggering a historic move in the AI market. [Click here now for the full story.]( Treasuries My buddy H is a hedge fund manager in Hong Kong. He sent me this message on WhatsApp yesterday: You're not going to believe me, so check it out yourself. The 5-year beta of TLT is almost the same as TSLA. We certainly live in interesting times. First, beta measures a stock's volatility to the overall market. It’s calculated using linear regression. It tells us how volatile a stock is compared to the market, usually the S&P 500. For example: Stock’s Beta (for example) Simulated Market Return Simulated Stock Return 1.5 Up 10% Up 15% (luxury, tech) 1.0 Up 10% Up 10% (consumer discretionary) 0.7 Up 10% Up 7% (defensive stocks) It’s easy to interpret. If a stock has a beta of 1.5, we can expect it to go up 15% if the market rallies 10%. Luxury stocks and tech stocks exhibit this type of behavior. Market darling Nvidia (NVDA; beta = 1.69) has been dragging its sector for a wild ride. A stock with an average beta of 1.0 moves like the market. Visa (V; beta = 0.97) has an unmatched ubiquity. It is the market. A stock with a beta of less than 1.0 will move less than the overall market on an average day. Defensive stocks like Walmart (WMT; beta = 0.52) exhibit this behavior. Here’s the thing. Historically, TLT has a beta of practically zero. TLT is a bond fund and, therefore, should not correlate with the stock market whatsoever. Alas, it does. But if you do a linear regression of TLT’s monthly returns with the returns of the SPX, you’d find its beta is a whopping 2.17 – extremely volatile. TSLA’s 5-year monthly beta is 2.32, and we know what a roller coaster that’s been. My point is that the foundation of the market, the asset that gives risk-free returns, the US long bond, is as volatile as Elon’s electric car factory and has lost 34.22% over the last four years. Credit: StockCharts.com James Grant, of Grant’s Interest Rate Observer fame, once said that T-bonds offered return-free risk rather than risk-free returns. Now, they’re just a money pit. When market observers point out that BRICS can’t create a currency because they “need” a liquid bond market like the US’s, I wonder why anyone would want to guarantee themselves a big loss. And knock-on effects already hit some banks last year. The Banks From rates, we come immediately to the banks. If you recall, Silicon Valley Bank, First Republic, Here’s what I wrote back in March 2023: First, let’s establish why even Treasury bonds are a risky investment in a rising rate environment. US treasury bonds are default risk-free, not price risk-free. That is, the US Treasury can print whatever money it needs to make its investors whole, so it will never default on its debts. But USTs certainly have price risk! Just look at the ETF known as the TLT, which holds long-dated Treasury bonds: Just eyeballing this chart, you can see the TLT fell from a peak of about $150 to a trough of about $92.50. That’s a 38% loss! Not very risk-free, is it? But that’s what too many investors think. As rates rose, the long bond was crushed. Too many banks were, and still are, packed to the gills with the stuff. They’re colloquially known as “unrealized losses.” But it’s not just Treasuries; it’s mortgage-backed securities. Mortgage-Backed Securities Mortgage-backed securities (MBSs) are another enormous problem. It’s no secret the commercial real estate market continues to struggle. From the May 28th Rude edition: What Just Happened According to [Bloomberg]( For the first time since the financial crisis, investors in top-rated bonds backed by commercial real estate debt are getting hit with losses. Buyers of the AAA portion of a $308 million note backed by the mortgage on the 1740 Broadway building in midtown Manhattan got less than three-quarters of their original investment back earlier this month after the loan was sold at a steep discount. It’s the first such loss of the post-crisis era, according to Barclays Plc. All five groups of lower ranking creditors were wiped out. Market watchers say the fact the pain is reaching all the way up to top-ranked holders, overwhelming safeguards put in place to ensure their full repayment, is a testament to how deeply distressed pockets of the US commercial real estate market have become. Here we go again. My esteemed colleague Jim Rickards said after the March 2023 bank crisis that we were in the eye of the storm and not out of it yet. Once again, he called it correctly. Because of the mess the banks are in, I still think there’s a chance Jay Powell will cut rates next week at the Fed meeting. I’m probably wrong about that, but here’s the latest Zero Hedge headline: Credit: [Zero Hedge]( I’m thrilled to be wrong if the cut happens in July. Gold and silver will pop further once the rate cut happens. As for equities… Equities? We’re in the middle of an old-style Misesian crack-up boom. A crack-up boom is an economic crisis characterized by a recession in the real economy and a collapse of the monetary system due to continual credit expansion, which results in unsustainable, rapid price increases. Austrian economist Ludwig von Mises developed this concept as part of the Austrian business cycle theory (ABCT). The only difference from Mises' theory is that we needed recklessly expansionary fiscal policy (fiscal dominance) from Joke Biden and his idiotic Congress to get the legally counterfeited money into the hands of the people. That’s what created consumer price inflation. And that’s what will, at least temporarily, power equities pricing. So, while there’s big trouble on the horizon, selling now is lunacy. Remember, making new all-time highs isn’t characteristic of a bear market. Wrap Up I had a busy travel schedule this week, so thanks for bearing with me. I must thank Chris Campbell and Byron King for their excellent contributions to the Rude this week. It took a load off. With that said, keep your wits about you. It’s not time to sell yet. But it will be one day. The foundations of the market are wobbling, and now that’s infected the corporate bond market and MBSs. We’re not at equities… yet. What will tell us to get out? It’ll likely be a sharply steepening yield curve and (finally) rising oil prices. But more on that later. For now, enjoy it while it lasts. Have a great weekend! All the best, Sean Ring Editor, Rude Awakening X (formerly Twitter): [@seaniechaos]( Rate this email Like Dislike Thanks for rating this content! Looks like something went wrong. Please try to rate again. In Case You Missed It… King: D-Day, 80 Years On… SEAN RING Dear Reader, I’ll leave this solemn subject to Paradigm Press’s elder statesman and historian, Byron King, who wrote this engaging piece for the eightieth anniversary of the D-Day landings. My grandfather, John Zingaro, landed there that fateful day, while Homer King, the father of today’s author, flew ground attack missions overhead. Read all about the Distinguished Flying Cross recipient’s “unintended air conditioning” below. All the best, Sean Ring Editor, Rude Awakening X (formerly Twitter): [@seaniechaos]( June 6, 1944: “L-Day” BYRON KING Wait, what? L-Day? I suspect you thought that June 6, 1944, was D-Day, when U.S.-British-Canadian and other Allies invaded Normandy, France, eighty years ago today. Yes, I know that the event is called D-Day, but for reasons I’ll explain in a moment, let’s go with the letter “L.” Bear with me… Who Put the “D” in D-Day? D-Day is a confusing label. There’s no correct explanation for the letter “D,” not now nor back on June 6, 1944. In fact, in 1964, not quite twenty years after the end of the Second World War, an interviewer asked retired General and former U.S. President Dwight Eisenhower what the D meant. Ike tilted his head, thought for a moment, and wasn’t exactly sure, but it might represent “departure day” when troops kicked off toward the beaches. General Eisenhower and airborne troops, June 5, 1944. U.S. National Archives. Ike’s answer might work if for no other reason than he was the Supreme Allied Commander of the entire operation. He should know, right? Except with all respect to Ike, not everyone who hit the sand in France left their departure point on the same day. Many soldiers “departed” their bases days before the landing, and many sailors were moving into position weeks before June 6. Other historians have opined that the D stood for decision-day or designated day, highlighting the calendar date when the landing craft moved shoreward. This is okay as informed speculation but not definitive. One old Army Staff College acquaintance once explained to me that the D was short for the word “day,” as if to say that the name of the operation was really Day-Day. Let’s just grant that some people differ over the origin of the D-Day label and not bog down on the alphabetical point. More importantly, what occurred on June 6, 1944, was officially named Operation Overlord, the effort by Western powers in the Second World War to conduct an opposed landing in France, move ashore, and open a new front against German forces in occupied Europe. This brings me back to calling the event “L-Day” because the landings were very much about logistics—mostly about logistics, truthfully. Or, as Admiral Ernest King (no relation to your editor), Chief of Naval Operations for most of World War II, once quipped, “I don’t know what the hell this ‘logistics’ is, that [General George] Marshall is always talking about, but I want some of it.” CNO Admiral Ernest King (L) and General George Marshall (R), with General Henry Arnold (C), leave the White House after briefing President Roosevelt on June 6, 1944. U.S. National Archives. [Ex-CIA Insider Releases Trump Election Bombshell]( Former advisor to the CIA, the Pentagon and the White House Jim Rickards just dropped [this Trump election bombshell](. For the sake of our country… I hope he’s wrong. But Jim correctly predicted the Great Recession of 2008, Trump’s 2016 election, and the Covid Crisis. [Click here to see the details]( because if he’s right, you need to prepare now. [Click Here To Learn More]( The Meaning of June 6 Before we proceed further, pause for a few seconds and acknowledge that June 6, 1944, is truly an important date in U.S. history, as well as British, European, and even Soviet/Russian history. We’ll discuss it all in more depth, anon. If you are so inclined, say a prayer and recall the bravery and sense of duty of everyone who crossed the line and went into France on that late spring day in 1944. As an editorial point of privilege, I’ll mention my long-departed father, Homer King, who served as an Army combat pilot and flew ground attack missions during the June 6 landings. At one point, he piloted his heavily damaged P-47 fighter-bomber back to England, shot full of holes and leaking fuel. He landed and traded his bird in for another one without all the unintended air conditioning. Then he flew back to France. Much later, and somewhat to his surprise, he was called into the colonel’s office to receive a Distinguished Flying Cross. “For extraordinary achievement while participating in aerial flight.” U.S. Department of Defense. Depending on your age and origins, perhaps you, too, had a father or grandfather, uncle, etc. (and yes, more than a few women in uniform) who participated in the fight in Europe, 1941 – 45. Perhaps your relatives served in the Pacific Theater or some other front across the globe. Or they remained home in the U.S., possibly working at a defense plant. Or maybe it’s none of the above, and don’t worry 'cuz it’s all good. June 6 is your day, too. Sadly, we live in an era when history is poorly taught in most schools and generally unappreciated across our culture. And if the cultural elite shuns any field of history, it’s military history. Just try to find a decent university program in military history at any U.S., Canadian, or British university (hint: good luck; you’ll be laughed out of the faculty lounge at most schools if you say you want to work in military history). Meanwhile, if you want to be underwhelmed, walk through a college campus and ask 19- and 20-year-olds about World War II. To the extent that large numbers of people know much at all about June 6 and D-Day (or L-Day, as I’ll expand in a moment), it’s from movies like Saving Private Ryan (1998) or The Longest Day (1962); or perhaps the television series Band of Brothers (2001). Okay, pilgrims… I’ll take some knowledge of the war over none at all. However, the problem with what you see in movies is that there are a lot of action scenes with soldiers hitting the beach or parachuting from airplanes. They land on the sand, rifle in hand, taking fire from enemy machine guns and artillery. They run up hills, blast away, toss hand grenades, capture pillboxes, and mow down the other side’s soldiers. As it all unfolds, one sees the Hollywood human side, with soldierly bonding, everyone looking out for their buddies, people being wounded and killed, and survivors living to fight another day. Which is to say, learning “history” from watching movies is quite misleading. Because whatever they show on the screen, everything about fighting a war comes back to logistics. Gimme the Fuel, Ammunition and Supplies Consider this: How much gear do you think a typical soldier carries when he jumps out of an airplane or when the landing craft's ramp drops down? Forty pounds? 50? 75? How much ammunition can anyone carry? How many rounds? How many hand grenades? What about troops who haul machine guns or mortars? Crew-served weapons weigh more than you think, as do the rounds they fire. What about medical supplies? Or radios and batteries? Fresh water? And maybe some food? Plus, say, a small shovel, and maybe a rain poncho. And… you get the idea, right? American troops hit the beach on June 6, 1944. U.S. National Archives. Here’s the point. When Tom Hanks and his troops hit the beach in Saving Private Ryan and then humped through minefields and across the dunes, dodging bullets and shrapnel, every one of them had a combat-service life of about an hour, likely less. Because in a very short time span, they would have fired all their ammunition, tossed the grenades, used up the medical supplies, and (as the movie showed) the radio would be shot through. And then what? Well… If it’s you in the dirt, hunkering undercover, you better have some of that “logistics” thing backing you up. That is, after the first boats hit the beach and land troops, the next wave had better be right behind, hauling more troops to replace casualties and a lot of useful supplies, all staged for fast extraction and movement across open fields of fire. More rifle rounds, grenades, mortar shells, ammo belts for machine guns, medical supplies, and people to treat and evacuate the wounded. Then comes engineering equipment like mine clearance devices and armored bulldozers to dig out firing positions. Plus, mobile field artillery and ammunition, along with gun crews and repair kits for when things break, because they always break. And then, in other landing craft, not far behind that second or third wave, you require armored equipment like tanks and personnel carriers, hauling fuel (lots!), ammunition, communication gear, and much more. Indeed, after troops seize the beachhead, things begin to look like this: Landing ships deliver equipment and supplies to Normandy; cargo ships offshore. U.S. National Archives. All of this—troops ashore, with weapons, ammo, gear, equipment, etc., following immediately—is but the tactical end of a massive, operational-strategic-level logistics effort. Logistics, Logistics, and More Logistics Of course, the invasion of June 6 was deeply planned, but the date itself was an accident of the calendar and weather. Immense levels of politics, planning, and war-related, economy-changing production went into the effort. Where to begin? Well, consider how the Soviets were fighting Germany and her allies since the invasion in June 1941. After that, Soviet leader Joseph Stalin constantly demanded that Britain and the U.S. “open a second front” against Germany, considering that the Russians were taking casualties by the millions. To give a feel for the scope of loss in the East, the Battle of Moscow in 1941 cost the Soviets over half a million troops killed. In 1942 - 43, the Soviets lost over 800,000 dead in the first year of the 900-day siege of Leningrad. In the same timeframe, 1942 – 43, Stalingrad cost the Soviets perhaps two million killed, while in 1943, the Kursk battle added another three-quarters of a million dead. In November 1943, at the Tehran Conference, President Roosevelt and Prime Minister Churchill promised Stalin that the Western Allies would invade France in May 1944. Of course, to accomplish that mission, the U.S. had to build entire fleets—over ten thousand—of cargo ships and landing craft, along with enough equipment to stage and wage a land war across northern Europe. This illustrates how logistics reflects a nation’s industrial power; stated another way, military power is the first derivative of a nation’s energy base and industrial system. If you want ships, you need steel and machinery. But if you allocate steel and machinery to build ships, then the metal and equipment will not go into tanks or trucks. Plus, you need everything else that goes into ships, ranging from propellers to anchor chains, plus trained crews that take time to recruit and assemble. Another U.S. strategic-logistical constraint was that the country was at war against Japan in the Pacific Theater. Admiral Nimitz and General MacArthur also wanted ships, aircraft, weapons, ammunition, fuel, medical supplies, trained personnel, and much else. While Russians died fighting Germans, Americans and British died, too, in ocean-spanning battles across the western and southwest Pacific. And don’t neglect learning curves. For example, one early logistical disaster occurred in August 1942, with the battle for Guadalcanal, east of New Guinea. Basically, the Navy and Marines did a piss-poor job of loading cargo ships, such that critical materials were buried in the holds beneath less critical supplies. Then, at Guadalcanal, Marines waded ashore, and supplies were slow to follow. In fact, most cargo never even made it to the beach because Japanese air attacks drove the ships away, leaving Marines stranded and scrounging for everything. By the second day, Marines were down to half-rations and soon had to sift through the sand to find random rounds of dropped ammunition. Two years later, in 1944, the costly lessons of Guadalcanal were incorporated into the invasion of Normandy. The plan involved detailed mapping and intelligence gathering, overwhelming air supremacy, massive naval gunfire support, robust communications, and literally thousands of well-staged cargo ships offshore hauling fuel, ammunition, heavy weapons, medical support, and an encyclopedia of other warfighting kit. Even then, Operation Overlord had problems. The weather in May was bad, so the invasion was postponed to June. Tides and moonlight dictated a short window of June 5 – 7, but much also depended on fickle weather. Even then, on June 6, winds and waves were severe enough to blow many airborne troops and seaborne landing craft away from their assigned targets, leading to deep levels of the proverbial “fog of war.” And today, eighty years later, we remember it all, each in our own way and as best we can. The full story of just June 6 alone is a tale far too long to tell here, let alone to relate how the invasion unfolded in the following days, weeks, and months. The immediate takeaway is to recall and honor the bravery of soldiers and sailors past and the brilliance of planners who put the operation together. That, and understanding that nothing big, complex, and important happens absent immense levels of thought and attention to detail; it could not happen back then and does not happen today. Which is to say, bone up on your logistics. That’s all for now. And thank you for subscribing and reading. Best wishes, Byron W. King Senior Geologist Military Historian Global Favorite Paradigm Press Group ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2024 Paradigm Press, LLC. 1001 Cathedral Street, Baltimore, MD 21201. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your Rude Awakening e-mail subscription and associated external offers sent from Rude Awakening, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. We welcome comments or suggestions at feedback@rudeawakening.info. This address is for feedback only. For questions about your account or to speak with customer service, [contact us here]( or call (844)-731-0984. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized financial advice. We allow the editors of our publications to recommend securities that they own themselves. However, our policy prohibits editors from exiting a personal trade while the recommendation to subscribers is open. In no circumstance may an editor sell a security before subscribers have a fair opportunity to exit. The length of time an editor must wait after subscribers have been advised to exit a play depends on the type of publication. All other employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of a printed-only publication prior to following an initial recommendation. Any investments recommended in this letter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company. Rude Awakening is committed to protecting and respecting your privacy. We do not rent or share your email address. Please read our [Privacy Statement.]( If you are having trouble receiving your Rude Awakening subscription, you can ensure its arrival in your mailbox by [whitelisting Rude Awakening.](