35.   When Dementia Replaces Meritocracy – Two Brief but Critical Speeches

Those two speeches are among four key data points that describe the short-term economic future of the global and USA economies. 

1. Fed Chairman Powell gave an amazingly brief speech – four pages and eight minutes long.  But what he said transformed the world financial markets.  My summary – The Fed is going to keep raising interest rates until inflation is back down to 2% annually…no pause….no pivot.  The correct view on this statement is:
   1. All assets will be repriced as interest rates increase. ALL ASSETS.
   2. The rate of inflation is a lagging indicator of the economy, and it takes 9 to 12 months for any action of The Fed to appear in the marketplace.  Therefore, a soft landing is impossible.  Prepare for a crash landing.
   3. Something in the economic system will have to break before The Fed will change its course. 

2. The Crown Prince of Saudi Arabia also gave a short speech saying that the price of oil in the physical market does not reflect the price “in the paper market”.  He is not happy and is prepared to cut production to get the two price points aligned.  His reference was to some entity trading in the futures market to influence the price of oil and gasoline between now and mid-November.  Does that date give you a guess as to the party doing the market manipulation?  Betcha right.

3. Europeans have been getting their first taste of the result of depending on “Green Energy” as electricity has soared forcing small business to close since they are not able to afford the new energy prices.  Wood for fuel is been sold out and Europeans are now foraging in wooded areas for dead trees to cut for heat this winter.  Not only are solar and wind generation not reliable sources of electricity, the cost of electricity in Germany had already tripled under Merkel’s Green Energy plan.  German legislators have now redefined “green” to include nuclear and delayed the decommissioning of Germany’s remaining nuclear electricity generation plants.  The only logical expectation is that by mid-winter when the population is hungry and cold, nuclear generation of electricity will become a savior.  Wise up Americans!!!! Education is always expensive.

4. Several sources suggest that hedge funds have indeed taken severe financial hits magnified by them being highly leveraged, their normal mode of operation.  At the same time, since about 2010, hedge funds have been massive buyers of single-family homes in order to rent them.  The additional demand is partially responsible for the run up in values especially when mixed with the historic low mortgage interest rates.  It is normal for an investor with a portfolio of assets to sell highly appreciated assets to offset losses elsewhere in their portfolio.  I am reading that hedge funds are no longer buying single family houses.  If they start selling houses, will the shortage of homes become a surplus thus further reducing house prices.  Yep.

Three occurrences that are glimmers of hope for the USA:

1. There are now 20 FBI Whistle Blowers that have retained counsel and are talking with the press and Republican members of Congress.  Hence Attorney General Garland’s announcements prohibiting that activity demonstrate that again the Biden Administration does not feel the need to abide by either the law or the Constitution.  FBI Director Wray is in the Whistle Blower’s sights and already the FBI Special Agent who has the distinction of “investigating” the Russian Collusion, Hunter Biden’s laptop, and lead the raid on Trump’s home in Florida has resigned.  Three Strikes you are out or managing optics?

2. Michelle Long Spears won her election in Dekalb County District 2.  In the election held on May 24 she came in 3^rd but an examination of the result showed that in her precinct where she and her husband voted for her, the machines showed no one voted for her. She demanded a hand count of the ballots and found the machine count and the hand count did not match.  In fact, the machines undercounted the ballots by almost 3,000 votes out of total votes of 15,000.   20% error rate!  The voting machines – Dominion. 

3. Warner Brothers owns CNN and continues to clean house. Combined with their recent decision to trash a woke movie that had been finished but not distributed makes me wonder if they are actually focusing CNN on reporting facts and prepared to lead American companies away from “Go Woke, Go Broke” behavior.

Meanwhile China’s economy continues to melt without the American media reporting it.  That plus the collapsing European economy due to energy costs and the out of public sight problems with the hedge funds suggest a massive economic problem coming.  Perhaps the adjective BRUTAL is more accurate.

In the local real estate market, several home builders have shared with me that their activity is down by approximately 25 -30% from last year. They are making sales but the combination of 40% increases in home prices and interest rates moving from 3% to 6% have taken a toll.

Here is my perspective on reality:

1. In 2023 the current recession will become quite serious, potentially worse that The Great Recession of 2008-2011.  All asset values including real estate will decline.
2. Recovery will require replacing the current administration and Congress with meritocracy guided adults so it will be after 2025 before an economic recovery occurs.
3. The global sourcing system that has provided inexpensive goods to the USA is broken beyond repair.
4. RE-Shoring will occur which will drive up the need for significant investment in manufacturing facilities and equipment here in the USA.
5. The result will be better jobs for the middle class but also an enormous demand for capital to fund the requisite facilities, equipment, and raw materials.
6. There will also be a dramatic increase in demand for energy which cannot be met by solar or wind, both of which are irreparably deficient sources of energy. Fossil and nuclear will be the winners.  Investors in wind and solar are buying a modern ay Edsel.
7. All of the above will demand more capital than is available, so interest rates will rise to allocate the capital that is available.
8. The cost of finished goods will be higher, but the supply chains will be shorter.
9. The wise use of land will determine the future success of the USA.

The best summary of the land market is – short term pain but long-term gain.  But the immediate future is perilous as Obama tries to compete his promised transformation of the USA into a large Kenya, his home country and third world.  Hopefully Americans will successfully thwart his goal. Fortunately, God is in control.

Please pray:

1. That God exercises his control over our government at all levels.
2. For the “Forgotten 599” surviving Americans being held as political prisoners by Biden and the Demented Marxists in hell hole conditions in the DC Gulag.  
3. For honest elections because without them we are not free.
4. For the valiant Ukrainians.

Let’s Go Brandon!

“I know what it is to have little, and I know what it is to have plenty.  In any and all circumstances I have learned the secret of being well fed and of going hungry, of having plenty and of being in need.  I can do all things through him who strengthen me.”

(Philippians 4:12-13)   New Revised Standard Version, Oxford University Press)

Stay healthy,

Ned 

August 31, 2022        

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