June 28…)
The CNN presidential debate was a fair and well-handled opportunity for the American voter to see and hear Biden and Trump make their case. The mute button was a good idea. My take after reading reviews in the liberal press is the democrats got the result they wanted.
In the news
Tokyo CPI rose 2.1% est. 2%, May Industrial output rose 2.8% est. 2.0%. Quoting BBG at 20:06 last night:” Topix heads for 34-year high, surpasses March peak.” USD/JPY trades a 34 year high (chart below) … any questions?
At last, the end is nigh. It’s halftime.
Trends and ranges in metals will have to wait a few more days to resolve. In the next 6 months deficit spending and treasury funding will roll on unabated at the rate of > 1 trillion dollars per quarter.
Charlie Kirk, a critic of the left, posted this on X yesterday: “A man reorders his identical Walmart shopping list from 2022 for 45 items. In 2022: $126. In 2024: $414 The same basket of goods nearly quadrupled in price in just two years.” To be fair it tripled, and the list wasn’t posted. However, it illustrates the collapse of Powell’s primary policy goal: inflation expectations.
My vibe
There are some similarities between gold in the 1970s and gold today but comparing the two doesn’t work. In the 70s there were no computers, no NFP on the 1st Friday of the month. No CPI, no ISM. The BLS existed but its only customers were newspapers and economists.
The Fed reported M2 every Thursday at 4 PM. Other than that, the entire financial universe was stocks, bonds, cash banking and gold. The commodity markets hadn’t changed since the 19th century. Bond futures were approved in 1977. Everything else arrived in the 80s with Ronald Reagan. S & Ps were approved in 1984.
Today we have a derivative tower of babel. As of the end of June 2023, the notional value of outstanding over the counter derivatives was $715 trillion (source BIS). Investopedia puts it at 1 quadrillion so, it is reassuring that the latest ‘stress test’ was given the imprimatur of safety by the Fed. More than a decade ago a trader at JPM named Bruno tested the limits of infinite risk. He got fired and they sent out for more beer.
Returning to 70s inflation vs 2024, the day I bought my first seat on the Comex in May of 1977 the volume on the big board was 14 million shares. Average daily volume in 1977 was 21 million per day. According to NASDAQ, the 10-day moving average of total daily US equity volume is currently 10 billion shares per day or 714 X greater.
Gold has been making all-time highs as the Fed hiked rates 5-fold. So, forget about the idea rate hikes are bearish for gold. My best guess as to where a relative 70s gold price might be today is ca $250 to $300/toz.
In the 70s the dollar fell as rates rose because lenders had no faith in our money. That part of an inflationary expectations will never change and it’s about to pay a visit to Japan by invitation where debt to GDP is 300%.
Happy Friday. Here we go H-2.
JJ
**always a taker of ideas and views**
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Charts and data CQG and Bloomberg
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arguably, for me the most memorable thing was the feeling, in the early 80's that the sky was the limit and everything would get better on every metric compared to what occurred in the 70's. I fear that the broader attitude today is much more 1975 than 1985
I remember the 70s so well. It felt like running for a bus, with no hope of catching it.