The fog of war and smoke of burning inflation take down buildings and markets.
While several stories in the news throughout the day have said a direct attack by Iran on Israel is expected in the next 48 hours (by the time this is published that will be the next 36), the latest article just out says the attack has apparently begun. Rockets from Iran’s proxy in Lebanon, Hezbollah, are said to be raining down in such a barrage as to “overwhelm” Israel’s Iron Dome missile defense system.
If the rain of rockets is the full extent of the attack, it would appear Iran’s Supreme Leader (Seyyed Ali Hosseini Khameneh known as Ali Khamenei) has decided not to launch an attack directly from Iranian soil, which Israel’s Prime Minister Benjamin Netanyahu promised would result in a direct attack by Israel on Iranian soil, which US President Joe Biden said would be fully supported by the US. An attack by Hezbollah is a little less likely to bring direct war with Iran and more likely to focus Israel’s military response on Lebanon and particularly Hezbollah positions.
Of course, there is nothing to say Iran will not also launch its hypersonic missiles from Iran, but that would virtually guarantee full on war with Israel and the US, rather than war between Israel and Iran’s proxies.
Videos show multiple rockets from the Iran-backed group soaring across northern Israel and hitting the dome as sirens blare in the background.
Observers said the rockets appeared to have “overwhelmed” the Iron Dome, due to the sheer scale of the attack, though no casualties have been confirmed yet.
Hot inflation burns markets and bludgeons banks
The recent rise in inflation, meanwhile, triggered more trouble in the stock market, knocking the Dow down 475 points and delivering the S&P its harshest blow of the year as stock investors get their heads rattled by relentless shocks of reality, which they should have easily seen coming. The blinders of greed kept them from seeing the more than dark clouds of smoke forming all around them from inflation incinerating the economy … like the smoke clouds of war.
Also blowing up the inflated hopes of stock investors were the words of Jamie Dimon in his report for JPMorgan Chase today. Dimon said almost verbatim what he said in his letter to clients that I covered earlier this week, setting clear guidance for lowered earnings expectations below expectations in 2024 due to likely rising interest rates forced by inflation, war and other major geopolitical concerns:
Jamie Dimon, the chief executive of JPMorgan Chase, on Friday warned of an “unsettling” global landscape, highlighting a cascade of pressures including war, rising geopolitical tensions and inflation that threaten the economy and could weigh on the performance of the nation’s largest bank….
His gloom, however, has also been consistently at odds with heady financial markets.
Yeah, well, this time I have no doubt he is right, and financial markets are blinded by by the fog of the Fed’s war on inflation (and mostly by their own greed). Dimon is preparing his bank for harsh times to come, as he has been about the best at doing in past times, always setting his bank up to reap benefits from the failures of others during bombardments of economic and financial destruction while making sure his own bank always comes out bigger and stronger because of all the bailouts.
It is now easier to see why Dimon was so candid earlier this week about the troubles to come. He was preparing the soil for how much he knew his report for the first quarter of 2024 would have to lower expectations in order to avoid making surprising downside reports on actual earnings later in the year.
While it earned more than $13 billion in the first quarter, the bank’s average customer deposits fell and it warned of higher expenses in the future. JPMorgan also disclosed a fall in its so-called net interest income, a closely watched financial metric that essentially measures how much money it is able to make from lending.
Wells Fargo, the nation’s third-largest bank, on Friday separately reported earnings that also included a drop in that measure.
Inflation, by forcing the Fed to keep fighting, is raining missiles down that are overwhelming the economy’s Iron Dome. One article today even warns of a formation developing around the stock market that looks similar to the setup just before the infamous crash of 1987, which delivered the S&P 500 its most severe down day from the start of its history to today. No wonder, then, that today delivered the S&P its worst blow of this year.
The sudden inversion in market conditions and truth about the Fed’s inflation fight losing ground for the time being due to the Fed’s stalled advances, have given rise to an outlandishly huge bet that the market will crash. Ruffer, a major UK asset manager, has parked most of its assets in plain old cash to be ready to reap the rewards in the discounted sales of fallen giants to come, and has placed some potentially ripe stock options to short the market. Ruffer is convinced that 1987 is back on the event horizon. Its bet is made for the next three months, anticipating the big crash to happen within that window.
Excessive optimism over US interest-rate cuts has left markets priced close to perfection, fueling Black Monday-style liquidity risks as the US central bank continues to wind down its bond-buying program, Smith said. Even as the latest hot US inflation print dims the outlook for US easing, Ruffer’s view is still among the most bearish in the market….
While its causes are debated, the lead-up to the [Black-Monday] plunge was characterized by a frothy bull market in risk assets, which Smith said he sees parallels to today.
Time for Caution
In 2008, Ruffer returned 16% to investors while many others tanked.
“We have two investment objectives: One is capital preservation, and the second is to deliver a better return than cash, but it is a secondary objective,” he said in an interview. “We’re at a point in time where we think focusing on the former is the most important.”
“…structurally interest rates and inflation are headed higher.”
All is glittering for gold, however.
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