Is Powell Ready to Pause? w/ Mish Schneider

0:00If you've been considering futures trading, now might be the time to take a closer look. The futures market has seen increased activity recently, and Plus 500 Futures offers a straightforward entry point. The platform provides access to major instruments, including the S &P 500, NASDAQ, Bitcoin, natural gas, and other key markets across equity indices, energy, metals, forex, and crypto. Their interface is designed for accessibility. You can monitor and execute trades from your phone with a$100 minimum deposit. Once your account is open, potential trades can be executed in two clicks. For those who prefer to practice first, Plus500 offers an unlimited demo account with full charting and analytical tools.

0:45No risk involves while you familiarize yourself with the platform. The company has been operating in the trading space for over 20 years. Download the Plus500 app. Trading in futures involves the risk of loss. It is not suitable for everyone. Not all applicants will qualify.

1:05Thank you.

1:34Is Powell ready to pause? Welcome to the Real Vision Daily Briefing. It's Tuesday, June 13, 2023. I'm Ash Bennington. I'm joined today by Mish Schneider, Chief Strategist at MarketGage. Welcome, Mish. Nice to see you, Ash. It's great to see you as well. I'm excited for this show. Obviously, we're having this on a great day here to talk about macroeconomics and everything that's happening in markets. We We have Fed Day coming up tomorrow. First, I should say we're having a little bit of a technical streaming issue on our website right now. So if you're watching on YouTube, that's the place to get this content live.

2:10I'm sure we're going to have the website issue fixed shortly, and we'll have it there with a slight delay. Mish, I should say coming out of the gate, we talked a little bit about CPI. Let me just read through these numbers and get your impression here. CPI month over month came out 0.1 % on a month over month basis, apparently cooling. Consensus was 0.2%. consensus range 0 to 0.3 and prior 0.4. So obviously below consensus, below consensus from and below prior. So a bit of cooling. But when we look at it year over year, this is where the complexity comes through. This is headline. Year over year, prior 4.9%, actual 4%.

2:48It's still twice what the Fed's target is. How do you think about all this complexity, Mish? Well, I'm definitely in the camp of the fact that today's CPI numbers were so expected, even though they came in technically under expectation, because we've seen a huge drop in some of the commodity prices over the last few months. So I always wonder what's going to happen next, not so much what already happened. And the fact that they were a little bit cooler today, of course, has now really charged up the bull base after the last couple of days where we've seen great rallies. But I'm actually still thinking now that this is sort of the correction in inflation.

3:31This was kind of like the trough in terms of it coming down from its highs and could easily start turning up. And in fact, I think I sent you a chart where it shows that we're still over 5 % in terms of the CPI. And it depends on where you look. Obviously, numbers are cooked all the time. We've come off from the highs at over 8%. But we are really still above where we broke out in terms of inflation in 2021. And that means it's still, although I hate to use the word since it's so overused, sticky. And a couple of other things from the report I found interesting. One would be that food, which actually had been level over the last couple of months, rose slightly, but still rose.

4:17And so did apparel and so did shelter. So we definitely depends on where you look. Obviously, certain sectors are showing some signs of relief while others could emerge. And of course, then there's all the X factors we can talk about that what could spur more inflation in the second half. Ms. Chogney, depending upon where you look, this chart that we're looking at right now that's on screen, rate of U.S. inflation is slowing. What's that reflective of? Is that core CPI or is that, I'm sorry, headline CPI? What are we looking at? Because it's slightly above where the numbers came in. Yeah, that would be on the basis.

4:51Well, first of all, I just saw the chart today. So I don't know if it's necessarily been updated to this particular point. Right, right. But you can see the trend. And to me, I was much more interested in the actual trend of this chart to show how we actually have been cooling now, right, for the last few months. So that's why I always like to look ahead and not necessarily back. So we've come off tremendously. And now if we looked at it like we looked at any other chart, you would see that we're heading into support, so to speak. And so that's why, can it break down under, whether you're looking at just this chart, 5%, or if you want to look at the headline numbers today, 4%, that's really the big question.

5:33So my guess is the answer is no, and it'll start to creep back up, but we could talk about some of those reasons. Yeah, I'm really curious about it, to talk about where you see the trend heading. Lawrence Summers out yesterday talking about inflation, that in his view, it's still hot. He's been a deficit hawk and an inflation hawk for some time. Talk a little bit about the broader context in this, in terms of the broader macroeconomic outlook, as well as what you see in terms of asset prices. Well, let's see. Let's begin, first of all, with a prediction that I had made, just, I think, you know, just based on some charts that I had been looking at when I zoomed out to a monthly, and I brought in a lot of monthly charts to take a look at.

6:12So let's start there. We had talked about the S &P 500 possibly going to 4 ,400. So we're darn close as of today. While the small caps would be the key to keep an eye on, because in order for it to even get to a point of a two-year business cycle breakout, like the SPY has done, and obviously NASDAQ did before, it would really have to go up even further from here, up and around. We're looking just at the Russell in terms of the index, 1 ,930. So let's give it a range, 1 ,900 to 1 ,950. And that once we got to that point in the Russells, wherever the SPY was, whether it was at 4 ,400 or 4 ,500, that we would start to see the top.

6:59Now, that was based on pure technical analysis projecting out on these monthly charts. And the chart that you have up there right now shows you that blue line, right? That's the 23 month in the Russell 2000 versus the Qs, which went through it and has obviously followed through going through it last month. So in terms of where that could be relative to where the Russells could be if they can't get through, I would say maybe 380 or 3 ,800, depending on how you want to look at it in an index or an ETF. And we're getting close. So this is a real moment of truth, I think, for the market, because right now we've gone up so much.

7:42Right. And a lot of this rally has been in anticipation of everything that we've seen. Fed slowing down, if not pausing. The economy contracting, but maybe not contracting very much more. The dollar sort of stabilizing at current levels. the inflation cooling, the labor market showing pockets of strength at the same time, some pockets of concern. All of these things coming to this point are we're seeing reflected in these charts right now in that the growth has really taken off. It was so undervalued based on the hawkish Fed from 2022. So that's why I'm looking, what's the next six months gonna do?

8:23And are we gonna get through this point in the small caps? We have to. I think, personally, because it's not just the small caps, right? It's the retail sector, the transportation sector, the banking. That's a whole other ball of wax right there. They have to prove that we really are going into a period of economic growth, which infers a couple of things, right? Inflation stays low and the Fed stays relatively calm, not too hawkish, not too dovish. And those are two big ips, I think. Yeah. You mentioned SPX closing out the day here, 4 ,369 one day, up about, oh, about 65 one hundredths of 1%. Trailing 12 months, up 16.5%, year to date up 13.75%.

9:10I mean, these are significant moves. Well, right. And then you have the people who come out and say, well, the S &P is up 20%, therefore we're in a bullish market. and they never quite really bought into that statistic because they were saying when the market was down 20 % that we were in a bearish market. And as you know, we went down a little bit further and then completely turned around. So I'd say that the bullish market, certainly in the NASDAQ and certainly the growth stocks and the AR stocks, that's been here for a while. We've been talking about this for months already. But in terms of being really in a bull market, I think historically, If you just go back to every kind of bull market we've had really since the mortgage crisis in 2008, it's been led by growth and by tech.

9:57And we've gotten to a certain point where the Russells try to keep up. But with GDP, it hasn't really exploded in this country in a long time. Once that starts to stall out or roll over, it's almost like you get the semiconductors and the growth stocks looking back and going, oh, wait a minute. And then they start to fall back, too. And that's been every crash we've seen for whatever reason that we've had. I'm not saying we're going to crash, but we certainly look like we're due for a correction. We're going to take a quick break and be right back with more of the day's top analysis on the Real Vision daily briefing.

10:34Yeah. Let's talk a little bit about energy. It's something that you talk about in your note. Talk about that as a cause and an effect. What do you see happening next? And what do you see it implying about the broader landscape for asset valuations? Well, energy came back today, actually, along with the rest of the market. You know, there's another expression that when people start buying the things that are really beaten up, you know, it's coming to the end of the bull market. So that could be the case with energy for sure. But I've really kept my eyes particularly on crude oil. And whether you want to look at West Texas or you want to look at Brent or LightSuite, they're all pretty much in the same.

11:12They all kind of look the same, right? So I think I gave you a chart of what is that? Is that crude oil right there? There's that light sweet that you have up there on the screen. Yeah, OK. That looks right. It looks like I have WTI on my screen. It looks exactly the same. So yeah, exactly. So we'll just call it crude oil without distinguishing which which kind. So essentially, I find this chart to be so fascinating in terms of answering the energy question, because I like to look. I'm a futures trader, right? I came from the floor. I traded on NYMEX for years. So to me, what happens in the futures or in the underlying really kind of dictates everything.

11:51So everybody yesterday, again, was getting super negative in crude oil. Goldman Sachs came out with a bearish call. And of course, typical of these type of calls, they often come out bearish at the bottom and bullish at the top. And this turned around today. And we can talk about fundamental reasons why or what have you. Mostly Goldman Sachs is bearish because they're saying supply demand. And I find that a little bit head scratching because if the economy actually is improving and people are traveling more, cruise lines have been going up and the airline travel has been going up and leisure has been going up and everything's been going up.

12:27That to me tells me there's an increasing demand and eventually that has to impact oil. Evie, of course, we can talk about that separately. So instead, right, what happened? Not only did we see this go up today and hold those critical support levels at around$67 a barrel, didn't get through 70 yet, so it still has more to improve. It had an inside day. But if you look at the bottom chart, that is our real motion momentum indicator. And what that showed is a classic mean reversion today. So I found that very interesting that we would have this mean reversion and not only have this mean reversion back over the Bollinger Band, but that we also are approaching over a major moving average there.

13:13And I'm looking because I'm putting my glasses on. So you can see that green line that you see, that's the 200-day moving average. So we have the 50 above the 200 in momentum, which is bullish versus the bearish chart of price. We had a mean reversion above the Bollinger Band and back above that 200. So that tells me that oil, after everybody's kind of put it aside as the dead instrument, could still wake up. And that, of course, would create a whole new inflationary environment. Yeah, you know, it's interesting. We can talk about this on a sort of a cyclical basis as we have been here. But it does seem as though the secular bears on oil might have gotten a little ahead of themselves in terms of demand.

13:52I mean, I get it. 50 years from now, we're going to be using less oil than we do today. But tomorrow, 2025, 2030, this is a long-term transition into green energy, and the liquid balance is still very large. I couldn't agree with you more. I mean, do I believe, like you, that one day oil will really be the way of the dinosaur? Right. Yes. But, yes, we're still far from that. And, of course, I think I know where you're going to lead here. But even in our switch to alternative energy and EV, there's still a drain on natural resources. And so I wouldn't be throwing out the oil thesis anytime soon until we know we have enough natural supply and raw materials even to support the infrastructure of EVs and batteries and alternative energy.

14:41Right. Talking about infrastructure, supply chains, and resources, I wanted to take a look at a clip. I hear something you mentioned earlier, which is, of course, AI. This is from the Festival of Learning AI edition. The panel that chat GPT didn't want you to see is what it's called, with Nardo Manoloto, managing partner of Qubits Ventures. This is all about something that's really fascinating, which is quantum computing, hosted by Mike Green and Maggie Lake. Let's take a look at this, aired today on Essential. I think it's definitely a space race, an arms race, a resource race, Maggie, as well as a supply chain race.

15:18So if you take a look at the number of countries that have a quantum strategy now, you know, there are, I think, 23 different countries have provided budget to start looking into quantum. And that means quantum is a critical technology for them to support the space and the arms race and the protection race, right? So from a security perspective. But a big part of it is like every country is trying to figure out the whole supply chain of how are we going to create all of these different demands for semiconductors and chipsets and picks and shovels, as they call it. And what about the critical resources that we have, right, that we need to develop?

16:03Things like minerals, rare earth minerals, copper, you know, silicon, lithium niobate. So these are minerals that are out there that are mined. So if you take a look at that, right, so you have powerful countries that can afford to develop these kind of technologies. And you have resource rich countries that are rich in resources. So how are we going to partner with them and collaborate with them? Is there going to be a little bit of a friction that happens with that in the race for resources to meet the supply chain demands of these chip intensive, compute intensive industries? So I think we also have to look at it from those two perspectives, supply chain and resources.

16:50Mish, this is exactly what you were starting to say. Thoughts? well yeah i actually had never thought of it in terms of a race like an arms race kind of thing and i thought that was kind of brilliant because it articulated and sometimes i try to say things about what i see uh like shortages of raw materials uh and and i get a sense of them and then you hear an expert like this articulated so beautifully and i'm always very grateful for that and certainly this is the case so because what he's really talking about is kind of what i'm inferring is not only do we need a vast amount of natural resources, but we also have to depend on playing nice with these countries who provide them.

17:32And as we know, we've been sort of heading more into an anti-globalist situation here in the U.S., right down to the chip and the chips race, because we're investing so much, billions and billions of dollars of being able to produce our chips here. But everybody's going to depend on those same raw materials. So it's really going to get down to that. How much is there? And will countries be willing to trade them freely? Yeah. And where it's going to get priced as a consequence of both of those factors. I think that's so well said. I'm not an expert on this either. But to your point, I often hear people talk about things like battery technology as this kind of panacea, like, well, it's going to be battery technology.

18:11We're not going to be reliant on fossil fuels, which is great, obviously. But they talk about it sometimes almost like it's computer code. And it's like, hey, guys, this requires material resources too, things like rare earth elements and a whole series of other types of factor inputs that really ultimately come from the earth that need to be mined, that need to be distributed, that have political access questions, and of course, that have price impact. And that is a great segue, Ash, to the four-screen chart that I sent you, because I wanted you guys to see monthly charts of Tesla and some of the materials that go into these batteries and these EVs that that we're talking about right now.

18:50So again, I'm really into the zooming out now because most people are looking at things that on a daily basis, that 20 % were in a bullish market or there are some people looking at it weekly. I've been completely fixated on these monthly charts and they've worked beautifully. I mean, obviously, if you just followed that, you would have known to get long the NASDAQ. You would have been long, not necessarily Tesla, but NVIDIA and Microsoft and all these stocks have taken out that 23 month. But here I found so interesting. I haven't actually compared the four of these before, but let's start with Tesla, right?

19:2813 days in a row, Tesla has gone up, right? That's what every media head is talking about right now. Look where it may be stopping right here at the 23 month moving average. Now that doesn't mean it will, but it certainly wouldn't surprise me if after this 13 days of rally at this key two-year expansion period or 23-month moving average that we start to see some kind of at least correction. And I wouldn't dismiss the possibility of some kind of top either. How long that top is remains to be seen. And then you move over to lithium. So, right, lithium is definitely a key ingredient in terms of batteries and EV.

20:13And lithium also has really basically not been able to get over that 23-month moving average. So it's almost like so much of this is based on hype and not necessarily actual production yet. So that could change. And with more production, obviously more stress and then obviously more bullish for something like lithium. And then yet if we move to steel, now steel has a double edge, right, because it's used in EVs, but it's also used in home building. And the home builder sector has been very strong, which, of course, has also defied everybody who's called the housing crash. This is why, you know, you've got to take all this stuff with a grain of salt and learn how to read a chart.

20:57So here we have steel, and this is steel dynamics, over the 23-month, has been, never really broke it, which is why I have not been able to get into the disinflation or deflation camp. I'm looking right here saying it corrected to support, and now it's holding it, but we've got to see what happens from here. And then finally, copper is another one, Dr. Copper. Right now, this is Freeport, McMorrin. This is not straight-up copper, and I do like to look at the underlying, but I thought for the purposes of the 23 month, this would be fun. It got through the 23 month. Now it's sitting right on it again.

21:32So what this all tells me is very simple. It tells me that the EV space has run up on some really good news. Obviously, the fact that Tesla has made deals with General Motors and Ford has helped. We are going to need infrastructure and charging stations that Tesla has been competitive. And yet NIO just came out and went much lower in terms of their prices, so China's still in the game. And these raw materials that supply these EVs and these batteries are already moving up vis-a-vis, as we're seeing in steel and copper. And lithium could be the next thing to explode. It's very much controlled by Chile as the biggest producer, and that's all government controlled.

22:15But it gets back to that point, right, about playing nice with governments and getting enough exported out from these countries that have them. We're going to take another quick break and be right back with more of the day's top analysis on the Real Vision daily briefing.

22:34By the way, talking about commodities, here's a question that comes to us from TrillionXMacro on YouTube. Mitch, what's your view on agriculture commodities? And then he adds or she adds DBA to the moon. I think that's the Invesco, one of the Invesco commodity funds. Well, I also sent you a chart of corn futures. And I'm really glad I got that question and not necessarily about gold because gold is just kind of like sitting there like a dud right now. And so last time I was on and I talked with Maggie, we talked about DBA, may even be the same person asking this question. And I said it was very much in a range, right?

23:10So DBA was trading like kind of between 2050 and 2130. So here we are back at the top of the range. At the same time, if we take a look at this corn chart here, this is corn futures, by the way, a couple of things to know. Number one is the plantings. USDA had a couple of key reports. One still coming up. One is in terms of how much is planted. Well, wheat and corn are still well below. And the second and probably even the more important one will come out on Thursday, and that is drought. And right now, 45 % of the corn in this country is dependent on growing in regions that have had severe drought.

23:49And we've got El Nino going on. And, you know, El Nino can wreak its own little havoc. It can either create tremendous floods like we just saw in Cuba or tremendous drought like we've seen around the world and certainly in some of the pockets here in the plains in the U.S. These are the short-term weather cycles, El Nino and La Nina, that alternate back and forth and can cause, as you said, chaos in either direction. And we're in the season, right? And we're in the summer season to boot. So corn right now, look at this. It had this great bottom. And now it's clearing that green line would be the, excuse me, that's the blue line.

24:22That would be the 50-day moving average. And the momentum indicators are also, just like I showed you before, they're also showing now some kind of a mean reversion with price going up. Which tells me that now DBA, because it will be joined by wheat and possibly soybeans, sugar's taking a pause, coffee's taking a pause. But really, we're looking at grains here. If DBA gets over this 2130 level, yeah, I might agree with that to the moon, at least to 22. Yeah. Here's a question about another commodity, but of a very different kind. This time it's from Chris Fool from the YouTube channel. What does Mish expect for Bitcoin in the short term considering the incoming rate hike?

25:03Obviously, a little bit of a presupposition in there. Well, I'm not quite exactly sure I would say that the rates are really the thing that's been impacting Bitcoin lately with Gensler and the SEC and Binance. And I mean, it's really it's been a headline a minute. It's been hard to even keep track of unless you're just an expert in that area. But what I will say is this 24 ,000 to 25 ,000 level has held up like crazy, which is amazing. I have listened to experts like, let's say, Will Clemente or even our own Holden. He believes that we are going to bottom out pretty soon here. And starting in October, we're going to start to see rallies, particularly in Bitcoin.

25:48And I'm going to go with that. I'm going to say that I wouldn't necessarily want to be involved right now. But if we still see all this bad news absorbed and we start to move away from this 24, 25, even 26 ,000 area, then that could be the start of something much bigger in Bitcoin. And that's about the best I can say about it right here. Yeah, I was watching. I, of course, as many of our viewers know, host Real Vision Crypto Daily Briefing at noon. Bitcoin trading right now at 25 ,848. We had a little bit of an interesting move today. It dipped below the$500 billion market cap level, briefly, for like 30 seconds.