Is the U.S. Dollar Bull Market Over?

Timewise, the U.S. dollar rally was on its last legs in 2020. The prior dollar bull market lasted about six years. There is still the possibility of extension. Macrowise, it should have broken out, but central bankers have intervened at multiple points in 2016, 2018, 2019 and 2020. Moving forward, will the U.S. avoid any correction in the market and move straight into expansion, or will this all blow up in central bankers faces next year? The similarities to the Nasdaq melt up in 1999 and the commodities melt up in 2008, make me still lean towards a much higher U.S. dollar before this cycle ends. Support for the dollar is at 88, and then 83, with 99 being the more important level. Since the euro is by far the most important component of the DXY, it will give a bullish signal long before DXY. A EURUSD advance to 1.21 would invalidate the large topping pattern. The euro only need advance 2 percent to achieve that feat.


Modest Inflation Points to $6,000 Gold

Below are charts comparing gold and silver to the CPI Index, specifically CPIAUCSL at FRED. I believe the CPI is reasonably accurate. Most inflation in the past 40 years flowed into financial assets with the exception of the 1998-2008 commodity bull market.

1. Gold vs CPI has an incredible basing pattern. The measured move out of this pattern is 15.5x the CPI Index. If inflation were approximately 4.1 percent annualized over the coming decade, gold would trade at $6,000 per ounce. The prior inflation spikes accompanied gold outperformance.

2. Assuming the CPI is reasonably correct, the charts indicate the gold/silver ratio will break out to a new range. This is my bias, but I believe gold will establish new ratios with most commodities. Gold will be remonetized over the next 20 years.

3. If CPI is understated, silver has been a terrible long-term investment if the goal was preserving purchasing power. Gold might also be a poor ultra long-term investment. The implication of high real inflation, and stubbornly lower precious metals, points to the Julian Simon argument being correct. Commodity prices are in long-term decline thanks to improving technology.

4. Silver and other commodities can outperform gold for years because they are at the low-end of their valuation relative to the CPI index (oil and platinum are less than one-third of their ratios with CPI), but long-term, it points to gold holding its value better. The Julian Simon argument might hold for most industrial commodities.


"This is Old News" Say Bulls as Chinese Investors Dump Shares

Is it a bull market correction or the beginning of the end?

Geopolitical risk is nothing new. Embassy closings are more political in nature than economic. Threats to tech companies and Hong Kong's status were far more relevant for the stock market, yet the bulls ignored it on the way up. Now on the way down, headline writers are pointing to embassy closings, a news item that would be ignored by the stock market in a time of positive mood. The dip, along with the inability for the financial media to identify a credible explanation, highlights the possibility that market mood is turning again.

iFeng: 一则过时消息成暴跌推手!谁在制造恐慌气氛?A股1天蒸发3.3万亿
It stands to reason that in the face of Sino-US friction, the probability of market weakness is relatively high. However, in the absence of a sharp decline in the periphery, the decline in A shares was somewhat beyond the expectations of most people in the market.

On July 24, under the background of the weak performance of U.S. stocks in the night trading and the re-escalation of international disputes, the A-shares opened lower in the morning, and then the decline increased. The Shanghai Composite Index fell by more than 4% at one point, but still fell 3.86% at the close, falling below 3,200 points. It is worth noting that the bargaining chips of technology stocks have loosened, representing that the ChiNext Index closed at 2,627.84 points, down 6.14%; Kechuang 50 closed at 1,389.31 points, down 7.02%. A-shares evaporated by nearly 3.3 trillion yuan that day, and the actual net sales of northbound funds were 16.357 billion yuan, and the net sales in the past two trading days reached 20 billion yuan.

Judging from the information on the disk, according to the Chinese Ministry of Foreign Affairs, on the morning of July 24, 2020, the Chinese Ministry of Foreign Affairs notified the U.S. Embassy in China that China has decided to revoke the permission for the establishment and operation of the U.S. Consulate General in Chengdu. Stop all business and activities and put forward specific requirements. The above-mentioned measures by China are a legitimate and necessary response to the unreasonable actions of the United States. They are in compliance with international law and basic norms of international relations, as well as diplomatic practices. After the news was released, the market saw a greater degree of slump.

However, it is still an outdated news that really accelerates the market. During the session, a news about Trump's press conference circulated widely in the market. The news stated that there will be explosive news that will shock China and foreign countries. However, the reporter found that this press conference had already been held in the morning Beijing time and there was no explosive news.

So, who is creating the atmosphere of panic? Can the market continue?

Interest in Precious Metals Returns to China

iFeng has a whole section dedicated to precious metals. 黄金白银暴涨

Here's an article from that section, discussing silver's 90 percent rise in 4 months. I ends with a warning for leveraged traders: 白银价格惊天暴涨超90%!仍在历史高点“半山腰”上 为何疯狂暴走?
It is worthy of investors' attention that although the future trend of silver prices is still optimistic, the recent rise in silver prices has triggered the speculation of leveraged funds. According to statistics, the incremental funds of various silver ETFs and other financial derivatives around the world have poured into 1.5 billion US dollars in the past two days. Therefore, especially traders who have participated in leveraged trading and margin trading, need to be alert to the trading risks caused by short-term shocks .

Another discusses the gains Chinese aunties will have thanks to their dip-buying that started in 2013: 涨疯了!黄金、白银携手上热搜,金价创9年新高!中国大妈解套了
Chinese aunts all solved the problem and made a lot of money

In April 2013, the international gold price experienced a rare sharp drop in history. As of the end of May 2013, the price of gold had dropped to US$1386.4 per ounce.

At this time, Chinese aunts quickly entered the market and hunted down the gold price.

Statistics show that they bought 300 tons of gold at an average price of about US$1,300 per ounce. This move even supported the market in the short term, and allowed gold prices to rebound. It also allowed national buyers to witness the purchasing power of Chinese aunts.

However, this wave of bargaining has been copied halfway through the mountain.

Since then, the international gold price has fallen all the way. As of the end of 2015, the international gold price reached 1060.24 US dollars per ounce. That is to say, the Chinese aunt who bought gold in April 2013 suffered a loss of about 30%.

Subsequently, the aunt seemed to disappear, but the price of gold has been rebounding.

In the two time periods from June to the end of September 2016 and from January to April 2018, the price of gold once rushed to the $1,300/ounce point, and the market had opportunities for understanding.

In January 2019, the gold market became warmer and once again stood at US$1,300 per ounce. Since May 2019, the price of gold has been in a shocking upward state, and the monthly trend of COMEX spot gold is very sharp.

In other words, if Chinese aunts have been holding gold, they will not only be able to solve the problem, but also gain a lot.
The article also discusses why gold and silver are rising. It points the finger at the weaker dollar and excessive money creation in Europe and the USA. Of note, it doesn't mention Chinese credit creation at all. The avoidance of words such as yuan and People's Bank of China is conspicuous.

China Expected to Tighten Monetary Policy in 2H

China will decelerate its credit growth in the second half of 2020 with the economy stabilized and nascent speculative fever threatening bubbles in housing and stocks.

21st Century: 货币政策已回归常态 下半年或是稳货币、紧信用组合
As usual, the Political Bureau of the CPC Central Committee will hold a meeting in late July to analyze and study the economic situation and make arrangements for economic work in the second half of the year. Among them, the market is highly concerned about whether there will be fine-tuning of monetary policy.

Wind data shows that the recent DR007 interest rate has remained at around 2.2%, which is roughly the same as the central bank's policy interest rate, and has risen by 70BP compared to the average level between March and May. This means that monetary policy has returned to a normalized level from the ultra-loose state during the response to the epidemic.

Monetary policy operations in the second half of the year are faced with a balance between pros and cons. On the one hand, the macroeconomic status quo requires monetary policy to relax support, and at the same time, lower inflation makes monetary policy loose. On the other hand, restraining idling arbitrage, the surge in leverage, and the pressure of rising housing prices require appropriate tightening of monetary policy.

The reporter learned that the reason for the central bank's withdrawal of the ultra-loose monetary policy is the gradual stabilization of the macro economy. Looking forward, the probability of further tightening of monetary policy in the second half of the year is not high, and it is still on the loose channel. However, there are still differences in the market as to how far the central bank cuts the RRR and interest rates.

"The period of the most loose monetary policy during the year has passed. At present, the real economy is showing signs of marginal improvement. The operation of monetary policy should be adapted to the situation of the real economy. Therefore, monetary policy will enter an observation period. The operation of quasi-cutting interest rates will be more cautious." Wu Chaoming, vice president of the Institute of Finance and Information, told a reporter from 21st Century Business Herald.


Ren Zhiqiang Kicked Out of the CCP

SCMP: Chinese coronavirus critic Ren Zhiqiang under investigation, Communist Party disciplinary committee says
Ren Zhiqiang, the former Chinese property tycoon and outspoken critic of the government’s handling of the coronavirus outbreak, is under investigation for alleged “serious violations of law and discipline”, the Communist Party’s disciplinary watchdog announced.

In a short statement released on Tuesday, the Commission for Discipline Inspection in Beijing said that Ren – a member of China’s ruling Communist Party and a former top executive of state-controlled property developer Huayuan Real Estate Group – was under investigation.

Friends say that they have lost contact with Ren, 69, since March 12 after an article he wrote criticising the way in which Chinese government responded to the coronavirus outbreak was widely shared online.

In the essay, which does not mention the top leadership by name, Ren was critical not only of the initial cover-up of the virus outbreak, but also of the way in which Beijing is now promoting its success in handling it. Additionally, he was critical of the growth of Chinese President Xi Jinping’s personal power.
一财: 北京市华远集团原党委副书记、董事长任志强严重违纪违法被开除党籍
A few days ago, the District Supervisory Committee of the Xicheng District Commission for Discipline Inspection of Beijing Municipality conducted an investigation and investigation on the suspected serious violation of discipline and law by Ren Zhiqiang, the former deputy secretary and chairman of the Beijing Huayuan Group.

After investigation, Ren Zhiqiang lost his ideals and convictions, abandoned his original mission, and kept consistent with the Party Central Committee on major issues of principle. He publicly published articles against the four basic principles, vilified the image of the party and the country, distorted party and military history, and was not loyal to the party. , Dishonest, against organizational review; violation of the spirit of the eight central regulations, illegal eating and drinking with public funds, illegal holding and using public funds to purchase golf cards; when organizing conversations, failing to truthfully explain the problem; using public power as a tool for personal gain, Illegal use of public funds should be reimbursed for expenses that should be paid by individuals, long-term free use of office space and housing provided by social businessmen, and huge profits from affiliated companies engaged in illegal profit-making activities; improper performance of duties caused major losses to state-owned assets; family traditions were corrupted, family education Lax, and collaborating with their children to make money.

Ren Zhiqiang seriously violated the party's political discipline, organizational discipline, integrity discipline, work discipline, and life discipline, constituted a serious job violation and was suspected of corruption, bribery, embezzlement of public funds, and state-owned company personnel abuse of power. In accordance with the relevant provisions of the "Regulations on Disciplinary Actions of the Communist Party of China", "The Supervision Law of the People's Republic of China" and other relevant regulations, the Xicheng District Commission for Discipline Inspection decided to expel Ren Zhiqiang from the party; cancel the benefits he enjoyed according to the regulations; collect his disciplinary and illegal income; The suspected crime was transferred to the procuratorial organ for review and prosecution in accordance with the law, and the property involved was transferred with the case.


Socionomics Alert: No Mood for Cocoa

Another sign of the broken stock market comes from cocoa demand with consumers foregoing small luxuries such as chocolate.

Contrary to "common sense" that says people listen to music and watch movies to change their mood, socionomic theory says they choose activities that reflect their mood. If the commodity analyst is right and chocolate is a good-mood food, the dip reflects mood plunging to levels unseen in nearly a century.
ZH: Cocoa Prices Hit Two Year Low As Chocolate Consumption Falters
Swiss chocolate maker Barry Callebaut reported last week a 14.3% decline in last quarter sales as volumes sold to retail clients were halved.

ICE Europe cocoa futures plunged into a bear market in early July with prices down 24% in 22 weeks. The plunge in prices started around the time the pandemic began (late January/early February).

...Carlos Mera, a commodity analyst at Rabobank, told Financial Times the plunge in prices reflected consumers slashing discretionary spending. "The main factor is people are not in a celebratory mood," he said, referring to the downturn in the global economy.

Some commodity analyst uses the bean as a barometer of the economy because chocolate sales are highly dependent on consumers. So the break lower in cocoa prices could suggest the global economy is not recovering in a "V" formation but rather an "L."


China Dollarized More Than Ever

The quickest path to de-dollarization is devaluation. China has accomplished very little in the way of dedollarization over the past decade. They've mainly dedollarized their FX reserves, effectively going short the dollar amid a bull rally. If the dollar keeps rising....

The position here is the same as it has been for years. Major yuan devaluation is coming, either before or after a major political conflict. Back in 2014 I though they'd devalue and the U.S. would retaliate with tariffs. Now tariffs are already coming back, there is a trade war, tensions in the South China Sea are rising, the U.S. blames China for the coronavirus outbreak, Hong Kong national security law, plus issues such as Uighur internment, cyber espionage, banning TikTok, blocking Huawei, arresting spies in U.S. universities, the list goes on. At some point the relationship can bend no more and China stops worrying about the political fallout from the necessary plunge in the yuan's value.

All fiat currencies must fall given debt levels, but the choice is the dollar takes everyone down together, or the other currencies devalue versus the dollar.

ZH: The Dollar "Has Us By The Throat": Chinese Official Urges Gradual Decoupling Of Yuan Ahead Of "Full-Blown Escalation"
In a brief outline presented separately by Nikkei, Zhou's position is that the Chinese must prepare:

1. For the deterioration of Sino-U.S. relations and the full escalation of the struggle.

2. To cope with shrinking external demand and a disruption of supply chains.

3. For a new normal of coexisting with the novel coronavirus pandemic over the long term.

4. To leave the dollar hegemony and gradually realize the decoupling of the yuan from the dollar.

5. For the outbreak of a global food crisis.

6. For a resurgence of international terrorism.

Again, such a grim position forecasting isolation is nowhere near the official Chinese Communist Party line, but represents a predicted necessary future reaction to full-blown long lasting conflict with the US.


S&P 500 Back to Tracking Fed Balance Sheet

the Fed balance sheet peaked on June 10. The S&P 500 Index peaked the same week.


High Yield Spread Bounced Off "Sell" Signal Line

The red horizontal is a sell signal for stocks. When the option-adjusted high yield bond spread crosses above, sell. It does not produce a buy signal except in hindsight. Of note, the spread bounced off the sell signal line.

Ozymandias Stock

Macro Charts for July 2020: Credit vs Equity Indexes

Here's the DJIA and QQQ versus TOTLL (Loans and Leases in Bank Credit, All Commercial Banks). You can see the market peaks in 1999 and 2020 clearly. What's notable is the market goes above the horizontal right around the time Greenspan warns of irrational exuberance. It also goes over right as volatility is about to blow up in February 2018. The "inflation lows" are in the early 1980s and 2008, the deflationary collapse at the end of a period of inflation.
This next chart is QQQ vs the Fed's balance sheet, WALCL. QQQ must rally about 32 percent to retake the horizontal.
My takeaway is stocks may lose value relative to credit creation in the coming years, assuming the relationship holds. An alternative is QQQ is basing and will break out to a new high, that QQQ will outstrip credit creation. This requires QQQ strengthening its intellectual property exposure towards efficiency rather than branding. Companies such as Apple could under perform in high inflation even if Apple beats companies with weaker brands, whereas a company such as Nvidia could climb as companies spend faster to beat rising costs.

Here's the ratio of gold to the Fed's balance sheet and TOTLL. WALCL doesn't tell us more than TOTLL: gold has been in a credit-adjusted bear market since peaking in 1980. The quick and dirty message is that gold is trading at 20 percent of its 1980 peak value relative to total credit. Gold would have to trade at $9,000 today to match the 1980 peak. For a more reasonable and more immediate target, for gold to hit resistance, it would have to rally to about $2170 per ounce.
What popped out to me was how the long-term gold-to-credit chart looked a lot like the U.S. Dollar Index, albeit with different dates.
Takeaway: if credit growth will accelerate here and CPI inflation also take off, then assets such as gold should experience turbocharged gains as they rise much faster than credit growth. An explosion in gold would require a much larger rise in inflation than seen in the 2000s though. Equities will underperform as they tread water or even decline relative to credit amid price inflation. However, if credit mainly flows back into assets such as stock, as has been the case from 2011-2020, then equities could still deliver large real returns for investors. It doesn't seem like a repeat of the past 10 years is coming if only because of the political volatility being generated.

China Forex Reserves Heading for 10pc of M2

It doesn't matter until it does. China's forex reserves covered 10.3 percent of M2 as of June 30. The rally in the yuan since then has reduced coverage to 10.2 percent.

M2 grew at 11.1 percent yoy in June, the same as the prior month. Month-on-month growth in M2 was 1.65 percent, which was similar to the 1.60 percent in June 2019. If the PBoC wants to hold M2 near 11.0 percent yoy growth, the next three months combined will see about as much credit creation as June alone.


China Prepares For Falling Population as Fertility Crashes

21st Century Herald: 多地出台鼓励生育政策背后:00后比90后少了4700万
"In the past, I wanted to give birth but could not give birth, but didn't dare to give birth, but now I was urged to give birth without giving birth, and the times have really changed!" After repeatedly urging her daughter to give birth to no results, Ms. Huang, 52, had no choice but to give up.

She couldn't figure it out: Now that the eldest daughter has been married for several years, she still refuses to have a baby after all persuasion.

"Marriage is not the beginning of a real marital life, it is the birth of a child." Ms. Huang's daughter Chen Ling (pseudonym) confessed that she currently has a small house and a car in Beijing. Although she has the foundation to have children, once she has children, Life is no longer as simple as the two-person world. "Let's wait any longer."
The number of Chinese age 10 to 20 is nearly 50 million less than the number of 20-to-30 year-olds.
Falling fertility is the price of using women to produce GDP instead of children. Materialist philosophies push religion and tradition out of society and replace it with money. Once enough people have shifted into GDP-production and mass consumption, the feedback loop kicks in. Peer pressure pushes young people to study longer, take on debt, delay marriage and family formation. Rising per capita household income drives up the cost of real estate. Keeping up with the Jonses becomes more expensive. (Neighbors of lottery winners are more likely to go bankrupt)

China's fertility rate is converging with the rest of East Asia, which is lower than replacement level. Policies such as the two=child policy produce small temporary effects that are quickly overwhelmed by long-established trends:
The first batch of single children with two children entered kindergarten in 2017. According to statistics from the Ministry of Education, children admitted to kindergarten in 2017 did reverse the previous downward trend, an increase of 158,700 compared with 2016. However, by 2018, the number of children enrolled in kindergartens across the country decreased by 740,000 compared with the previous year, and the number of children enrolled in kindergartens in 2019 was again reduced by 1.75 million from the previous year.
China is uniquely positioned to reverse fertility because it has total control over the culture. If it wants to change it can, but this might require an entirely new approach to economic development as well:
More policies to encourage fertility
Facing the situation of the birth population that has fallen too fast, the family planning policy that has been implemented frequently for decades has been quietly changing.

Following the deletion of the "implementation of family planning" in the marriage and family chapter of the "Civil Code of the People's Republic of China" adopted by the Third Session of the 13th National People's Congress, on June 3, Article 15 of the "Regulations on Population and Family Planning of Henan Province" Amend the paragraph to read: "Promote a couple (including remarried couples) to have two children."

On June 9, Ningxia deleted the provision of "expulsion beyond birth" for public officials in the revised family planning regulations. Previously, it also proposed that employers be encouraged to give 10 days of joint parental leave each year to their spouses each year when their children are 0 to 3 years old.

In addition, since this year, many places have also introduced a series of measures to encourage fertility. For example, Beijing adjusted the treatment of childbirth medical expenses, Guangdong required the full implementation of maternity leave, and Guizhou proposed that it should not be dismissed due to the pregnancy of female employees.

"Some of these policies are corrections to past policies and some are responses to national policies. Generally speaking, they are developing in a looser direction." But Huang Wenzheng believes that the effectiveness of related policies in improving fertility remains to be seen.

The current fertility encouragement policies in various countries can be divided into three categories: financial support (that is, cash, food stamps, or tax relief for families with children), day care and education support (that is, education subsidies), pregnancy and childbirth Benefits (such as paid maternity leave).

However, Wang Hui and others from Peking University Guanghua School of Management found that the effect of subsidies is not significant in the economic sense. It pointed out in the article "Challenges of Population Changes and Aging in the 70 Years of New China" that the average consumption of 10% of GDP as a subsidy can make each family have one more child, and the cost is very high.

"Fundamentally, it is necessary to coordinate fertility policies at the national level." Lu Jiehua, a professor at the Department of Sociology at Peking University, believes.

Population issues need to be planned in advance
According to the forecast of the Chinese Academy of Social Sciences in 2019, if China's total fertility rate has been maintained at 1.6, the negative population growth will occur early in 2027.

"Now, if the fertility policy is not adjusted, the inflection point of negative population growth may arrive earlier than 2027." Lu Jiehua said in an interview because the calculation at that time was based on the total fertility rate of 1.6, and the current fertility level is already It fell to about 1.5.

"Whether it is the experience of various parts of East Asia or various analyses, the later the low fertility rate, the harder it will be to deal with." Huang Wenzheng emphasized that it takes 20 years for a person to fully enter the economic cycle from birth. The impact of growth lags behind by about 20 years, and population issues must be planned in advance.

Lu Jiehua also holds this view. In his view, the birth policy should continue to be adjusted. At the same time, the fertility policy is not a one-off. "The effect of the maternity support policy will be more obvious." Huang Wenzheng suggested that the policy formulation needs to first solve the problem of high cost of care for infants and young children aged 0-3 and 3-6 years old in order to effectively encourage and increase the fertility rate.

At the same time, the issue of gender inequality should also attract attention. Lu Jiehua emphasized that after the implementation of the comprehensive two-child policy, many companies have a negative attitude towards recruiting female employees and need to strengthen the protection of women's rights and interests from the institutional level.
Feminism is a materialist philosophy designed to boost economic production. Anyone coming from a pro-feminist viewpoint will fail to boost fertility. Assuming China will stick with materialist philosophy and the CCP won't allow rival belief systems (such as Christianity and Islam), one way to boost fertility might be to encourage "professional" motherhood. The state could pay mothers substantial salaries if the have 6+ children (via tax credits), perhaps including free villas in planned communities for these high-fertility families. Another would be to use the state's full power over media to push parenthood. Encourage celebrities and government officials to have more children. Make a new rule in the party: you cannot be promoted to a public role unless you have at least 2 children, and having more children boosts your "score" for promotion. That might get fertility back towards replacement or stabilize it at a higher sub-replacement rate.

In short, shifting the trend in fertility requires a Herculean effort. Assuming this is the state's goal, the most sustainable option is fundamental reform of religion and politics. Barring that, the state must take extreme efforts to counteract its fertility-suppressing ideology. Until there is a shocking policy announcement, the safe bet is that long-term fertility will trend downward until it stabilizes, likely because of natural selection. At some point, people who prefer having children over increased consumption will grow within the gene pool. It would likely have to be a genetic trait in a state such as China since materialism is the ruling ideology and allows no competition. In the West, minority populations such as traditionalist Christians, including the Amish, will stabilize fertility sooner.


Chinese Pork Prices Rising at 500pc Annualized Rate

Chinese pork prices are up nearly 17 over the past 5 weeks.

iFeng: 短暂降价后猪肉批发价现五连涨,这次又是因为啥?
Last week (June 22-28), the wholesale price of pork was 44.66 yuan per kilogram, up 2.9% from the previous week. In addition, the wholesale pork prices for the week of June 15-21, June 8-14, June 1-7 and May 25-31 were up 5.1%, 3%, 3.8% and 1.1 respectively from the previous week %.

Overall, the wholesale price of pork last week was directly increased by 16.79% from the 38.24 yuan/kg before the price increase. Data from the Ministry of Agriculture and Rural Affairs also showed that the national average wholesale price of pork was 45.74 yuan/kg in July, a year-on-year increase of 93.4%.
Why are pork prices rising?
Fu Yifu, a senior researcher at Suning Financial Research Institute, explained to the Beijing News reporter at Shell Finance that the swine fever rebound, blocked pork imports and heavy rains have led to rising transportation costs as the three main reasons for this round of pork price increases.
Inflation is latent until a spark is lit in a credit money system. In a fiat system where cash is being given out, inflation is almost immediate. In a financialized credit system, the financial markets act as a giant filter soaking up new credit. Creating new debt to pay off old debt, for example, can even cause deflationary behavior because it pushes more people towards bankruptcy.

At least one analyst sees a new permanently high plateau for pork prices:
So, will subsequent pork prices continue to rise?

According to the opinion of Guojin Securities Research, as the current price correction rate of pigs is basically the same as the improvement of the leading indicator of pig stocks, considering the seasonal factors, there is less room for the decline of pig prices in the third quarter. After the short-term supply and demand mismatch has eased The average pork price is expected to fall slightly. From the perspective of the number of capable sows, there is still some downward space for the price of pigs in the fourth quarter. If the adjustment of the price of pigs by the end of the year is the same as that of the leading sows, the price of pigs will be at 35 In the range of -40 yuan/kg, the price is unlikely to fall back to the 20 yuan era.
If there is going to be inflation as a result of the coronavirus pandemic, broken supply chains and government/central bank response, something like pork prices in China (and soon after the rest of the food sector) is where it should emerge. If China can't get inflation going in these conditions, the inflation narrative is still broken after 11 years.


After All That We've Been Through, It All Comes Down

Well, here we are again
I guess it must be fate
We've tried it on our own
But deep inside we've known
We'd be back to set things straight

Continuing Claims Holding at Elevated Level

The Department of Labor estimates unemployment was 13.2 percent in week ended June 20. Continuing claims still had a 1.4 million handle, indicating no hiring surge that would explain the BLS estimate of 11.1 percent unemployment. Unless millions of people not on unemployment were not working and have since returned to work. The two data sets cannot be reconciled, as the BLS uses a model, but roughly speaking, BLS is saying a net 4 million people returned to work who were not on unemployment. My sense is the DoL is far more accurate. The BLS model was criticized during normal times. I have a hard time believing current events haven't broken the model.

Dumping the BLS report, the DoL report shows improvements in the labor market, but no V-shaped recovery.


Demographic Headwinds Arrive

The U.S. fertility rate is below replacement. Population growth is about 50 percent immigrants, and higher if you include native born children of immigrants because recent immigrants have higher average fertility. The current ban on immigration, likely to be a permanent policy, will eliminate the majority of population growth. A decline of 0.6 percent from economic growth gets one close to a target of around 1 percent GDP growth per annum. Even if there is some population growth, the marginal impact on sectors such as housing will be much larger than a linear extrapolation from population. Add in other factors such as aging of the population and the inefficient healthcare sector consuming ever more reasons as the country ages and the long-term outlook is not great for growth.
The chart below from RealInvestmentAdvice.com is far closer to a potential reality than is understood today. Their long-term growth forecast is 1.07 percent. My hunch is the coming decade will be more volatile than the last, and that the current recession will last longer than anticipated. Average growth could be around 1 percent, but it will come from much bigger losses early on and stronger growth in the later years. Either way, forecasting sub-1.8 percent growth is a high probability forecast until there is a deflationary credit collapse or a jubilee/currency collapse that wipes out debt.
ZH: The Decade Long Path Ahead To Recovery, Part 1: Debt