18 March 2022

The laws of the free market have been sacrificed at the alter of vested interests at the LME.

Nickel fell by the maximum allowed for a second day as the market seeks to reset from last week’s historic short squeeze, while brokers were left stunned as yet another glitch delayed the start of trading in London.

Nickel futures on the London Metal Exchange plunged by the 8% daily limit on Thursday to $41,945 a tonne, although only a handful of trades were recorded. Prices dropped by the previous 5% floor on Wednesday when the market opened from a week-long suspension imposed to try and restore order to the market after an unprecedented spike in nickel caused chaos across the metals industry.

I think Mr Big Shot or Mr Big Short is now likely to escape his mark to market losses as he reverses the squeeze on those trying to bear squeeze him.

Remember I mentioned in my last letter the commodity trading firm Trafigura well they are still struggling to fund their margin accounts as we see reflected in their corporate bonds.

Money Complex

Let me share an insight that is becoming more and more apparent as we start to get better insights into the world of central banking with the steady flow of behind the scenes in the form of books and media reports. Central Bankers are influencers, they are actors, they are salesman, they are liars and some are megalomaniac’s.

More about this in a minute first lets look at some stats.

Not every recession is led by a 50% rise in crude. But every 50% rise in crude has led a recession. (h/t Jim Bianco)

Over the last 5yrs an inverted yield curve has called every recession.

I am seeing some strange divergences with the yield curve 10y – 3m, and 10yr – 2y so I am not 100% sure how to read this. See below.

If you look at the S&P 3 month returns going into a tightening cycle this is the weakest market we have seen at this stage of the cycle in 50yrs.

Ok with those props let me get back to Mr Jerome Powell.

In case you were living in a cave this week you will have heard that the FOMC raised rates 0.25% with Powell suggesting 6 more rate hikes to come this year. He assured American’s the economy will not tip into recession.

The American economy is very strong and well positioned to handle tighter monetary policy.” Let us remember these words in the years to come as we remember the words “transitory” when describing inflation that is now at 40yr highs.

For those of you new to the central banking game, this is called jawboning. Don’t believe a word of it keep watching the bond markets (when the Fed stops manipulating) and the economic data to see what is really happening.

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