Welcome anon to another week of paid content.
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Please feel free to skip around or ignore certain sections if it does not apply to you. The Table of Contents is made to preserve your time in this manner. You can always simply read the conclusion if you are in a hurry.
All times given in this update are in US Central time (UTC-6 clock).
Song of the Week - Voochie P, Lil Sauce White, and Sauce Walka - Karate Body
The Japanese dude needs subtitles, but his verse went hard. Similarly, I’m gonna have to find subtitled versions of this weeks speeches from the Bank of Japan if I want to understand whats going on over there.
Table of Contents
The Obvious Failure of Sanctions
Economic Calendar
NZ and Canadian Interest Rates
New Zealand
Canada
European Interest Rates
French Presidential Election
US Inflation
Bank of Japan
Crypto Macro
Centralized Exchanges Going down
Conclusion
1. The Obvious Failure of Sanctions
It’s been a month and a half since Russia invaded Ukraine and the west set out on the silliest possible path they could have chosen. Sanctioning Russia. As of right now, Russia is on pace to set a record for income from their nationalized economies this year.
This outcome was always going to happen and was clear before Russia even invaded. Bloomberg notes that they calculated 2022’s income based on current prices. You might rebut with “but nobody is buying from Russia anymore, they are sanctioned,” but, countries are still buying oil, gas, uranium, food, fertilizer, and other exports from Russia. Most simply can’t afford not to, or do not have any alternatives in place. Which was why the sanctions would never work in the first place.
The ruble of course has completely recovered in value since the initial sanctions that had Biden tapdancing about the Ruble collapsing.
So what has happened? Russian nationalized industry profits have increased. The Ruble is back to it’s previous level, and many nations are now being forced to purchase Rubles in order to do business with Russia and purchase their exports. Russian entities were essentially gifted property that western investment had paid for as the west abandoned those investments in Russia. Russian oligarchs living overseas (who were unpopular anyways) had their property seized. Many other nations that previously settled trade in dollars on the SWIFT system (like India and Brazil) have begun settling some transactions in Rubles, Yuan, or their own local currencies instead. The west is experiencing shortages of food and shortages of energy and crippling inflation. While Russia is set to run another budget surplus while their national currency is strengthening.
You couldn’t have formed a better plan to cripple the west and empower countries outside of our sphere of influence if you had tried. This all plays in to the grand thesis of course of an asset bottom coming soon to the markets we are interested in (crypto, precious metals, other counter-inflationarys).
One thing that people have kept sending me that I’m going to respond to here is below. People keep DMing me articles and interpretations claiming that Russia has backed the ruble with gold. I’ve received many articles like this that are incorrect. No offense to any of you that have believed it, this is just a facet of our current media climate. Not everybody can be an expert in everything. I’m sure there are many topics within which you could run circles around me, and I don’t doubt that you would have the grace to treat my ignorance with the benevolent paternalism that we all thrive when placed under.
The Russian central bank did not peg the ruble to Gold. There was no 2 way fixed convertibility. All that happened was the Russian central bank told everyone that they were willing to buy gold at a fixed price from all major russian banks. Were they also selling gold at that price? No, they weren’t. In fact, their offered price was below the market price. No one could bring 5,000 rubles to the central bank and walk away with a gram of gold. Someone offering to buy something from you at a specific price is not the same as a central bank backing every single ruble with a fixed volume of gold in a vault and guaranteeing the exchange for Gold at any time and any place. In fact those two things are quite different, but this story nonetheless has been circling among this informational sphere and I wanted to clear it up. Also of note, the Russian central bank has already cancelled this open buy order and are back to negotiated prices for each sale.
2. Economic Calendar
Refer to Economic Calendar Settings Post for filter settings used.
There are a few impactful events going on here. The bank of Japan Governor is going to be speaking twice this week. I will make a concerted effort to try to find translations to see if they will be permanently implementing their bid into their treasury markets. If so that would make Japan the first major country to succumb to permanent QE after the 2020 crash.
US inflation will be coming out on Tuesday as well as the Royal Bank of New Zealand deciding on interest rate policy. We also have interest rate decisions from Canada and the European Union. I suspect that the EU will be the next entity to commit permanent suicide on their currency, and I’ll go into that more in the section on their rate decision.
We’re also going to talk about the French election here as well, it holds a special place in my heart, because in the 2017 French election, I remember holding a short position of EUR/USD (I was short the Euro against the US Dollar), over the weekend and getting burned when Macron won as I had been betting on Le Pen to pull it out. This year, it’s going to run-off to the same exact candidates in the 2nd round of elections and I’d like to talk about what it would mean depending on which candidate wins.
In the post above you can see me warning the people long on the Euro that they might get burned holding a position over that weekend. Lessons have a funny way of making sure that you learn them in the most painful way possible if you ignore them. To be fair, I agitated over closing my position for several hours on that thursday and friday leading into the election. I was aware of the risk, but eventually decided to accept it. Nonetheless, it was a good laugh for me afterwards.
The valuable lesson that I learned, was that I should never be holding a position on news that is open for trading during a time within which I cannot trade. My broker at the time did not allow for trading until the desk in Wellington opened on Sunday at 4pm my time. French elections occur on the weekend so that people can more easily vote in them, and the results had been tallied by around 1pm my time. Those that had access to trading liquidity before my desk opened, all went long on the Euro, or closed their shorts, while I had to sit and wait until the Wellington desk opened. I don’t remember how much my position ran past my stop loss, but at the time I think I probably lost 1k or 2k on that position, which was quite a lot for me at that time. I was so certain that Le Pen would win that election, and so crushed when she lost. Now, it’s just a memory I laugh at.
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