It's Up, It's Down, It's All Around

Turmoil in all directions: on the war front, on the national debt, in markets and banks.

The Kremlin announced this morning that Vladimir Putin survived an assassination attempt from a drone bombing his living quarters inside the Kremlin. This comes on the eve of leaked news that Putin is preparing Russian state media for the possibility that Russia loses the war when Ukraine’s threatened major offensive begins later this month. The head of Russia’s toughest and just about only successful forces at this point in the war — the Wagner mercenary group — has said he will retreat from Ukraine before the offensive if Russia does not ready him for the new assault with adequate weapons supply. If his forces are equipped, he says they will stay and fight to the last man standing, which still doesn’t sound promising for Russia. Signs of Russia’s retreat can be seen in heavy trenching that is now happening behind Russia’s border. The Russians are writhing.

So are US regional banks. Numerous headlines in the financial news today show that fewer and fewer people believe Treasurer Yellen when she pretends that “our banks are fundamentally sound.” A former Fed reserve bank president believes more banking trouble is to come. One of the biggest bank CEOs in Europe believes more banking trouble is likely to come in the US. The stock market believes regional banks are in for more trouble, taking that sector into a deeper dive. 

And this is just round one in the US banking crisis because the present crisis was solely about the crash of cryptos triggering bank runs which could not be met by banks due to the Fed devaluing their Treasury reserves. Round two comes when banks start facing serious defaults because the economy is sliding back into recession, particularly from the badly crumbling commercial real-estate market.

In this time of peril, the debt ceiling talks are also up and down. While House Speaker McCarthy has accepted Biden's invitation to meet at the White House, Biden is holding firm to no negotiations, and McCarthy probably could not deliver a vote for a clean raise in the debt ceiling even if he promises to do so and his life depends on it. With the ceiling now likely moved up to just a month away and with very few days this month when McCarthy and Biden will be in town together and very few days when congress will be meeting, the deadline for a deal is even tighter than it sounds. 

Job openings are way up. That’s good news — normally — unless you are the Fed fighting inflation. Oh, but job openings are way down, too, all within a twenty-four hour period, depending on whose report you listen to. In this jumble of disjointed news, the Fed must make its decision today about whether or not this will be its final rate increase, as core inflation remains stubbornly high. Even longtime investor and big market shorter Stanley Drukenmiller says he has never experienced a time so confusing as the present — never seen anything like it.