No Black Swan (Out of the Blue)

  • It was the Panic of 2008, but guess who was “eerily calm”?
  • Jim Rickards on a scary Great Depression-era indicator
  • Despite a risk-off day for gold, forecasts are “gaga”
  • Initial unemployment claims (yawn)… and “Massholes”
  • The Commerce Department defends Coinbase… Spotify streamlines its NYC footprint… No mas: “Taco Tuesday”… And more!

“It was eerily calm,” guest host Danielle DiMartino Booth said yesterday during Paradigm’s live “Secrets of Jekyll Island” event. And hold that thought…

Ms. DiMartino Booth joined our macro expert Jim Rickards and publisher Doug Hill from the tiny Georgia island where the Federal Reserve was first conceived.

And because she was an adviser at the Dallas Federal Reserve Bank — with a front-row seat to the dramatic events of 2008 — Doug asked her the questions most of us would ask if we got a chance to converse with her.

“What is it like inside the walls of the Dallas Fed when banks are starting to suggest that they may not be solvent anymore? Is it panic? Is it another day at the office? What is it like?”

behind the scenes

Courtesy: Paradigm Press Group

“I spent a lot of time then at the New York Fed,” she replies. “That’s where the markets desk is, that’s where the open market operations are… But it was eerily calm.

“There were individuals inside the institution who still believed, in the midst of a crisis, as Ben Bernanke did, that the subprime crisis was going to be contained.”

She adds: “The definition of systemic risk is that you can’t define it. It happens, but it’s an after-the-fact thing that you figure out.

“What is so unique about today is that there’s no ‘systemic risk.’ You feel it, but you don’t know where it’s coming from,says Ms. DiMartino Booth, putting into words what most Americans are sensing in 2023.

“But are there warning signs?” Jim Rickards responds. “Absolutely…

“When Lehman Bros. filed for bankruptcy at midnight on Sept. 15, 2008, everyone goes, ‘There’s the black swan,’” Jim says, referring to Nassim Taleb’s 2007 book The Black Swan.

black swan

Jim: “Nobody in the world thought there was a black swan… and then somebody got to Australia.”

“It’s a great title for a book, but these financial crises do not come out of the blue,” he says. “Anybody who couldn’t see [Lehman’s bankruptcy] coming a mile away was not very attentive.

“The fact is there are a lot of warnings, but you have to know where to look, and the Fed is always looking in the wrong places,” Jim says. On the whole, the Fed “looks backward,” he says, especially at skewed official unemployment stats.

“Yeah, [unemployment] is the lowest since the 1960s, but unemployment is a lagging indicator. A lot of other things go wrong first. The last thing [employers] want to do is fire people… But when things are bad enough, they will.”

To wit, Danielle and Jim both spotlight the No. 1 and No. 3 export nations in the world. “If you look at the technical data out of the third-largest exporting nation,” Danielle says, “Germany’s in technical recession because they printed negative GDP in the fourth quarter of 2022, and now, the first quarter of 2023 is going to turn negative.”

“German exports are contracting,” Jim agrees. “Where do German exports go? A lot of them go to China. China’s imports are contracting because, what do they buy? Commodity inputs. Well, if they’re not making anything, they don’t need commodity inputs.”

“If you look at some of the recent data out of China, the world’s largest exporting nation,” Danielle concurs, “it’s looking like a train wreck. And that’s what the Chinese authorities are allowing us to see.

“So you’ve got the first- and the third-largest exporting nations in the world effectively in recession,” she concludes.

Jim synthesizes this information into a salient point that financial media are not talking about…

“We’re seeing a lot of indicators, but contracting world trade — seen in the Great Depression — is one of the scariest,” Jim emphasizes. “Wall Street economists… should be looking at imports and exports. Both declining,” he says.

Just fathom, for a moment, this eye-opening stat from Danish shipping giant Maersk, a bellwether for global trade…

“Maersk’s underlying earnings before interest and tax could be as little as $2 billion in 2023 compared with $31.2 billion in 2022,” says trade publication Transport Topics. (Let that factoid sink in.) “We believe that this guidance reflects the substantially lower container freight rates going into 2023,” the company says.

All things considered, Paradigm publisher Doug Hill interjected during our Jekyll Island event yesterday: “So if we’re looking at a slowdown in trade globally… if we’re looking at a Fed that’s tightening monetary policy… if we’re looking at a recession here in the U.S…

“If I’m an investor, what do I do? What works?”

Jim Rickards and Ms. Martino Booth both answered Doug’s question yesterday, offering some authoritative guidance — including two specific portfolio hedges (apart from the obvious: gold).

In case you missed our “Secrets of Jekyll Island” conference, you can watch a replay of their fascinating, wide-ranging discussion right here.

At the time of writing, two of the three major U.S. stock exchanges are in the green. The S&P 500 Index is up 0.55% to 4,180 and the tech-loving Nasdaq is up 1.5% to 12,670. It’s the staid Dow that’s just nominally in the red at 33,400.

But it’s the commodities complex that’s getting hammered today. Crude is down 1.25% to $71.97 for a barrel of WTI. At the same time, gold is down 1.30% to $1,959.20 per ounce and silver’s down 1%, stuck below $24.

Despite gold’s sell-off, headlines for the yellow metal are absolutely bullish. “Why investors are going gaga for gold,” says the Financial Times (two hours ago) or “Here are 3 reasons to buy gold, according to UBS,” says CNBC (one hour ago).

Mark Haefele, UBS chief investment officer, predicts: “We continue to see gold hitting $2,100/oz by year-end and $2,200/oz by March 2024, and retain our most-preferred rating on gold alongside our positive stance on broad commodities.”

On to a few key indicators out today…

  • The “Philly Fed” survey for the mid-Atlantic, including up-to-the-minute data from regional Federal Reserve banks, is in contraction territory for the ninth straight month
  • Existing-home sales decreased 3.4% in April, with all four major regions of the U.S. experiencing month-over-month and year-over-year downturns.

The Department of Labor reports initial jobless claims dropped 22,000 to 242,000 for the week ending May 13… Yawn, nothing to see here, right?

We wouldn’t even bother mentioning it, except for this: “The prior week’s numbers had been heavily boosted by a jump in filings in Massachusetts, which accounted for nearly half of the increase of the (unadjusted) filings across the nation,” Axios says.

Accordingly, Massachusetts Department of Unemployment Assistance has issued an alert, claiming a strong uptick in “fraudulent claim activities” whereby state residents “using stolen personal information… fraudulently obtain unemployment benefits.”

Giving new meaning to the epithet “Masshole.”

“Big news on the crypto front: The U.S. Chamber of Commerce has just filed a brief in the Coinbase v. SEC case,” says Paradigm’s crypto authority Chris Campbell.

“The U.S. Chamber of Commerce is no lightweight organization,” he says. “It’s a powerhouse, representing the interests of companies spanning every industry in the U.S., not merely the crypto world.”

And now? “They’re pointing the finger at the SEC, accusing them of ‘unlawful’ conduct in the realm of digital assets. Their brief kicks off with this statement: ‘As it stands today, nobody knows for certain which digital assets, if any, are ‘securities’ under federal law.’

“The Chamber argues…

  • “The cloud of regulatory uncertainty is choking the life out of innovation in the U.S.
  • The SEC is stirring up a storm in the digital assets regulatory landscape
  • The SEC is trampling over constitutional due process and fair notice rights.”

The brief concludes: “The SEC’s actions are not just harmful policy; they are unlawful.” Which jibes with Chris’s assessment: “The ‘regulation by enforcement’ actions from the SEC are fairly unpopular.

“For a variety of reasons, we suspect Gary Gensler wants to keep regulatory clarity at bay for as long as possible,” says Chris.

Which also coincides with a brief aside from Jim Rickards, who details an intentionally murky crypto-SVB-Yellen connection.

“Signature Bank was no worse off than a lot of other banks,” Jim says. “If it had survived until Monday, March 13, it would have been rescued by the Federal Reserve’s Bank Term Funding Program (BTFP) along with the entire U.S. banking system.

“Why did Signature Bank get whacked under those circumstances?

“Signature Bank got whacked because it was offering a portal to the crypto world called Signet,” Jim says. “Once the FDIC announced a blanket deposit guarantee and the Fed offered an unlimited ability to swap bonds for cash at par, Signature would have been fine like any other bank.

“Yellen just used a panicked weekend to wipe out the Signet portal,” says Jim. “As Rahm Emanuel said, never let a good crisis go to waste.”

Music streaming giant Spotify plans to sublet five floors of office space at 4 World Trade Center in Manhattan.

“Spotify occupies roughly 564,000 square feet at Silverstein Properties‘ 72-story tower and will reportedly try to offload at least the 85,666 square feet it leased from the Port Authority of New York and New Jersey in 2018,” says an article at Commercial Observer.

Indeed, in pre-pandemic days, Spotify’s NYC relocation was seen as a real “get” for the city and for a certain disgraced governor…

ethan tweet

Pander much?

“Spotify became the anchor tenant at the 3 million-square-foot building in 2017, thanks in part to a deal with New York for an $11 million rent reduction on its space,” the article says.

“Stockholm-based Spotify has let its employees work from anywhere since 2021.” As a result, the company says it will be shrinking its “real estate footprint.”

“At the same time, Manhattan’s available sublet space hit a new high at 22.1 million square feet in the first quarter of 2023,” Commercial Observer reports.

Since 1989, Taco John’s has held the federal trademark for the phrase “Taco Tuesday.”

The Wyoming-based fast-food chain, with 400 restaurants in 23 states, “has earned a reputation for sending cease-and-desist letters to other restaurants that dared to use the ubiquitous phrase,” The Guardian reports.


“1979 Franchisee in Minnesota Coined ‘Taco Tuesday’ which was then trademarked in 1989.”Source, Image courtesy:

Now, in a press release, Taco Bell — which has 7,200 locations — says it’s starting a petition to “liberate” the phrase.

“Taco Bell believes ‘Taco Tuesday’ should belong to all who make, sell, eat and celebrate tacos… How can anyone Live Más if they’re not allowed to freely say ‘Taco Tuesday’?”

(Three words: Ay, Dios mío.)

“It’s been ours for 34 years, and we’re very proud of that,” says Taco John’s chief marketing officer Barry Westrum. “While Taco Tuesdays may have become part of the American lexicon, that doesn’t give our competition the right to take it from us.”

In this David-and-Goliath situation, I’m siding with the underdog… And while I’ve never eaten at Taco John’s (full disclosure: never heard of ‘em), but their food’s gotta be better than Taco Bell’s. I mean, the bar’s set pretty low.

We’ll be back Friday with another episode of The 5. Take care…

Best regards,

Emily Clancy
The 5 Min. Forecast

P.S. As Jim Rickards says often, a recession and a financial crisis aren’t the same thing. There were recessions with no financial crisis in 1990–91 and 2001. There were financial crises with no recession in 1994 and 1998.

But once in a while, they happen at the same time — 2008 was an example. “We may be heading for something like that again,” was Jim Rickards’ most ominous warning yesterday during Paradigm’s exclusive Secrets of Jekyll Island event.

Jim along with special guest Danielle DiMartino Booth held forth for two hours yesterday — their outlook for the rest of 2023, and what you can do about it.

We got fabulous feedback from our readers. We did this event not to do a hard-sell of a high-priced trading service — just as our way of saying thank you for subscribing to a Paradigm Press publication and giving us your trust. If you missed the live event, you can watch the replay right here, right now.

Emily Clancy

Emily Clancy

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