Kevin Wadsworth: This Time, the Entire System is at Risk
Tom welcomes back the Market Weather Forecaster Kevin Wadsworth. Kevin discusses his background in assessing systemic risks. He believes there are serious risks of systemic failure, particularly in Europe. U.S. government debt is in a parabolic rise, and the math is starting to no longer add up. The cracks are forming in the foundations of the global central banking system.
Kevin shows off his US 10-Year yield chart, which demonstrates a forty-year historic trend shift.
The various PPI charts for Europe are quite literally off the charts. Germany, Italy, France, Eurozone, and U.K. have all had massive rises in their producer price indexes which surpass all historic levels even wartime. We are in uncharted waters. There is a delay between PPI levels and consumer prices. This doesn’t feel transitory, and who knows what the consequences will be.
We’ve also had absolute chaos in the U.K. pound versus the dollar. The evidence is now suggesting that problems will begin appearing in the United States. Whenever markets reach mainstream news headline levels, look for a coming reversal. The U.K. central bank has now restarted easing.
Europe is seeing sky-high electrical prices, in part due to natural gas shortages. They are currently around seven times normal highs. The government solution is to subsidize electricity and have the populace pay the excess cost back later on. We’re guaranteeing future inflation. The U.K. has extremely limited storage capacity for natural gas. People need to be prepared for long power outages this winter. We could see a series of domino like systemic failures this winter.
History demonstrates that in a true large bear market, drops of 70-80% are normal. Hard assets are the place to be in this type of environment.
He notes that Bitcoin has never been through a circular market downturn in equities. Should it break out above the 30-week MA and move up despite equity performance, that would be a good sign.
Short-term quick jumps like we just saw in silver are unlikely to mean that much. Investors need to be cautious and wait for the preponderance of the weight of evidence.
There are multiple reasons why governments and central banks alike would want CBDCs, including control and ease of taxation.
Time Stamp References:
0:00 – Introduction
0:40 – Systemic Collapse Risk
4:58 – Yen & Pound Stability
7:00 – Rate Hikes & Yields
13:20 – European PPI Indexes
16:41 – Pound Vs. Dollar
20:45 – Electric & NatGas Prices
29:15 – Equity Markets
32:50 – Gold Vs. Equity Ratios
35:50 – Gold & Purchasing Power
40:14 – Cryptocurrencies
43:14 – Silver & Finding Bottoms
48:45 – Assessing CBDCs & News
54:50 – Wrap Up
Talking Points From This Episode
- The systemic risks are building in the global financial system and investors need to exercise caution.
- PPI Manufacturing inflation indexes for Europe are quite literally off the charts.
- His assessment of energy, equities, gold, Bitcoin and the potential for more inflation.
- Be cautious and wait for the significant evidence of market direction.
Kevin Wadsworth has a background in meteorology, having spent over 25 years in military and civilian weather forecasting. Over the years, his career has involved everything from briefing pilots to producing commercial advice to utility companies and providing TV and radio broadcasts. His current role is as a Civil Contingency Advisor consists of linking with the emergency response community. He gives advance notice of life-threatening weather events and advice during events influenced by the weather, such as wildfires and industrial accidents.
The science behind weather forecasting aims to unlock methods and techniques for predicting the future with ever-increasing accuracy. A friend and colleague helped spark an interest in the global economy and the financial world in the early 2000s. The financial crash of 2008 got Kevin hooked, and he gradually became aware of the similarities between forecasting the future weather and forecasting future price movements in the financial markets. Around that time, he read an abridged version of Strauss and Howes ‘The Fourth Turning’, which intrigued him.
The cyclical nature of markets mirrors the cyclical nature of the weather and seasons. The process of gathering evidence via multiple computer models that assess the likelihood of all possible future outcomes works just as well for predicting the future price of gold for indicating whether it’s likely to rain on the weekend or not.
His focus is on tuning out all the noise and presenting clear and uncluttered charts while gathering all the evidence. Kevin tries to have no bias, but instead follows the weight of evidence. He says, I’m not a bull or a bear; I’m simply presenting the evidence as I see it.