Dawn Report – September 14, 2022

What a change 24 hours makes.

When you last read Dawn Report, the markets were expecting some good news on inflation. It had “peaked,” said the experts, and it was smooth sailing from here.

President Joe Biden even had a glitzy White House event to celebrate his “Inflation Reduction Act.”

That didn’t age well…

The Consumer Price Index showed that inflation actually increased in August month-to-moth, when most experts were predicting a decline. As a result, the Dow saw its worst day since June 2020.

The Fed itself is coming under heavy attack for allegedly pushing the American economy into recession. Now, nothing like that is certain… but the mood has shifted drastically.

And it’s not like politicians haven’t gone after Chairman Jerome Powell before. Senator Elizabeth Warren famously called him a “dangerous man.”

The hard truth is that the Fed simply doesn’t have the power to put us in or out of a recession all by itself. There are numerous factors out of its control… including the prospect of a nationwide rail strike.

A new British monarch… railroad strikes paralyzing the economy… what year is it?!?

But look on the bright side. We’re already seeing some mild recovery this morning as investors move into value stocks. The question now is whether the technical signals suggest this is just a dead cat bounce… or whether it’s the start of another bull cycle.

If you aren’t already connected, make sure you’re plugged into my Before The Bell Alerts to get action items every single trading day…

And don’t miss our political insider Mr. X’s breakdown of the inflation situation and the role of the Fed.

A lot happening… a lot moving… let’s make sure to keep pace.

Keep Moving,


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CPI Stuns, Biden Spins, Railroad Strike?

  • Inflation Up, In Shock To Markets – The Dow and NASDAQ suffered crushing declines after the Consumer Price Index report for August showed inflation was actually up 0.1%. This was a major shock to most experts, who were expecting a decline of 0.1%. It practically guarantees at least a three-quarters of a point interest rate hike at the Fed’s next meeting on September 20-21.
  • Potential Railway Strike Tests White House – The White House is scrambling to secure already buckling supply chains in response to a possible railway strike beginning Friday. Departments of Agriculture, Transportation, and Energy are all huddling about how to deal with a catastrophic transportation breakdown. About 57,000 conductors and engineers are at loggerheads with major carriers and a federally mandated “cooling off” period is about to run out.

Workers and carriers face a terrible choice
  • President Touts Inflation Reduction Act – Putting the best face on a bad news cycle, President Joe Biden held a major event at the White House to celebrate the “Inflation Reduction Act,” one of his Administration’s major legislative achievements. He argued that it would reduce costs, especially when it comes to health care. “Today offers proof that the soul of America is vibrant, the future of America is bright and the promise of America is real,” the president said.

  • Starbucks Bets Big On China – Starbucks CEO Howard Schultz said that China will be Starbucks’s largest market by 2025, as the company struggles to reinvent itself. The company plans about 9,000 locations by that date. SBUX wasn’t exempt from the market decline, losing 1.38% during the trading day, but it gained that all back and more in after-hours trading.


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HOT SPOTS: What’s Going on in Geopolitics

  • China/Russia To Huddle On Ukraine War – Xi Jinping and Vladimir Putin will discuss the war in Ukraine when they meet later this week, according to the Kremlin. The summit will take place in Uzbekistan. The two leaders will have plenty of other issues on the agenda, including another near-war situation between Armenia and Azerbaijan and increasing Russian trade with China.
  • South Korea Fines Google And Meta On Privacy Violations  South Korea fined Alphabet (GOOGL) and Meta Platforms (META) millions of dollars after accusations of privacy law violations. The Personal Information Proection Commission said Google will have to cough up $50 million and Meta $22 million. It’s just the latest obstacle both countries are facing from governments abroad that are determined not to let Big Tech get its way.

  • Status Of Swedish Government Still Unclear – It will take until tonight or Thursday to determine who will get the chance to make up Sweden’s new government after a bitterly close election. However, one thing is clear – the “far-right” Sweden Democrats have accomplished an astonishing rise in popularity, becoming the second biggest party in the country and the party which increased its support the most. That said, the incumbent Social Democrats remain the largest party, brining in more than 30% of the vote. Prime Minister Magdalena Andersson has refused to concede defeat.

CUTTING EDGE: Whats Happening In Tech

  • Graham Broaches Social Media Licenses – Senator Lindsey Graham (R-SC) said he was working on a bill with Senators Elizabeth Warren (D-Mass) and Josh Hawley (R-MO) that would more aggressively regulate social media companies. This might even require social media companies to get a license before they can operate. He also promised more protections for free speech. “If somebody takes your content down you’ll have an appeal process,” he said. The exact form of the bill has yet to be determined, but you can guarantee lobbyists will be watching it closely.
  • ♫ NOW TESTIFY ♫ – Former security head for Twitter (TWTR) Peiter Zatko told the Senate Judiciary Committee that the FBI warned Twitter it had a Chinese spy on staff. The Indian government also had agents within the company. He also alleged there were thousands of attempts to hack into Twitter each week. “This fundamental lack of logging inside Twitter is a remnant of being so far behind on their infrastructure, the engineering, and the engineers not being given the ability to put things in place to modernize,” he said.

  • Apple Aligns With TSMC – Apple is reportedly planning to use chips from Taiwan’s TSMC in its new iPhones and Macbooks next year. The Taiwanese company is traded as TSM on the NYSE). The company controls most of the global market for contractually produced chips.

Taiwan’s expertise in chipmaking is part of its geopolitical importance


“That was likely the last time we’ll hear from Chairman Powell until the Fed’s next meeting on September 20-21. Given yesterday’s news, a half-point interest rate hike, which would have sent the market surging, is almost out of the question. A three-quarters of a point hike looks more likely… and we can’t rule out something even greater.”

Yesterday’s report changed everything. Mr. X warns that the Fed just got the excuse it needed for what it wants to do anyway – jack up interest rates. And unfortunately, even that might not be enough to stop inflation… or a recession.

It also comes at the worst possible time for President Joe Biden – just when he’s trying to convince Americans about the merits of his “Inflation Reduction Act.”

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