A&W Root Beer puts pants on ‘polarizing" mascot bear Rooty after M&Ms "pauses" spokescandies

A&W Restaurants said Tuesday that its mascot Rooty's lack of pants was too polarizing and henceforth, the bear will be sporting denim jeans......»»

Category: topSource: foxnewsJan 24th, 2023

A&W Restaurants puts pants on "polarizing" mascot bear Rooty in joke announcement

A&W Restaurants claimed its mascot Rooty's lack of pants was too polarizing, then later fessed up that the announcement of the bear's new look was just a joke......»»

Category: topSource: foxnewsJan 25th, 2023

M&M"s Ends Woke "Spokescandies" After Pushback, Replacing Them With Actress Maya Rudolph

M&M's Ends Woke "Spokescandies" After Pushback, Replacing Them With Actress Maya Rudolph Authored by Bryan Jung via The Epoch Times, M&M’s says it’s pulling its increasingly woke “spokescandies” mascots after a massive pushback over the politicization of the beloved candy brand. Mars, the candy maker which produces M&M’s, announced on Jan. 23 that it would replace its decades-old team of M&M’s “spokescandies” mascots with the actress Maya Rudolph, after backlash by longtime fans over its failed makeover to make the brand more inclusive. Rudolph said she will take the place of the iconic mascots before the company’s awaited Super Bowl ad that will be aired during the game on Feb. 12. “I am a lifelong lover of the candy, and I feel like it’s such an honor to be asked to be part of such a legendary brand’s campaign,” she told NBC’s TODAY. The “spokescandies” were a team of little cartoon M&M’s mascots, which have appeared in every commercial and other marketing materials representing the candy covered chocolates since 1960. Even Candy Favorites Are Unable to Escape Wokeism In January 2022, Mars updated the cartoon mascots and M&M’s marketing with a plan to rebrand each mascot with a new backstory, clothing, and personality to be more inclusive under the slogan: “M&M’S® Creating a World Where Everyone Feels They Belong.” M&M’s said that its branding would “reflect an updated tone of voice that is more inclusive, welcoming, and unifying, while remaining rooted in our signature jester wit and humor.” The “feminine” green” M&M, for example, was criticized by the left for being marketed as “too sexy,” so was transformed into a feminist character, with the company switching out her knee-high heeled boots for sneakers. “Being a hypewoman for my friends, I think we all win when we see more women in leading roles, so I’m happy to take on the part of supportive friend when they succeed,” the Mars advertising has the green M&M saying. The “male” orange mascot became a character ridden with anxiety, and the “female” brown mascot became a boss with an assured personality. “Male” red, who had been the bully in the past, became kind to his co-characters. Mars’s most controversial change was the new purple M&M, a “lesbian” mascot which was designed to represent inclusivity. The new purple candy mascot was created to “help more people feel they belong,” the brand announced in September, explaining that the “lesbian” mascot “celebrates all voices, encouraging people around the world to embrace their authentic selves.” The purple “lesbian” made her debut with a new song called, “I’m Just Gonna Be Me,” featuring an accompanying music video. Mars announced in December that it would make its return to the Super Bowl with a 30-second spot during, and that the commercial would include its seven revamped M&M’s characters. “The latest campaign extends our purposeful work over the last year, but is rooted in a new creative territory, and we can’t wait for our fans to see what’s about to unfold,” Gabrielle Wesley, chief marketing office for Mars, wrote in a press release. Mars Withdraws Woke M&Ms After Fan and Media Backlash The rebrand, however, brought ridicule from conservative commentators and many fans, such as Fox News host Tucker Carlson, with many claiming that the makeovers were another example of a left-wing woke agenda gone too far. M&M’s finally conceded to its critics, posting on Jan. 23, on Instagram:  “America, let’s talk. In the last year, we’ve made some changes to our beloved spokescandies. We weren’t sure if anyone would even notice. And we definitely didn’t think it would break the internet. But now we get it—even a candy’s shoes can be polarizing. Which was the last thing M&M’s wanted since we’re all about bringing people together.” “Therefore, we have decided to take an indefinite pause on the spokescandies,” the statement continued. We give the final word to Tucker Carlson who summed up the farce tonight perfectly... Our response to the end of the obese and lesbian M&M spokescandies — Tucker Carlson (@TuckerCarlson) January 24, 2023 Tyler Durden Mon, 01/23/2023 - 21:21.....»»

Category: worldSource: nytJan 23rd, 2023

M&M"s says its killing its "spokescandies" after conservatives were outraged that the green one didn"t wear go-go boots anymore

The chocolate brand announced an "indefinite pause from the spokecandies" Monday morning, citing controversy over the candies' changing appearances. M&Ms M&Ms announced Monday that it would be taking "an indefinite pause from the spokescandies." The spokescandies are being replaced by actress Maya Rudolph.  Conservatives have criticized the brand's rebranded female M&M candies, dubbing them "less sexy." M&Ms chocolate announced on Monday that it is taking "an indefinite pause from the spokescandies" after controversy over their rebranded appearances."In the last year, we've made some changes to our beloved spokescandies. We weren't sure if anyone would even notice," the brand said in a statement shared on Twitter. "And we definitely didn't think it would break the internet. But now we get it — even a candy's shoes can be polarizing.""Which was the last thing M&M's wanted since we're all about bringing people together," the brand added. In their place, actress Maya Rudolph has been tapped as the new spokesperson for the beloved chocolate candy, M&M's said. Representatives for Mars Wrigley and Maya Rudolph did not immediately respond to Insider's requests for comment.The brand began making changes to its walking, talking M&M's characters early last year, replacing the shoes of both the brown and green female M&M's. Most notably, Mars Wrigley, the maker of the popular chocolate candy, replaced the green M&M's high-heeled go-go boots with sneakers. At the time, Anton Vincent, president of Mars Wrigley North America, said the changes were made to make the characters more "representative of the customer."The changes sparked controversy from conservatives like Fox News host Tucker Carlson, who said the female M&Ms were now "less sexy" with their new footwear. In January 2022, Carlson said on his show that "M&Ms will not be satisfied until every last cartoon character is deeply unappealing and totally androgynous until the moment you wouldn't want to have a drink with any one of them."The timing of Mars Wrigley's move to rebrand again without the spokescandies is notable.Nearly three years ago, on January 23, 2020, Planters nuts killed Mr. Peanut — the face of the brand for more than 100 years — in a pre-Super Bowl ad.The brand's new mascot, also a humanized peanut, was born during a February 2020 Super Bowl commercial, in which he was introduced as Baby Nut.By December 2020, the new mascot was deemed a fully grown peanut by December 2020, Esquire reported at the time.Read the original article on Business Insider.....»»

Category: worldSource: nytJan 23rd, 2023

I spent $5,700 to travel to Antarctica on an expedition cruise ship. Here are 9 things I think everyone should know before going.

The Drake Passage is no joke, so be ready for plates crashing and difficulty walking as the ship rocks back and forth. Traveling to AntarcticaTaylor Rains/Insider Tourism to Antarctica is booming post-pandemic, with an expected 100,000 people visiting this season. I voyaged to the continent on Intrepid Travel’s expedition cruise ship and it was a life-changing experience. Here’s what to expect on the one-in-a-lifetime adventure, from facing the Drake Passage to riding zodiacs. When I first decided I wanted to go to Antarctica, I had no idea where to start.Standing at the port with the Ocean Endeavour.Taylor Rains/InsiderI knew a few things, like the fact I'd need to travel by ship and leave out of South America, but I was pretty naive to factors like costs and how to pack.The Ushuaia sign in Argentina.Taylor Rains/InsiderBut, after a wild adventure across the infamous Drake Passage and plenty of amazing experiences on my seventh continent, I've learned where I went right, and where I went wrong.A mountain in Antarctica.Taylor Rains/InsiderHere are the 9 things I think everyone should know before leaving on Intrepid Travel's nearly two-week "Best of Antarctica" voyage.The Ocean Endeavour in port in Ushuaia, Argentina.Taylor Rains/Insider1: Yes, it will cost you an arm and a leg to get to Antarctica. But, you can get a cheaper rate if you're willing to share a cabin with a stranger.The Ocean Endeavour.Taylor Rains/InsiderBecause the white desert is so isolated, it takes a lot of time, fuel, and manpower to get there, forcing companies to charge a pretty penny for the once-in-a-lifetime trips.Leaving Ushuaia.Taylor Rains/InsiderFor my nine-day cruise, I paid $5,700 for a triple interior cabin, which came with single beds, one shower, and two random female roommates.I was in the "quad-room" but it was sold as a triple, and my roommate were lovely and drama-free. And, please excuse the mess, it was a hectic embarkation day.Taylor Rains/InsiderMy rate was purchased as a Black Friday sale in November 2019, though I was slapped with a $456 "fuel surcharge" in August 2022 due to rising prices.The possible fee is in Intrepid’s contract, and it is now included in the posted rates for future Intrepid Antarctic cruises.Taylor Rains/InsiderRising fuel costs, as well as surging demand, are pushing rates up, with the most expensive cabins — singles and suites — going for $10,000 to $18,000 during Intrepid's 2023/2024 season.My friend had a room with two twin beds and two berths that folded down, meaning four people could sleep in the cabin. She had no roommates though.Courtesy of Karen BeckSource: Intrepid TravelThese rooms are private and can be booked by a solo traveler, though rooms with double beds will require an additional single supplement charge.Ocean Endeavour's owner's suite.Intrepid TravelSource: Intrepid TravelAccording to Intrepid, its twin, triple, and quad rooms are shared, though its Ocean Endeavour only puts three people in its four-person cabin. However, contact the company if you're unsure about your rooming selection.The layout of the three other triple rooms only had three beds but had two showers. It was a little more narrow than mine, and the closets were smaller.Intrepid TravelSource: Intrepid TravelThe base rate I paid for the tour included three meals a day, a hotel stay for the night before embarkation, expedition guides, and all the Antarctic sightseeing. But, it wasn't my only expense.The dining room.Taylor Rains/InsiderI also had to pay about $1,000 total for roundtrip flights from the US to Ushuaia via Buenos Aires…The view on descent into Ushuaia.Taylor Rains/Insider…as well as $300 for camping and $150 for snowshoeing. The latter I had to sign up for on the boat, though neither excursion went due to poor weather at the landing sitesThe expedition guides showed us how to use the day paddle, snowshoeing, and camping equipment. I had to sign up for camping in advance as spots are limited.Taylor Rains/InsiderThe boat has WiFi, but its unavailable more times than not, and it costs $20 for 30 minutes, $50 for 90 minutes, or $100 for 200 minutes. I bought 90 minutes for emergencies.Penguins on Antarctica.Taylor Rains/InsiderSouvenirs from the boat's onboard shop, as well as alcohol from the bar, were also an additional cost. However, Intrepid allowed us to bring wine and beer for free.There was no bottle fee in the dining room for wine either.Taylor Rains/Insider2: You will leave out of southern cities in South America, and getting there isn't always easy.Standing with the "fin del mundo" sign in Ushuaia.Taylor Rains/InsiderMy cruise departed out of Ushuaia, Argentina, which is the world's southern-most city. Some ships leave from other places, like Punta Arenas, Chile, but I will focus on my experience getting in and out of Ushuaia.A view of the port in Ushuaia.Taylor Rains/InsiderI was booked on flights on Aerolineas Argentinas from Miami to Buenos Aires to Ushuaia, and back the same way. But, the airline changed my return flight from Buenos Aires, not only amending the time, but also the arrival airport.Inside Aerolineas Argentinas' Boeing 737. A few other carriers like Flybondi and JetSmart also operate the route.Taylor Rains/InsiderInstead of flying into the international airport and easily connecting to my Miami-bound flight, I was re-booked onto a flight to the domestic airport, which is about 45 minutes away by car — and my connection was shortened to just two and a half hours.BA sign in Buenos Aires.Taylor Rains/InsiderIt was a stressful journey home, to say the least, but Aerolineas put me on standby for an earlier flight from Ushuaia to help me out.My boarding pass for the earlier flight.Taylor Rains/InsiderAlthough I got lucky, I would not fly out the same day as disembarkation if I were to do it again. Instead, I would fly out the next morning, giving me more time between flights, as my return to Miami left at 11:30 p.m.My Aerolineas Argentinas plane in Miami.Taylor Rains/Insider3: You don't need to bring a lot of clothes, but don't forget things like binoculars, hand warmers, sunscreen, and ChapStick.Taylor Rains/InsiderWhen checking in at the hotel in Ushuaia, I saw people with several large suitcases and carry-ons, as well as backpacks and camera bags. And that was all for just one or two people.Our luggage was already in our rooms before we boarded the ship.Taylor Rains/InsiderWhat I learned is that you can survive with one checked bag, or even just a carry-on and a personal item — which is the route I took.My 35L Cotopaxi carry on backpack (below) and 20L person item (above). I also only brought a carry-on because of my tight connection in Buenos Aires on the way home.Taylor Rains/InsiderThe reason I say to pack light, assuming Antarctica is your only stop on this trip and you don't require extra items for personal reasons, is three-fold.I understand camera bags can take up a lot of space, so bringing a checked bag is sometimes unavoidable. But, hopefully these tips help you determine what you can leave at home, and give you more packing space!Taylor Rains/InsiderOne — heavy jackets and muck boots are included in Intrepid's tour price, and the same goes for most other operators, so you can leave those at home.The parkas and boots can be stored in assigned lockers in the ship's mud room on deck 4, which is where everyone got ready before going out on the zodiacs.Taylor Rains/InsiderThe windproof and waterproof parkas are typically a bright color and will keep you warm off the ship. Intrepid allowed us to keep our Kathmandu puffer, but the parka and boots were for rental only and provided after embarkation.The branded Kathmandu jacket was black with a 600 synthetic fill.Taylor Rains/InsiderTwo — the ship is hot, so you will not need to wear layers on the boat, and only closed-toed shoes are allowed.The Compass Club stretched the side of deck 6 and is where people spent time reading or socializing.Taylor Rains/InsiderI suggest rotating T-shirts, leggings, and jeans, and only bringing one pair of good tennis shoes. You won't need heels, hiking boots, or sandals, unless, of course, you're spending extra time in another destination before or after Antarctica.People sitting inside the Nautilus Lounge on embarkation day.Taylor Rains/InsiderThree — laundry onboard the Ocean Endeavour was $39 for a full load of clothes, and some companies offer the service for free.A laundry bag was left on the side table by my bed with information on the service. For layering, I suggest synthetic or merino wool layers — not cotton.Taylor Rains/InsiderMoreover, Intrepid's tour is in Antarctica for up to four days, so you only need a few layer pieces — especially if they are merino wool, which is anti-odor and can be worn several times before washing.I packed 7 tops, 5 bottoms, wool socks, gloves, a beanie, a buff, ski goggles, and a medicine kit in my carry-on. My personal item held toiletries, electronics, my water bottle, and a small purse. If I went back, I would leave my sweatshirt and jeans at home.Taylor Rains/InsiderThe one thing I regret not bringing is a pair of binoculars as it would've made the sometimes distant wildlife much easier to see. But I'm glad I brought my SPF 40 chapstick and hand warmers, the latter I actually preferred for my boots.A chinstrap penguin on a small iceberg.Taylor Rains/Insider4: The Drake Passage is no joke, so do not forget seasickness medicine.The boat hitting the water after a giant wave in the Drake Passage on the way back to Argentina.Taylor Rains/InsiderTikTokers are sharing harrowing videos from the extreme waters of Drake Passage — a shortcut to Antarctica with some of the choppiest water in the worldVideos on social media over the past few weeks have painted a worrisome picture of the rough sea between South America and Antarctica. And, they aren't too far off.The waves and snow heading through the Drake Passage.Taylor Rains/InsiderOn my trip, 30+ mile per hour gale-force winds and some 15-foot waves rocked the boat back and forth, making it difficult to walk, causing food to fall off tables, and knocking some passengers out of their beds at night.Glasses falling during a giant wave.Courtesy of Paulina PortilloThe journey through the Drake lasted about two days each way, and the movement made a lot of people seasick. Fortunately, I avoided the nausea thanks to the Scopolamine patches prescribed by my doctor.The Scopolamine patch goes behind your ear. My doctor instructed me to only use half of the patch, which I put on about three hours before setting sail. It works for three days before needing to switch it out.Taylor Rains/InsiderI didn't experience any side effects from the patch, like blurry vision, though some did. So, I recommend bringing an additional anti-nausea medicine, like Dramamine, but don't use them together.Day two of sailing through the Drake Passage on the way to Antarctica.Taylor Rains/Insider5: This is an expedition, so don't expect to drink mojitos by the pool or see Broadway performances in a giant theater.Most spaces had minimal seating or decor because everything would slide or fall when sailing through the Drake Passage.Taylor Rains/InsiderThe Ocean Endeavour is a robust polar ship built for cruises to the Arctic and Antarctic, so it comes with the essentials, like cabins, lounges, and a dining room.Taylor Rains/InsiderIt also has an onboard spa, a gym, a pool, and a hot tub, but that's about as far as the luxuries go. And, as you can imagine, the pool was never open, and the jacuzzi was only available half the time.View of the aft deck. The pool was on deck 6 while the hot tub was right above it on deck 7. The pool wasn't used due to the cold and winds.Taylor Rains/InsiderThere is no casino, no steakhouse or sushi bar, and you can forget about a dance club. But, that doesn't mean you won't feel at home in your tiny Antarctic community.We enjoyed a champagne toast on the last night of the voyage.Taylor Rains/InsiderThe small, 200-person ship made it easy to meet other travelers and socialize. Many people played games in the lounges, while others spent time reading or streaming pre-downloaded movies and TV shows.Playing cards in the lounge between zodiac rides.Taylor Rains/InsiderMoreover, the tour guides prepared daily science presentations, which covered everything from polar birds and seals to tectonic plates and the history of Antarctic expeditions.A Southern Ocean bird.Courtesy of H.D. HuntFortunately, I ended up meeting nine other travelers on my first day — some solo and a few in pairs — and we spend the entire trip together. So, don't be worried about going alone as there will be others wanting to make new friends.My little Antarctic family: (L-R): Erica, me, Emily, Courtney, Paulina, Nastassja, Joanna, Ashley, Harrison, and Hugo.Taylor Rains/Insider6: You will get wet on the zodiac boats, and it can be a bumpy ride.Sitting on the zodiac.Taylor Rains/InsiderOnce cruise ships arrive in Antarctica, they can't actually dock at any landing site. Instead, a fleet of rubber zodiac boats is used to ferry passengers to and from shore.Tourists stepping on Antarctica at the tour's first landing site.Taylor Rains/InsiderThe boats carry up to 10 people and are operated by expedition guides. Guests will either go to land and walk on the continent, or spend time zipping around just looking at the glaciers, icebergs, and wildlife.A shot of a zodiac and an iceberg taken by my friend from our zodiac.Courtesy of H.D. HuntWhen in the zodiacs, the weather can change dramatically and rough waves can make the ride a little nerve-wracking. The photos below were taken about 25 minutes apart.The photo on the left shows sunny skies and we could see the mountains around us. The photo on the right is blizzard conditions with clouds blocking the scenery.Courtesy of H.D. HuntConsidering you can have sunny skies one minute and blizzard conditions the next, you need to be prepared to get wet. Intrepid required us to bring waterproof pants — I went with REI — and those that didn't could buy some onboard.Two of my friends cuddled for warmth as we made our way back to the ship. If you think you'll be cold, then don't hesitate to wear an extra layer. You can always take it off.Taylor Rains/InsiderWhile the zodiac is really fun, unfortunately, there have been a few deaths this season due to people falling off.Getting off the zodiac during bad weather.Taylor Rains/InsiderSource: Travel WeeklyWith that said, it is extremely important to use care when getting on and off the zodiacs — don't be afraid to take assistance from your guides — and only stand when given permission.On of my Antarctic buds, Ashley, standing on the zodiac after being given permission by our guide. I'm next to her waving.Courtesy of Karen Beck7: There are strict rules to follow when stepping on Antarctica.Our first Antarctica landing.Taylor Rains/InsiderAccording to the International Association of Antarctic Tour Operators, which encourages responsible travel to the continent, 100 people from a single vessel can be on each landing at one time.Our first Antarctica landing.Taylor Rains/InsiderThis means our 200-person boat broke up landings into groups. If you make it to shore, be aware that you cannot let anything touch the ice, except for your boots and walking sticks.We saw a whale while cruising around Antarctica on a zodiac.Taylor Rains/InsiderThis is to prevent the spread of the avian flu that has been impacting some bird populations, and IAATO worries it could reach the Antarctic penguin populations.Taylor Rains/InsiderAll guests were instructed to sterilize their boots and trekking poles before leaving the ship. Moreover, we were told to have our cameras out and ready before getting off the zodiac.After the first day on the zodiac, I left my backpack behind and only brought my trekking pole and my iPhone for photos.Taylor Rains/Insider8: Things will likely not go to plan, so expect itineraries to change and be flexible.The Ocean Endeavour with a chinstrap penguin.Taylor Rains/InsiderWhile Intrepid planned to spend four days in Antarctica, our trip was cut short to just two and a half days due to a monster storm.Intrepid showed us the weather in the Drake Passage, with pink meaning gale-force winds and huge wave swells.Taylor Rains/InsiderThe captain explained the reasoning and while we were all disappointed, we understood the urgency of getting back to Argentina safely.The map of sites we'd landed in Antarctica, and some we hoped to go to but were unable.Taylor Rains/InsiderWhat I learned is to be ready for plans to change, whether that means not getting to camp, not doing a specific shore landing, or being forced to go home early.One zodiac cruise destination was a 1915 shipwreck. The ship is called the Guvernøren and intentionally beached itself at Foyn Harbour after catching fire.Taylor Rains/InsiderFor example, Intrepid told us we'd be landing at a site with a scientific research station, but ice prevented us from going to shore, so we spent hours on the zodiacs instead.Views of the research station.Courtesy of Harrison HuntHowever, this actually provided the best view of whales, seals, and icebergs, so I didn't mind. I decided early that I'd just go with the flow and enjoy my time on my seventh continent.A close up shot my friend got of a seal during one of our zodiac rides.Courtesy of Harrison Hunt9: Going to Antarctica is not 100% environmentally friendly, though Intrepid tries.View of the Ocean Endeavour from the zodiac.Taylor Rains/InsiderAccording to a study from NC State University, tourism to Antarctica could stress out and distract penguins on Barrientos Island — one of the most heavily visited areas on the continent.A penguin getting ready to jump.Courtesy of Harrison HuntSource: NC State UniversityCo-author Yu-Fai Leung said the penguins may already be adapted to humans since people have been visiting the area since 2005, but IAATO still needs to "balance tourism demand with conservation needs."Me standing more than the required distance away from the penguins. Intrepid gave us strict parameters for where we could walk on shore.Taylor Rains/InsiderSource: NC State UniversityIn addition to potentially harming wildlife, cruise ships are inherently bad for Earth's oceans. However, Intrepid says it does carbon offset, uses biodegradable cleaning products, and collects sustainability-related scientific data on every voyage.Intrepid runs a citizen science program on its Antarctic voyages to collect data for environmental programs that study things like whales, seals, and phytoplankton.Taylor Rains/InsiderSource: Intrepid TravelMoreover, it did not offer a lot of fish onboard because it could not find a sustainable provider. Though, it still had some fish for those with certain dietary needs.A sample menu from the first a-la-carte meal. A grilled branzino fillet was always available.Taylor Rains/InsiderWhile I try to be environmentally conscious in my day-to-day life, I was also aware of the impact of going to Antarctica and planned accordingly, like reading IAATO's recommendations and listening to my guides.I was bundled with 17 total pieces of clothing, as well as a mandatory life jacket.Taylor Rains/InsiderAt the end of the day, I don't regret going to Antarctica, and each person can make that decision for themselves.Taylor Rains/InsiderIt was truly a life-changing experience thanks to the knowledgeable guides and the amazing people I met onboard.A selfie on the zodiac with one of our guides, Andrew.Taylor Rains/InsiderAnd don't skip the polar plunge, if you can. You're attached to a rope and given a shot of vodka afterward to warm you up — it was quite a thrill!Me taking the polar plunge into Deception Island, which is actually a crater and active volcano.Courtesy of Intrepid TravelRead the original article on Business Insider.....»»

Category: personnelSource: nytDec 26th, 2022

Dave Collum"s 2022 Year In Review, Part 1: All Roads Lead To Ukraine

Dave Collum's 2022 Year In Review, Part 1: All Roads Lead To Ukraine Authored by David B. Collum, Betty R. Miller Professor of Chemistry and Chemical Biology - Cornell University (Email:, Twitter: @DavidBCollum), This Year in Review is brought to you by Pfizer, FTX, and Raytheon... Every year, David Collum writes a detailed “Year in Review” synopsis full of keen perspective and plenty of wit. This year’s is no exception, with Dave striking again in his usually poignant and delightfully acerbic way. To download Part 1 as a pdf, click here: 2022 Year in Review: All Roads Lead to Ukraine. Introduction Every year, I write an annual survey of what happened in the world. After posting at Peak Prosperity, it gets a bump from the putative commies at Zerohedge1,2,3,4 who I read religiously. (I have topped over 60 cameo appearances at Zerohedge, consistent with getting booted off Twitter four times.) Why do I write it? My best answer is that you do not understand something until you have written your ideas down coherently. I am also trying to figure out who keeps yelling “Beetlejuice!” Write as often as possible, not with the idea at once of getting into print, but as if you were learning an instrument. ~ J. B. Priestley, English novelist I break every rule of blog marketing. Nobody writes one gigantic blog a year, but it makes the rounds. It is onerous and exhausting, especially since I must necessarily procrastinate up to the deadline. 2022: The Year I spent reading Dave Collum’s 2021 Year In Review. ~ Commenter Most years, I write what I can and then wrap it. In 2021, however, I had a primal drive to cover the usual stuff plus two topics that do not lend themselves to abbreviation: the Covid pandemic and rising global authoritarianism. Many are now realizing that the former is a manifestation of the latter. While I may not have been correct I had to get it right…if that makes any sense. Like so many young athletes in 2021, I left it all on the field. I uploaded it too demoralized and depressed to even send it to friends, confidants, and family. The peeing was special. ~ David Einhorn Diehards found it anyway and reached out with comments. Two I call good friends had diametric views that I will take the liberty of paraphrasing. Sitting on one shoulder was Tony Deden, founder of Edelweiss Holdings based in Switzerland and a saint, who sensed my pain and urged me to stop writing. He went beyond the pale by inviting me to detox in his chalet in the Swiss Alps or on his 25-acre strawberry farm on Crete. I had to pass because traveling is hard on the family. On the other shoulder was David Einhorn, a friend of a dozen years who has helped me in ways few will ever know. He told me I must keep writing it. I think 2021 could have been the apex and a perfect time to stop. I sided with David this year but may soon follow Tony’s advice. OK, Dave, but what is that peeing thing about? Well, I was scheduled to host David and his lovely girlfriend, Natalie, for a late dinner on a Thursday night at my house. I answered the door in my bathrobe, they had horrified looks, and I exclaimed, “Fuck. It’s Thursday?” We got takeout, and all was fine, even after my sweet little Boston Terrier puppy, Fiona, pissed on Natalie. That, dear friends, is how you treat financial royalty! All Roads Lead to Ukraine. Trying to understand the war from a dead cold start was monumentally hard. Geopolitical events occur to teach Americans geography; I am no exception. As a combination of foreshadowing and trigger warning, I am going to steelman the debate by taking a decidedly Russian perspective but am not sure it is steelmanning if you come to believe it. If this is gonna drive you nuts, I beg you to stop reading because you will just get mad while I wallow in the slime of your frustrated soul. I propose Vladimir Putin for the Nobel Prize in Medicine, for solving COVID globally in 48 hours. ~ Anonymous As Ron Popeil would say, “But wait. There’s more!” The Ukrainian theme runs deeper than that. Here is a little more foreshadowing. Canadian trucker crusher Chrystia Freeland has deep Ukrainian Nazi roots. Nina Jankowicz, initially appointed as head of Biden’s Orwellian “Disinformation Governing Board” (Ministry of Truth for short) was doing psy-op work in Ukraine in her previous gig. The collapse of the second largest cryptocurrency exchange in the world (FTX) revealed a massive money laundering scheme through Ukraine with political ties in the US. The rising tide of a global neo-Nazism—an idea I am still dubious about—connects tiki torchers in Charlottesville, suspicious rabble-rousers in the January 6th “insurrection”, the Patriot Front, and the Azov Battalion in Ukraine.5 Who is that guy with the horns hanging out with Ukrainian “nationalist”? The U.S.-sponsored bioweapons lab in Wuhan that spawned the SARS-Cov-2 virus has 36 counterparts in Ukraine. The crackhead son of the President of the United States ran scams in Ukraine via Burisma Holdings, the same country that his dad funded a proxy war. And who was the largest donor to the Clinton Foundation for 15 years? Ukraine. Go figure. A Year in Transition. This was my runner up for the title. Aren’t we always stuck on the “Mobius Strip from Hell” that never ends? Francis Fukuyama and Tom Friedman were wrong: history did not end, and the world is going spherical again rather quickly. Of course, we never know the future, but each year seems to have themes that play out with a quantized feel to it. By contrast, 2022 has left world economies heading south but with no bottom in sight. Neither the Fed nor the markets are done inflicting pain. The risk of global famine is real but with inestimable consequences. The futures of Bitcoin and other crypto currencies hang in the balance with more than just price corrections now in play. The war in Ukraine could end with a whimper (but only if Russia wins) or with a thermonuclear conflagration (nobody wins). Europeans are pondering the relative merits of freezing to death owing to lack of energy or starving to death owing to lack of food, but maybe those potentially biblical events are just clickbait. The WEF has reared its ugly head—the WEF’s Great Reset is not just a theory—yet we still haven’t a clue what those diabolical authoritarian meat puppets are up to. Why do we have to start eating bugs and forfeiting all earthly belongings and to whom. It is hard to see how we smoothly get to 2023 from 2022. Me by email: [blah blah, blah…we are hosed…blah, blah, gurgle, gurgle] Larry Summers: Thanks for these thoughtful comments. I mostly agree. Stephen Roach: Thanks Dave. I am in violent agreement with Larry these days. Under Powell, the Fed is currently in the deepest hole it has ever been in. Anything is possible, I guess—including a night-time landing on an aircraft carrier in the midst of a raging typhoon. Might not be soft, though… Maybe the markets and economy will be fine—maybe I am merely full of shit—but the other guys in that email threesome are deep and dark too. Stephen, who has been so generous with his time and wisdom over many years, expressed dismay in an op-ed over a particularly inaccurate call about what would happen. I offered wisdom in return: Me by email: Several years ago I promised myself I would stop reading about what will happen. I am not sure we ever know what had happened and am clueless about what is happening. Roach: You are a better man than me! My accrued wisdom comes from having read and made too many predictions that were garbage or profoundly early. I have spent countless hours over the years pondering alternative narratives via suppositories offered in the press, good versus evil, the meaning of life, contemporary events in historical contexts, and what it means to be human. The future is too much to handle. Michael Crichton once noted that it is sobering to read newspapers from 30 years ago; the above-the-fold hot topics seem so irrelevant. He also pointed out that persistent fear can lay waste to your mental and physical health.6 I identify as a conspiracy theorist. My pronouns are They/Lied. When there’s no such thing as truth, you can’t define reality. When you can’t define reality, the only thing that matters is power. ~ Maajid Nawaz, British activist and radio host I am confounded that I—one of the 15% returns into the banking system and consumers’ pockets. Maybe Volcker’s recession initiated the reversal of the inflation mindset and money flows while Russia’s cheap resources, China’s cheap labor, and the U.S.’s great demographics did the heavy lifting. I’m still pondering Andolfatto’s thesis a decade later. Engineering a higher nominal GDP growth through a higher structural level of inflation is a proven way to get rid of high levels of debt. That’s exactly how many countries, including the US and the UK, got rid of their debt after World War II.16 ~ Russell Napier, author of Anatomy of a Bear There is too much debt in the world, so they must inflate it away, which they will. That’s the only thing you need to know.17 ~ Eric Peters, CIO of One River Asset Management Ominously, the inflation is global.18 How else could the dollar be so strong in the Forex markets? Germany, for example, put together back-to-back quarters of 33% rises in producer prices (45% year-over-year in September), which ought scare the hell out of all of us given their history.19 The combined balance sheets of the world’s central banks grew tenfold in less than two decades.20 We have a global debt problem which appears to be getting addressed by global inflation. Much of it comes from the tens of trillions of dollars rammed into the global system during and following the GFC (Great Financial Crisis)21,22 and then trillions more to enable the IFL (Insane Fucking Lockdown) that completely screwed up the supply chains. If the Fed had not promised somebody behind closed doors that they would do their part, the lockdown would not have happened. No Fed, no lockdown. Period. Now you know who to blame. Let’s not let that “inflate away debt” idea—Ray Dalio’s “beautiful deleveraging”—go by uncontested. It reminds me of picking yourself up by your bootstraps: have you ever tried to do it? Those who say the world is doing it right now seem unaware that the rate of debt growth is outpacing inflation. Hard to see how that gets you anywhere. The U.S. debt-to-GDP has grown >15% in four years.23 Wobbling on a weak understanding of global finance, I called out to financial Twitter (fintwit) for examples of countries that inflated away their debt without a deflationary default in the end. (Of course, inflation is a default too but humor me.) I got answers, many from smart guys who thought their answers were obvious but don’t work for me: Weimar Germany? No. They screwed the populace but big sovereign debts were denominated in gold, ultimately leading to WWII. Argentina? Please: They defaulted 6 times in the last century. An obscure answer: Canada in the 1980s and 1990s? They did burn down their debt, but the inflation rate was way too low to account for it; austerity and growth get a lot of the credit. Japan? Nope. Although not imploding yet, their debt-to-GDP is a monster with inflation just beginning to flicker. The post-World War II United States for the win! They had double-digit negative rates on sovereign debt, and bondholders got crushed. So that is a valid case, but let us not forget that the U.S. was the only industrial nation standing—a juggernaut—controlling 80% of global GDP. How much post-war debt reduction was inflation and how much was American Exceptionalism (a term coined by Stalin)? Someone smarter than me could do that math. The Russian invasion of Ukraine has put an end to the globalization we have experienced over the last three decades. A large-scale reorientation of supply chains will inherently be inflationary. ~ Larry Fink, CEO of Blackrock There are other problems looming that are ominous. The world is said to be at the precipice of deglobalizing, propelled by a collapse of the global population. Yes. You heard that right. imploding. Deglobalization means that goods and services may no longer be made most efficiently and economically. Former Stratfor demographer, Peter Zeihan, claims population collapse and accompanying deglobalization is already baked into the cake (see Books).24 The conflict in Ukraine has been horrible for inflation since energy prices drive the prices of everything, and one could imagine the conflict accelerating deglobalization. If the conflict gets worse or spreads, I’d say it is time to panic. I grew up in France, so I had a good dose of Marx in my education. The first thing Marx teaches you is that revolutions are typically the result of inflation. ~ Louis-Vincent Gave, 2021 The Fed We have got to get inflation behind us. I wish there were a painless way to do that, there isn’t…there will be pain. ~ Jerome “J-Pain” Powell, being clear We’re going to have a good deal of pain and suffering before we can solve these things. ~ William McChesney Martin, 1969, and there was pain to come The Fed is now in a bind. The drag queen shows at the Eccles Building are over. Forty years of disinflation and jawboning to the point of blowers cramp created a gargantuan recency bias, leaving generations of Americans unfamiliar with the socioeconomic horrors that bad monetary policy can inflict on an economy and society. We are confronting an inflation problem, but what policy tools do we have to defeat it? Recall that when Volcker took on the inflation Balrog, the national debt was 31% of GDP. Now it is more than four times that. Total public and private debt relative to GDP is up almost threefold. Volcker did not have to worry about the systemic risk that his successors at the Fed nurtured to maturity. Since the Fed has been accused of keeping rates “too low for too long” too many times by too many smart guys, they can’t plead ignorance no matter how compelling that defense seems. Hiking rates to bring down inflation is not a ‘policy mistake,’ it’s the Fed’s mandate. The true policy mistake was believing that 0% rates, buying billions of mortgage bonds in a housing bubble, & increasing the money supply by 40% in 2 yrs would have no negative consequences. ~ Charlie Biello, CEO of Compound Capital Advisors Leading up to 2019, the Fed had belatedly started hiking rates and reducing its balance sheet. I thought it was way too late and possibly a mistake to do both concurrently. The repo market started convulsing in late 2019, prompting the Fed to pivot yet again by “going direct”—shoving money straight at the consumers—at the behest of Blackrock in a white paper.1,2,3 A few months later the Fed agreed to put the economy in an induced covid coma, causing much bigger problems. Inflation is now in our DNA as the dreaded “inflation expectations” have taken root. Unlike his predecessors, Powell is in a brawl with fiscal policymakers—way too many tools inside the beltway spending money to slay inflation—with whom Powell has neither control nor allegiance. It will turn out to be largely impossible to normalize interest rates without collapsing the economy. ~ Edward Chancellor, market historian The second fundamental problem is one of legacy and credibility. Many market participants—pivot watchers—see Powell et al. as swamp creatures, controlled by some higher power to mitigate all pain and damage. I see Powell as a guy who wants to be in the pantheon of central bankers alongside Paul Volcker while being compared with the profoundly destructive Arthur Burns by the likes of Roach, Summers, and others.4,5 Bill Gross called them an “ignorant—yes ignorant—Federal Reserve” while making allusions to “Ponzi finance.”6 What path will a narcissist at the peak of his power choose: protector of credibility and legacy or savior of markets and destroyer of currencies? I suspect legacy wins, but it is just a hunch. The markets are currently taking the other side of the bet. So far, Jerome Powell looks more like Arthur Burns than Paul Volcker. ~ Bill Dudley, former head of the New York Fed Before looking at what the Fed might do going forward and with what level of fortitude, let’s look at what prominent Fed detractors have to say in their own words juxtaposed with a few Fed comments for comic relief. Mind you, most of these are not just loose-cannon bloggers. The country is suffering from the worst cost-of-living crisis in 42 years. The Fed wasn’t data-dependent and now has sacrificed its credibility. ~ Lacy Hunt, Hoisington Investment Management and former deflationist This is the fundamental problem…It is a fundamental trap…It’s gonna be really bad. I think we should worry more about deflation. I think that is a huge risk people aren’t thinking about. If the Fed pops this bubble there will be a deflationary spiral…It is going to cause devastation.7 ~ Mark Spitznagel, Universa Investments, on Dr. Frankenstein and the monster There is a whole generation of people who don’t remember inflation. They don’t know what it is, and so I think inflation is a non-existent threat. ~ Alice Rivlin, former Fed governor, circa 2017 The Fed’s latest moves are consistent with a central bank that is continuously scrambling to catch up with realities on the ground. It is the kind of thing that one typically finds in developing countries with weak institutions, not in the issuer of the world’s reserve currency and the custodian of the world’s most sophisticated financial markets. ~ Mohamed El-Erian, former PIMCO I think we’re in one of those very difficult periods where simply capital preservation is I think the most important thing we can strive for…[The Fed] has inflation on the one hand, slowing growth on the other, and they’re going to be clashing all the time. You can’t think of a worse environment than where we are right now for financial assets…Look at the level of overvaluation we’re in right now in terms of rates and stocks…Sub-two-percent inflation is a much better problem to have than above-two-percent inflation.8 ~ Paul Tudor Jones, founder of Tudor Investment Corp. Hitting or exceeding 2 percent inflation for a few months does not mean victory. To fully achieve the goal of price stability, we need to see a sustained period of moderately above-target inflation. Only then will the job be complete.9 ~ Mary Daly, San Francisco Fed President Mary Daly, in 2020 showing zero understanding of “price stability” I don’t feel the pain of inflation anymore. I see prices rising but I have enough…I sometimes balk at the price of things, but I don’t find myself in a space where I have to make tradeoffs because I have enough, and many Americans have enough.10 ~ Mary Daly, San Francisco Fed President, in 2022 showing zero understanding of inflation. I know from studying history that credit eventually kills all great societies. We have essentially taken out our American Express card and said we are going to have a great time…Perhaps we are simply responding to the same type of cycles that most advanced civilizations fell prey to, whether it was the Romans, sixteenth-century Spain, eighteenth-century France, or nineteenth-century Britain.11 ~ Paul Tudor Jones, founder of Tudor Investment Corp. The West is now awakening from decades of poor policy. The consequences will appear overwhelming at first. We’ll get through, but that long, painful process has only just begun.12 ~ Eric Peters, CIO of One River Asset Management I think now we have more credibility, we’re moving faster, we will be able to bring inflation under control sooner and with less disruption to the economy than we had in the ’70s. ~ James Bullard, President of the Saint Louis Fed Now that the Fed finds itself in such an uncomfortable situation—one largely of its own making—it may be inclined to eschew further rate hikes, particularly given the growing criticism that it is tipping the economy into recession, destroying wealth, and fueling instability. Yet such a course of action would risk repeating the monetary-policy mistake of the 1970s, saddling America and the world with an even longer period of stagflationary trends. ~ Mohamed El-Erian, former head of PIMCO The Fed’s application of its framework has left it behind the curve in controlling inflation. This, in turn, has made a hard landing virtually inevitable. ~ Bill Dudley, former head of the New York Federal Reserve Because inflation is ultimately a monetary phenomenon, the Federal Reserve has the capacity and the responsibility to ensure inflation expectations are firmly anchored at—and not below—our target. ~ Lael Brainard, current Vice Chair of the Federal Reserve, May 16, 2019 Staff economists at the Federal Reserve predict…a measured inflation rate of slightly less than 2% in 2022, according to minutes of the September Federal Open Market Committee meeting released last Wednesday. ~ James Grant, @Grantspub, October 2021 Valuations have only begun to retreat from record extremes as a decline in the economy begins and at a time when the Fed is not only unable to come to its rescue but is forced to implement policy that will only make things worse. ~ Jesse Felder, The Felder Report The length of predicted recession—two full years—is extraordinary. Add to that probably the most bearish comment I have ever heard from a Fed bank—“the odds of a hard landing are around 80%” and wow! ~ Albert Edwards, Societe General (SocGen) We want to see inflation move up to 2%. And we mean that on a sustainable basis. We don’t mean just tap the brakes once. But then we’d also like to see it on track to move moderately above 2% for some time. ~ Jerome Powell, April 2021, on pain avoidance Possibly the most robust indicator of an impending recession is when the Fed dismisses the inverting yield curve as a predictor of an impending recession. ~ Albert Edwards, SocGen Since 2010, Central Bankers became active market participants—uneconomic market participants with infinite balance sheets, seeking to distort market mechanisms for pricing of risk. These distortions spread into all financial markets…this easing cycle has no precedent and undoing something so unique will not resemble previous cycles…To return balance sheets to where they were in 2010 at the beginning of QE would mean a sale of $20 trillion in assets, or roughly equivalent to selling the entire $24 trillion in U.S. annual GDP.13 ~ Lindsay Politi, One River Asset Management The Fed doesn’t want to get into the credit allocation business. ~ Loretta Mester, Cleveland Fed President, after buying $1.3 trillion of mortgage-backed securities in less than two years It could be useful to be able to intervene directly in assets where the prices have a more direct link to spending decisions. ~ Janet “Yeltsin” Yellen, on the credit allocation business The Fed since Volcker has been pretty clueless and remains so. What has been more remarkable, though, is the persistent confidence…despite the demonstrable ineptness in dealing with asset bubbles. ~ Jeremy Grantham, GMO We are on the cusp of a rare paradigm shift in interest rates. Such changes take decades—or even generations—to occur. But when they do, the financial implications are profound. ~ Nick Giambruno, founder of The Financial Underground Their job is to fight inflation. They’ve done a terrible job of it so far. ~ Jeff Gundlach, founder of Doubleline Capital, in reference to the Fed Underlying inflation appears to still be well anchored at levels consistent with the Fed’s average 2 percent objective, and so—unlike in the Volker and Greenspan eras—no extra monetary restraint is needed to bring trend inflation down.14 ~ Charles Evans, President of the Chicago Fed You know what upsets me the most? People say why do you get so exercised about the Federal Reserve? It’s because the people they screwed going in were the lower and middle-class people, and the people getting screwed on the way out are those same people. They’re getting it on both ends. ~ Guy Adami, money manager and CNBC host (a good one) We will not allow inflation to rise above 2% or less…We could raise interest rates in 15 minutes if we had to. ~ Ben Bernanke, winner of the 2022 Nobel Prize in Economics Thank you, President Fisher, I know we put a lot of value on anecdotal reports around this table, and often to great credit. But I do want to urge you not to overweight the macroeconomic opinions of private-sector people who are not trained in economics. ~ Ben Bernanke The Fed surely put the holdout deflationists—Napier, Hunt, and Shedlock—in their place, although it could still be the end game; David Rosenberg thinks so.15 I am going to disagree with Milton Friedman here: I did not believe inflation is just a monetary problem or government spending problem. It may start that way, but it mutates. Now the Fed has to deal with the Bronteroc. By assuming inflation is always just a monetary phenomenon, market participants stop thinking because the Fed has their backs. I think this model is now wrong. I think the Fed absolutely does not get the pain associated with a collapsing bubble.16 ~ Jeremy Grantham, founder of GMO I am not sure there is widespread agreement on the Fed’s goals. Is it to fight inflation, pop an all-time record bubble across all asset classes, euthanize the market zombies,17,18 regain credibility by detonating the Fed put19—the implicit guarantee under the markets—or…wait for it…destroy the Europeans?20 Maybe Powell is channeling the legendary King Canute, showing that even the most omnipotent King can’t stem the tides. No matter what, the bulk of the stock toshers seem unwilling to grasp that the Fed will push rates up until the will to speculate is broken. Michael Every of Rabobank suggests “They are being told clearly they can no longer have their cake, and everyone else’s cake, and eat it and fit in their jeans. And they are ignoring it.”21 Failure is not an option for Jay Powell. I think they’re going to 4% come hell or high water. Until inflation comes down a lot, the Fed is really a single-mandate central bank.22 ~ Richard Clarida, former Fed Vice Chair Does the Fed have the fortitude? The Bank of England folded fast to save their pension system.23 Some thought the Fed couldn’t lift rates above 1%.24 This is no longer 14 days to flatten the yield curve. They are up against a wall: “The Fed has never before started a rate hiking cycle when inflation was already 7.9%.”25 An anonymous (but prominent) commentator with the pseudonym Mr. Skin noted how many times Powell has referred to “real interest rates” and said he wanted them “over +1%.” They are camped at about –10% right now, so that is an unveiled threat to “unwind unknown globs of leverage.” Roach sees the “Fed funds rate up 10% from here.”26 Powell insisted that a neutral policy stance is “not a place to pause or stop” and that the Fed would embrace “a restrictive policy stance for some time.” Fed President Loretta Mester warned that they would raise rates “even in a recession.” I don’t think the Fed is gonna let up just because the economy starts popping a few rivets. There isn’t enough blood in the streets for a Theranos lab test. Before this is over, there will be bloated corpses, shattered dreams, and milk cartons with Cathie Wood’s face. I am still waiting for [Powell] to act boldly—‘boldly’ means he has to shock the market. If you want to change someone’s view, if you want to change someone’s action, you can’t slap them on the hand, you have to hit them in the face. ~ Henry Kauffman, legend The Federal Reserve appears to be braced and wants participants in the market to understand they will stay the course…the rough landing odds are very high…Monetary policy is currently on the right course but current right course will have to persevere.” ~ Lacy Hunt What about other central banks? It appears that they have been cast adrift while we try to solve our domestic problems. This could become a monetary Monroe Doctrine. The strengthening dollar is wreaking havoc on global credit markets. The Fed sent a few currency swaps to alleviate a few currencies getting pegged by the strong dollar, but my sympathies are not high. We have a $2 quadrillion notional value derivatives market that has overstayed its welcome in the world of wealth creation, serving only to finance finance. The Swiss National Bank stress really leaves me cold since they were printing francs to buy US equities. When in Econ 101 did you guys learn about that? Fuck ’em. We now understand better how little we understand about inflation. ~ Jerome Powell Broken Markets My money remains on the likelihood that this is the early stages of a profound bear market in assets. Populism in the west has a long way to go. QE has undermined savings, and now populism will undermine the price mechanism. We are at the start of a 25-year cycle, so get used to it. ~ Crispin Odey, Odey Asset Management and a notorious bear I am suspecting that the broken YIR clock is finally right. What we will find out is whether it blows up your house at high noon. The presumption that bailouts by the Fed would always be forthcoming and would always work has allowed investors to buy speculative non-GAAP tech garbage. That model may be tested. We are looking at some events that have not been seen for many years (decades). For starters, we are coming off a frothy high in the equity markets said to be the biggest bubble of them all. This is occurring concurrently with a serious, if not potentially disastrous, downturn in the bond market. Recall that a 60:40 portfolio in the 2007–09 bear market was cushioned by the bond market. The risk parity cult—those striving to bring risks and rewards of stocks and bonds to parity by leveraging their bond portfolios—may have overshot their mark. We also haven’t seen inflation levels like this for four decades. To top it off, we are not coming off a euphoric high. Investors may have done well in their portfolios, but all other geopolitical and social pressures have left us plebes in sour moods. Entering a secular bear market in stocks and bonds pissed off at the World is not a solid foundation to begin a long slog. When I look back at the bull market that we’ve had in financial assets really starting in 1982. All the factors that created that boom not only have stopped, they’ve reversed…We are in deep trouble. ~ Stan Druckenmiller With the Fed boxed in by rapidly rising but still historically low rates and serious inflation, it is akin to a visit to your oncologist. What comes next? You get your affairs in order. The luminary Murray Stahl of Horizon Kinetics has a way with words. He notes that “the Age of Monetary Policy is over.” Channeling some of Murray’s thoughts blended with a few of my own, we may be at the end of a unique economic cycle. In the early ‘80s, the Russians were starved for capital and began flooding the world with dirt-cheap commodities. The Chinese were starved for capital—quite literally China had $38,000 of foreign reserves in its banking system as it exited its self-exile1—so they began flooding the market with dirt-cheap labor. The US long-bond rates began a four-decade trek from 16% to essentially zero. Meanwhile, the boomer demographic not only hit the workforce, but they brought their wives with them in large numbers. I have argued generously that buybacks are a reach for yield given the low returns even on fortress balance sheets, but debt-fueled price pumping nicely propelled executive stock option valuations too. These tailwinds will not repeat over the next four decades. Globalization is fraying at the edges and, according to Zeihan, will be ripped apart in a global demographic collapse.2 Prior droughts have been due to rising inflation and/or high market valuation. The U.S. is now at risk from both… U.S. returns are at now risk from both the prospect of higher inflation AND the headwind to returns from high starting-point valuations. ~ Gerard Minack, Minack Advisors and former Morgan Stanley economist And, by the way, my definition of a correction is that it adjusts asset values and investors’ attitudes significantly. When was our last correction? March 2020? Not a chance. What attitudes got corrected? How about 2007–09? Not in my book. Investors were rewarded for their tenacity. The last real correction was 1967–81. Equity investors lost 70% of their equity gains inflation corrected. You could not give equities away even though, by all metrics, they were dirt cheap, but why take a risk on equities after 14 years of bludgeoning? A simple reversion to trend, if it happened tomorrow, would require the S&P 500 Index to fall back below 2,000, the prospect of an even greater decline is a frightening one, indeed. ~ Jesse Felder, The Felder Report Every year, I take a swipe at valuations. Two years ago I went at the egregiously overpriced FAANGs and related tech garbage. Moreover, the FAANGs et al. have an enormous collective market cap compared to the dot-coms that caused pain.3 Although the FAANGs et al. humiliated me in 2021 by continuing their moonshot, their two-year returns are slightly sobering and exonerating: Table. Two-year total returns of the FAANGs et al. critiqued in 2020 Amazon                        –43% Apple                            +9% Facebook*                     –56% Genius Brands              –59% Google                          +7% Microsoft                      +6% Netflix                          –46% Nvidia                           +26% Salesforce                     –31% Shopify                         –62% Tesla                             –30% Zoom                            –81% *Metaverse Today, only finance is profitable, while production is in crisis. ~ Thierry Meyssan, French journalist At the end of 2021, an analysis of 25 valuation metrics showed the markets to be 120–150% above historical fair value.5,6I obsessed over 1994 as the year that valuations left Earth’s gravitational field. The markets have been steadily climbing the wall of worry residing above historic fair value with occasional pauses that refresh since then, propelled by (a) a bond rout intervention in 1994 that never really stopped and (b) the rapid rise of passive index investing. The curve in the following has no mathematical basis, but I think it captures the problem and the 1994 launch date nicely: Find a metric that makes you more optimistic—be my guest—but it would be perilous to ignore the 25 I laid out in detail last year.7 With the S&P doing an orderly swan dive of 20% as of 12/16/22, many investors are looking to buy the dips. Do you really think unwinding.....»»

Category: smallbizSource: nytDec 24th, 2022

Wall Street"s Biggest Bear Reveals His 2023 Forecast: 4,150, To 3,000, To 3,900... And Then A Boom

Wall Street's Biggest Bear Reveals His 2023 Forecast: 4,150, To 3,000, To 3,900... And Then A Boom It's been a bad year for Wall Street predictions: actually scratch that, it's been absolutely terrible. Last November when bank after bank released their paperweight 100+ page forecasts for the year ahead (which weren't worth the cost of the paper they were printed on) the average year ahead forecast among Wall Street's firms was above 5,000 with a few exceptions: both Bank of America and Morgan Stanley were well below. As we noted exactly one year ago, Morgan Stanley forecast a "below-consensus forecast for the S&P 500 (4,400 by end-2022). That ‘bearish’ forecast is still a historically high multiple (18x) on an optimistic 2023 EPS number (US$245)." Considering that Goldman was pushing 5,100 and JPMorgan's permabulls led by mARKKo were somewhere in the mid-5000s, Morgan Stanley's Mike Wilson would end up looking positive like Nostradamus compared to all of the bank's ridiculous peers (only BofA's Michael Hartnett was even more accurate, read bearish). Which is not to say that Morgan Stanley got everything right. On the contrary, as this tweet from one year ago show, the bank's economists were convinced the Fed would not hike at all in 2022. So much for "Team Transitory" after the fastest hiking cycle since Volcker. Morgan Stanley: "Our economists see two drivers for no hikes in 2022 – falling core PCE inflation and rising labor force participation." — zerohedge (@zerohedge) November 21, 2021 With that in mind, we will gladly skip anything JPM and Goldman have to say about the year ahead (or maybe we will just highlight it as a scenario that will definitely not happen), and instead will selectively cover what the bank's equity strategist Mike Wilson predicts will happen next year, if for no other reason than he has been unabashedly contrarian - and right for the most part - in 2022. Ironically, unlike last year when Wilson's downbeat forecast stood out like a sore thumb, in his latest year-ahead preview titled "2023 US Equities Outlook: The Road Not Taken" (available to pro subs), this year even Wilson - who recently turned quite bullish and correctly predicted a few weeks ago that stocks would spike in the current tactical and technical bear market rally and rise as high as 4,150 before they stumble much lower - admits that his year ahead targets are "unexciting with a narrower range than normal", although - in taking a page out of the famous Robert Frost poem - he predicts that the path in 2023 "will not be as smooth. Investors will need to be more tactical and make choices with no regrets." Here we will cut to the chase, and report upfront that Wilson's year-end 2023 forecast is not that far from where the market closed today. And while the bank does not expect much to change price-wise between now and Dec 31, 2023, it thinks that the way we get there will be quite a rollercoaster, to wit: While our year end 2023 base case price target of 3,900 is roughly in line with where we're currently trading, it won't be a smooth ride. We remain highly convicted that 2023 bottom up consensus earnings are materially too high. On that score, we revise our '23 EPS forecast another 8% lower to $195 in the base case, a reflection of worsening output from our leading earnings models. This leaves us 16% below consensus on '23 EPS in our base case and down 11% from a year-over-year growth standpoint. After what's left of this current tactical rally, we see the S&P 500 discounting the '23 earnings risk sometime in Q123 via a ~3,000-3,300 price trough. We think this occurs in advance of the eventual trough in EPS, which is typical for earnings recessions. While we see 2023 as a very challenging year for earnings growth, 2024 should be a strong rebound where positive operating leverage returns—i.e., the next boom. Equities should begin to process that growth reacceleration well in advance, and rebound sharply to finish the year at 3,900 in our base case. Bear/Base/Bull price skew: 3,500/3,900/4,200 So with the summary out of the way, let's take a closer look at Wilson's forecast starting with where the title comes from. Well, as the strategist explains "last year's Fire and Ice narrative worked so well we decided to dust off another Robert Frost jewel to describe this year's outlook with The Road Not Taken. As described by many literary experts, and Frost himself, the poem presents the dilemma we all face in life that different choices lead to different outcomes, and while the road taken can be a good one, these choices create doubt and even remorse about the road not taken – i.e., what if/could have been? For the year ahead, we think investors will need to be more tactical with their views on the economy, policy, earnings and valuation. This is because we are closer to the end of the cycle at this point, and that means the trends in these key variables can zig and  zag before the final path is clear. In other words, while flexibility is always important to successful investing, it's critical now." In contrast to what lies ahead, Wilson says that "the set-up was so poor a year ago that the trends in all of the variables mentioned above were headed lower, in our view" (although let's just pretend that MS economists did not predict that the first rate hike would take place in 2023). Under these conditions, he goes on, "the right choice/strategy was about managing and/or profiting from the new downtrend. After all, Fire and Ice, the poem, is not a debate about the destination – it's the end of the world. Instead, it's about what causes it and the path to that destination. In the case of our bear market call, it was a combination of both Fire AND Ice – inflation AND slowing growth, a generally toxic cocktail for stocks." Of course, as it would later turn out, that cocktail proved to be just as bad for bonds, at least so far. However, as the Ice overtakes the Fire and inflation cools off, Wilson is becoming more confident that bonds should handily beat stocks in this final verse that has yet to fully play out . That divergence, he notes, "can create new opportunities and confusion about the road we are on" and is why as we speculated in recent posts, Wilson has pivoted to a more bullish tactical view. This sets up a convenient transition to Wilson's well-telegraphed near-term outlook where he maintains a "tactically bullish call" as we transition from Fire to Ice, "a window of opportunity when long-term interest rates typically fall prior to the magnitude of the slowdown being reflected in earnings estimates and the economy. This is the classic late cycle period between the Fed's last hike and the recession." It's also why BofA's Michael Hartnett correctly called for a post-Halloween rally and why this site has been pounding the table on the strong technicals that will drive the market until the fundamentals return with next month's Payrolls, CPI, and FOMC. Historically, Wilson writes, this period is a profitable one for stocks as shown in the chart below, denoted by the double-digit rallies that follow the moment the Fed pauses as markets price in the inevitable rate cuts that follow. What happens after this tactical rally however, is more tricky: three months ago, Wilson suggested the Fed's pause would coincide with the arrival of a recession this cycle given the extreme inflation dynamics. In short, the Fed would not pause until payrolls were negative, the unequivocal indicator of a recession (something which we believe may happen as soon as December, and considering the mass layoff announcements we have seen in recent days we are willing to double down on this forecast). Needless to say, the advent of a recession will make it too late to kick save the cycle or the downtrend for stocks. However, for now, the jobs market - as indicated by the highly politicized BLS - has remained "stronger for longer" even in the face of weakening earnings. And yes, there is a possibility that Biden has instructed the Department of Labor to maintain this charade, and the strong jobs numbers may persist into next year (just ignore the tens of thousands of highly-paid tech workers getting fired every day now), leaving the window open for a period when the Fed can slow/pause rate hikes before we get a negative payroll reading. That hope for a softish landing - in a nutshell - is what Wilson thinks is behind the current rally, and why he thinks it can push further "because we won't have evidence of the hard freeze for a few more months and markets can dream of a less hawkish Fed, lower rates and resilient earnings in the interim." Obviously in this context, last week's softer than expected CPI report was the critically necessary data point to fuel that dream. Here Wilson brings up an interesting nuance: while a pause (or semi pivot) is good for stocks, a full-blown pivot (i.e., rate cuts) is actually bad. In his own words: ... we want to remind readers that a pause is different than a cut. While some investors may think a cut is even better than a pause in rates, the evidence does not bear that out. Exhibit 3 shows that when the cuts coincide with a recession, it's not good for equities. So, while we think there is a window for stocks to run into year end as the markets dream of a pause, a Fed that is cutting is probably a bad sign that the recession has arrived (negative payrolls). This is especially true given the uniqueness of this cycle – i.e., higher than target inflation and fear of a resurgence means the Fed may pause, but won't cut rates before a recession arrives. Needless to say, and as much as it will anger the permabears out there, so far the tactical rally call has played out to a tee. Interestingly, prior to last week's softer than expected CPI release, it's produced very bifurcated performance, with the Dow Industrials and small caps dominating the Nasdaq and S&P 500. However, that all changed last week when bonds moved higher (yields lower) on the softer CPI, a necessary development for the tactical long call to have another leg higher. How far does the current rally go? As Wilson discussed in last week's note, lower rate volatility was the key to the first leg of this rally which supported valuations and the more cyclical parts of the equity market initially. But in order to get the next leg of the tactical equity rally, Wilson argued rate levels would need to fall. Furthermore, this leg would be led by a catch up in Nasdaq/long duration growth stocks relative to the Dow Industrials and Russell 2000. In short, the move lower in yields last week was the catalyst for even higher prices for the S&P 500, even from here. While the lower end of Wilson's prior target for this rally (4000-4150) was achieved on Friday when the S&P hit 4,000, the strategist thinks the upper end of that range will be reached, and he would even not rule out even higher prices should 10-year UST yields fall more precipitously – i.e., 3.25%. That's the good news. The bad news is that once we do hit the bear market rally target, the bear market will resume with a vengeance. Here is Wilson: Unfortunately, we have more confidence today than we did a few months ago in our well below bottom-up consensus earnings forecasts for next year. In fact, we are cutting our estimates even further today, essentially moving to the bear case earnings scenario we first presented in early September. More specifically, Morgan Stanley's base case S&P EPS forecast for 2023 is now $195, down from $212, while its bear and bull case forecasts are $180 and $215, respectively. These forecasts are derived from our top down earnings leading indicators (Exhibit 6 and Exhibit 7). To summarize the story so far: we have about 200 more points left in the bear market rally which rises to 4,200, followed by a 1000 points swoon to 3,200 over the near-to-mid term. What happens then? Getting back to the narrative for the next 12 months, Wilson concedes that the path forward is much more uncertain than a year ago and likely to bring several twists and days/weeks of remorse for investors regretting they traded it differently – i.e., "The Road Not Taken." If one were to take Wilson's S&P bear/base/bull targets (3500/3900/4200) at face value, they might say it looks like he is expecting a generally boring year. However, as the strategist cautions, "nothing could be further from the truth. In fact, we would argue the past 12 months have been pretty boring because a bear market was so likely we simply set our defensive strategy and stayed with it –i.e., "boring can be beautiful." Drilling down on Wilson's year-end price forecast matrix, he warns that while his year-end 2023 base case price target of 3,900 is roughly in line with where we're currently trading, it won't be a smooth ride. In short, he expects "a bust before a boom, and it comes down to earnings." Here's why: Our highest conviction view across the board is that 2023 bottom up consensus earnings are materially too high. On that score, we revise our '23 EPS forecast another 8% lower to $195 in the base case, a reflection of worsening output from our leading earnings models and increased conviction that margin pressure will be greater than appreciated. This leaves us 16% below consensus on '23 EPS in our base case and down 11% from a year-over-year growth standpoint. After what's left of this current tactical rally, we see the S&P 500 discounting the '23 earnings risk sometime in the first quarter of next year via a ~3,000-3,300 price trough. We think this occurs in advance of the eventual trough in EPS, which is typical for earnings recessions. In other words, price leads earnings and it's not typical to put a trough multiple on trough earnings. We think that means the Q1 price low is marked by a 13.5-15X multiple on a forward EPS number of ~$220. The good news for those who survive the coming rollercoaster is that while "2023 will be a very challenging year for earnings growth, 2024 should be the opposite—a rebound growth year where positive operating leverage resumes—i.e., the next boom." As such, Wilson believes that equities should begin to process that growth reacceleration well in advance, rebounding off a ~3,000-3,300 price trough in Q1 and finishing the year at 3,900 in his base case. We conclude by presenting Wilson's three cases for year-end 2023: the base, the bull and the bear. Base Case Price Target for Dec. '23: 3,900 In our 3,900 base case, the market puts a 16.1x P/E multiple on forward (2024) EPS of $241. This outcome represents a proper earnings recession (year-over-year EPS growth contracts by 11%). We see nominal top line growth slowing to low single digit territory (from low teens in ‘22). Meanwhile, margins do the heavy lifting to the downside as cost pressures remain stickier than slowing end demand and pricing. On that front, we see margins contracting by ~150 bps next year, taking the net margin time series back just below its 25-year trend line. We see the S&P 500 discounting this earnings risk sometime in the first quarter of next year in advance of the eventual trough in EPS which is typical for earnings recessions. While we see 2023 as a very challenging year for earnings growth, 2024 should be the opposite—a rebound growth year where positive operating leverage resumes. As such, equities should process that growth reacceleration well in advance, rebounding off a ~3,000-3,300 price trough in Q1 and finishing the year at ~3,900 in our base case. Bull Case Price Target for Dec. '23: 4,200 In our 4,200 bull case, the market puts a 16.7x P/E multiple on forward (2024) EPS of $251. This outcome represents a disappointing EPS growth backdrop for ’23 but it’s more of a muddle through (-4% year-over-year EPS growth). The correction of cycle excesses is less pervasive and, as a result, the magnitude of the growth rebound in 2024 is less significant than it is in our base and bear cases. In this scenario, we see nominal top line growth slowing to positive mid single digit territory next year. Margins compress by ~100 bps, a less severe outcome than what we see in our base and bear cases. By the end of next year, the market is processing a healthy mid-teens EPS growth rebound in 2024, and the multiple expands to ~16.7x. Because our bull case presents the least attractive ’24 EPS growth profile as ’23 is more of a muddle through scenario, it also offers a less attractive upside price skew to our base and bear cases than we’ve typically forecasted. In this scenario, we don't expect new Q1 '23 price lows (i.e., we'd expect a retest of 3,500 but not a new low). Bear Case Price Target for Dec. '23: 3,500 In our 3,500 bear case, the market puts a 15.3x P/E multiple on forward (2024) EPS of $230. This outcome represents a more severe earnings recession in ‘23 as compared to our base case (year-over-year EPS growth contracts by 16%). Margins do the heavy lifting to the downside which is typical even in more significant earnings recessions. On that score, we see margins contracting by ~200-225 bps next year. We think the S&P 500 discounts this earnings risk sometime in the first half of next year at a price level of ~3,000. As in our base case, the market can then look forward to a growth reacceleration in 2024, albeit from a lower price and $ EPS level Much more in the full MS forecast available to pro subs. Tyler Durden Tue, 11/15/2022 - 04:25.....»»

Category: worldSource: nytNov 15th, 2022

Peak Fed Hawkishness Means Sustainable Rally Is Still A Way Off

Peak Fed Hawkishness Means Sustainable Rally Is Still A Way Off By Simon White, Bloomberg Markets Live reporter and analyst Stocks will be stuck in a bear market for several more months even with a peak in Fed hawkishness. Peak global inflation is likely here, allowing global central banks, including the Fed, to begin a gradual tempering of their hawkishness. The Fed will announce Wednesday the outcome of its rate-setting meeting, with a 75 bps hike expected. (To be clear, even while global inflation may have peaked, there are likely still several countries that will see another inflation peak later in this cycle.) This might be taken as an all-clear for stocks and a swift end to the bear market, but current formidable headwinds and history suggest otherwise. First, a distinction needs to be made between peak Fed hawkishness and the Fed pivot. A peak in hawkishness does not mean an immediate flip-flop to dovishness. Instead, it means the peak Fed Funds rate should stop rising - which we have seen - and be maintained. As the market starts to price this in, the front of the very steep Fed Funds curve should flatten, and the back of the curve – where the pivot is – should disinvert, taking the pivot out. The negative correlation between the front and the back of the Fed Funds curve – pivoting around the peak in the Fed Funds rate – is very unusual. The last time was during the aggressive Fed hiking cycle in 1994, and then in again in the late 1990s. The pricing out of the Fed pivot has implications for volatility as the relative price of crash insurance has a strong relationship with expected Fed cuts. No pivot likely means more expensive out-of-the-money S&P puts, and hence a higher VIX. The end of the 1994 rate-hike cycle set the stage for a multi-year equity rally into the tech bubble. However, that is not the typical case. In median terms, the S&P moves sideways for about six months after the last Fed hike before putting in a pronounced rally. Given we likely have three (perhaps more) rate moves to go before the Fed pauses – along with an increasingly likely earnings recession – any sustainable rally in equities and an end to the bear market is a way off. Tyler Durden Tue, 11/01/2022 - 12:20.....»»

Category: dealsSource: nytNov 1st, 2022

Chris Hedges: Stop Worrying & Love the Bomb

Chris Hedges: Stop Worrying & Love the Bomb Authored by Chris Hedges via, I have covered enough wars to know that once you open that Pandora’s box, the many evils that pour out are beyond anyone’s control. War accelerates the whirlwind of industrial killing. The longer any war continues, the closer and closer each side comes to self-annihilation.  Unless it is stopped, the proxy war between Russia and the U.S. in Ukraine all but guarantees direct confrontation with Russia and, with it, the very real possibility of nuclear war.` Bombs Away – by Mr. Fish. U.S. President Joe Biden, who doesn’t always seem to be quite sure where he is or what he is supposed to be saying, is being propped up in the I-am-a-bigger-man-than-you contest with Russian President Vladimir Putin by a coterie of rabid warmongers who have orchestrated over 20 years of military fiascos. They are salivating at the prospect of taking on Russia, and then, if there is any habitation left on the globe, China. Trapped in the polarizing mindset of the Cold War — where any effort to de-escalate conflicts through diplomacy is considered appeasement, a perfidious Munich moment — they smugly push the human species closer and closer toward obliteration. Unfortunately for us, one of these true believers is Secretary of State Antony Blinken. “Putin is saying he is not bluffing. Well, he cannot afford bluffing, and it has to be clear that the people supporting Ukraine and the European Union and the Member States, and the United States and NATO are not bluffing neither,” E.U. foreign policy chief Josep Borrell warned. “Any nuclear attack against Ukraine will create an answer, not a nuclear answer but such a powerful answer from the military side that the Russian Army will be annihilated.” Annihilated. Are these people insane? Josep Borrell in 2019. (European Parliament, CC BY 2.0, Wikimedia Commons)  You know we are in trouble when former Donald Trump is the voice of reason. “We must demand the immediate negotiation of a peaceful end to the war in Ukraine, or we will end up in world war three” the former U.S. president said. “And there will be nothing left of our planet — all because stupid people didn’t have a clue … They don’t understand what they’re dealing with, the power of nuclear.” I dealt with many of these ideologues — David Petraeus, Elliot Abrams, Robert Kagan, Victoria Nuland — as a foreign correspondent for The New York Times. Once you strip away their chest full of medals or fancy degrees, you find shallow men and women, craven careerists who obsequiously serve the war industry that ensures their promotions, pays the budgets of their think tanks and showers them with money as board members of military contractors. They are the pimps of war. If you reported on them, as I did, you would not sleep well at night. They are vain enough and stupid enough to blow up the world long before we go extinct because of the climate crisis, which they have also dutifully accelerated. If, as Joe Biden says, Putin is “not joking” about using nuclear weapons and we risk nuclear “Armageddon,” why isn’t Biden on the phone to Putin? Why doesn’t he follow the example of John F. Kennedy, who repeatedly communicated with Nikita Khrushchev to negotiate an end to the Cuban missile crisis? Kennedy, who unlike Biden served in the military, knew the obtuseness of generals. He had the good sense to ignore Curtis LeMay, the Air Force chief of staff and head of the Strategic Air Command, as well as the model for General Jack D. Ripper in “Dr. Strangelove,” who urged Kennedy to bomb the Cuban missile bases, an act that would have probably ignited a nuclear war. Biden is not made of the same stuff. Retired General Curtis LeMay in 1987. (U.S. National Archives, CC BY-SA 4.0, Wikimedia Commons) Why is Washington sending $50 billion in arms and assistance to sustain the conflict in Ukraine and promising billions more for “as long as it takes”? Why did Washington and Whitehall dissuade Ukraine’s President Vladimir Zelensky, a former stand-up comic who has been magically transformed by these war lovers into the new Winston Churchill, from pursuing negotiations with Moscow, set up by Turkey? Why do they believe that militarily humiliating Putin, whom they are also determined to remove from power, won’t lead him to do the unthinkable in a final act of desperation? Moscow strongly implied it would use nuclear weapons in response to a “threat” to its “territorial integrity” and the pimps of war shouted down anyone who expressed concern that we all might go up in mushroom clouds, labeling them traitors who are weakening Ukrainian and Western resolve. Giddy at the battlefield losses suffered by Russia, they poke the Russian bear with ever greater ferocity. The Pentagon helped plan Ukraine’s latest counteroffensive, and the C.I.A. passes on battlefield intelligence. The U.S. is slipping, as we did in Vietnam, from advising, arming, funding and supporting, into fighting.  U.S. President Joe Biden during a briefing by his national security team, Aug. 18, 2021. (Public Domain, Wikimedia Commons) None of this is helped by Zelensky’s suggestion that, to deter the use of nuclear weapons by Russia, NATO should launch “preventive strikes.” “Waiting for the nuclear strikes first and then to say ‘what’s going to happen to them.’ No! There is a need to review the way the pressure is being exerted. So there is a need to review this procedure,” he said. Kremlin spokesman Dmitry Peskov said the remarks, which Zelensky tried to roll back, were “nothing else than a call to start a world war.”  The West has been baiting Moscow for decades. I reported from Eastern Europe at the end of the Cold War. I watched these militarists set out to build what they called a unipolar world — a world where they alone ruled. First, they broke promises not to expand NATO beyond the borders of a unified Germany. Then they broke promises not to “permanently station substantial combat forces” in the new NATO member countries in Eastern and Central Europe. Then they broke promises not to station missile systems along Russia’s border. Then they broke promises not to interfere in the internal affairs of border states such as Ukraine, orchestrating the 2014 coup that ousted the elected government of Victor Yanukovich, replacing it with an anti-Russian — fascist aligned — government, which, in turn, led to an eight-year-long civil war, as the Russian populated regions in the east sought independence from Kiev. They armed Ukraine with NATO weapons and trained 100,000 Ukrainian soldiers after the coup. Then they recruited neutral Finland and Sweden into NATO. Now the U.S. is being asked to send advanced long-range missile systems to Ukraine, which Russia says would make the U.S. “a direct party to the conflict.” But blinded by hubris and lacking any understanding of geopolitics, they push us, like the hapless generals in the Austro-Hungarian empire, towards catastrophe. The West calls for total victory. Russia annexes four Ukrainian provinces. The Westhelps Ukraine bomb the Kerch Bridge. Russia rains missiles down on Ukrainian cities. The West gives Ukraine sophisticated air defense systems. The West gloats over Russian losses. Russia introduces conscription. Now Russia carries out drone and cruise missile attacks on power, sewage and water treatment plants. Where does it end? “Is the United States, for example, trying to help bring an end to this conflict, through a settlement that would allow for a sovereign Ukraine and some kind of relationship between the United States and Russia?” a New York Times editorial asks. “Or is the United States now trying to weaken Russia permanently? Has the administration’s goal shifted to destabilizing Putin or having him removed? Does the United States intend to hold Putin accountable as a war criminal? Or is the goal to try to avoid a wider war — and if so, how does crowing about providing U.S. intelligence to kill Russians and sink one of their ships achieve this?” No one has any answers. The Times editorial ridicules the folly of attempting to recapture all of Ukrainian territory, especially those territories populated by ethnic Russians. “A decisive military victory for Ukraine over Russia, in which Ukraine regains all the territory Russia has seized since 2014, is not a realistic goal,” it reads. “Though Russia’s planning and fighting have been surprisingly sloppy, Russia remains too strong, and Mr. Putin has invested too much personal prestige in the invasion to back down.” But common sense, along with realistic military objectives and an equitable peace, is overpowered by the intoxication of war. On Oct. 17, NATO countries began a two-week-long exercise in Europe, called Steadfast Noon, in which 60 aircraft, including fighter jets and long-range bombers flown in from Minot Air Base in North Dakota are simulating dropping thermonuclear bombs on European targets. This exercise happens annually. But the timing is nevertheless ominous. The U.S. has some 150 “tactical” nuclear warheads stationed in Belgium, Germany, Italy, the Netherlands and Turkey.  Admiral Rob Bauer, chair of NATO Military Committee, during a meeting of NATO defence ministers on Oct. 13. (NATO) Ukraine will be a long and costly war of attrition, one that will leave much of Ukraine in ruins and hundreds of thousands of families convulsed by lifelong grief. If NATO prevails and Putin feels his hold on power is in jeopardy, what will stop him from lashing out in desperation? Russia has the world’s largest arsenal of tactical nukes, weapons that can kill tens of thousands if used on a city. It also possesses nearly 6,000 nuclear warheads. Putin does not want to end up, like his Serbian allies Slobodan Miloševic and Ratko Mladic, as a convicted war criminal in the Hague. Nor does he want to go the way of Saddam Hussein and Muammar Gaddafi. What will stop him from upping the ante if he feels cornered? Russian President Vladimir Putin puts nuclear forces on high alert, Feb. 27. (Kremlin) There is something grimly cavalier about how political, military and intelligence chiefs, including C.I.A. Director William Burns, a former U.S. ambassador to Moscow, agree about the danger of humiliating and defeating Putin and the specter of nuclear war. “Given the potential desperation of President Putin and the Russian leadership, given the setbacks that they’ve faced so far, militarily, none of us can take lightly the threat posed by a potential resort to tactical nuclear weapons or low-yield nuclear weapons,” Burns said in remarks at Georgia Tech in Atlanta. Former C.I.A. Director Leon Panetta, who also served as defense secretary under President Barack Obama, wrote this month that U.S. intelligence agencies believe the odds of the war in Ukraine spiraling into a nuclear war are as high as 1-in-4. The director of National Intelligence, Avril Haines, echoed this warning, telling the Senate Armed Services Committee in May that if Putin believed there was an existential threat to Russia, he could resort to nuclear weapons.  “We do think that [Putin’s perception of an existential threat] could be the case in the event that he perceives that he is losing the war in Ukraine, and that NATO in effect is either intervening or about to intervene in that context, which would obviously contribute to a perception that he is about to lose the war in Ukraine,” Haines said. “As this war and its consequences slowly weaken Russian conventional strength … Russia likely will increasingly rely on its nuclear deterrent to signal the West and project strength to its internal and external audiences,” Lt. Gen. Scott Berrier wrote in the Defense Intelligence Agency’s threat assessment submitted to the same Armed Services Committee at the end of April. Given these assessments, why don’t Burns, Panetta, Haines and Berrier, urgently advocate diplomacy with Russia to de-escalate the nuclear threat? This war should never have happened. The U.S. was well aware it was provoking Russia. But it was drunk on its own power, especially as it emerged as the world’s sole superpower at the end of the Cold War, and besides, there were billions in profits to be made in arms sales to new NATO members. In 2008, when Burns was serving as the ambassador to Moscow, he wrote to Secretary of State Condoleezza Rice: “Ukrainian entry into NATO is the brightest of all redlines for the Russian elite (not just Putin). In more than two and a half years of conversations with key Russian players, from knuckle-draggers in the dark recesses of the Kremlin to Putin’s sharpest liberal critics, I have yet to find anyone who views Ukraine in NATO as anything other than a direct challenge to Russian interests.”  Sixty-six U.N. members, most from the Global South, have called for diplomacy to end the war in Ukraine, as required by the U.N. Charter. But few of the big power players are listening. If you think nuclear war can’t happen, pay a visit to Hiroshima and Nagasaki. These Japanese cities had no military value. They were wiped out because most of the rest of Japan’s urban centers had already been destroyed by saturation bombing campaigns directed by LeMay. The U.S. knew Japan was crippled and ready to surrender, but it wanted to send a message to the Soviet Union that with its new atomic weapons it was going to dominate the world. We saw how that turned out. Chris Hedges is a Pulitzer Prize–winning journalist who was a foreign correspondent for 15 years for The New York Times, where he served as the Middle East bureau chief and Balkan bureau chief for the paper. He previously worked overseas for The Dallas Morning News, The Christian Science Monitor and NPR.  He is the host of show “The Chris Hedges Report.” Author’s Note to Readers: There is now no way left for me to continue to write a weekly column for ScheerPost and produce my weekly television show without your help. The walls are closing in, with startling rapidity, on independent journalism, with the elites, including the Democratic Party elites, clamoring for more and more censorship. Bob Scheer, who runs ScheerPost on a shoestring budget, and I will not waiver in our commitment to independent and honest journalism, and we will never put ScheerPost behind a paywall, charge a subscription for it, sell your data or accept advertising. Please, if you can, sign up at so I can continue to post my Monday column on ScheerPost and produce my weekly television show, “The Chris Hedges Report.” This column is from Scheerpost, for which Chris Hedges writes a regular column. Click here to sign up for email alerts. Tyler Durden Sun, 10/30/2022 - 22:00.....»»

Category: blogSource: zerohedgeOct 30th, 2022

FedSpeak & Yentervention Spark Buying Panic In Bonds, Stocks, & Gold

FedSpeak & Yentervention Spark Buying Panic In Bonds, Stocks, & Gold With the Fed's black out ahead of the November meeting beginning tomorrow, it seems they wanted to get as much jawboning in as possible today... Fed's Daly (bear in mind she is one of the more dovish FOMC members) built on earlier comments by WSJ Timiraos (conditioning investors for a smaller Dec hike without sparking a melt-up in stocks) offering the market a bone of dovishness (well less than hawkishness)... *DALY: LITTLE BIT OF PENT-UP TIGHTENING WORKING THROUGH ECONOMY *DALY: NEED TO WATCH HOW RESTRICTIVE; CAN'T OVERTIGHTEN EITHER; REQUIRES STEP DOWN INTO SMALLER INCREMENTS OF HIKES But even she backed off from a real dovish perspective... *DALY: THINK HARD ABOUT STEP DOWN BUT WE'RE NOT THERE YET Fed's Evans confirmed the 'pause' - not a 'pivot'... *EVANS: EXPECT FED TO RAISE RATES FURTHER, HOLD STANCE A WHILE Fed's Bullard was his usual hawkish self: *BULLARD: STRONG JOB MARKET GIVES FED LEEWAY TO FIGHT INFLATION The result of all this was a dovish drop in terminal rate expectations, but a hawkish shift in subsequent rate-cut expectations (i.e. a pause after Dec/Feb NOT a pivot)... Source: Bloomberg 75bps is still a lock for November but the odds of a 75bps hike in Dec tumbled from around 70% to around 30%. (and odds of a 50bps hike in Feb dropped to 30% from 50%)... Source: Bloomberg Between WSJ and Daly, expectations for the yield curve (OIS) eased notably (5-10bps) from yesterday... Source: Bloomberg Has The Fed done enough damage? Financial Conditions are at their tightest (on a month-end basis) since July 2009 and the last 12 months has seen an almost unprecedented tightening of financial conditions... Source: Bloomberg While The Fed was jawboning, The Bank of Japan (despite no comment) was clearly in the markets, smashing JPY almost 6 handles stronger after it crashed to 152/USD (in September the intervention sparked a 5.5 handle spike which was completely erased within 3 days)... Source: Bloomberg Finance Minister Shunichi Suzuki, speaking to reporters this week, reiterated the country will take appropriate action against speculative moves. “All the market talk is about intervention,” even though there’s no official confirmation, said Alan Ruskin, chief international strategist at Deutsche Bank AG. “Intervention is only a short-term palliative in current circumstances.” There’s no official confirmation of intervention, but it “smells like it for sure,” said Alex Etra, a senior strategist at Exante Data Inc. Intervention won’t stop the yen from weakening further because “they are rowing upstream against fundamentals: high energy prices and rate differentials,” he said. Volumes in yen futures today were dramatically bigger than during the last major intervention... Kyodo separately reports the country’s top currency official, Masato Kanda, declined to comment on whether the country intervened when asked by reporters. But hey none of that matters because President Biden claims Republicans want to "crash the economy next year by threatening the full faith and credit of the United States..."?! Joe Biden accuses Republicans of wanting to "crash the economy." — (@townhallcom) October 21, 2022 And after all that, US equities ripped higher today (Nasdaq was down over 1% in the pre-open, ended up over 2.5%) And US stocks had their best week since June (with Nasdaq outperforming)... Interestingly, "most shorted" stocks were barely positive on the week... Source: Bloomberg Perhaps even more notably, VIX was bid this afternoon as stocks soared - was the world and his pet rabbit buying calls (levered longs)? Source: Bloomberg It appears so... S&P vol skew is at extremes (calls max bid over puts)... Source: Bloomberg Credit markets are a bloodbath with LQD breaking back below $100 - the same level it traded at in Sept 2008 when Lehman collapsed and the credit market froze. For now, HYG is trading just marginally above the March 2020 COVID lockdown lows in price (when The Fed took the unprecedented action of buying junk bonds)... Source: Bloomberg Thanks to today's plunge in yields (with the short-end dramatically outperforming), 2Y yields ended the week -2bps while the long-end was up over 33bps... Source: Bloomberg Today saw the yield curve (2s30s) steepen 20bps (the biggest daily steepening since March 2020) erasing most of the flattening (inversion) from September's CPI print plunge. On the week, the curve steepened over 30bps - its biggest steepening since January 2009... Source: Bloomberg For some context, this was the 12th straight week of 10Y yields increasing - equaling the record streak of all time from 1984... Yen's gains today sent the dollar reeling to its worst day in almost 3 weeks and worst weekly drop since August...erasing all of its post-payrolls gains... Source: Bloomberg Bitcoin puked back below $19000 this morning then ripped back above it on the dollar drop, dovish-ish FedSpeak. $19,000 seems like a key level now for over a month... Source: Bloomberg Gold saw its best day since the start of October today (finding support at Sept lows when the BoE panicked), pushing the precious metal higher on the week... Source: Bloomberg Oil prices were flat on the week despite Biden's promises with WTI ending around $85... Source: Bloomberg Finally, here's St.Louis Fed's Jim Bullard explaining the situation to those who still don't get it... "I would not call lower equity prices financial stress..." Source: Bloomberg So, don't hold your breath for a Fed Put reappearing anytime soon. But this, on the other hand, could be a major problem, the all important FRA-OIS indicator of interbank funding stress (and money-market risk) is surging above 45bps (when The Fed last stepped in with unprecedented size to flood the lane during the COVID lockdowns)... Source: Bloomberg In fact, on a month-end basis, FRA-OIS is at its most-stressed since Dec 2011 A very quick primer on this all important spread: What is FRA? A forward rate agreement is a deal to swap future fixed interest payments for variable ones, or vice versa. The key rate for U.S. markets is the three-month London interbank offered rate, or Libor, in U.S. dollars. The benchmark is derived by major banks submitting rates based on transactions that are compiled to establish benchmark for five different currencies across seven different loan periods. Those benchmarks underpin interest rates on trillions of dollars of financial instruments and products from student and car loans to mortgages and credit cards. What is OIS? The Overnight Index Swap rate is calculated from contracts in which investors swap fixed- and floating-rate cash flows. Some of the most commonly used swap rates relate to the Federal Reserve’s main interest-rate target, and those are regarded as proxies for where markets see U.S. central bank policy headed at various points in the future. That's the theory. But why does the FRA-OIS spread matter in practice?  Well, it’s regarded as the markets’ measure of how expensive or cheap it will be for banks to borrow in the future, as shown by Libor, relative to a risk-free rate, the kind that’s paid by highly rated sovereign borrowers such as the U.S. government. The FRA-OIS spread therefore provides another snapshot of how the market is viewing credit conditions because of the fact that traders are betting on where Libor-OIS - its underlying spread - will be. As a further reminder, there are typically 3 reasons why it would blow out: the risk premium for uncertainty of US monetary policy, recently elevated credit spreads (CDS) of banks, and demand for funds in preparation for market stress. Whatever the reasons, a blow out in FRA/OIS means that dollar funding is becoming increasingly problematic, amid an ominous global dollar shortage. In summary, if the FRA-OIS spikes another 10-15 points, the Fed will have no choice but to emerge from its paralysis and reassure markets that the financial system isn't about to experience another paralysis... which is perhaps why all the sudden jawboning on rate-hikes and pauses are happening. Never forget, we live in a world where "insider trading" is illegal, but Fed policy path leaks to Wall. St. Journal reporters move asset prices in the hundreds of billions of dollars.— Lawrence McDonald (@Convertbond) October 21, 2022 Tyler Durden Fri, 10/21/2022 - 16:01.....»»

Category: blogSource: zerohedgeOct 21st, 2022

Retiring At 35 (Without Giving Up Everything)

There are certain things that I would never give up. I’m talking about things like a delicious In-N-Out burger or my Netflix subscription. Okay, maybe I would give up Netflix. I mean, something’s gotta be up with the streaming service if it lost almost a million subscribers in the second quarter of 2022. However, when […] There are certain things that I would never give up. I’m talking about things like a delicious In-N-Out burger or my Netflix subscription. Okay, maybe I would give up Netflix. I mean, something’s gotta be up with the streaming service if it lost almost a million subscribers in the second quarter of 2022. However, when it comes to financial independence, you often hear people say that you have to give up certain things. And this is especially true if you’re trying to retire early. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q2 2022 hedge fund letters, conferences and more   After all, these are the same people saving something like 97% of their income. Obviously, that means it’s not in their budget to spend money on going out to eat or streaming services. But what if I told you that you can still retire early, specifically in your 30s, without sacrificing everything? While it may sound too good to be true, it’s definitely possible with a bit of patience and dedication. Be clear about your future plans - and stick to them Your first step? Establishing an honest estimate of your needs. But how exactly can you figure out how big your nest egg should be? Well, you need to take into the following three factors. Longevity. News flash. We’re living longer. As of 2022, the average life expectancy in the U.S. is 79.05 years. As such, if you’re planning on retiring at 35, you need to make sure that you can stretch your income for the next 35 years. Lifestyle. The next step is determining the lifestyle you would like to enjoy after leaving your job. To start, ask yourself the following questions after age 30: Would you still be interested in pursuing your hobbies and passions? Are you planning to travel, buy the latest gadgets, take classes, or do you think you’d like to do all these things? How much mortgage or rent are you willing to pay, and what kind of insurance protection do you want? Obviously, depending on your lifestyle vision, you will need to save a certain amount of money. The actual numbers. By the time you retire, Citizens Bank and Fidelity recommend saving 10 to 12 times your annual income. In other words, earning $100,000 per year, you should set aside $1 million to $1.2 million for retirement. However, your withdrawal rate may determine your goal number. Using your target withdrawal rate as a guide, divide your retirement spending by your yearly retirement spending. For example, if you plan to spend $40,000 after taxes every year and withdraw 2%, you would need $2 million ($40,000/.02) to retire. Obviously, inflation needs to be adjusted annually to the number you come up with. Creating a pre-retirement and post-retirement budget makes sense. A budget before retirement will keep you on track to reach your savings goal. But, a budget after retirement can help prevent you from running out of cash. Regarding budgeting, I suggest organizing it by needs and wants. Groceries, for instance, are essential. But, a delicious burger every week is a need. And although it may also be more necessary than desirable, make sure you have an emergency fund. Make a lifestyle change Controlling your expenses is the key to making changes, Steve Adcock, who achieved financial independence by 35 told me. “That means it’s like never going out to eat or very rarely. I think we gave ourselves like 50 bucks a month or something to go out to eat. I love going out to eat,” he adds. “For me, that was like the biggest, I guess, drawback or negative or sacrifice, or however you want to call it, to this whole business of retiring early.” “But we tracked our expenses so closely, that for a couple of years, we could have told you how much we spent on sweet potatoes, every single year.” Not just that, but everything else as well. It is not necessary to be as detailed as that. “But I would say that’s probably not required for everybody.” “What is required is knowing where you’re spending money,” Steve continues. Why? “Because it is impossible to cut your expenses if you have no idea where your money’s going anyway. How to keep your spending in check. The first step is so difficult, Steve warns. “Because you have to go through your credit card statements and bank statements and just understand where the heck your money is going.” Maybe you pay $150 a month for cable TV that you never watch. “But if you don’t check that bill and understand where that money is, you have no idea that you’re spending it because it’s all automated,” he says. The money is just taken out of your bank account without you thinking about it. “So those things are tough, it’s a tough habit, a tough pattern to get into.” “Once you do start making that progress, that snowball begins to build and becomes bigger, bigger and bigger,” says Steve. “And it becomes easier for you to realize what’s an expense that’s legitimate or what might be an expense that you can certainly cut out.” “For us, the majority of what we spent on, were expenses that we can cut out,” he adds. “We kept our gym membership because that was healthy.” Dining out cost us about $50 a month. Our biggest expenditures were food and our mortgage, of course. In addition, we didn’t spend much on magazines or cable TV. “We kept the internet for obvious reasons, but we really streamlined for those few years.” This allowed Steve and his wife to save a lot of money. Maximize your savings While saving is important, you’re not going to become rich simply by saving money. “Ordering water instead of soda or beer at restaurants might save you a few hundred dollars over the course of a year,” Steve wrote for CNBC. “But let’s face it: A few hundred bucks isn’t life-changing money,” he adds. “If ordering water were the Easy button to achieving early retirement, we’d all be retired and sipping margaritas in paradise.” The concept of compound interest doesn’t just appear out of nowhere, he adds. “Early retirement is enabled by household wealth. How much money you have, rather than how much you save.” “It is true that saving money does not lead to wealth,” states Steve. “That said, there’s nothing wrong with saving some cash by changing up the spending habits you developed over the years.” It’s great to save money. And, it can help. “It’s just not the secret sauce to early retirement.” “Wealth comes from a very different source: Investments,” Steve explains. But, how exactly can you maximize your savings? Give the following a try: Participate in your employer’s 401(k) match Contribute as much as you can to your 401(k) Consider money market and CD savings accounts that offer high-interest rates Don’t miss out on cashback opportunities Streamline your savings with automation While you are still employed, try to negotiate a raise Utilize credits and deductions to reduce your taxable income Increase your savings rate on a regular basis Save every dollar you earn from your second job or passive income Instead of beating the market, participate in it Speaking of investing, most FIRE followers opt for index funds over riskier, more volatile investments such as stocks or cryptocurrencies, notes CNBC. Generally, index funds are baskets of different stocks that aim to mimic the performance of a major stock index, such as the S&P 500. And, if you weren’t aware, is based on the market capitalization of 500 major U.S. companies. “The best advice I have is the conventional wisdom in the financial independence community is that it’s better to participate in the market than to try to beat it,” says Ed Ditto of Early Retirement Dude. “And one of the best ways to do that is to buy low-cost index funds. You’ll find that the Vanguard S&P 500 ETF is the darling of the FIRE set.” With index funds, you have access to stocks from a variety of industries. Because of this, investing in an index fund, which gives you a lot of diversification, puts you at less risk. The value of stocks from one industry might fall, but gains in another might offset it. In the 50-year period from 1970 to 2020, the S&P 500 has averaged 10.83% annual returns, according to Investopedia. The returns vary from year to year, depending on whether it’s a bull or bear market. It’s also not guaranteed that past performance will repeat itself. How to play the investing game. A trading platform like Vanguard, E*TRADE, or TD Ameritrade is an excellent way to get started investing. Unlike other trading platforms, these platforms don’t charge commissions for executing trades. Fees are charged by these platforms for the money you invest in funds, known as expense ratios. A passively managed fund has lower expense ratios than an actively managed one. In most cases, the expense ratio is expressed as a percentage. For every $1,000 you invest in a fund that charges a 0.15% expense ratio, you’ll pay $1.50. A robo-advisor, like Wealthfront, Betterment, or Charles Schwab, might be a smart place to start when building your investment portfolio. The goal of robot advisors is to get an understanding of your finances and future goals and then invest accordingly. Account fees are typically charged on top of fund expense ratios by robo-advisors. Don’t ignore the fine print when investing, so you know how much you’re paying. In addition to index funds, some FIRE followers invest in other asset classes that require a greater level of experience and knowledge. “As time goes along, and as your portfolio starts to build, you owe it to yourself to take new risks,” Kiersten Saunders of rich & REGULAR. “I think what people find when they get online is they start to see all of the hype and the buzz around crypto, NFTs, real estate, these types of asset classes that are either very risky or have high barriers to entry.” Go where it’s cheap I’m gonna be brutally honest. Unless you’ve inherited an insane amount of money or won the lottery, it’s going to be impossible to retire early and live in an expensive city. I’m talking about San Fran, NYC, Honolulu, or D.C. Instead, you’re probably gonna have to relocate. For example, Steve moved out to the Arizona desert. People who retired early, such as Kristy Shen and Bryce Leung, also relocated to a more affordable location. “We were spending nearly $3,000 a month on rent, and that was considered a good deal,” Scott Rieckens, who lived in Coronado, Calif., a beach resort across the bay from San Diego, told the New York Times. “We made something like $160,000 between the two of us, but we didn’t have a whole lot left over.” Rieckens became enthused after listening to an interview with Pete Adeney, aka Mr. Money Mustache, who The New Yorker called “the Frugal Guru” (he retired at 30). It was time for Reickens and his wife to ditch their leased BMW and stop eating out several nights a week. It’s all about “arbitrage” In spite of those lifestyle cuts, the couple couldn’t substantially increase their savings rate. Why? Because they have to move to a cheaper neighborhood. FYI, this is a deleveraging technique known as “arbitrage.” According to Adeney, the idea is “to reap the high salary” in a place such as Silicon Valley, “then take that nest egg out to any of the thousands of nice, affordable cities and towns we have in this country and begin the second stage of life on your own terms.” “I never paid attention to the finances. I thought it will all work out,” said Rieckens. “After I had a baby, I had stress around how I could spend more time with her. I was almost a slave to my job because of the way we were living.” After moving to Bend, Ore., in 2017, Rieckens and his family were able to buy a house since the state sales tax does not exist there. While Mr. Rieckens often rides his bike around town, gas for their used Honda CRV with 186,000 miles is a dollar-per-gallon cheaper than in San Diego. Savings require enough income Some people are able to retire early without making as many sacrifices as others. For example, someone might find great satisfaction riding a bike instead of driving a car to save money. But, a trade-off like this might not be possible for someone else. It’s a given that you have to earn enough money to retire early. As such, make sure your income covers your basics, and then save and invest a chunk of it for retirement. Everyone can’t do this. Having frugal habits won’t make up for not earning enough money to save aggressively for early retirement. If you aren’t earning enough to retire comfortably, then find ways to boost your income beyond your typical 9-to-5 job. According to the IRS, this type of work is called “material participation,” which means any work you do on a “regular, continuous and substantial basis.” Material participation is determined by several factors, such as working over 500 hours on a project or job. In retirement, however, you would like to focus on something else. The only option left is passive income generation. In terms of both asset allocation and income generated, make sure your portfolio’s fixed-income portion is adequate. Assets that generate passive income include: Annuity plans Dividends from securities P2P lending Rental Properties Passive income can even come from side hustles like blogging or self-publishing an ebook. Remember, personal finance is personal. Although I like some of the Fire Movement’s ideas, I think people need to realize that personal finance is, well, personal. In other words, do whatever works best for you. And, for some, that doesn’t mean saving 70% of your income. It’s more important for me to know if you think saving 10%, 5%, and getting that free match is enough. I’ve seen people nearing retirement and having the biggest regret of wishing they had started earlier or saved more. It’s something I’ve heard countless times. Perhaps it isn’t 70%. But it must be more than five or 10% unless you just love the work and want to work until you’re 65. There is a possibility that you have a pension, but it is less likely. After all, today, fewer than one-third (31%) of Americans retire with defined benefit pensions. And, putting all your trust in social security is a bad idea. In short, make it happen for yourself by taking control. Commit to your retirement plan but enjoy life too. “You can’t live your life in a way where it feels like a sacrifice, because that’s just not going to work,” says Steve. “Nobody likes to live that way.” “And what I like to do, is I like to encourage people to think of money as a representation of time,” he adds. “And this is especially true if you have a goal of early retirement.” Suppose you want to retire at 40 or 50. Are you willing to spend that much time on that new car? “If you want a $50,000 car, depending on how much you make in salary, is that worth working another year, working in another two years, so you can afford to buy that car?” Steve asks. “If you think that it’s worth it, if you do, if you’re okay with working longer in order to fund your lifestyle, that’s fine.” That’s perfectly fine. It’s just a matter of choosing. “And that’s effectively how we got up to 70%, “ he says. “Because for me, I wanted to retire early, so bad that nothing, nothing was worth the extra time, for the most part.” Except for the gym and occasional restaurant trips. For Steve, there were exceptions, such as the gym or occasional restaurant trip. “And I think we had Netflix that we were paying for at the time.” The big expenses, however, weren’t worth it for Steve and his wife. “It wasn’t worth working longer.” Frequently Asked Questions Is it possible for you to retire early? This question can be difficult to answer if you haven’t decided where you’ll live or how you’ll spend your retirement. The ideal situation is for you to either replace your current income or have sufficient savings to cover your current lifestyle or essentials. If you have other retirement goals, your current budget may need to be adjusted. For example, maybe you never considered moving. But, to reach your goal of retiring early, you might have to move. You should also consider all of the “what if” scenarios possible. After determining your long-term spending goals, you’ll be able to determine how many additional working years and savings could affect them. How much money do I need to retire early? There are a number of factors that influence an individual’s retirement income. Retirement age, monthly expenses, Social Security benefits, and life expectancy are taken into account. ‌To ensure a comfortable retirement, you should consult a financial advisor. How is Social Security impacted by early retirement? “Workers planning for their retirement should be aware that retirement benefits depend on age at retirement,” notes the Social Security Administration. “If a worker begins receiving benefits before his/her normal (or full) retirement age, the worker will receive a reduced benefit. A worker can choose to retire as early as age 62, but doing so may result in a reduction of as much as 30 percent.” “Starting to receive benefits after normal retirement age may result in larger benefits,” explains the SSA. “With delayed retirement credits, a person can receive his or her largest benefit by retiring at age 70.” For each month before the normal retirement age, you lose 5/9 of one percent of your benefit. When the number of months over 36 is exceeded, the benefit is reduced by 5/12 of one percent per month. “For example, if the number of reduction months is 60 (the maximum number for retirement at 62 when normal retirement age is 67), then the benefit is reduced by 30 percent,” adds the SSA. “This maximum reduction is calculated as 36 months times 5/9 of 1 percent plus 24 months times 5/12 of 1 percent.” When can I make penalty-free 401(k) withdrawals? You can usually withdraw funds from your 401(k) after age 59 1/2 without incurring penalties. You are required to take the required minimum distributions by the time you turn 72 (or 70 1/2 if you were born before July 1, 1949). In the event of later retirement, you must take the required minimum distributions by April of the following year. What are the drawbacks to early retirement? Early retirement carries a lot of financial risks unless you have plenty of savings or multiple income sources. In fact, for some, early retirement can bankrupt your dreams before of the following: Retirement often lasts longer than planned. There may be a temptation to take social security benefits before the age of 70 when benefits peak. You’re missing out on the power of compounding interest. You’ll be in medical coverage limbo without a plan from an employer. Or, until you’re eligible for Medicare at 65. Did you know that the average American has $90,460 in debt? Credit cards, personal loans, mortgages, and student loans all fall under consumer debt making early retirement a challenge. You have less flexibility without a recurring income. And, it may be difficult to reenter the workforce. Your savings may be insufficient. Plus, you may succumb to lifestyle creep or deal with market downturns. Retirement comes with feelings or boredom and isolation. Article by Jeff Rose, Due About The Author Jeff Rose is an Iraqi Combat Veteran and founder of Good Financial Cents. He teaches people wealth hacking. He is a frequent on CNBC, Forbes, Nasdaq and many other publications. He is author of the book "Soldier of Finance: Take Charge of Your Money and Invest in your Future" where he teaches how he escaped from $20,000 in credit card debt to a life of wealth......»»

Category: blogSource: valuewalkSep 6th, 2022

The Politically Incorrect Guide To Economics

The Politically Incorrect Guide To Economics Authored by David Gordon via The Mises Institute, The Politically Incorrect Guide to Economics by Thomas J. DiLorenzo Regnery Publishing, 2022; xx + 242 pp. Like Ludwig von Mises and Murray Rothbard, Tom DiLorenzo is an economist with an extraordinary knowledge of history, and this shows to great advantage in his brilliant new book. In it, he stresses that economists who fail to grasp how the free market works often devise elaborate theories to show “market failures,” but when examined in the light of historical evidence, these theories fall to the ground. As a prime example of this, Paul Samuelson in his Economics, for decades the most influential university textbook, indicted the market for its failure to conform to the welfare ideal of “perfect competition.” Concerning this, DiLorenzo says: That never-to-be-realized-anywhere-on-earth state of perfect competition is one where all products in every industry are identical; they are produced by “many” business firms; everyone charges the same price; everyone has perfect information … and there is free or costless entry into every industry and every exit out of it. Several other equally unrealistic assumptions were added over the years, but these were always the main ones. This pipe dream became the new understanding of what constituted “competition,” at least among academic economists. (pp. 30–31) Supporters of this view used the perfect competition model to demand that large firms be broken up. Couldn’t “monopolists” engage in “predatory pricing” to secure their position against competitors? DiLorenzo finds no historical evidence that such a thing has ever taken place. In fact, to this day there is no record of any business achieving a monopoly through predatory pricing! There have nevertheless been hundreds of antitrust lawsuits based on this theory, most of them private lawsuits with one company suing a competitor for lowering its prices. Think about that: in the name of protecting the consumer, antitrust regulation allows businesses to sue to “protect” customers from their competitors’ lower prices. (p. 38) Unfortunately, perfect competition is far from the only case of an alleged “market failure.” Critics charge that “public goods,” goods that are both nonrival and nonexcludable, cannot be adequately supplied in the free market. As an example, a guided-missile defense system protects everyone within a territory, not just customers willing to pay for it; and, given the large numbers of consumers of this good, people could in a free market “free ride,” imagining that others would bear the burden. General awareness of this phenomenon will make everyone reluctant to pay, since even those who want the good would rather not pay for it. “Away with this flimsy theory!” says DiLorenzo: it too lacks historical support. Another problem with the theory of the “free-rider problem” is that there are examples all around us of private individuals and groups providing myriad types of goods and services that are “nonrival” and “nonexcludable.” Americans are probably the most charitable people in the world…. The very existence of the many privately funded charities proves that the free-rider problem is not nearly as severe a problem as students of economics are led to believe…. Especially at the state and local levels of government, it is hard to think of any service provided by governments that is not also provided by private businesses (or private nonprofit organizations), usually at a fraction of the cost and with higher quality and customer service to boot. (pp. 67–69) DiLorenzo finds a general pattern that underlies the failure of all the various attacks on the free market. In the free market, entrepreneurs have an incentive to satisfy consumers, as that is the path to profit. Government bureaucrats have no such incentive; to the contrary, they are free to seek “power and pelf,” as Murray Rothbard used to say. DiLorenzo puts this key insight in this way: Profits and losses are the measuring rods of how good a job a business is doing with regard to serving its customers. Growing profits mean that a better and better job is being done in that regard; losses mean the opposite. No one is forced to buy anything from anyone in a free market…. In government bureaucracies, failure is success. The worse the public schools get, the more money they get in next year’s budget. The longer government fails in the War on Poverty, the more money the poverty agencies get. The longer the failed wars that are never won go on, the more enriched is the Pentagon and the military-industrial establishment. And on and on. (pp. 121–23) If the free market is better than a centrally directed economy, we must in choosing proper policy beware that we have the genuine article, not a counterfeit. As an example, DiLorenzo first aptly brings out the fallacies of protectionism. “Chief among them is the ‘Buy American’ scam designed to make people believe that protectionism will somehow save American jobs. The truth is that protectionism may temporarily preserve some jobs in the protected industry, but always at the expense of destroying other American jobs elsewhere and plundering American consumers with higher prices” (p. 178). But, he says, international trade agreements like the North American Free Trade Agreement (NAFTA) do not in fact promote free trade but subject it to government control. Just because politicians call something a “free trade agreement” doesn’t make it one. They always choose wonderful-sounding names for their legislation, which in reality is usually the work of scores of greedy plunder-seeking lobbyists. This was the case with NAFTA, which was some 2,400 pages of bureaucratic regulation and central planning of the trade between the United States, Canada, and Mexico and the rest of the world. It contained nine hundred pages of tariffs, the opposite of free trade. (pp. 181–82) As mentioned above, DiLorenzo has a wide knowledge of history, and this he puts to exemplary use in his discussion of the federal income tax, which, he aptly reminds us, the great Old Right author Frank Chodorov called “the root of all evil.” However much we hate to pay taxes, Chodorov’s phrase may seem exaggerated, but, DiLorenzo reminds us, he had a point. Americans were literally turned into slaves of the state, said Chodorov, for what the government was now saying to its citizens was: “Your earnings are not exclusively your own. We have a claim on them, and our claim precedes yours. We will allow you to keep some of it, because we recognize your need, but not your right … The amount of your earnings that you may retain for yourself is determined by the needs of the government, and you have nothing to say about it.” In other words, the income tax was the biggest attack on the principle of private property in American history. (p. 163) Relying on the great book of Felix Morley, Freedom and Federalism, which he calls “the best book ever written about American federalism” (p. 165), DiLorenzo says that the federal income tax bypassed the authority of the states over their citizens. Further, “it essentially turned most state governments into puppets of the ‘federal’ government once the federal government had enough funds with which to bribe or threaten the states to bend to its will by either granting or withholding ‘aid to the states’” (p. 165). Tom DiLorenzo’s masterful book brings out in unsurpassed fashion that the free market rests on mutually beneficial exchange. He quotes Adam Smith: “Whoever offers to another a bargain of any kind proposes to do this: Give me that which I want, and you shall have that which you want, is the meaning of every such offer; and it is this manner that we obtain from one another the far greater part of those good offices which we stand in need of” (p. 5). (Smith, by the way, here alludes to the Latin do ut des, “I give that you may give,” important in the Roman religion and civil law.). The book is, as David Stockman says, a worthy successor to Henry Hazlitt’s Economics in One Lesson. Tyler Durden Wed, 08/31/2022 - 14:25.....»»

Category: personnelSource: nytAug 31st, 2022

22 personalized Father"s Day gifts, from a custom pair of Nikes to a comic book where he"s the superhero

Instead of settling for cheesy, shop these personalized Father's Day gifts that are actually interesting and unique. Dad will love any one of them. Prices are accurate at the time of publication.When you buy through our links, Insider may earn an affiliate commission. Learn more.Instead of settling for cheesy, shop these personalized Father's Day gifts that are actually interesting and unique. Dad will love any one of them.Uncommon Goods; MintedFor many, the father-child relationship is a unique one. The best dads are supportive and caring in a way that only dads can be, so it seems natural to look for a gift that's just as special and distinctive as they are. With this in mind, we've collected a list of personalized Father's Day gifts that will feel like they were created especially for Dad. However you're acknowledging your father or father figure in your life, we hope that the personalization element helps you honor your bond even more.The 22 best personalized Father's Day gifts in 2022:A custom book from his new favorite authorAmazonGift the "What I Love About Dad" book, $10.62Best for: The sentimental dadIt doesn't get quite as personal as a book written for Dad, by you. Once you purchase this book, you'll be able to manually fill in the prompts with answers that are unique to the relationship between you and your father figure. A frame sporting Dad's best titleMintedGift the Best Dad Ever print, from $46Best for: The dad who documents everythingIf your dad loves reliving old memories, this custom photo frame will surely put a smile on his face. It's customized while remaining chic, so it will add a personal touch to any room without leaning towards cheesy. Custom coastersZazzleGift a custom set of coasters, from $12.10Best for: The dad who loves hostingAdorn your Dad's favorite phrase, team, or company with a set of coasters made just for him. He'll be extra eager to show these off at the next family gathering. An action-packed comic bookUncommonGoodsGift the Mega Dad Personalized Comic Book, $40Best for: The Marvel-loving dadWe always knew Dad was a superhero, but here's definitive proof. This fun comic book incorporates your own name into the story and takes you and your dad on a series of adventures. A pair of summer espadrillesSoludosGift a pair of Soludos custom slippers, $95Best for: The dad sick of sneakersAdd artwork like fruits and animals, text, and a crest to these comfortable and lightweight shoes, which are perfect for vacation strolling and wandering. Three hand-picked vinyl records every monthVNYLGift a VNYL membership, from $35/monthBest for: The dad who lives in his "Dead" teeVNYL's music curators will choose three records for him based on his music tastes and "vibe" he's feeling that month. It's a fun, affordable, and convenient way to grow his vinyl collection. A leather travel-document holderLeatherologyGift the Leatherology Travel Document Holder, from $120 (+10 monogram)Best for: The dad on the goThis handsome leather accessory keeps his most important documents organized and makes moving through the airport a breeze. It has nine credit card slots with a thumb-slide ID window; ticket, passport, and baggage claim pockets; an exterior boarding pass pocket; and three receipt pockets. Choose your leather color from a selection of classic and bright options, then monogram the front with up to four characters. A personalized body care set that uses his favorite scentsThe Mad Optimist/FacebookGift a Mad Optimist body-care set, from $30Best for: The dad who takes skin care seriouslyThe Mad Optimist is a startup that makes all-natural, fully personalized body-care products — from your preferred scents and ingredients to custom labels. The line includes soaps, balms, and bath soaks, and you can combine up to four different scents. An engraved beer bottle insulatorBottleKeeperGift an engraved BottleKeeper, from $29.99Best for: The dad who hates flat beer (or accidentally drinking someone else's)The neoprene-lined stainless steel bottle keeps his beer colder for longer, so he'll never have to deal with flat, warm beer during barbecues and outdoor gatherings again. With a personalized bottle of his own, he won't mix up his drinks with anyone else's. Engrave it with text or a monogram and choose from a variety of fonts. A map poster of a special placeGrafomapGift a Grafomap custom map poster, $49Best for: The dad who still talks about how much he loved ParisHis favorite place in the world might be his hometown, college town, vacation spot, or wherever his family is. With its unique color themes, customizable labels, and variety of sizes and finishes, Grafomap can capture any location in a thoughtful, personal way.A suit that fits really wellIndochinoGift an Indochino gift card, from $50Best for: The fashion-forward fatherIndochino's custom suits are much more affordable than traditional services. They make every man look and feel more confident because every aspect of the suit, from the lining color to the number of buttons, is tailored to his exact measurements and preferences. A curated box of wine delivered to his doorWincGift a Winc gift card, from $60Best for: The chardonnay-sipping dadIt can be difficult gifting wine when you're not exactly sure of the recipient's tastes and preferences. A Winc gift card puts your dad in control. He'll take a short quiz to assess his tastes, then Winc will send him a personalized selection of full-bottle wines he'll enjoy. A hand-painted monogrammed suitcaseAway/FacebookGift a monogrammed Away Carry-On, $275Best for: The dad with a big trip coming upPersonalize this smart suitcase with a three-letter monogram that's hand-painted by a lettering artist at Away's NYC studio. Away's suitcases, available in a variety of colors, are already eye-catching enough, but this special touch will make them even more so. A clothing subscriptionMenlo ClubGift a Menlo Club membership, from $20Best for: The dad who refuses to try on clothes in storesWhether your dad hates shopping for himself or wants an easy wardrobe refresh, a clothing subscription service like Menlo Club can help him out. The monthly styling fee goes towards a selection of shirts, pants, jackets, shorts, shoes, and accessories that will fit his personal style. He only pays for whatever he wants to keep and can cancel the membership at any time. A Hydro Flask bottleHydro FlaskGift a Hydro Flask custom bottle, from $33Best for: The dad who forgets to stay hydratedA lot of people own Hydro Flasks, but this is one that will never get lost in the mix because you can choose the size (from 12 oz. to 64 oz.), mouth type, lid type, and color, and bottle color. Exclusive to the custom Hydro Flask is a silicone boot that prevents awful clinking noises and provides additional grip on slippery surfaces. A shaving kitHarry'sGift an engraved Harry's Winston Set, $25Best for: The dad who savors his morning routineHarry's German-engineered shave cartridges combined with a sleek polished chrome finish handle (which is engravable) will make dad's shaving routine feel luxurious. Choose between a foaming gel that lathers into a rich foam or a smooth shave cream. A pair of Nike sneakersNike/InstagramGift a pair of Nike sneakers, prices varyBest for: The fitness-obsessed fatherWhether he runs occasionally to clear his mind or is the family's resident marathoner, he'll love a pair of shoes to truly call his own. More than 70 styles, including casual walking shoes, soccer cleats, and basketball shoes, can be designed from the outsole to the laces.A chef's knifeMade InGift the Made In Engraved Chef's Knife, $99Best for: The dad who always cooks for youThis well-balanced, ultra-sharp knife has his name written all over it. Made In makes a variety of high-quality cookware for affordable prices, so be sure to also check out its stainless clad and carbon steel pans. For a personalized option, however, get this chef-approved knife. Golf ball markersEtsyGift the Personalized Golf Ball Markers, $24Best for: The golf dadThese hand-stamped golf ball markers come with their own carry box and are truly one-of-a-kind. His golf game becomes instantly elevated with the markers, which are made from sterling silver.A photo calendarArtifact UprisingGift the Artifact Uprising Brass Easel and Calendar, from $59Best for: The dad who loves a desk calendarArtifact Uprising always manages to make even the simplest photo gifts look sophisticated. The solid brass easel holds up a calendar design of your choice on premium-quality paper. Choosing just 12 photos for this tabletop display may prove to be difficult. Cufflinks containing sand from his favorite beachUncommonGoodsGift the Custom Beach Cufflinks, from $144Best for: The dad who likes unique accessoriesThese cufflinks are sure to please the outdoorsy dad who always has sun and sand on his mind. Jewelrymaker Holly Daniels Christensen has sand from beaches all around the world, or if you don't see your desired spot on the list, you can even send in your own sand for an extra $25. A gift box that combines all his favorite accessories, treats, and grooming productsBoxfox/InstagramGift a Boxfox custom gift box, price variesBest for: The dad who wants it allWhile Boxfox does offer pre-curated gift collections, the best part of the service is the ability to make your own. Coming from brands like Herbivore Botanicals, Voluspa, and Corkcicle, the products are actually high quality, so he can enjoy a thoughtful gift that doesn't look hastily thrown together.Read the original article on Business Insider.....»»

Category: dealsSource: nytMay 18th, 2022

Gordon Chang: What To Do About China

Gordon Chang: What To Do About China Authored by Gordon Chang via The Gatestone Institute, Since about 2018, Chinese officials have been talking about the moon and Mars as sovereign Chinese territory, part of the People's Republic of China. This means that China considers those heavenly bodies to be like the South China Sea. This also means that China will exclude other nations from going to the moon and Mars if they have the capability to do so. We do not have to speculate about that: Chinese officials say this is what they are going to do. [W]hen Biden says, "Oh, the Chinese just want to compete with us," he is wrong. They do not want to "compete" within the international system. They do not even want to change that system... They want to overthrow it altogether, period. Is Xi Jinping really that bold... to start another war? ... First, China considers the United States to be its enemy. Second the United States is no longer deterring China. China feels it has a big green light to do whatever it wants. We Americans don't pay attention to propaganda... After all, these are just words. At this particular time, these words... [suggest] to me that China is laying the justification for a strike on the United States. We keep ignoring what Beijing is saying. We kept ignoring what Osama bin Laden was saying. We have to remember that the Chinese regime, unlike the Japanese, always warn its adversaries about what it is going to do The second reason war is coming is that America's deterrence of China is breaking down. Di's message was that with cash, China can do anything it wants, and that all Americans would take cash. He mentioned two words in this regard: Hunter Biden. In February, [Biden] had a two‑hour phone call with Xi Jinping. By Biden's own admission, he didn't raise the issue of the origins of COVID‑19 even once. If you are Xi Jinping, after you put down the receiver, your first thought is, "I just got away with killing hundreds of thousands of Americans." We have news that China is building something like 345 missile silos in three locations: in Gansu, Xinjiang, and in Inner Mongolia. These silos are clearly built to accommodate the DF‑41. The DF‑41 has a range of about 9,300 miles, which means that it can reach any part of the United States. The DF‑41 carries 10 warheads. This means that China could, in about two years..., have a bigger arsenal than ours. ...we have to assume the worst because Chinese leaders and Chinese generals, on occasion, unprovoked, have made threats to nuke American cities. In July, 2021 China tested a hypersonic glide warhead, which circled the world. This signals China intends to violate the Outer Space Treaty, to which China is a party. As of today, more than eight million people have died outside China. What happened? No one imposed costs on China. For at least a half‑decade, maybe a little bit longer, Chinese military researchers have been openly writing about a new type of biological warfare....They talk about a new type of biological warfare of "specific ethnic genetic attacks." In other words, pathogens that will leave the Chinese immune but sicken and kill everybody else, which means that the next disease from China can be a civilization killer. A lot of military analysts talk about how the first seconds of a war with China are going to be fought in outer space. They are going to blind our satellites, take them down, do all sorts of stuff. Those statements are wrong. The first day of war against the United States occurs about six months earlier, when they release pathogens in the United States. Then we are going to have that day in space. The war starts here, with a pathogen ‑‑ a virus, a microbe, a bug of some kind. That is where it begins. The One‑China policy is something many people misunderstand. Probably because Beijing uses propaganda to try to fuzzy up the issue.... China has a One‑China principle: that Taiwan is part of the People's Republic of China, full stop. We have a One‑China policy..., that the status of Taiwan is unresolved.... that the resolution of the status of Taiwan must be with the consent of people on both sides of the Strait. We need a policy of "strategic clarity," where we tell China that we will defend Taiwan. We also say we will extend a mutual defense treaty to Taiwan if it wants it, and we will put American troops on the island as a tripwire. We are Americans. We naturally assume that there are solutions, and good solutions, to every problem. After three decades of truly misguided China policy, there are no ... solutions that are "undangerous." ...The current trend of policy is unsustainable. There will be no American republic if we continue to do what we are currently doing and if we continue to allow China to do what it does. I do not think that enforcing a trade deal will start World War III. China has not met its obligations. As of a few months ago, China had met about 62% of its commitments..... We should be increasing the tariffs that President Trump imposed under Section 301 of the Trade Act of 1974. Remember, those tariffs are meant to be a remedy for the theft of US intellectual property. China has continued to steal US IP. As matter of fact, it has gotten worse... I do not think that we should be trying to foster integration of Wall Street into China's markets.... Do not take it from me, just look at their failure to comply with very simple, easy‑to‑comply-with requirements. It was a mistake. The best response would be if we hit them with everything at once because China right now is weak. If we were going to pick the number one thing to do, I would think trade. China now has a debt crisis, so they are not going to invest their way out of this crisis, which means the only way they can save their economy is net exports. We should stop buying their stuff. China has bought the political establishment in the Solomon Islands, except for one brave man named David Suidani. Recently, somebody got the bright idea of publishing all of the specific payments that Beijing has made to Solomon Islands politicians.... We should be doing this with payments to American politicians, we should be doing this across the board. What bothers me is that, although their assumptions about China have demonstrably been proven wrong, American policymakers still continue with the same policies. There is, in some people's mind, an unbreakable view that we have to cooperate with China.... This is what people learn in international relations school when they go to Georgetown, and they become totally stupid. Clearly, Nike and Apple and other companies are now, at this very moment, trying to prevent Congress from enacting toughened rules on the importation of forced‑labor products into our country. Moreover, the Chinese regime is even more casualty‑averse than we are. Even if Beijing thinks it can take Taiwan by force, it is probably not going to invade because it knows an invasion would be unpopular with most people in China. It is not going to risk hundreds of thousands of casualties that would result from an invasion. Unfortunately..., we taught the Chinese that they can without cost engage in these dangerous maneuvers of intercepting our planes and our ships. That is the problem: because as we have taught the Chinese to be more aggressive, they have been. [W]e should have made it clear to the Chinese leadership that they cannot kill Americans without cost. Hundreds of thousands Americans have been killed by a disease that China deliberately spread. From October 2020 to October 2021, more than 105,000 Americans died from fentanyl -- which China has purposefully, as a matter of state and Communist Party policy -- sold to Americans... we have to change course. I would close China's four remaining consulates. I would also strip the Chinese embassy down to the ambassador and his personal staff. The thousands who are in Washington, DC, they would be out. I would also raise tariffs to 3,600%, or whatever. This is a good time to do it. We have supply chain disruptions. We are not getting products from China anyway. We can actually start to do this sort of stuff. I would... just hammer those guys all the time verbally. People may think, "Those are just words." For communists, words are really important, because they are an insecure regime where propaganda is absolutely critical. I would be going after the Communists on human rights, I would be going after them on occupying the South China Sea, on Taiwan, unrelentingly -- because I would want to show the world that the United States is no longer afraid of China.... State Department people, they are frightened. We need to say to the Chinese regime, like Dulles, "I'm not afraid of you. I'm going after you, and I'm going to win." Is Xi Jinping really that bold... to start another war?... First, China considers the United States to be its enemy. Second the United States is no longer deterring China. China feels it has a big green light to do whatever it wants. All the conditions for history's next great war are in place. Jim Holmes, the Wiley Professor at the Naval War College, actually talks about this period as being 1937. 1937 was the year in which if you were in Europe or America, you could sense the trouble. If you were in Asia in 1937, you would be even more worried, because that year saw Japan's second invasion of China that decade. No matter where you lived, however, you could not be sure that the worst would happen, that great armies and navies around the world would clash. There was still hope that the situation could be managed. As we now know, the worst did happen. In fact, what happened was worse than what anyone thought at the time. We are now, thanks to China, back to 1937. We will begin our discussion in Afghanistan. Beijing has had long‑standing relations with the Afghan Taliban, going back before 9/11, and continuing through that event. After the US drove the Taliban from power and while it was conducting an insurgency, China was selling the group arms, including anti‑aircraft missiles, that were used to kill American and NATO forces. China's support for killing Americans has continued to today. In December 2020, Indian Intelligence was instrumental, in Afghanistan, in breaking up a ring of Chinese spies and members of the Haqqani Network. The Trump administration believed that the Chinese portion of that ring was actually paying cash for killing Americans. What can happen next? We should not be surprised if China gives the Taliban an atomic weapon to be used against an American city. Would they be that vicious? We have to remember that China purposefully, over the course of decades, proliferated its nuclear weapons technology to Pakistan and then helped Pakistan sell that Chinese technology around the world to regimes such as Iran's and North Korea's. Today, China supports the Taliban. We know this because China has kept open its embassy in Kabul. China is also running interference for the Taliban in the United Nations Security Council. It is urging countries to support that insurgent group with aid. It looks as if the Taliban's main financial backers these days are the Chinese. Beijing is hoping to cash in on its relationship in Central Asia. Unfortunately, there is a man named Biden, who is helping them. In early August, Biden issued an executive order setting a goal that by 2030, half of all American vehicles should be electric‑powered. To be electric‑powered, we need rare earth minerals, we need lithium. As many people have said, Afghanistan is the Saudi Arabia of rare earths and lithium. If Beijing can mine this, it makes the United States even more dependent on China. It certainly helps the Taliban immeasurably. Unfortunately, Beijing has more than just Afghanistan in mind. The Chinese want to take away our sovereignty, and that of other nations, and rule the world. They actually even want to rule the near parts of the solar system. Yes, that does sound far‑fetched, but, no, I'm not exaggerating. Chinese President Xi Jinping would like to end the current international system. On July 1, in a landmark speech, in connection with the centennial of China's ruling organization, he said this: "The Communist Party of China and the Chinese people, with their bravery and tenacity, solemnly proclaim to the world that the Chinese people are not only good at taking down the old world, but also good in building a new one." By that, China's leader means ending the international system, the Westphalian international system. It means he wants to impose China's imperial‑era notions of governance, where Chinese emperors believed they not only had the Mandate of Heaven over tianxia, or all under Heaven, but that Heaven actually compelled the Chinese to rule the entire world. Xi Jinping has been using tianxia themes for decades, and so have his subordinates, including Foreign Minister Wang Yi, who in September 2017 wrote an article in Study Times, the Central Party School's influential newspaper. In that article, Wang Yi wrote that Xi Jinping's thought on diplomacy ‑‑ a "thought" in Communist Party lingo is an important body of ideological work ‑‑ Wang Yi wrote that Xi Jinping's thought on diplomacy made innovations on and transcended the traditional theories of Western international relations of the past 300 years. Take 2017, subtract 300 years, and you almost get to 1648, which means that Wang Yi, with his time reference, was pointing to the Treaty of Westphalia of 1648, which established the current system of sovereign states. When Wang Yi writes that Xi Jinping wants to transcend that system, he is really telling us that China's leader does not want sovereign states, or at least no more of them than China. This means that when Biden says, "Oh, the Chinese just want to compete with us," he is wrong. They do not want to "compete" within the international system. They do not even want to change that system so it is more to their liking. They want to overthrow it altogether, period. China is also revolutionary with regard to the solar system. Since about 2018, Chinese officials have been talking about the moon and Mars as sovereign Chinese territory. In other words, as part of the People's Republic of China. This means that China considers those heavenly bodies to be like the South China Sea: theirs and theirs alone. This also means that China will exclude other nations from going to the moon and Mars if they have the capability to do so. We do not have to speculate about that: Chinese officials say this is what they are going to do. Let us return to April 2021. Beijing announced the name of its Mars rover. "We are naming the Mars rover Zhurong," the Chinese said, "because Zhurong was the god of fire in Chinese mythology, " How nice. Yes, Zhurong is the god of fire. What Beijing did not tell us is that Zhurong is also the god of war—and the god of the South China Sea. Is Xi Jinping really that bold or that desperate to start another war? Two points. First, China considers the United States to be its enemy. The second point is that the United States is no longer deterring China. China feels it has a big green light to do whatever it wants. On the first point, about our enemy status, we have to go back to May 2019. People's Daily, the most authoritative publication in China, actually carried a piece that declared a "people's war" on the US. This was not just some isolated thought. On August 29th 2021, People's Daily came out with a landmark piece that accused the United States of committing "barbaric" acts against China. Again, this was during a month of hostile propaganda blasts from China. On the August 29th, Global Times, which is controlled by People's Daily, came right out and also said that the United States was an enemy or like an enemy. We Americans don't pay attention to propaganda. The question is, should we be concerned about what China is saying? After all, these are just words. At this particular time, these words are significant. The strident anti‑Americanism suggests to me that China is laying the justification for a strike on the United States. We keep ignoring what Beijing is saying. We kept ignoring what Osama bin Laden was saying. We have to remember that the Chinese regime, unlike the Japanese, always warn its adversaries about what it is going to do. Jim Lilley, our great ambassador to Beijing during the Tiananmen Massacre, actually said that China always telegraphs its punches. At this moment, China is telegraphing a punch. That hostility, unfortunately, is not something we can do very much about. The Chinese Communist regime inherently idealizes struggle, and it demands that others show subservience to it. The second reason war is coming is that America's deterrence of China is breaking down. That is evident from what the Chinese are saying. In March of 2021, China sent its top two diplomats, Yang Jiechi and Wang Yi, to Anchorage to meet our top officials, Secretary of State Antony Blinken and National Security Advisor Jake Sullivan. Yang, in chilling words, said the US could no longer talk to China "from a position of strength." We saw the same theme during the fall of Kabul. China then was saying, "Look, those Americans, they can't deal with the insurgent Taliban. How can they hope to counter us magnificent Chinese?" Global Times actually came out with a piece referring to Americans: "They can't win wars anymore." We also saw propaganda at that same time directed at Taiwan. Global Times was saying, again, in an editorial, an important signal of official Chinese thinking, "When we decide to invade, Taiwan will fall within hours and the US will not come to help." It is probably no coincidence that this propaganda came at the time of incursions into Taiwan's air-defense identification zone. We need to be concerned with more than just the intensity and with the frequency of these flights, however. We have to be concerned that China was sending H‑6K bombers; they are nuclear‑capable. Something is wrong. Global Times recently came out with an editorial with the title, "Time to warn Taiwan secessionists and their fomenters: war is real." Beijing is at this moment saying things heard before history's great conflicts. The Chinese regime right now seems to be feeling incredibly arrogant. We heard this on November 28th in 2020, when Di Dongsheng, an academic in Beijing, gave a lecture live-streamed to China. Di showed the arrogance of the Chinese elite. More importantly, he was showing that the Chinese elite no longer wanted to hide how they felt. Di, for instance, openly stated that China could determine outcomes at the highest levels of the American political system. Di's message was that with cash, China can do anything it wants, and that all Americans would take cash. He mentioned two words in this regard: Hunter Biden. Unfortunately, President Joe Biden is reinforcing this notion. China, for instance, has so far killed nearly one million Americans with a disease that it deliberately spread beyond its borders. Yet, what happened? Nothing. We know that China was able to spread this disease with its close relationship with the World Health Organization. President Trump, in July of 2020, took us out of the WHO. What did Biden do? In his first hours in office, on January 20th, 2021, he put us back into the WHO. In February, he had a two‑hour phone call with Xi Jinping. By Biden's own admission, he didn't raise the issue of the origins of COVID‑19 even once. If you are Xi Jinping, after you put down the receiver, your first thought is, "I just got away with killing hundreds of thousands of Americans." Then there's somebody named John Kerry. Our republic is not safe when John Kerry carries a diplomatic passport, as he now does. He is willing to make almost any deal to get China to sign an enhanced climate arrangement. Kerry gave a revealing interview to David Westin of Bloomberg on September 22, 2021. Westin asked him, "What is the process by which one trades off climate against human rights?" Climate against human rights? Kerry came back and said, "Well, life is always full of tough choices in the relationship between nations." Tough choices? We Americans need to ask, "What is Kerry willing to give up to get his climate deal?" Democracies tend to deal with each other in the way that Kerry says. If we are nice to a democracy, that will lead to warm relations; warm relations will lead to deals, long‑standing ties. Kerry thinks that the Chinese communists think that way. Unfortunately, they do not. We know this because Kerry's successor as Secretary of State, Hillary Clinton, in February 2009, said in public, "I'm not going to press the Chinese on human rights because I've got bigger fish to fry." She then went to Beijing a day after saying that and got no cooperation from the Chinese. Even worse, just weeks after that, China felt so bold that it attacked an unarmed US Navy reconnaissance vessel in the South China Sea. The attack was so serious that it constituted an act of war. The Chinese simply do not think the way that Kerry believes they do. All of this, when you put it together, means that the risk of war is much higher than we tend to think. Conflict with today's aggressor is going to be more destructive than it was in the 1930s. We have news that China is building something like 345 missile silos in three locations: in Gansu, Xinjiang, and in Inner Mongolia. These silos are clearly built to accommodate the DF‑41. The DF‑41 has a range of about 9,300 miles, which means that it can reach any part of the United States. The DF‑41 carries 10 warheads. This means that China could, in about two years, as some experts think, have a bigger arsenal than ours. China has built decoy silos before. We are not sure they are going to put all 345 missiles into these facilities, but we have to assume the worst because Chinese leaders and Chinese generals, on occasion, unprovoked, have made threats to nuke American cities. This, of course, calls into question their official no‑first‑use policy, and also a lot of other things. China will not talk to us about arms control. We have to be concerned that China and Russia, which already are coordinating their military activities, would gang up against us with their arsenals. In July, 2021 China tested a hypersonic glide warhead, which circled the world. This signals China intends to violate the Outer Space Treaty, to which China is a party. It also shows that in hypersonic technology, which was developed by Americans, China is now at least a decade ahead of us in fielding a weapon. Why is China doing all this now? The country is coming apart at the seams. There is, for instance, a debt crisis. Evergrande and other property developers have started to default. It is more than just a crisis of companies. China is basically now having its 2008. Even more important than that, they have an economy that is stumbling and a food crisis that is worsening year to year. They know their environment is exhausted. Of course, they also are suffering from a continuing COVID‑19 epidemic. To make matters worse, all of this is occurring while China is on the edge of the steepest demographic decline in history in the absence of war or disease. Two Chinese demographers recently stated that China's population will probably halve in 45 years. If you run out those projections, it means that by the end of the century, China will be about a third of its current size, basically about the same number of people as the United States. These developments are roiling the political system. Xi Jinping is being blamed for these debacles. We know he has a low threshold of risk. Xi now has all the incentive in the world to deflect popular and regime discontent by lashing out. In 1966, Mao Zedong, the founder of the People's Republic, was sidelined in Beijing. What did he do? He started the Cultural Revolution. He tried to use the Chinese people against his political enemies. That created a decade of chaos. Xi Jinping is trying to do the same thing with his "common prosperity" program. The difference is that Mao did not have the means to plunge the world into war. Xi, with his shiny new military, clearly does have that ability. So here is a 1930s scenario to consider. The next time China starts a conflict, whether accidentally or on purpose, we could see that China's friends -- Russia, North Korea, Iran, Pakistan -- either in coordination with China or just taking advantage of the situation, move against their enemies. That would be Ukraine in the case of Russia, South Korea in the case of North Korea, Israel in the case of Iran, India in the case of Pakistan, and Morocco in the case of Algeria. We could see crises at both ends of the European landmass and in Africa at the same time. This is how world wars start. *  *  * Question: Why do you believe China attacked the world with coronavirus? Chang: I believe that SARS‑CoV‑2, the pathogen that causes COVID‑19, is not natural. There are, for example, unnatural arrangements of amino acids, like the double‑CGG sequence, that do not occur in nature. We do not have a hundred percent assurance on where this pathogen came from. We do, however, have a hundred percent assurance on something else: that for about five weeks, maybe even five months, Chinese leaders knew that this disease was highly transmissible, from one human to the next, but they told the world that it was not. At the same time as they were locking down their own country ‑‑ Xi Jinping by locking down was indicating that he thought this was an effective way of stopping the disease -- he was pressuring other countries not to impose travel restrictions and quarantines on arrivals from China. It was those arrivals from China that turned what should have been an epidemic confined to the central part of China, into a global pandemic. As of today, more than eight million people have died outside China. What happened? No one imposed costs on China. For at least a half‑decade, maybe a little bit longer, Chinese military researchers have been openly writing about a new type of biological warfare. This was, for instance, in the 2017 edition of "The Science of Military Strategy," the authoritative publication of China's National Defense University. They talk about a new type of biological warfare of "specific ethnic genetic attacks." In other words, pathogens that will leave the Chinese immune but sicken and kill everybody else, which means that the next disease from China can be a civilization killer. Remember, Xi Jinping must be thinking, "I just got away with killing eight million people. Why wouldn't I unleash a biological attack on the United States? Look what the virus has done not only to kill Americans but also to divide American society." A lot of military analysts talk about how the first seconds of a war with China are going to be fought in outer space. They are going to blind our satellites, take them down, do all sorts of stuff. Those statements are wrong. The first day of war against the United States occurs about six months earlier, when they release pathogens in the United States. Then we are going to have that day in space. The war starts here, with a pathogen ‑‑ a virus, a microbe, a bug of some kind. That is where it begins. Question: You mentioned 1939. Taiwan is the Poland of today. We get mixed signals: Biden invites the Taiwanese foreign minister to his inauguration, but then we hear Ned Price, his State Department spokesman, say that America will always respect the One‑China policy. Meaning, we're sidelining defending Taiwan? Chang: The One‑China policy is something many people misunderstand. Probably because Beijing uses propaganda to try to fuzzy up the issue. China has a One‑China principle: that Taiwan is part of the People's Republic of China, full stop. We have a One‑China policy, which is different. We recognize Beijing as the legitimate government of China. We also say that the status of Taiwan is unresolved. Then, the third part of our One‑China policy is that the resolution of the status of Taiwan must be with the consent of people on both sides of the Strait. In other words, that is code for peace, a peaceful resolution. Our policies are defined by the One‑China policy, the Three Communiques, Reagan's Six Assurances, and the Taiwan Relations Act. Our policy is difficult for someone named Joe Biden to articulate, because he came back from a campaign trip to Michigan, and he was asked by a reporter about Taiwan, and Biden said, "Don't worry about this. We got it covered. I had a phone call with Xi Jinping and he agreed to abide by the Taiwan agreement." In official US discourse, there is no such thing as a "Taiwan agreement." Some reporter then asked Ned Price what did Biden mean by the Taiwan agreement. Ned Price said, "The Taiwan agreement means the Three Communiques the Six Assurances, the Taiwan Relations Act, and the One‑China policy." Ned Price could not have been telling the truth because Xi Jinping did not agree to America's position on Taiwan. That is clear. There is complete fuzziness or outright lying in the Biden administration about this. Biden's policies on Taiwan are not horrible, but they are also not appropriate for this time. decades, we have had this policy of "strategic ambiguity," where we do not tell either side what we would do in the face of imminent conflict. That worked in a benign period. We are no longer in a benign period. We are in one of the most dangerous periods in history. We need a policy of "strategic clarity," where we tell China that we will defend Taiwan. We also say we will extend a mutual defense treaty to Taiwan if it wants it, and we will put American troops on the island as a tripwire. Question: You think he is not saying that because he has no intention of actually doing it, so in a way, he is telling the truth? Chang: The mind of Biden is difficult to understand. We do not know what the administration would do. We have never known, after Allen Dulles, what any administration would do, with regard to Taiwan. We knew what Dulles would have done. We have got to be really concerned because there are voices in the administration that would give Taiwan, and give other parts of the world, to China. It would probably start with John Kerry; that is only a guess. Question: You mentioned earlier the growing Chinese economic problems. Would you use taking action on the enormous trade deficits we run with China to contribute to that problem? Chang: Yes, we should absolutely do that. Go back to a day which, in my mind, lives in infamy, which is January 15th, 2020, when President Trump signed the Phase One trade deal, which I think was a mistake. In that Phase One trade deal, it was very easy for China to comply, because there were specific targets that China had to meet in buying US goods and services. This was "managed trade." China has not met its obligations. As of a few months ago, China had met about 62% of its commitments. That means, they have dishonored this deal in a material and significant way. If nothing else, China has failed to meet its Phase One trade deal commitments. We should be increasing the tariffs that President Trump imposed under Section 301 of the Trade Act of 1974. Remember, those tariffs are meant to be a remedy for the theft of US intellectual property. China has continued to steal US IP. As matter of fact, it has gotten worse: for instance, these Chinese anti‑lawsuit injunctions, which they have started to institute. We need to do something: China steals somewhere between $300 to $600 billion worth of US intellectual property each year. That is a grievous wound on the US economy, it is a grievous wound on our society in general. We need to do something about it. Question: As a follow‑up on that, Japan commenced World War II because of the tariffs Roosevelt was strapping on oil imports into Japan, do you think that might well have the same effect on China, where we do begin to impose stiffer tariffs on American imports? Chang: That is a really important question, to which nobody has an answer. I do not think that China would start a war over tariffs. Let me answer this question in a different way. We are Americans. We naturally assume that there are solutions, and good solutions, to every problem. After three decades of truly misguided China policy, there are no good solutions. There are no solutions that are "undangerous." Every solution, going forward, carries great risk. The current trend of policy is unsustainable. There will be no American republic if we continue to do what we are currently doing and if we continue to allow China to do what it does. I do not think that enforcing a trade deal will start World War III. The point is, we have no choice right now. First, I don't think the Chinese were ever going to honor the Phase One agreement . This was not a deal where there were some fuzzy requirements. This deal was very clear: China buys these amounts of agricultural products by such and such date, China buys so many manufactured products by such and such date. This was not rocket science. China purposefully decided not to honor it. There are also other issues regarding the trade deal do not think that we should be trying to foster integration of Wall Street into China's markets, which is what the Phase One deal also contemplated. Goldman Sachs ran away like a bandit on that. There are lot of objections to it. I do not think we should be trading with China, for a lot of reasons. The Phase One trade deal, in my mind, was a great mistake. Do not take it from me, just look at their failure to comply with very simple, easy‑to‑comply-with requirements. It was a mistake. Question: Concerning cybersecurity, as we saw in the recent departure of a Pentagon official, ringing the alarm on how we are completely vulnerable to China's cyberattacks. From your perspective, what would an attack look like on China that would hurt them? What particular institutions would be the most vulnerable? Is it exposing their secrets? Is it something on their financial system? Is it something on their medical system or critical infrastructure? What does the best way look like to damage them? Also, regarding what you mentioned about Afghanistan, we know that China has been making inroads into Pakistan as a check on American hegemony in relationships with India and Afghanistan. Now that the Afghanistan domino is down, what do you see in the future for Pakistan's nuclear capability, in conjunction with Chinese backing, to move ever further westward towards Afghanistan, and endangering Middle East security? Chang: Right now, India has been disheartened by what happened, because India was one of the main backers of the Afghan government. What we did in New Delhi was delegitimize our friends, so that now the pro‑Russian, the pro‑Chinese elements in the Indian national security establishment are basically setting the tone. This is terrible. What has happened, though, in Pakistan itself, is not an unmitigated disaster for us, because China has suffered blowback there. There is an Afghan Taliban, and there is a Pakistani Taliban. They have diametrically‑opposed policies on China. The Afghan Taliban is an ally of China; the Pakistani Taliban kill Chinese. They do that because they want to destabilize Pakistan's capital, Islamabad. Beijing supports Islamabad. The calculation on part of the Pakistani Taliban is, "We kill Chinese, we destabilize Islamabad, we then get to set up the caliphate in Pakistan." What has happened is, with this incredible success of the Afghan Taliban, that the Pakistani Taliban has been re‑energized -- not good news for China. China has something called the China‑Pakistan Economic Corridor, part of their Belt and Road Initiative. Ultimately that is going to be something like $62 billion of investment into Pakistani roads, airports, electric power plants, utilities, all the rest of it. I am very happy that China is in Pakistan, because they are now dealing with a situation that they have no solutions to. It's like Winston Churchill on Italy, "It's now your turn." We should never have had good relations with Pakistan. That was always a short‑term compromise that, even in the short term, undermined American interests. The point is that China is now having troubles in Pakistan because of their success in Afghanistan. Pakistan is important to China for a number of reasons. One of them is, they want it as an outlet to the Indian Ocean that bypasses the Malacca Strait -- a choke point that the US Navy ‑‑ in their view ‑‑ could easily close off, which is correct. They want to bypass that, but their port in Gwadar is a failure in many respects. Gwadar is in Pakistan's Baluchistan. The Baluchs are one of the most oppressed minorities on earth. They have now taken to violence against the Chinese, and they have been effective. Pakistan is a failure for China. The best response would be if we hit them with everything at once because China right now is weak. If we were going to pick the number one thing to do, I would think trade. Trade is really what they need right now. Their economy is stalling. There are three parts to the Chinese economy, as there are to all economies: consumption, investment, and net exports. Their consumption right now is extremely weak from indicators that we have. The question is can they invest? China now has a debt crisis, so they are not going to invest their way out of this crisis, which means the only way they can save their economy is net exports. We should stop buying their stuff. We have extraordinary supply chain disruptions right now. It should be pretty easy for us to make the case that we must become self‑sufficient on a number of items. Hit them on trade. Hit them on investment, publicize the bank account details of Chinese leaders. All these things that we do, we do it all at the same time. We can maybe get rid of these guys. Question: In the Solomon Islands, they published China's under-the-table payments to political figures. Should we do the same thing with China's leaders? Chang: Yes. There is now a contest for the Solomon Islands, which includes Guadalcanal. China has bought the political establishment in the Solomon Islands, except for one brave man named David Suidani. Recently, somebody got the bright idea of publishing all of the specific payments that Beijing has made to Solomon Islands politicians. This was really good news. We should be doing this with payments to American politicians, we should be doing this across the board. Why don't we publish their payments to politicians around the world? Let's expose these guys, let's go after them. Let's root out Chinese influence, because they are subverting our political system. Similarly, we should also be publishing the bank account details of all these Chinese leaders, because they are corrupt as hell. Question: Could you comment, please, on what you think is the nature of the personal relationships between Hunter Biden, his father, and Chinese financial institutions. How has it, if at all, affected American foreign policy towards China, and how will it affect that policy? Chang: There are two things here. There are the financial ties. Hunter Biden has connections with Chinese institutions, which you cannot explain in the absence of corruption. For instance, he has a relationship with Bohai Harvest Partners, BHR. China puts a lot of money into the care of foreign investment managers. The two billion, or whatever the number is, is not that large, but they only put money with people who have a track record in managing investments. Hunter Biden only has a track record of being the son of Joe Biden. There are three investigations of Hunter Biden right now. There is the Wilmington US Attorney's Office, the FBI -- I don't place very much hope in either of these – but the third one might actually bear some fruit: the IRS investigation of Hunter Biden. Let us say, for the moment, that Biden is able to corrupt all three of these investigations. Yet money always leaves a trail. We are going to find out one way or another. Peter Schweizer, for instance, is working on a book on the Biden cash. Eventually, we are going to know about that. What worries me is not so much the money trail -- and of course, there's the art sales, a subject in itself, because we will find out. What worries me is that Hunter Biden, by his own admission, is a troubled individual. He has been to China a number of times. He has probably committed some embarrassing act there, which means that the Ministry of State Security has audio and video recordings of this. Those are the things that can be used for blackmail. We Americans would never know about it, because blackmail does not necessarily leave a trail. This is what we should be most concerned about. Biden has now had two long phone calls with Xi Jinping. The February call, plus also one a few months ago. We do not know what was said. I would be very worried that when Xi Jinping wants to say something, there will be a phone call to Biden, and it would be Xi doing the talking without note takers. Question: Please tell us about the China desk over the 30 years, the influence of the bureaucracy on politics; what can they affect? Chang: I do not agree with our China policy establishment in Washington, in general, and specifically the State Department and NSC. This a complicated issue. First, there is this notion after the end of the Cold War, that the nature of governments did not matter. You could trade with them, you could strengthen them, and it would not have national security implications. That was wrong for a number of reasons, as we are now seeing. What bothers me is that, although their assumptions about China have demonstrably been proven wrong, American policymakers still continue with the same policies. There is, in some people's mind, an unbreakable view that we have to cooperate with China. You hear this from Blinken all the time: "We've got to cooperate where we can." It is this formulation which is tired, and which has not produced the types of policies that are necessary to defend our republic. That is the unfortunate thing. This is what people learn in international relations school when they go to Georgetown, and they become totally stupid. We Americans should be upset because we have a political class that is not defending us. They are not defending us because they have these notions of China. George Kennan understood the nature of the Soviet Union. I do not understand why we cannot understand the true nature of the Chinese regime. Part of it is because we have Wall Street, we have Walmart, and they carry China's water. There are more of us than there are of them in this country. We have to exercise our vote to make sure that we implement China policies that actually protect us. Policies that protect us are going to be drastic and they will be extreme, but absolutely, we have now dug ourselves into such a hole after three decades of truly misguided views on China, that I don't know what else to say. This is not some partisan complaint. Liberals and conservatives, Republicans and Democrats, all have truly misguided China policies. I do not know what it takes to break this view, except maybe for the deaths of American servicemen and women. Question: Is the big obstacle American businesses which, in donations to Biden, are the ones stopping decoupling of commerce, and saying, "Do not have war; we would rather earn money"? Chang: It is. You have, for instance, Nike. There are a number of different companies, but Nike comes to mind right now, because they love to lecture us about racism. For years they were operating a factory in Qingdao, in the northeastern part of China, that resembled a concentration camp. The laborers were Uighur and Kazakh women, brought there on cattle cars and forced to work. This factory, technically, was operated by a South Korean sub‑contractor, but that contractor had a three‑decade relationship with Nike. Nike had to know what was going on. This was forced labor, perhaps even slave labor. Clearly, Nike and Apple and other companies are now, at this very moment, trying to prevent Congress from enacting toughened rules on the importation of forced‑labor products into our country. One of the good things Trump did was, towards the end of his four years, he started to vigorously enforce the statutes that are already on the books, about products that are made with forced and slave labor. Biden, to his credit, has continued tougher enforcement. Right now, the big struggle is not the enforcement, but enhancing those rules. Apple and all of these companies are now very much trying to prevent amendment of those laws. It's business, but it's also immoral. Question: It is not just big Wall Street firms. There are companies that print the Bible. Most Bibles are now printed in China. When President Trump imposed the tariffs, a lot of the Bible printers who depended on China actually went to Trump and said, "You cannot put those tariffs in because then the cost of Bibles will go up." Chang: Most everyone lobbies for China. We have to take away their incentive to do so. Question: What are the chances that China's going to invade Taiwan? Chang: There is no clear answer. There are a number of factors that promote stability. One of them is that, for China to invade Taiwan, Xi Jinping has to give some general or admiral basically total control over the Chinese military. That makes this flag officer the most powerful person in China. Xi is not about to do that. Moreover, the Chinese regime is even more casualty‑adverse than we are. Even if Beijing thinks it can take Taiwan by force, it is probably not going to invade because it knows an invasion would be unpopular with most people in China. It is not going to risk hundreds of thousands of casualties that would result from an invasion. The reason we have to be concerned is because it is not just a question of Xi Jinping waking up one morning and saying, "I want to invade Taiwan." The danger is the risk of accidental contact, in the skies or on the seas, around Taiwan. We know that China has been engaging in hostile conduct, and this is not just the incursions into Taiwan's air-defense identification zone. There are also dangerous intercepts of the US Navy and the US Air Force in the global commons. One of those accidents could spiral out of control. We saw this on April 1st, 2001, with the EP‑3, where a Chinese jet clipped the wing of that slow‑moving propeller plane of the US Navy. The only reason we got through it was that George W. Bush, to his eternal shame, paid China a sum that was essentially a ransom. He allowed our crew to be held for 11 days. He allowed the Chinese to strip that plane. This was wrong. This was the worst incident in US diplomatic history, but Bush's craven response did get us through it. Unfortunately, by getting through it we taught the Chinese that they can without cost engage in these dangerous maneuvers of intercepting our planes and our ships. That is the problem: because as we have taught the Chinese to be more aggressive, they have been. One of these incidents will go wrong. The law of averages says that. Then we have to really worry. Question: You don't think Xi thinks, "Oh well, we can sacrifice a few million Chinese"? Chang: On the night of June 15th, 2020, there was a clash between Chinese and Indian soldiers in Ladakh, in the Galwan Valley. That was a Chinese sneak attack on Indian-controlled territory. That night, 20 Indian soldiers were killed. China did not admit to any casualties. The Indians were saying that they killed about 45 Chinese soldiers that night. Remember, this was June 15th of 2020. It took until February of 2021 for China to admit that four Chinese soldiers died. TASS, the Russian news agency, recently issued a story reporting that 45 Chinese soldiers actually died that night. This incident shows you how risk‑averse and casualty‑averse the Chinese Communist Party is. They are willing to intimidate, they are willing to do all sorts of things. They are, however, loath to fight sustained engagements. Remember, that the number one goal of Chinese foreign policy is not to take over Taiwan. The number one goal of Chinese foreign policy is to preserve Communist Party rule. If the Communist Party feels that the Chinese people are not on board with an invasion of Taiwan, they will not do it even if they think they will be successful. Right now, the Chinese people are not in any mood for a full‑scale invasion of Taiwan. On the other hand, Xi Jinping has a very low threshold of risk. He took a consensual political system where no Chinese leader got too much blame or too much credit, because everybody shared in decisions, and Xi took power from everybody, which means, he ended up with full accountability, which means -- he is now fully responsible. In 2017, when everything was going China's way, this was great for Xi Jinping because he got all the credit. Now in 2021, where things are not going China's way, he is getting all the blame. The other thing, is that Xi has raised the cost of losing a political struggle in China. In the Deng Xiaoping era, Deng reduced the cost of losing a struggle. In the Maoist era, if you lost a struggle, you potentially lost your life. In Deng's era, if you lost a struggle, you got a nice house, a comfortable life. Xi Jinping has reversed that. Now the cost of losing a political struggle in China is very high. So there is now a combination of these two developments. Xi has full accountability. He knows that if he is thrown out of power, he loses not just power. He loses his freedom, his assets, potentially his life. If he has nothing to lose, however, it means that he can start a war, either "accidentally" or on purpose. He could be thinking, "I'm dying anyway, so why don't I just roll the dice and see if I can get out of this?" That is the reason why this moment is so exceedingly risky. When you look at the internal dynamics inside China right now, we are dealing with a system in crisis. Question: China has a conference coming up in a year or so. What does Chairman Xi want to do to make sure he gets through that conference with triumph? Chang: The Communist Party has recently been holding its National Congresses once every five years. If the pattern follows -- and that is an if -- the 20th National Congress of the Communist Party will be held either October or November of next year. This is an important Congress, more so than most of them because Xi Jinping is looking for an unprecedented third term as general secretary of the Communist Party. If you go back six months ago, maybe a year, everyone was saying, "Oh, Xi Jinping. No problem. He's president for life. He's going to get his third term. He will get his fourth term. He will get his fifth term, as long as he lives. This guy is there forever." Right now, that assumption is no longer valid. We do not know what's going to happen because he is being blamed for everything. Remember, as we get close to the 20th National Congress, Xi Jinping knows he has to show "success." Showing "success" could very well mean killing some more Indians or killing Americans or killing Japanese or something. We just don't know what is going to happen. Prior to the National Congress, there is the sixth plenum of the 19th Congress. Who knows what is going to happen there. The Communist Party calendar, as you point out, does dictate the way Xi Jinping interacts with the world. Question: Going back to the wing-clip incident, what should Bush have done? Chang: What Bush should have done is immediately demand the return of that plane. What he should have done was to impose trade sanctions, investment sanctions, whatever, to get our plane back. We were fortunate, in the sense that our aviators were returned, but they were returned in a way that has made relations with China worse, because we taught the Chinese regime to be more aggressive and more belligerent. We created the problems of today and of tomorrow. I would have imposed sanction after sanction after sanction, and just demand that they return the plane and the pilots. Remember, that at some point, it was in China's interests to return our aviators. The costs would have been too high for the Chinese to keep them. We did not use that leverage on them. While we are on this topic, we should have made it clear to the Chinese leadership that they cannot kill Americans without cost. Hundreds of thousands Americans have been killed by a disease that China deliberately spread. In one year, from 2020 to 2021, nearly 80,000 Americans died from fentanyl, which China has purposefully, as a matter of state and Communist Party policy -- sold to Americans. China is killing us. We have to do something different. I'm not saying that we have good solutions; we don't. But we have to change course. Question: Biden is continuing this hostage thing with Huawei, returning the CFO of Huawei in exchange for two Canadians. Have we taught the Chinese that they can grab more hostages? Chang: President Trump was right to seek the extradition of Meng Wanzhou, the chief financial officer of Huawei Technologies. Biden, in a deal, released her. She did not even have to plead guilty to any Federal crime. She signed a statement, which I hope we'll be able to use against Huawei. As soon as Meng was released, China released the "two Michaels," the two Canadians who were grabbed within days of our seeking extradition of Meng Wanzhou. In other words, the two Michaels were hostages. We have taught China that any time that we try to enforce our own laws, they can just grab Americans. They have grabbed Americans as hostages before, but this case is high profile. They grabbed Americans, and then they grabbed Canadians, and they got away with it. They are going to do it again. We are creating the incentives for Beijing to act even more dangerously and lawlessly and criminally in the future. This has to stop. Question: On the off-chance that the current leader does not maintain his position, what are your thoughts on the leaders that we should keep an eye on? Chang: There is no one who stands out among the members of the Politburo Standing Committee. That is purposeful. Xi Jinping has made sure that there is nobody who can be considered a successor; that is the last thing he wants. If there is a change in leadership, the new leader probably will come from Jiang Zemin's Shanghai Gang faction. Jiang was China's leader before Hu Jintao, and Hu came before Xi Jinping. There is now a lot of factional infighting. Most of the reporting shows that Jiang has been trying to unseat Xi Jinping because Xi has been putting Jiang's allies in jail. Remember, the Communist Party is not a monolith. It has a lot of factions. Jiang's faction is not the only one. There is something called the Communist Youth League of Hu Jintao. It could, therefore, be anybody. Question: Double question: You did not talk about Hong Kong. Is Hong Kong lost forever to the Chinese Communist Party? Second question, if you could, what are the three policies that you would change right away? Chang: Hong Kong is not lost forever. In Hong Kong, there is an insurgency. We know from the history of insurgencies that they die away -- and they come back. We have seen this in Hong Kong. The big protests in Hong Kong, remember, 2003, 2014, 2019. In those interim periods, everyone said, "Oh, the protest movement is gone." It wasn't. China has been very effective with its national security law, but there is still resistance in Hong Kong. There is still a lot of fight there. It may not manifest itself for quite some time, but this struggle is not over, especially if the United States stands behind the people there. Biden, although he campaigned on helping Hong Kong, has done nothing. On the second question, I would close China's four remaining consulates. I would also strip the Chinese embassy down to the ambassador and his personal staff. The thousands who are in Washington, DC, they would be out. I would also raise tariffs to 3,600%, or whatever. This is a good time to do it. We have supply chain disruptions. We are not getting products from China anyway. We can actually start to do this sort of stuff. The third thing, I would do what Pompeo did, just hammer those guys all the time verbally. People may think, "Those are just words." For communists, words are really important, because they are an insecure regime where propaganda is absolutely critical. I would be going after the Communists on human rights, I would be going after them on occupying the South China Sea, on Taiwan, unrelentingly -- because I would want to show the world that the United States is no longer afraid of China. We have taught the world that we are afraid of dealing with the Chinese. State Department people, they are frightened. We need to say to the Chinese regime, like Dulles, "I'm not afraid of you. I'm going after you, and I'm going to win." Tyler Durden Sun, 05/01/2022 - 23:20.....»»

Category: blogSource: zerohedgeMay 2nd, 2022

Futures, Yields Rise On Ceasefire Hopes As Ukraine-Russia Talks Resume

Futures, Yields Rise On Ceasefire Hopes As Ukraine-Russia Talks Resume Following yesterday's surge in stocks following an FT report that Russia has eased on its Ukraine demands and the Russian ceasefire document no longer contains any discussion of three of Russia’s initial core demands - “denazification”, “demilitarisation”, and legal protection for the Russian language in Ukraine - overnight futures have extended their "feel good" rise as peace negotiations which resumed on Tuesday in Turkey between Russia and Ukraine stoked a rally in global equities, and hit session highs after Ukrainian negotiator Podoliak noted that a ceasefire is being discussed with Russia adding a press conference is to be expected later. Ukraine is striving for a cease-fire agreement in talks with Russian negotiators that started Tuesday in Turkey, setting a “minimum” goal of an improvement in the humanitarian situation. Nasdaq 100 futures were up 0.6% while S&P 500 futures gained 0.5% and Dow futures 0.4%. Europe’s Stoxx 600 Index also advanced, with auto and consumer stocks outperforming. Oil fluctuated as investors weighed the impact of China’s mobility curbs against a Covid resurgence on demand; the dollar dropped. Treasuries bear flattened, outperforming bunds and gilts as haven demand continues to be unwound; the 10Y TSY yield rose to 2.50%. Apple headed higher in premarket trading and was set for its longest winning streak since 2003, in which the iPhone maker has added about $407 billion in market capitalization. A revival in the so-called meme stock rally also set GameStop on course for its 11th straight day of gains as retail traders bid up OTM calls sparking yet another gamma squeeze and proving that the market remains hopelessly broken. Here are some other notable premarket mvoers: Dave & Buster’s (PLAY) shares drop 7.2% after the dining and entertainment venue operator reported earnings per share for the fourth quarter that missed the average analyst estimate. While analysts pointed to the impact of the Omicron variant of the Covid-19 virus on the company’s fourth-quarter, they saw reassuring signs in the firm’s margins and recent improvements. Progenity (PROG US) falls 20% in U.S. premarket trading after the firm late on Monday reported a wider annual loss for 2021 than expected. Small biotech and pharma companies rally in U.S. premarket trading, rebounding from this year’s declines, as investor appetite for riskier assets and so-called meme stocks grows. Brooklyn Immunotherapeutics (BTX US) +8.7%, Alaunos Therapeutics (TCRT US) +6.5%. CVS Health (CVS US) shares drop 1.7% in U.S. premarket trading after Deutsche Bank downgrades the pharmacy health care provider to hold from buy amid rising risks. U.S. stocks have rebounded in March as the Federal Reserve issued an upbeat outlook on economic growth, with investors also looking past surging inflation and a historic rout in Treasuries. Paradoxically, technology-heavy stocks, which tend to sell off when interest rates are rising, have in fact outperformed the benchmark S&P 500 as traders focused instead on differentiating between profitable and unprofitable firms.  Even more paradoxically as a new cold war rages, the Nasdaq 100 is on track for its biggest monthly gain since October 2021. "The resilience of global stocks given the cocktail of risks facing the global economy is truly impressive, but this stoicism is likely to face continuing tests as the impact of mounting prices and the actions of central banks continue to feed through, not to mention the ongoing geopolitical concerns,” Russ Mould, investment director at AJ Bell Ltd., said in emailed comments. Meanwhile, government bond yields rose, with bets on aggressive U.S. monetary tightening hurting shorter maturity Treasuries. Inversions along the curve, where some short-term rates exceed longer tenor yields, point to concerns about a looming economic downturn as the Federal Reserve hikes interest rates to quell high inflation. Hopes of a cease-fire in Ukraine-Russia talks also bolstered European equities. The Stoxx 600 jumped 1.3%, with automakers, consumer products and services and technology shares leading gains. Here are some of the biggest European movers today: Carlsberg shares advance as much as 4.5% as analysts welcomed the brewer’s decision to exit Russia, with Credit Suisse seeing potential for a re-rating for a stock battered by Russia’s invasion of Ukraine. Adyen shares gain as much as 6% after JPMorgan said the company could boost its outlook for long-term margin to more than 70% from 65%, placing the firm on “positive catalyst watch.” Currys Plc shares rise as much as 12% following a so-called uncooked mention in a Betaville blog post regarding potential takeover interest in the electrical goods retailer. Euromoney shares climb as much as 4.9% after Investec raises its recommendation to buy from hold, citing a disconnect between the share price and the media firm’s operational performance. Schibsted shares rise as much as 6.6%, the most since March 16, after its largest shareholder, Blommenholm Industrier, buys 1 million Class A shares at NOK222.5 each. Nordex shares rise as much as 8.3% after the wind-turbine maker’s new FY22 guidance is ahead of expectations, Jefferies says; wind power peers Vestas and Orsted gain, too. Barclays falls as much as 5.7% in London following news that an unnamed investor sold about 575m shares at a discount. Stock is also downgraded to neutral from overweight at JPMorgan. Maersk, Kuehne + Nagel and Hapag-Lloyd all drop after Deutsche Bank downgrades several logistics and container stocks due to the indirect consequences of the war in Ukraine. Sanofi shares fall as much as 2.5% after the firm provided a new sales forecast for its drug Dupixent, with both Morgan Stanley and Citi noting guidance is slightly behind expectations. Earlier in the session, Asian stocks advanced after a three-day loss, as a decline in oil prices eased concerns over corporate earnings and Chinese tech stocks extended gains into a second day. The MSCI Asia Pacific Index rose 0.7% with Tencent, Toyota Motor, and Alibaba among the biggest contributors to the advance. Apart from Hong Kong, where gains in tech and health names drove gauges higher, equities in Japan and Australia outperformed, with the former benefiting from a weaker yen and the latter rising ahead of a budget release after markets closed. Investors are waiting to see how the cease-fire talks between Russia and Ukraine proceed, while assessing the repercussions to businesses from the lockdown in Shanghai. The risk of Chinese firms, especially those in the property sector, facing trading halts is weighing on sentiment as a key earnings deadline looms.  Oil Extends Losses on China Demand Concerns Ahead of OPEC+ Meet “A V-shaped recovery in stock markets looks difficult,” said Kim Kyung Hwan, a strategist at Hana Financial Investment in Seoul.  “The worst is behind in terms of investor sentiment, but issues like Covid lockdowns and the war in Ukraine aren’t resolved, traders are just getting used to them.” Despite Tuesday’s gain, the benchmark Asian measure is poised for a third straight monthly loss. It’s also lagging behind the S&P 500 index in recent performance Japanese equities rose, powered by exporters after the yen plunged by the most since March 2020 against the U.S. dollar on the Bank of Japan’s easing measures. Electronics and auto makers were the biggest boosts to the Topix, which rose 0.9%. Fast Retailing and SoftBank Group were the largest contributors to a 1.1% gain in the Nikkei 225. The yen was slightly higher after weakening 1.5% against the greenback on Monday. “Makers of export-related products like automobiles should rise with the BOJ’s continuous bond-purchase operations expected to continue weakening the yen,” said Hideyuki Ishiguro, a strategist at Nomura Asset Management. The drop in oil prices is a “relief” for Japan as an importer, and growth stocks should benefit from the slowing rise in long-term U.S. interest rates, he added Indian stocks rose as a drop in crude prices along with prospects of more cease-fire talks between Russia and Ukraine supported buying sentiment. The S&P BSE Sensex climbed 0.6% to 57,943.65, in Mumbai, a second day of gains, while the NSE Nifty 50 Index also advanced by a similar magnitude. Housing Development Finance Corp. advanced 3.1% and was the biggest boost to the Sensex, which had 20 of the 30 shares trading higher.   Fifteen of 19 sectoral indexes compiled by BSE Ltd. rose, led by a gauge of healthcare stocks. Price of Brent crude, a major import for India, hovered around $113 a barrel, down about 6% this week.  Lower oil is supporting gains across economies as a lockdown in parts of China after a resurgence in Covid cases raised possibilities of lower demand, Mitul Shah, head of research at Reliance Securities, wrote in a note. “The Russia-Ukraine conflict and inflationary pressures continue to keep the market wavered,” he said.    In rates, Treasuries extended bear-flattening move with yields cheaper by ~5bp across front-end of the curve, following wider losses for bunds and gilts in early European session. U.S. 10-year yields around 2.49%, higher by ~3bp on the day with bunds and gilts trading cheaper by 6bp and 4bp in the sector; Treasury curve-flattening persists with 2s10s spread tighter by 4.5bp as front-end continues to underperform. The week's auction cycle concludes with $47b 7-year note sale at 1pm ET, following Monday double supply of 2- and 5-year notes; WI 7-year around 2.60% is above auction stops since 2019 and ~69.5bp cheaper than February’s stop-out. IG dollar issuance slate includes two 3Y SOFR deals; two deals priced $4b Monday, and early calls for April are for around $100b of issuance. In Europe, fixed income trades heavy in the risk-on environment. Bund and Treasury curves bear-flatten with U.S. 5s30s remaining inverted and 2s10s flattening a further ~5bps near 7bps. Germany’s 2y yield trades ~3bps shy of a 0% yield. Gilts bear-steepen, cheapening 7-8bps across the back end. Peripheral spreads tighten modestly. In FX, Bloomberg dollar spot drops 0.3%, CHF is the weakest in G-10 sending EUR/CHF 0.6% higher on to a 1.03-handle. The Bloomberg Dollar Spot Index hovered as the greenback traded mixed versus its Group-of-10 peers; Scandinavian currencies were the best performers while the Swiss franc and the pound were the worst. The yen inched up after posting is biggest drop in over a year Monday; the currency may be heading for its worst monthly performance versus the dollar since November 2016, yet trading in the options space is much more balanced. Super-long Japanese government bonds dropped while benchmark 10-year notes were supported by the central bank’s purchase operations; The Bank of Japan offered to buy an unlimited amount of 5- to 10-year government notes for a second time on Tuesday Cable gave up an early advance to fall to an almost two-week low; gilts fell. London’s Metropolitan Police are set to issue at least 20 fines to government officials close to the prime minister who broke U.K. lockdown rules, although this tranche of fines is unlikely to touch Prime Minister Boris Johnson Australia’s three-year bonds dropped after retail sales beat economists’ estimates, with the gap over 10-year notes narrowing to the least since March 2020 In commodities, crude futures hold in the green, recouping Asia’s weakness. WTI regains a $106-handle, Brent trades near $113. Spot gold extends losses, dropping ~$13 before stalling near $1,910/oz. Base metals trade poorly with LME nickel underperforming Looking at the day ahead now, and data releases from the US include the FHFA house price index for January, the Case-Shiller home price index for January, the Conference Board’s consumer confidence indicator for March, and the JOLTS job openings for February. Over in Europe there’s also French consumer confidence for March, Germany’s GfK consumer confidence reading for April and UK mortgage approvals for February. Lastly, central bank speakers include the Fed’s Harker. Market Snapshot S&P 500 futures up 0.5% to 4,590.75 STOXX Europe 600 up 1.1% to 459.14 MXAP up 0.7% to 179.73 MXAPJ up 0.6% to 586.67 Nikkei up 1.1% to 28,252.42 Topix up 0.9% to 1,991.66 Hang Seng Index up 1.1% to 21,927.63 Shanghai Composite down 0.3% to 3,203.94 Sensex up 0.2% to 57,724.92 Australia S&P/ASX 200 up 0.7% to 7,464.26 Kospi up 0.4% to 2,741.07 German 10Y yield little changed at 0.63% Euro little changed at $1.0995 Brent Futures up 1.3% to $113.95/bbl Gold spot down 0.4% to $1,916.02 U.S. Dollar Index little changed at 99.04 Top Overnight News from Bloomberg Deputy Treasury Secretary Wally Adeyemo said the U.S. and its allies will tighten the sanction screws on Russia over its invasion of Ukraine, singling out industries integral to Moscow’s war effort As NATO allies discuss the terms of any potential peace deal to be struck between Russia and Ukraine, signs of strategic splits are emerging from within their ranks Policymakers in Japan on Tuesday sought to balance a commitment to ultra-loose monetary policy in a world of rising interest rates without letting the yen tumble further toward a 20-year low Japan’s Finance Minister Shunichi Suzuki highlighted the need to check if a weaker yen is harming the economy, as he indicated heightened government concern over the currency’s recent slide The additional increase in energy prices resulting from the war in Ukraine pushed inflation significantly higher in March, European Central Bank Governing Council member Pablo Hernandez De Cos says Key OPEC members said oil prices would be even more volatile if not for the group’s strategy and that the U.S. must trust what it’s doing, as calls from major importers for higher production grow Russia has made a $102 million interest payment as the world’s biggest energy exporter continues to service its foreign bonds despite financial isolation after the invasion of Ukraine North Korea looks set to detonate its first nuclear bomb in more than four years, as the U.S.’s sanctions disputes with Russia and China make further United Nations penalties against the country unlikely More detailed look at global markets courtesy of Newsquawk Asia Pac stocks traded mostly higher following the gains in the US where growth stocks spearheaded a recovery and with a decline in oil prices conducive for risk. ASX 200 was led by strength in tech and consumer stocks heading into the Budget announcement. Nikkei 225 gained with Japan to compile economic measures by the end of next month. Hang Seng and traded mixed with the mainland index faltering amid the ongoing lockdown inShanghai Comp. Shanghai and despite the announcement of supportive measures by the local government. Top Asian News Australia’s Budget Pitches Cash to Key Voters Ahead of Election Samsung to Offer More Credit in India to Boost Smartphone Sales Modern Land Joins List of Earnings Delays: Evergrande Update Iron Ore Edges Lower in China as Virus Controls Dent Demand European bourses, Euro Stoxx 50 +2.2%, are firmer across the board in a continuation of the APAC/US handover as Russian-Ukraine talks begin. Upside that has been exacerbated by remarks from both Ukraine and Russian officials. US futures are firmer across the board, ES +0.4%, though magnitudes more contained with Fed speak and supply ahead Top European News U.K. Consumer Credit Surges at Strongest Pace in Five Years U.K. Faces Crypto Exodus as Firms Sound Off Before FCA Deadline European Banks Could Earn $6.6 Billion a Year Greening Economy Inflation Rose Sharply in March on Energy Shock: ECB’s de Cos Commodities: Crude benchmarks have experienced an erosion of earlier upside amid multiple, but generally constructive, updates from Ukraine and Russia. Specifically, Ukrainian negotiator Podoliak noted that a ceasefire is being discussed with Russia adding a press conference is to be expected later. Albeit, the morning's action has not been sufficient to spark a test of the overnight parameters for WTI and Brent. Spot are pressured once more, generally speaking in-fitting with other havens, exacerbated by thegold/silver aforementioned risk-on move. In FX, Euro elevated as EGB yields ramp up again and hopes rise regarding a Russia-Ukraine peace resolution, EUR /USD above 1.1000 and a series of decent option expiries stretching between 1.0950 and the round number. Buck caught amidst buoyant risk sentiment and hawkish Fed vibe, DXY sub-99.000 after narrowly missing test of 2022 peak on Monday. Yen maintains recovery momentum amidst more MoF verbal intervention and demand for month/fy end, USD /JPY under 124.00 vs 125.00+ peak yesterday. Franc flounders as SNB ponders direct repo indexing to main policy rate, USD/CHF around 0.9360 and EUR /CHF over 1.0300. US Event Calendar 09:00: Jan. S&P/CS 20 City MoM SA, est. 1.50%, prior 1.46% 09:00: Jan. FHFA House Price Index MoM, est. 1.2%, prior 1.2% 10:00: March Conf. Board Present Situation, prior 145.1 10:00: March Conf. Board Expectations, prior 87.5 10:00: Feb. JOLTs Job Openings, est. 11m, prior 11.3m 10:00: March Conf. Board Consumer Confidenc, est. 107.0, prior 110.5 Central Bank Speakers 09:00: Fed’s Williams Makes Opening Remarks at Bank Culture... 10:45: Fed’s Harker Discusses Economic Outlook 21:30: Fed’s Bostic Discusses Economic Leadership DB's Jim Reid concludes the overnight wrap A mixed medical report from the Reid family today. I have a nerve root block injection and a diagnostic test on my back tomorrow to battle my sciatica. I managed to stretch for an hour before attempting to play golf on Saturday thinking there was no hope. Miraculously it must have helped me get round but I then suffered for the rest of the weekend as I seized up as soon as I stopped. I told my wife I should have just carried on playing. She despaired at me. On the more positive side my 6-yr old Maisie had her latest 3-4 month scan yesterday. Regular readers will remember she's been in a wheelchair since November after an operation to help her battle a rare hip disorder called Perthes. There are no guarantees as to the long-term outcome with Perthes but the latest scan was encouraging and suggested that while her hip ball is fragmenting (disintegrating), it's not collapsing and getting out of shape largely due to no weight bearing. That suggests a decent chance that when it regrows (assuming it does) it will regrow relatively normally. The nightmare is if the hip ball gets squashed as it disintegrates. She'll still need to keep the weight off for most of the rest of the year but there's hope that by the end of it she can come out of her wheelchair and start the rehab towards a manageable hip. There are some horror stories with this disease in terms of pain and constant discomfort through the entirety of childhood so fingers crossed it's going in the right direction due to her discipline in spite of missing out on all the running about that she's desperate to do. Also helping is that she continues to swim 3-4 times a week and is remarkably good now. This has been the one blessing that's come out of a year and a half where we tried to get her problem diagnosed and then treated. Fingers crossed that the next scan in July will continue to move her in the right direction. Bond markets continued to be as volatile as my back yesterday with big swings in yields but with the front end sell-off being durable. This helped push a number of yield curves ever closer to inversion, meaning we have multiple recessionary signals starting or continuing to flash. The one we always look most closely at is the 2s10s curve, which has inverted prior to every one of the last 10 US recessions. Yesterday this flattened by -7.3bps to 12.5bps and this morning it’s currently just above 6bps with more flattening plus a new on the run 2yr note to blame. Could we invert today? Regardless it's likely to happen soon. A key factor behind this curve flattening has been monetary policy expectations, and over the last 24 hours we’ve seen investors continue to ratchet up their bets on how much tightening we’re likely to see this year. By the close yesterday, Fed Funds futures were pricing in a further 211bps of tightening by the end of 2022, on top of the 25bps a couple of weeks back, which if realised would be the largest move tighter in a calendar year since 1994, back when the Fed raised the target range for the Federal Funds by 250bps. On top of that, it’s clear that investors are also reappraising what the terminal rate is likely to be, and at one point yesterday investors were pricing in a move above 3% by the second half of 2023. We’re not talking much about the terminal rate at the moment, but as we move deeper into the hiking cycle, that’s likely to grab increasing attention, since the destination will have big implications for a wide variety of financial assets. Whilst the all-important 2s10s curve is still (just about) in positive territory, increasing numbers of curves have been inverting across different maturities, with the 3s30s curve becoming the latest to do so around the time we went to press yesterday, eventually closing down -10.4bps at -2.9bps. Similarly, the 3s10s that had already inverted went even deeper into inversion territory to close at -11.5bps, which is the most inverted it's been since 2006. The 5s30s was another to invert yesterday, falling as low as -7.1bps at one point before it steepened to close at -0.9bps. Clearly they are all a bit flatter this morning. If you’re interested in reading more on the yield curve, DB’s US economics team put out a piece last Friday (link here) looking at the value of these various measures for predicting recessions. The Fed have played down the usefulness of the 2s10s curve, and have argued that the Fed forward spread (18-month forward, 3-month yield minus the spot 3-month yield) is more valuable when it comes to explaining recessions risks over the next 12 months. But our economists find that traditional curve slope metrics like the 2s10s provide useful information over a longer horizon, like the next 2 years, and they point out that the 2s10s slope is consistent with a probability greater than 60% of a recession at some point over the next 2 years. Even with the latest round of flattening though, the truth is that the trend has been nearly all one-way for basically a year now. In fact, it was a year ago tomorrow that the slope of the 2s10s curve saw its intraday peak for this cycle, when it hit 162bps. Yesterday’s flattening also coincided with a healthy dose of Treasury volatility. 2yr yields ultimately wound up +5.8bps higher at 2.33%, after trading as much as +13.8bps higher during London trading. 10yr yields fell -1.5bps to 2.46%, but were as much as +8.0bps higher during London trading, and -6.1bps lower during the New York morning. This pushed the MOVE index of Treasury volatility +4.0pts higher to 129.3, just below levels realised in early March. In spite of all the volatility, equities were mostly positive yesterday, with the S&P 500 (+0.71%) staging a steady second half rally to start another week off in the green. The decline in longer-dated yields from their early London peak helped spur tech outperformance, with the NASDAQ gaining +1.31%. Europe also started the week on the front foot, with the STOXX 600 (+0.14%) advancing, alongside the DAX (+0.78%) and the CAC 40 (+0.54%). There were pockets of relative weakness however, with the small-cap Russell 2000 in the US closing flat. Energy stocks were left behind in the otherwise broad rally on both sides of the Atlantic given the large decline in oil discussed below, with the S&P 500 energy sector down -2.56% and the STOXX 600 energy sector down -2.10%. Indeed, Oil prices did fall back yesterday, with Brent crude down -6.77% to $112.48/bbl, but that reflected the lockdown in Shanghai and the prospect of a further release from the US Strategic Petroleum Reserve rather than more positive developments out of Ukraine. It's down another -0.8% this morning. On the other hand European natural gas (+1.26%) rose to €102.55/MWh, which occurred as German Economy minister Habeck said that the G7 had rejected the proposal from President Putin that natural gas contracts be paid in Rubles, with Habeck saying it was a “one-sided and clear breach of contracts”. Back to sovereign bonds, and there were some major moves in European sovereign bonds as well as the US yesterday, with yields on 10yr bunds moving to a fresh high above 0.6% after the open before modestly retreating -0.6bps to 0.58%. That pattern was common across core European sovereigns, with yields on 10yr gilts (-7.9bps) and OATs (-1.2bps) eventually also moving lower following their increases that morning. Similarly to the US, this has come as investor conviction has grown about the chances of tighter ECB policy in the coming months, with 48bps of hikes priced by year-end. Nevertheless, there’s still a wide policy divergence between the Fed’s and the ECB’s trajectory, and we saw this in the widening spread between 2yr US and Germany yields, which closed at 246.1bps yesterday, the most since September 2019. Asian equity markets are trading higher outside of China this morning with the Nikkei (+0.60%), Hang Seng (+0.40%) and Kospi (+0.31%) up. Stocks in mainland China are wavering with the Shanghai Composite (-0.44%) and CSI (-0.11%) both trading in negative territory as I type. Meanwhile, contracts on the S&P 500 (+0.04%) are fractionally higher while Nasdaq futures are down -0.11%. Early morning data showed that Japan’s industrial output rebounded +0.5% m/m in February after January’s contraction of -0.8%. Separately, Japan’s jobless rate inched down to 2.7% in February from 2.8% in January while the jobs-to-applicants ratio improved to 1.21 in February from 1.20 in the prior month. Elsewhere, Australia reported retail sales for February, advancing +1.8% m/m and beating market expectations for a +0.9% gain. It followed a downwardly revised +1.6% m/m increase in January. The Japanese Yen weakened to its lowest level against the US Dollar since 2015, depreciating -1.48% to 123.86 per dollar, and at one point surpassing 125 per dollar. It's moved nearly 8% in four weeks - a substantial move historically. The latest move came as the Bank of Japan announced they would purchase 10yr JGBs in unlimited quantities over three sessions today, tomorrow and the day after, which followed their move above 0.25% at one point, which we haven’t seen since 2016. The Yen is trading at 123.31 as we go to press so a continued reversal from the close and the lows yesterday morning. Elsewhere today, there’s set to be another round of in-person talks taking place in Turkey between Russia and Ukraine as the war continues into its second month. Investors have grasped at positive headlines in recent weeks and more sensitive assets such as energy prices have reacted accordingly, but the reality has been few signs of concrete progress towards any ceasefire, even if there has been a moderation in some of the demands from either side as to any potential settlement. Finally on Europe, we’re now just 12 days away from the first round of the French presidential election, and there are signs the race is tightening up slightly as the official campaign period began yesterday. Politico’s polling average puts President Macron in the lead still, but his 1st round polling has dipped to 28%, having been at 30% a couple of weeks earlier following the bounce he saw after Russia’s invasion of Ukraine. Behind him is Marine Le Pen on 19%, who he also faced in the second round back in 2017, and her average is up from 18% a couple of weeks earlier. The far-left Jean-Luc Mélenchon is also gaining, now in 3rd place with 14% (up from 12% a couple of weeks ago), but he’s still 5 points behind Le Pen, and only the top 2 candidates go through to the run-off two weeks later. Behind them are also the far-right Eric Zemmour (11%), as well as the conservative Valérie Pécresse (11%). To the day ahead now, and data releases from the US include the FHFA house price index for January, the Case-Shiller home price index for January, the Conference Board’s consumer confidence indicator for March, and the JOLTS job openings for February. Over in Europe there’s also French consumer confidence for March, Germany’s GfK consumer confidence reading for April and UK mortgage approvals for February. Lastly, central bank speakers include the Fed’s Harker. Tyler Durden Tue, 03/29/2022 - 07:51.....»»

Category: blogSource: zerohedgeMar 29th, 2022

The Man Behind Ethereum Is Worried About Crypto’s Future

In a few minutes, electronic music will start pulsing, stuffed animals will be flung through the air, women will emerge spinning Technicolor hula hoops, and a mechanical bull will rev into action, bucking off one delighted rider after another. It’s the closing party of ETHDenver, a weeklong cryptocurrency conference dedicated to the blockchain Ethereum. Lines… In a few minutes, electronic music will start pulsing, stuffed animals will be flung through the air, women will emerge spinning Technicolor hula hoops, and a mechanical bull will rev into action, bucking off one delighted rider after another. It’s the closing party of ETHDenver, a weeklong cryptocurrency conference dedicated to the blockchain Ethereum. Lines have stretched around the block for days. Now, on this Sunday night in February, the giddy energy is peaking. But as the crowd pushes inside, a wiry man with elfin features is sprinting out of the venue, past astonished selfie takers and venture capitalists. Some call out, imploring him to stay; others even chase him down the street, on foot and on scooters. Yet the man outruns them all, disappearing into the privacy of his hotel lobby, alone. [time-brightcove not-tgx=”true”] Vitalik Buterin, the most influential person in crypto, didn’t come to Denver to party. He doesn’t drink or particularly enjoy crowds. Not that there isn’t plenty for the 28-year-old creator of Ethereum to celebrate. Nine years ago, Buterin dreamed up Ethereum as a way to leverage the blockchain technology underlying Bitcoin for all sorts of uses beyond currency. Since then, it has emerged as the bedrock layer of what advocates say will be a new, open-source, decentralized internet. Ether, the platform’s native currency, has become the second biggest cryptocurrency behind Bitcoin, powering a trillion-dollar ecosystem that rivals Visa in terms of the money it moves. Ethereum has brought thousands of unbanked people around the world into financial systems, allowed capital to flow unencumbered across borders, and provided the infrastructure for entrepreneurs to build all sorts of new products, from payment systems to prediction markets, digital swap meets to medical-research hubs. Photograph by Benjamin Rasmussen for TIME But even as crypto has soared in value and volume, Buterin has watched the world he created evolve with a mixture of pride and dread. Ethereum has made a handful of white men unfathomably rich, pumped pollutants into the air, and emerged as a vehicle for tax evasion, money laundering, and mind-boggling scams. “Crypto itself has a lot of dystopian potential if implemented wrong,” the Russian-born Canadian explains the morning after the party in an 80-minute interview in his hotel room. Buterin worries about the dangers to overeager investors, the soaring transaction fees, and the shameless displays of wealth that have come to dominate public perception of crypto. “The peril is you have these $3 million monkeys and it becomes a different kind of gambling,” he says, referring to the Bored Ape Yacht Club, an überpopular NFT collection of garish primate cartoons that has become a digital-age status symbol for millionaires including Jimmy Fallon and Paris Hilton, and which have traded for more than $1 million a pop. “There definitely are lots of people that are just buying yachts and Lambos.” Read More: Politicians Show Their Increasing Interest In Crypto at ETHDenver 2022 Buterin hopes Ethereum will become the launchpad for all sorts of sociopolitical experimentation: fairer voting systems, urban planning, universal basic income, public-works projects. Above all, he wants the platform to be a counterweight to authoritarian governments and to upend Silicon Valley’s stranglehold over our digital lives. But he acknowledges that his vision for the transformative power of Ethereum is at risk of being overtaken by greed. And so he has reluctantly begun to take on a bigger public role in shaping its future. “If we don’t exercise our voice, the only things that get built are the things that are immediately profitable,” he says, reedy voice rising and falling as he fidgets his hands and sticks his toes between the cushions of a lumpy gray couch. “And those are often far from what’s actually the best for the world.” The irony is that despite all of Buterin’s cachet, he may not have the ability to prevent Ethereum from veering off course. That’s because he designed it as a decentralized platform, responsive not only to his own vision but also to the will of its builders, investors, and ever sprawling community. Buterin is not the formal leader of Ethereum. And he fundamentally rejects the idea that anyone should hold unilateral power over its future. Benjamin Rasmussen for TIMEButerin dons Shiba Inu pajama pants onstage at ETHDenver Which has left Buterin reliant on the limited tools of soft power: writing blog posts, giving interviews, conducting research, speaking at conferences where many attendees just want to bask in the glow of their newfound riches. “I’ve been yelling a lot, and sometimes that yelling does feel like howling into the wind,” he says, his eyes darting across the room. Whether or not his approach works (and how much sway Buterin has over his own brainchild) may be the difference between a future in which Ethereum becomes the basis of a new era of digital life, and one in which it’s just another instrument of financial speculation—credit-default swaps with a utopian patina. Three days after the music stops at ETHDenver, Buterin’s attention turns across the world, back to the region where he was born. In the war launched by Russian President Vladimir Putin, cryptocurrency almost immediately became a tool of Ukrainian resistance. More than $100 million in crypto was raised in the invasion’s first three weeks for the Ukrainian government and NGOs. Cryptocurrency has also provided a lifeline for some fleeing Ukrainians whose banks are inaccessible. At the same time, regulators worry that it will be used by Russian oligarchs to evade sanctions. Buterin has sprung into action too, matching hundreds of thousands of dollars in grants toward relief efforts and publicly lambasting Putin’s decision to invade. “One silver lining of the situation in the last three weeks is that it has reminded a lot of people in the crypto space that ultimately the goal of crypto is not to play games with million-dollar pictures of monkeys, it’s to do things that accomplish meaningful effects in the real world,” Buterin wrote in an email to TIME on March 14. His outspoken advocacy marks a change for a leader who has been slow to find his political voice. “One of the decisions I made in 2022 is to try to be more risk-taking and less neutral,” Buterin says. “I would rather Ethereum offend some people than turn into something that stands for nothing.” The war is personal to Buterin, who has both Russian and Ukrainian ancestry. He was born outside Moscow in 1994 to two computer scientists, Dmitry Buterin and Natalia Ameline, a few years after the fall of the Soviet Union. Monetary and social systems had collapsed; his mother’s parents lost their life savings amid rising inflation. “Growing up in the USSR, I didn’t realize most of the stuff I’d been told in school that was good, like communism, was all propaganda,” explains Dmitry. “So I wanted Vitalik to question conventions and beliefs, and he grew up very independent as a thinker.” The family initially lived in a university dorm room with a shared bathroom. There were no disposable diapers available, so his parents washed his by hand. Vitalik grew up with a turbulent, teeming mind. Dmitry says Vitalik learned how to read before he could sleep through the night, and was slow to form sentences compared with his peers. “Because his mind was going so fast,” Dmitry recalls, “it was actually hard for him to express himself verbally for some time.” Instead, Vitalik gravitated to the clarity of numbers. At 4, he inherited his parents’ old IBM computer and started playing around with Excel spreadsheets. At 7, he could recite more than a hundred digits of pi, and would shout out math equations to pass the time. By 12, he was coding inside Microsoft Office Suite. The precocious child’s isolation from his peers had been exacerbated by a move to Toronto in 2000, the same year Putin was first elected. His father characterizes Vitalik’s Canadian upbringing as “lucky and naive.” Vitalik himself uses the words “lonely and disconnected.” Courtesy Dmitry ButerinButerin on his IBM In 2011, Dmitry introduced Vitalik to Bitcoin, which had been created in the wake of the 2008 financial crisis. After seeing the collapse of financial systems in both Russia and the U.S., Dmitry was intrigued by the idea of an alternative global money source that was uncontrolled by authorities. Vitalik soon began writing articles exploring the new technology for the magazine Bitcoin Weekly, for which he earned 5 bitcoins a pop (back then, some $4; today, it would be worth about $200,000). Even as a teenager, Vitalik Buterin proved to be a pithy writer, able to articulate complex ideas about cryptocurrency and its underlying technology in clear prose. At 18, he co-founded Bitcoin Magazine and became its lead writer, earning a following both in Toronto and abroad. “A lot of people think of him as a typical techie engineer,” says Nathan Schneider, a media-studies professor at the University of Colorado, Boulder, who first interviewed Buterin in 2014. “But a core of his practice even more so is observation and writing—and that helped him see a cohesive vision that others weren’t seeing yet.” As Buterin learned more about the blockchain technology on which Bitcoin was built, he began to believe using it purely for currency was a waste. The blockchain, he thought, could serve as an efficient method for securing all sorts of assets: web applications, organizations, financial derivatives, nonpredatory loan programs, even wills. Each of these could be operated by “smart contracts,” code that could be programmed to carry out transactions without the need for intermediaries. A decentralized version of the rideshare industry, for example, could be built to send money directly from passengers to drivers, without Uber swiping a cut of the proceeds. Read the rest of Buterin’s interview in TIME’s newsletter Into the Metaverse. Subscribe for a weekly guide to the future of the Internet. You can find past issues of the newsletter here. In 2013, Buterin dropped out of college and wrote a 36-page white paper laying out his vision for Ethereum: a new open-source blockchain on which programmers could build any sort of application they wished. (Buterin swiped the name from a Wikipedia list of elements from science fiction.) He sent it to friends in the Bitcoin community, who passed it around. Soon a handful of programmers and businessmen around the world sought out Buterin in hopes of helping him bring it to life. Within months, a group of eight men who would become known as Ethereum’s founders were sharing a three-story Airbnb in Switzerland, writing code and wooing investors. While some of the other founders mixed work and play—watching Game of Thrones, persuading friends to bring over beer in exchange for Ether IOUs—Buterin mostly kept to himself, coding away on his laptop, according to Laura Shin’s recent book about the history of Ethereum, The Cryptopians. Over time, it became apparent that the group had very different plans for the nascent technology. Buterin wanted a decentralized open platform on which anyone could build anything. Others wanted to use the technology to create a business. One idea was to build the crypto equivalent to Google, in which Ethereum would use customer data to sell targeted ads. The men also squabbled over power and titles. One co-founder, Charles Hoskinson, appointed himself CEO—a designation that was of no interest to Buterin, who joked his title would be C-3PO, after the droid from Star Wars. The ensuing conflicts left Buterin with culture shock. In the space of a few months, he had gone from a cloistered life of writing code and technical articles to a that of a decisionmaker grappling with bloated egos and power struggles. His vision for Ethereum hung in the balance. “The biggest divide was definitely that a lot of these people cared about making money. For me, that was totally not my goal,” says Buterin, whose net worth is at least $800 million, according to public records on the blockchain whose accuracy was confirmed by a spokesperson. “There were even times at the beginning where I was negotiating down the percentages of the Ether distribution that both myself and the other top-level founders would get, in order to be more egalitarian. That did make them upset.” TIME Buterin says the other founders tried to take advantage of his naiveté to push through their own ideas about how Ethereum should run. “People used my fear of regulators against me,” he recalls, “saying that we should have a for-profit entity because it’s so much simpler legally than making a nonprofit.” As tensions rose, the group implored Buterin to make a decision. In June 2014, he asked Hoskinson and Amir Chetrit, two co-founders who were pushing Ethereum to become a business, to leave the group. He then set in motion the creation of the Ethereum Foundation (EF), a nonprofit established to safeguard Ethereum’s infrastructure and fund research and development projects. One by one, all the other founders peeled off over the next few years to pursue their own projects, either in tandem with Ethereum or as direct competitors. Some of them remain critical of Buterin’s approach. “In the dichotomy between centralization and anarchy, Ethereum seems to be going toward anarchy,” says Hoskinson, who now leads his own blockchain, Cardano. “We think there’s a middle ground to create some sort of blockchain-based governance system.” With the founders splintered, Buterin emerged as Ethereum’s philosophical leader. He had a seat on the EF board and the clout to shape industry trends and move markets with his public pronouncements. He even became known as “V God” in China. But he didn’t exactly step into the power vacuum. “He’s not good at bossing people around,” says Aya Miyaguchi, the executive director of the EF. “From a social-navigation perspective, he was immature. He’s probably still conflict-averse,” says Danny Ryan, a lead researcher at the EF. Buterin calls his struggle to inhabit the role of an organizational leader “my curse for the first few years at Ethereum.” It’s not hard to see why. Buterin still does not present stereotypical leadership qualities when you meet him. He sniffles and stutters through his sentences, walks stiffly, and struggles to hold eye contact. He puts almost no effort into his clothing, mostly wearing Uniqlo tees or garments gifted to him by friends. His disheveled appearance has made him an easy target on social media: he recently shared insults from online hecklers who said he looked like a “Bond villain” or an “alien crackhead.” Yet almost everyone who has a full conversation with Buterin comes away starry-eyed. Buterin is wryly funny and almost wholly devoid of pretension or ego. He’s an unabashed geek whose eyes spark when he alights upon one of his favorite concepts, whether it be quadratic voting or the governance system futarchy. Just as Ethereum is designed to be an everything machine, Buterin is an everything thinker, fluent in disciplines ranging from sociological theory to advanced calculus to land-tax history. (He’s currently using Duolingo to learn his fifth and sixth languages.) He doesn’t talk down to people, and he eschews a security detail. “An emotional part of me says that once you start going down that way, professionalizing is just another word for losing your soul,” he says. Benjamin Rasmussen for TIMEButerin, seen through a monitor at ETHDenver Alexis Ohanian, the co-founder of Reddit and a major crypto investor, says being around Buterin gives him “a similar vibe to when I first got to know Sir Tim Berners-Lee,” the inventor of the World Wide Web. “He’s very thoughtful and unassuming,” Ohanian says, “and he’s giving the world some of the most powerful Legos it’s ever seen.” For years, Buterin has been grappling with how much power to exercise in Ethereum’s decentralized ecosystem. The first major test came in 2016, when a newly created Ethereum-based fundraising body called the DAO was hacked for $60 million, which amounted at the time to more than 4% of all Ether in circulation. The hack tested the crypto community’s values: if they truly believed no central authority should override the code governing smart contracts, then thousands of investors would simply have to eat the loss—which could, in turn, encourage more hackers. On the other hand, if Buterin chose to reverse the hack using a maneuver called a hard fork, he would be wielding the same kind of central authority as the financial systems he sought to replace. Buterin took a middle ground. He consulted with other Ethereum leaders, wrote blog posts advocating for the hard fork, and watched as the community voted overwhelmingly in favor of that option via forums and petitions. When Ethereum developers created the fork, users and miners had the option to stick with the hacked version of the blockchain. But they overwhelmingly chose the forked version, and Ethereum quickly recovered in value. To Buterin, the DAO hack epitomized the promise of a decentralized approach to governance. “Leadership has to rely much more on soft power and less on hard power, so leaders have to actually take into account the feelings of the community and treat them with respect,” he says. “Leadership positions aren’t fixed, so if leaders stop performing, the world forgets about them. And the converse is that it’s very easy for new leaders to rise up.” Over the past few years, countless leaders have risen up in Ethereum, building all kinds of products, tokens, and subcultures. There was the ICO boom of 2017, in which venture capitalists raised billions of dollars for blockchain projects. There was DeFi summer in 2020, in which new trading mechanisms and derivative structures sent money whizzing around the world at hyperspeed. And there was last year’s explosion of NFTs: tradeable digital goods, like profile pictures, art collections, and sports cards, that skyrocketed in value. Skeptics have derided the utility of NFTs, in which billion-dollar economies have been built upon the perceived digital ownership of simple images that can easily be copied and pasted. But they have rapidly become one of the most utilized components of the Ethereum ecosystem. In January, the NFT trading platform OpenSea hit a record $5 billion in monthly sales. Benjamin Rasmussen for TIMEConference­goers line up to ask Buterin questions after his keynote Buterin didn’t predict the rise of NFTs, and has watched the phenomenon with a mixture of interest and anxiety. On one hand, they have helped to turbocharge the price of Ether, which has increased more than tenfold in value over the past two years. (Disclosure: I own less than $1,300 worth of Ether, which I purchased in 2021.) But their volume has overwhelmed the network, leading to a steep rise in congestion fees, in which, for instance, bidders trying to secure a rare NFT pay hundreds of dollars extra to make sure their transactions are expedited. Read More: NFT Art Collectors Are Playing a Risky Game—And Winning The fees have undermined some of Buterin’s favorite projects on the blockchain. Take Proof of Humanity, which awards a universal basic income—currently about $40 per month—to anyone who signs up. Depending on the week, the network’s congestion fees can make pulling money out of your wallet to pay for basic needs prohibitively expensive. “With fees being the way they are today,” Buterin says, “it really gets to the point where the financial derivatives and the gambley stuff start pricing out some of the cool stuff.” Inequities have crept into crypto in other ways, including a stark lack of gender and racial diversity. “It hasn’t been among the things I’ve put a lot of intellectual effort into,” Buterin admits of gender parity. “The ecosystem does need to improve there.” He’s scornful of the dominance of coin voting, a voting process for DAOs that Buterin feels is just a new version of plutocracy, one in which wealthy venture capitalists can make self-interested decisions with little resistance. “It’s become a de facto standard, which is a dystopia I’ve been seeing unfolding over the last few years,” he says. These problems have sparked a backlash both inside and outside the blockchain community. As crypto rockets toward the mainstream, its esoteric jargon, idiosyncratic culture, and financial excesses have been met with widespread disdain. Meanwhile, frustrated users are decamping to newer blockchains like Solana and BNB Chain, driven by the prospect of lower transaction fees, alternative building tools, or different philosophical values. Buterin understands why people are moving away from Ethereum. Unlike virtually any other leader in a trillion-dollar industry, he says he’s fine with it—especially given that Ethereum’s current problems stem from the fact that it has too many users. (Losing immense riches doesn’t faze him much, either: last year, he dumped $6 billion worth of Shiba Inu tokens that were gifted to him, explaining that he wanted to give some to charity, help maintain the meme coin’s value, and surrender his role as a “locus of power.”) In the meantime, he and the EF—which holds almost a billion dollars worth of Ether in reserve, a representative confirmed—are taking several approaches to improve the ecosystem. Last year, they handed out $27 million to Ethereum-based projects, up from $7.7 million in 2019, to recipients including smart-contract developers and an educational conference in Lagos. The EF research team is also working on two crucial technical updates. The first is known as the “merge,” which converts Ethereum from Proof of Work, a form of blockchain verification, to Proof of Stake, which the EF says will reduce Ethereum’s energy usage by more than 99% and make the network more secure. Buterin has been stumping for Proof of Stake since Ethereum’s founding, but repeated delays have turned implementation into a Waiting for Godot–style drama. At ETHDenver, the EF researcher Danny Ryan declared that the merge would happen within the next six months, unless “something insanely catastrophic” happens. The same day, Buterin encouraged companies worried about the environmental impact to delay using Ethereum until the merge is completed—even if it “gets delayed until 2025.” Benjamin Rasmussen for TIMEETHDenver attendee Brent Burdick checks his phone in an NFT gallery room In January, Moxie Marlinspike, co-founder of the messaging app Signal, wrote a widely read critique noting that despite its collectivist mantras, so-called web3 was already coalescing around centralized platforms. As he often does when faced with legitimate criticism, Buterin responded with a thoughtful, detailed post on Reddit. “The properly authenticated decentralized blockchain world is coming, and is much closer to being here than many people think,” he wrote. “I see no technical reason why the future needs to look like the status quo today.” Buterin is aware that crypto’s utopian promises sound stale to many, and calls the race to implement sharding in the face of competition a “ticking time bomb.” “If we don’t have sharding fast enough, then people might just start migrating to more centralized solutions,” he says. “And if after all that stuff happens and it still centralizes, then yes, there’s a much stronger argument that there’s a big problem.” As the technical kinks get worked out, Buterin has turned his attention toward larger sociopolitical issues he thinks the blockchain might solve. On his blog and on Twitter, you’ll find treatises on housing; on voting systems; on the best way to distribute public goods; on city building and longevity research. While Buterin spent much of the pandemic living in Singapore, he increasingly lives as a digital nomad, writing dispatches from the road. Those who know Buterin well have noticed a philosophical shift over the years. “He’s gone on a journey from being more sympathetic to anarcho-capitalist thinking to Georgist-type thinking,” says Glen Weyl, an economist who is one of his close collaborators, referring to a theory that holds the value of the commons should belong equally to all members of society. One of Buterin’s recent posts calls for the creation of a new type of NFT, based not on monetary value but on participation and identity. For instance, the allocation of votes in an organization might be determined by the commitment an individual has shown to the group, as opposed to the number of tokens they own. “NFTs can represent much more of who you are and not just what you can afford,” he writes. Read More: How Crypto Investors Are Handling Plunging Prices While Buterin’s blog is one of his main tools of public persuasion, his posts aren’t meant to be decrees, but rather intellectual explorations that invite debate. Buterin often dissects the flaws of obscure ideas he once wrote effusively about, like Harberger taxes. His blog is a model for how a leader can work through complex ideas with transparency and rigor, exposing the messy process of intellectual growth for all to see, and perhaps learn from. Some of Buterin’s more radical ideas can provoke alarm. In January, he caused a minor outrage on Twitter by advocating for synthetic wombs, which he argued could reduce the pay gap between men and women. He predicts there’s a decent chance someone born today will live to be 3,000, and takes the anti-diabetes medication Metformin in the hope of slowing his body’s aging, despite mixed studies on the drug’s efficacy. Subscribe to TIME’s newsletter Into the Metaverse for a weekly guide to the future of the Internet. You can find past issues of the newsletter here. As governmental bodies prepare to wade into crypto—in March, President Biden signed an Executive Order seeking a federal plan for regulating digital assets—Buterin has increasingly been sought out by politicians. At ETHDenver, he held a private conversation with Colorado Governor Jared Polis, a Democrat who supports cryptocurrencies. Buterin is anxious about crypto’s political valence in the U.S., where Republicans have generally been more eager to embrace it. “There’s definitely signs that are making it seem like crypto is on the verge of becoming a right-leaning thing,” Buterin says. “If it does happen, we’ll sacrifice a lot of the potential it has to offer.” To Buterin, the worst-case scenario for the future of crypto is that blockchain technology ends up concentrated in the hands of dictatorial governments. He is unhappy with El Salvador’s rollout of Bitcoin as legal tender, which has been riddled with identity theft and volatility. The prospect of governments using the technology to crack down on dissent is one reason Buterin is adamant about crypto remaining decentralized. He sees the technology as the most powerful equalizer to surveillance technology deployed by governments (like China’s) and powerful companies (like Meta) alike. If Mark Zuckerberg shouldn’t have the power to make epoch-changing decisions or control users’ data for profit, Buterin believes, then neither should he—even if that limits his ability to shape the future of his creation, sends some people to other blockchains, or allows others to use his platform in unsavory ways. “I would love to have an ecosystem that has lots of good crazy and bad crazy,” Buterin says. “Bad crazy is when there’s just huge amounts of money being drained and all it’s doing is subsidizing the hacker industry. Good crazy is when there’s tech work and research and development and public goods coming out of the other end. So there’s this battle. And we have to be intentional, and make sure more of the right things happen.” —With reporting by Nik Popli and Mariah Espada/Washington.....»»

Category: topSource: timeMar 18th, 2022

The Catalyst for The Great Rotation – Crescat Capital

Crescat Capital’s commentary for the month of November 2021, discussing the catalyst for the great rotation. Q3 2021 hedge fund letters, conferences and more The Catalyst for The Great Rotation Based on the firm’s current equity and macro models, and our investment team’s analysis, we believe we are in the explosive first wave of an […] Crescat Capital’s commentary for the month of November 2021, discussing the catalyst for the great rotation. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Walter Schloss Series in PDF Get the entire 10-part series on Walter Schloss in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more The Catalyst for The Great Rotation Based on the firm’s current equity and macro models, and our investment team’s analysis, we believe we are in the explosive first wave of an inflationary cycle in the US and globally that will elevate consumer prices at a much higher annualized rate and for significantly longer than priced into financial markets today. The factors driving our view include structural shortages in primary resource industries due to chronic underinvestment, incipient wage-price spirals, and unsustainably high government debt-to-GDP imbalances which make a new inflationary trend the policy path of least resistance. As an overarching macro investment theme at Crescat today, we are calling for what we have dubbed the Great Rotation. This theme is a highly probable and pending shift, in our view, out of crowded, hyper-overvalued, long-duration financial assets, including mega-cap tech and negative-real-yielding fixed income securities, and into the less populated and more undervalued segment of the market that is focused on the tangible assets at the core of the global economy. In our analysis, the companies involved in these industries are driven by both intrinsic and calculable fundamental value and offer some of the best value and appreciation potential in the market. Rising inflation expectations and the Fed attempting to tighten financial conditions are the catalyst for this critical inflection point. Policy makers are far from doing what is necessary to halt what is already the most inflationary environment since the 1970s when they are instead: Running twin deficits at double digit percentages of GDP. Holding the Fed funds rate at 0% for another seven months. Planning to add $400 billion more in QE before beginning to raise rates. Restricting commodity companies from exploring, developing, and producing natural resources.   Crescat’s Global Macro and Long/Short Equity strategies are hedge funds with significant short positions in the overvalued areas that we believe the investor masses will be rotating out of, as well as long positions in the undervalued areas, where we believe the smart money will be rotating into, in this likely-to-be epic regime change. At Crescat, these two strategies are the most comprehensive ways to play the Great Rotation. Large Cap and the Precious Metals strategies, on the other hand, are ways to play the long side of the Great Rotation without the short component. Note how the relative fundamental valuation, using enterprise value relative to sales, between the Russell Growth vs. Value indices is re-testing the peak tech bubble levels that we saw in 2000. Tech Looks Ready to Roll Over Technology stocks have retained the limelight in the press and investor consciousness year to date as well as price momentum but are now facing an outlook of significantly deteriorating growth and profitability. Meanwhile, primary resource stocks in the energy, materials, and industrial sectors have had equally strong momentum since the March 2020 Covid crash but possess eminently better intermediate-term growth, value, and appreciation potential as the world continues to emerge from the pandemic. The real aggregate free-cash-flow yield among tech companies in the S&P 500 is now even lower than it was at the peak of the Tech Bubble. With three of the big-five mega cap tech stocks (FB, AMZN, AAPL) missing Q3 revenue and/or earnings expectations and warning of a weak Q4, this is a fundamental signal of a major US market top in the making. Add to that Elon Musk boldly cashing in on $6.9 billion worth of his Tesla shares this week, the largest sale ever by a CEO. This at the same time as one of the best performing and most persistent hedge fund short sellers of the last decade was forced to throw in the towel due to client redemptions. Those clients are fools. Russell Clark is a legend and so is his performance on this much needed and now almost vacant side of the market. Hat tip to him. Our research shows that, across a composite of valuation metrics, the stock market is more overvalued than it was in 2000, as well as any other time in history, including 1929. However, our models also show that we are headed towards an inflationary bubble burst, like that of 1973-74, when popular large cap growth stocks were decimated at the same time as commodity prices and resource stocks exploded to the upside. This is a unique type of bear market and economy that we envision, because it is much different than the deflationary-style meltdowns of 1929-32 or 2008-09. The 2000-02 tech bust and 1973-74 stagflationary shock are much better case studies for the type of macro environment we envision and want to be positioned for over the next one-to-three years. These were abrupt regime shifts in macro environments where bubbles burst in overpopulated segments while new secular bull markets began in others. There was much money to be made on both the long and short side of the market by being in the right industries on each side. There was also much pain for those who ignored valuation, changing fundamentals, and macro indicators in their approach and just kept hanging on, or worse if they bought the dip of the prior popular trend instead. Crypto Software based crypto assets, in the CIO’s opinion, are in a broad speculative mania along with the entire software industry akin to the Dotcom bubble on steroids. No doubt, distributed ledger technologies and tokenization are brilliant innovations that have value and will have endurance, just like the Internet did at its investment craze peak in early 2000. Crescat is not short crypto assets though the idea has been tempting due to the excessive level of speculation, along with their abundance and questionable intrinsic value. They are not securities with underlying fundamentals that can be valued based on a discounted-free-cash-flow model or with macro data that makes any sense to us today. For now, we see too much risk to being short crypto assets due to their crazy popularity and dogmatic following, including as a form of inflation protection. We couldn’t agree more with the need for inflation protection, but fervently believe there is a much more prudent way to get that when one’s nest egg is considered. Primary Resources Industries According to our macro and fundamental models, the most desirable assets to own in today’s changing investing climate, are the hard and soft commodities that are the core building blocks of the global economy. In our analysis, some of the best prospective risk-adjusted performance in the financial markets over the next three years (our target investment horizon) should accrue to the companies that own and produce these resources. These firms offer some of the highest relative revenue, earnings, and free cash flow growth for the foreseeable future along with low stock price multiples today, a powerful setup. These companies are spread throughout the energy, materials, industrial, and agricultural sectors of the economy. Based on a discounted free cash flow valuation approach, they predominate the list of highest appreciation potential stocks in Crescat’s fundamental equity model. We expect the leadership in primary resource industries of the economy to continue over the next several quarters and years due to acute raw material shortages at the root of the supply chain, as well as increased demand due to fiscal and monetary policies, including the resource intensive push to a cleaner and greener economy. Heightened environmental and social pressure have only made the supply and demand imbalances more extreme. Strong fiscally driven tailwinds including the new $1.1 trillion Infrastructure Investment and Jobs Act just passed by Congress, and about to be signed by the president, add fuel to this fire. Supply-side constraints to producing the materials needed to run the new as well as the existing economy are not easily reversed due to long lead times and the multiple years of declining capital investment trends. We are already experiencing a domino effect among natural resources. It started with spikes in lumber prices, then oil and gas, lead, zinc, and coal. If we look at ammonia prices, a key ingredient in fertilizer, agricultural commodities are a whole new set of commodities likely to be spiking next, potentially creating food shortages. Crescat’s Large Cap, Global Macro, and Long/Short strategies own many positions in the broad resource sectors identified by our models. Among our favorites is precious metals. The Fundamental Opportunity in Precious Metals Gold and silver producers are trading at historically low free-cash-flow multiples and strong near-term growth prospects. We love them. But even more, we are enamored with high-quality gold, silver, and select copper and base metal explorers with high-grade targets who are aggressively growing new resource ounces in top mining jurisdictions globally. The companies with competent management and technical teams in this segment offer unbelievable value and appreciation potential according to our DCF model. Owning gold in the ground in a carefully constructed portfolio of these firms is one of the most asymmetric reward-to-risk opportunities we have ever seen. Precious Metals, A Key Focus Today With inflation continuing to surprise to the upside, precious metals mining stocks are ripe for a major breakout after taking the strong early lead among all S&P industry groups in the immediate four months after the March 2020 Covid crash. Until last month, gold and silver stocks had been consolidating, but with their underlying fundamentals only getting better, we believe they are poised for another major leg up. We are constructive regarding our potential to deliver a strong finish to 2021 based on the incredibly strong fundamental and macro set-up. That is our goal. At Crescat, we recently became so excited about the deep-value opportunity for precious metals ahead of a likely new secular bull market, that we created two focused strategies based on it, the Precious Metals separately managed account strategy launched in June 2019 and the private Precious Metals Fund in August of 2020, both industry specific mandates. Here is some quick math to illustrate the set up likely ahead of us. The monthly price of gold is now above its 2011 highs. If miners were to re-test the same levels, it would imply a 61% appreciation from here. More importantly, the fundamental story behind these companies today is unquestionably better than back then. Precious Metals Fund Description The Precious Metals Fund is an activist private fund. It is a macro and fundamental-driven industry specialist fund focused exclusively on the precious metals. This fund can short, in addition to going long, but chooses to be long-only today, given where we believe we are in the precious metals cycle, early in a new secular bull market. It also has an active futures account associated with it. The Precious Metals Fund participates in private as well as public transactions and holds a substantial equity warrant portfolio. We have partnered with renowned exploration geologist, Quinton Hennigh, PhD to help us manage the precious metals portfolios across the firm. He has been advising Crescat for the past two years and has recently joined the team full-time as an equity owner/member of the firm and its geologic and technical advisor. We remain locked and loaded with an extensive portfolio of undervalued gold and silver in the ground. We have significant copper and other base metal exposure too where gold and silver are significant byproducts. Our activist precious metals portfolio companies are focused on substantial organic growth in high-grade resource ounces through exploration and drilling. We expect industry M&A to heat up significantly over the next several quarters and our companies to be coveted. In a segment that has seen declining exploration spending for a decade,we have over 300 million target gold equivalent resource ounces in our portfolio which is thanks to Quinton’s expertise. Total global gold production in not even 100 million ounces. Global Macro Fund Description Crescat Global Macro remains the firm’s most comprehensive strategy and can trade any asset class globally, long and short, across currencies, commodities, fixed income, and equites. The Global Macro Fund was launched in 2006 to express investment themes via a broad set of instruments in addition to equities. The Global Macro Fund includes an active futures account and as well as equity account and several ISDA relationships with large bank counterparties to trade swaps that are not otherwise traded on an active exchange, such as our Chinese yuan and Hong Kong dollar put options that we own today. Long/Short Fund Description Long/Short is a classic equity hedge fund and is our second broadest mandate. It also exploits Crescat’s firmwide themes but is focused exclusively on equities. Long/Short is Crescat’s second longest running strategy. It was launched in 2000 and has persistently delivered strong alpha through multiple business cycles. Large Cap SMA Description Large Cap is a separately managed account strategy also focused on equities, but in the large and mid-cap realm. Think of it as a souped-up, blue-chip portfolio. Like all Crescat strategies, Large Cap is driven by our firmwide models and themes. It is focused on the best large and mid-cap long equity opportunities therein. It is diversified across select industries without being “diworsified” across all of them. Large Cap is Crescat’s longest running strategy. It was launched in 1999. It has been through the Tech Bubble, Tech Bust, Housing Bubble, Global Financial Crisis, and the longest bull market ever followed by both the Covid Crash and recovery. Precious Metals SMA Description The Precious Metals separately managed account strategy is a long-only separately managed account strategy designed for investors who do not qualify for our private fund, but who still want exposure to our management and publicly listed holdings. The Precious Metals SMAs do not participate in private placements and pre-IPO investments, nor do they get the warrants frequently associated with those investments, but they can still participate in our favorite public gold and silver stocks in a managed portfolio. We are long a selective basket of miners in the precious metals industry across all five strategies at Crescat today due to rising actual and expected inflation worldwide and ultra-cheap valuations. However, it is important to understand that Crescat is more than a precious metals focused investment firm. We remain a comprehensive, value-driven investment firm guided by fundamental equity and macro models across five differentiated strategies. In addition to the two precious metals strategies, we manage a Large Cap long-only SMA, a Long/Short Equity hedge fund, and a Global Macro hedge fund. Each of these three strategies has an increasingly broader mandate in that order. Crescat Hedge Fund Term Sheet Crescat SMA Term Sheet Fundamental Equity Quant Model Both Crescat Large Cap and Long/Short have beaten their benchmarks since inception, net of fees, on an absolute and risk-adjusted basis over multiple business cycles. One constant behind these strategies has been Crescat’s fundamental equity quant model. The CIO originally began developing it in 1995. He, along with Crescat and its predecessor firms, have continuously refined and applied the equity model to managing client money since 1997. The equity model has always been an important tool in driving the firm’s stock picking in addition to helping define macro themes. Crescat has invested heavily in improving our equity model over the last year. We are more excited than ever about its current condition and potential to continue to help the firm deliver alpha. Macro Models Crescat also relies on macro models for developing its investment themes. Co-portfolio manager, Tavi Costa, helped take Crescat’s macro modeling to a new level after he joined the firm in 2014. Today, Crescat applies a variety of its own macro models in addition to our equity model to source and support its firmwide investment themes and positions. Global Macro Positioning Crescat Global Macro, being our most comprehensive strategy, maintains exposures to Crescat’s themes and most of the positions in our equity-oriented mandates, but it will also add exposures to currencies, commodities, and/or fixed income asset classes. Today, Global Macro holds two substantial fixed income short positions in asymmetric reward-to-risk put options, because we are at the lowest level of real yields in post-World War II history without a bond bear market already having occurred. One is overdue, in our view, and most investors are not ready. The first fixed income position is a junk bond short via the iShares iBoxx $ High Yield Corporate Bond ETF which long investors today are effectively paying, in the form of negative real yields at an historic level, for the dubious privilege of accepting default risk. The second is a significant put option position in 10-year Treasury Note futures. With rising inflation in the form of both CPI and expectations, the Fed must do something credible to fight the steep rise in the price of consumer goods and services. It has already announced that it will be tapering its fixed income asset purchases. At the same time, the Treasury department is in extreme deficit spending mode relative to GDP while aggressively extending its maturities post a record Covid-T-Bill issuance. With the Fed out of the game, who is going to take-up the slack to digest the increased supply of long-duration Treasuries in a rising inflation environment? Shorting UST 10s from a starting nominal yield of 1.5% with CPI running at 6.2% simply makes a ton of sense to us here. China is the Black Swan trade of the century that the market still just doesn’t get in our view. We remain committed to Plan A here in Global Macro, an asymmetric trade with minimal downside risk through low volatility option premium paid and large upside potential through long USD calls versus short CNH and HKD puts. We have been risking about 1 to 1.5% quarterly with notional upside to devaluation and de-peg that has ranged from 500 to 1000%. China has been melting down before the world’s eyes all year. We believe its currency is the ultimate shoe to drop. We are continuing with this strategy. Summary The Fed is trapped into moving forward with its plan to scale back its debt monetization. For now, this includes pressure from the yield curve to raise rates next year. The taper matters big time as the catalyst for financial asset bubbles to burst along with actual inflation. This reduction of monetary stimulus is a huge liquidity drain on the margin given the formerly outrageous QE levels and asset bubbles they have created. Whether it is now or within just several months from now, we believe we are very close to a major twin top in US equity and credit markets. We need to be ready and positioned for it now. Across the firm, we are doing everything we can on that front. We are determined to make money on short side of the market in Global Macro and Long/Short when the Great Rotation burst gets going in earnest. The shorts have been holding those funds back YTD but we strongly believe that will not be the case forever. Many fund managers are precluded from shorting. We are not. The team here is working extremely hard and focused on delivering value across all our strategies. October Performance Crescat delivered robust performance in October across all strategies with precious metals long positions being the biggest driver. These holdings comprise our highest conviction forward-looking expected return vs. risk macro theme at Crescat. Thus, precious metals, and gold and silver mining equities, are widespread positions across all Crescat’s strategies. November has started off extremely well MTD, with short positions adding value in Global Macro and Long Short on top of strong gains in precious metals. Download PDF Version Sincerely, Kevin C. Smith, CFA Member & Chief Investment Officer Tavi Costa Member & Portfolio Manager For more information including how to invest, please contact: Marek Iwahashi Client Service Associate Cassie Fischer Client Service Associate Linda Carleu Smith, CPA Member & COO © 2021 Crescat Capital LLC Article by Crescat Capital Updated on Dec 20, 2021, 3:29 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkDec 20th, 2021

Rabo: Tonight"s Summit Between US And China Is Not About Trade; Or "Green"; Or Sunshine And Roses - It"s About Guns

Rabo: Tonight's Summit Between US And China Is Not About Trade; Or "Green"; Or Sunshine And Roses - It's About Guns By Michael Every of Rabobank Guns 'N' Roses COP26 is over and Bloomberg’s take is it “seals breakthrough climate deal after major compromises,” as Wall Street cannot says ESG without salivating. By contrast, COP president Sharma wept and apologized, and Greta Thunberg said “Blah blah blah.” Indeed, coal is not to be phased out but “phased down,” its longevity is ironically underlined by PM BoJo, who thought the summit was held in Edinburgh not Glasgow, proclaiming its “death knell”; the 1.5-degree Celsius target is not being met; and the can was kicked to COP27 in Egypt. The blame is being placed on India and China, but US coal is still 20% of its electricity generation, and Germany is hardly green. Then again, with energy prices surging due to a ‘green rush’, we already close to a global energy crisis, and a likely food-price crisis to follow ahead if fertilizer prices don’t decline. Use Your Illusion, 1 and 2 (1991) Today late US time, tomorrow Asian time, another key summit starts – between the US and Chinese leaders. This is not about trade; or Huawei; or ‘green’; or sunshine and roses. It is about guns. Market analysts will recoil, but a former high-level US diplomat writes in Foreign Affairs: “Although this coming summit cannot resolve, or even begin to resolve, issues such as the future of Taiwan, it does represent a chance for both leaders to re-establish some of the safeguards that can prevent these disputes from being decided by force…The US-Chinese relationship is in dire need of such diplomacy --particularly at high levels-- in order to stem a downward spiral that could lead to war.” A lot of tightly-held market illusions are riding on it. On the economic side, Bastiat said, "If goods don’t cross borders, armies will." However, the inverse realpolitik argument heard in DC is now that if goods cross borders, armies don’t have to bother. Consider this weekend’s Guardian report that “Beijing urges US businesses to lobby against China-related bills in Congress” – bills for the US to mirror Chinese industrial policy, with Beijing threatening US firms with loss of access should this legislation pass; The Economist saying “China still steals commercial secrets for its own firms’ profits”; and the UK ambassador being accused of lobbying the cabinet for China. Then there is the need to Build Back Better, which as Pettis and Klein underlined in ‘Trade Wars are Class Wars’ is actually all about the political-economy model. On which, see this long-read from Chinese intellectual Qin Hui, who argues we face a structural clash of economic systems as things stand, underlining the argument long echoed here that Western views of left vs. right no longer apply in a world economy centred on Chinese production. Ironically, when Bloomberg Opinion argues “Americans Need to Learn to Live More Like Europeans: Supply-chain shortages are constraining US consumers' endless appetite for buying whatever they want whenever they want. It's about time,” what it is actually implying is higher US savings, and so a swing from a trade deficit to a surplus…which would up-end the European and Chinese economic models it lauds, which are built on forcibly saving too much, via repressed demand, and exporting their excess production to the US directly and indirectly. I doubt the author grasps this – they are just echoing what they think they heard the White House say about inflation recently. In short, the Biden-Xi summit will find little common ground on the area the market is most concerned about – markets. Chinese Democracy (2008) For those who think the US-China tensions are not ideological, the Global Times also just stated in an op-ed that China is a “vigorous democracy,” while the West’s is ageing, and has developed an “efficient market economy” based on its political system, while the West is struggling. It concludes: “…The Chinese and Western democratic systems could learn from each other and carry out sound competition. Unfortunately, some political elites in the US and West stubbornly seek to turn the two systems into antagonistic relations. Then they will have to bear the long-term consequences of their actions. China will develop faster than them in the long run. After passing a critical point --it's doomed to appear in future-- the US and West's political confidence will be greatly shaken. Their unrealistic flattery of Western-style democracy will collapse.” So what is the ‘correct’ US/Biden response? Over Taiwan, the binary is even starker. The Global Times elsewhere urges “the US not to be reckless on trade and mutual security issues, especially on the South China Sea and Taiwan question, as it cannot bear the response from China.” Yet the South China Morning Post says ‘US puts Taiwan in focus in countdown to Xi-Biden summit,’ quoting other Chinese analysts stating Beijing and Washington need to reach a new deal to prevent armed conflict. What deal, exactly? Yes, US language is shifting: “Cold War” was never in vogue, but “extreme competition” just became “stiff competition” according to US National Security Advisor Sullivan. Will it transmute to “sound competition”, when US military alliances in the region are stiffening? The Aussie defense minister just said Canberra would also defend Taiwan, and Japan has suggested the same. Before the meeting we also saw a slew of key Chinese data that suggest its economy is struggling --if less than had been expected-- so there is again less tolerance for any US boat-rocking. New home prices dipped 0.3% m/m, showing an accelerating decline in this key sector; yet somehow retail sales were somehow 4.9% y/y vs. expectations of 3.7% (a price effect?); industrial production was 3.5% vs. a consensus of 3.0% y/y (an export effect); and fixed asset investment was 6.1% vs. 6.2% y/y YTD expected. Meanwhile, the plunge in the US Michigan consumer sentiment survey expectations index on Friday sent a similar message of serious trouble Stateside. In short, protocols to reduce tensions are welcome, and a common desire to deal with some joint problems is clear - but structural binaries on how to resolve them at root remain clearer. So do fat tail risks markets don’t want to see. Expect November Rain? The Spaghetti Incident? (1993) On which note, the crisis on the EU’s eastern border grows. Russia/Belarus are orchestrating the destabilization of Bosnia, an EU gas-price spike, a migration/border crisis, and the renewed threat of war with Ukraine (the rumor being Moscow may seize control of at least the Sea of Azov, which would impact on global wheat exports at a time when prices are already skyrocketing). Gas aside, this may not be registering in the west of the EU, but that is precisely why Russia is doing it: to expose that the EU is divided, and NATO looks unwilling to act. Because Russian gas flows across borders, à la Bastiat, either its army does not have to, or its army is able to flow as well, with “strategic autonomy” Paris and “Merkelcantilist” Berlin both saying “Whatchagonnado?” By contrast, the UK, ever eager for a distraction from a litany of corruption scandals, is sending token forces to support Poland, and the Guardian quotes the head of the UK armed forces stating the country needs to be ready for war with Russia: bomb back better? In short, we are starting to see serious volatility in some parts of the global financial markets: and, aside from central-bankery, much more is certain to come if you look at the real-world events unfolding as a direct result of four decades of people endlessly saying, “because markets.” Tyler Durden Mon, 11/15/2021 - 10:05.....»»

Category: blogSource: zerohedgeNov 15th, 2021

In Deep Ship: What"s Really Driving The Supply-Chain Crisis

In Deep Ship: What's Really Driving The Supply-Chain Crisis By Michael Every and Matteo Iagatti of Rabobank Summary It is impossible to ignore the current shipping crisis and its impact on global supply chains  A common view is that this is all the result of Covid-19. Yet while Covid has played a key role, it is only part of a far larger interconnected set of problems This report examines current shipping market dynamics; overlooked “Too Big to Sail” structural issues; a brewing political tsunami as a backlash; possible Cold War icebergs ahead; and the ‘ship of things to come’ if maritime past is a guide to maritime future  The central argument is that while central banks and governments both insist inflation is transitory and will fall once supply-chain bottlenecks are resolved, shipping dynamics suggest they are closer to becoming systemically entrenched Moreover, both historical and current trends towards addressing such problems suggest potential global market disruptions at least equal to the shocks we have already experienced. Many ports will get caught in this storm, if so Ready to ship off? It is impossible to ignore the current shipping crisis and its impact on global supply chains and economies. Businesses face huge headaches as supply dries up. Consumers see bare shelves and rising prices. Governments have no concrete solutions – save the army? Economists have to discuss the physical economy rather than a model. Central banks still assume this will all resolve itself. And shippers make massive profits. The giant Ever Given, which blocked the Suez Canal for six days in March 2021, is emblematic of these problems, but they run far deeper. This report will explore the shipping issue coast-to-coast, and past-to-present in six ‘containers’: “Are you shipping me?”, a deep-dive into market dynamics and supply-demand causes of soaring shipping prices; “To Big to Sail”, a key structural issue driving things; “Tsunami of politics” of the looming backlash to what is happening; “Cold War icebergs” of fat geopolitical tail risks; “Ship of things to come?”, asking if the maritime past is a potential guide to maritime future; and “Wait and sea?”, a strategic overview and conclusion. Are You Shipping Me? Since 2020, global shipping has been frenetic, with equally frenetic shipping rates (figure 2); difficulties for both businesses and consumers; and container-carrier profits. Is Covid-19 driving these developments, or are there other structural and cyclical factors at play? Let’s take stock. One root of the problem… In 2020, COVID-19 become a global pandemic, and lockdowns ensued: factories, restaurants, and shops all closed, bringing global supply chain almost to a halt. In this context, container carriers had no visibility on future demand and did the only reasonable thing: cut capacity. There is no economic sense in moving half-empty ships across the globe; it is costly, especially for a sector operated on tiny margins for a very long time. The consequence was widespread vessel cancellations, which soared in the first months of 2020 (figure 3). Progressively, more trade lines and ports were involved as containment measures were enacted globally. By H2-2020, virus containment measures were over in China, and many other nations eased them too. Shipping cancellations did not stop, however, just continuing at a slower pace. Indeed, capacity cuts have plagued supply-chains in 2021. Excluding the January-February peaks, from March to September 2021, an average of 9.2 vessels per week were cancelled, four vessels per week more than the previous off-peak period of July to December 2020 (figure 3). Cumulative cancellations (figure 4) underline the problems. Transpacific (e.g., China-US) and Asia-Northern Europe lines saw the largest capacity cuts, but Transatlantic and Mediterranean-North America vessels also reached historic levels of cancellations. Transpacific and Asia-Europe lines are the backbone of global trade, each representing 40% of the total container trade. More than 3 million TEUs (Twenty-foot Equivalent Units, a standard cargo measure) are moved on Transpacific and Asia-Europe lines in total per month. Due to cancellations, more than 10% of that capacity was lost in early 2020. In such a context, it was only normal to expect a rise in container rates. Over January-December 2020 the Global Baltic index (the world reference for box prices) increased by 115% from $1,460 to $3,140/TEU. However, as figure 2 shows, things then changed dramatically in 2021 for a variety of reasons. As can be seen (figure 5), cancellations alone cannot explain the price surge seen in the Baltic Dry Index -- the leading international Freight Rate Index, providing market rates for 12 global trade lines-- and on key global shipping routes (figure 6). So what did? We have instead identified five key themes that have pushed up shipping costs, which we will explore in turn: Suez – and what happened there; Sickness – or Covid-19 (again); Structure – of the shipping market; Stimulus – most so in the US; and “Stuck” – as in logistical congestion. Suez On March 23rd 2021, a 20,000TEU giant vessel, the Ever Given, owned by the Taiwanese carrier Evergreen, was forced by strong winds to park sideways in the Suez Canal, ultimately obstructing it. For the following six days, one of the fundamental arteries of trade between Europe, the Gulf, East Africa, the Indian Ocean, and South East Asia was closed for business. While the world realized how fragile globalized supply chains are, carriers and shippers were counting the costs. 370 ships could not pass the Canal, with cargoes worth around $9.5bn. Every conceivable good was on those ships. The result was more unforeseen delays, more congestions and, of course, more upward pressure on container rates. Sickness New COVID-19 Delta variant outbreaks in 20201 forced the closure of major Chinese ports such as Ningbo and Yantian causing delays and congestion that reverberated both in the region and globally. Vietnamese ports also suffered similar incidents. These closures, while not decisive blows, contributed to taking shipping capacity off the global grid, hindering the recovery trend. They were also signals of how thin the ice is that global supply chain are walking on. Indeed, Chinese and South-east Asian ports are still suffering the consequences of those earlier closures, with record queues of ships waiting to unload. Structure When external shocks cause price spikes it is always wise to look at structure of the sector in which disruption caused the price spike. This exercise provides precious hints on what the “descent” from the spike might look like. Crucially, in the shipping sector, consolidation and concentration has achieved levels that few other sectors of the economy reach. In the last five years, carriers controlling 80% of global capacity became more concentrated, with fewer operators of even larger size (figure 7). However, this is just the most obvious piece of the puzzle. In our opinion, the real change started in 2017, when the three main container alliances (2M, THE, and Ocean) were born. This changed horizontal cooperation between market leaders in shipping. The three do not fix prices, but via their networks capacity is shared and planned jointly, fully exploiting economies of scale that are decisive to making a capital-intensive business profitable and efficient. Unit margins can stay low as long as you move huge volume with high precision, and at the lowest cost possible. To be able to move the huge volumes required by a globalized and increasingly e-commerce economy at the levels of efficiency and speed demanded by operators up and down supply chains, there was little other options than to cooperate and keep goods flowing for the lowest cost possible at the highest speed possible. A tight discipline of cost was imposed on carriers, who also had to get bigger. This strategy more than paid off in the Covid crisis, when shippers demonstrated clear minds, efficiency in implementing capacity control, and a key understanding of the elements they could use to their advantage: in other words – how capitalism actually works. Carriers did not decide on the lockdowns or port closures; but they exploited their position in the global market when the pandemic erupted. In a recent report, Peter Sands from BIMCO (the Baltic and International Maritime Council) put it as follows: “Years of low freight rates resulting in rigorous cost-cutting by carriers have left them in a great position to maximise profits now that the market has turned.” Crucially, this market structure is here to stay - for now. It is a component of the global system. Carriers will continue to exert pressure and find ways to make profit but, most importantly, they will make more than sure that, this time, it is not only them that end up paying the costs of rebalancing within the global system. In short, the current market allows carriers to make historic levels of profits. However, in our view this is not the end of the story – as shall be shown later. Stimulus 2020 and 2021 saw unprecedented economic shocks from Covid-19, as well as unprecedented economic stimulus from some governments. In particular, the US government sent out direct stimulus cheques to taxpayers. With few services to spend the money on, it was instead centred on goods. Hence, consumer demand for some items is red-hot (figures 8-10). The consequences of this surge in buying on top of a workforce still partly in rolling lockdowns, and against a backlog of infrastructure decades in the making, was obvious: logistical gridlock. Moreover, with the US importing high volumes, and not exporting to match, and its own internal logistics log-jammed, there has been a build-up of shipping containers inside the US, and a shortage elsewhere. Shippers are, in some cases, even dropping their cargo and returning to Asia empty: the same has been reported in Australia. Against this backdrop, the US is perhaps close to introducing further major fiscal stimulus, with little of this able to address near-term infrastructure/logistical shortfalls. Needless to say, the impact on shipping, if such stimulus is passed, could be enormous. As such, while central banks and governments still insist that inflation is transitory, supply-chain dynamics suggest it is in fact closer to becoming systemically entrenched. Stuck In normal times, a surge in consumer spending would be a bonanza for everyone: raw material producers, manufacturers, carriers, shippers, and retailers alike. In Covid times, this is all a death-blow to global supply chains. Due to misplaced global capacity, high export volumes cannot be moved fast enough, intermediate goods cannot reach processors in time, and everybody is fighting to get a container spot on the ships available. Ports cannot handle the throughput given the backlog of containers that are still waiting to be shipped inland or loaded on a delayed boat. It is not by chance that congestion hit record peaks at the same time in Los Angeles – Long beach (LALB), and in the main ports in China, the two main poles of transpacific trade. Clearly, LALB cannot handle the surge in imports, the arrival queue keeps on growing by the day (figure 11). There are now plans to shift to working 24/7. However, critics note that all this would do is to shift containers from ships to clog other already backlogged areas of the port, potentially reducing efficiency even further. Meanwhile, in Shanghai and Ningbo there were also 154 ships waiting to unload at time of writing. The power-cuts seeing Chinese factories only operating 3-4 day weeks in many locations suggest a slow-down in the pace of goods accumulating at ports, but also imply disruption, shortages, and delays in loading, still making problems worse overall. Imagine large-scale US stimulus on top of a drop in supply! Overall, “endemic congestion” is the perfect definition for the state of the global shipping market. It is the results of many factors: vessels cancellations and capacity control; Covid; bursts of demand in some trade lines; imbalances in container distribution; regular disruption in key arteries and ports; a backlog and increasing volumes cannot be dealt with at the same time, all creating an exponentially amplifying effect. The epicenter is in the Pacific, but the problem is global. At present 10% of global container capacity is waiting to be unloaded on ship at the anchor outside some port. Solutions need to be found quickly – but can they be? The Transpacific situation is particularly delicate, stemming from a high number of cancellations, ongoing disruption, and the highest demand surge in the global economy. However, this perfect recipe for a disaster is also affecting Asia–Europe lines where shipping rates hikes also do not show any signs of slowing down. …and unstuck? The shipping business would logically seem best-placed to get out of this situation by increasing vessel capacity. Indeed, orders of new ships spiked in 2021, and in coming years 2.5m TEUs will come on stream (figure 12). However, this will not arrive for some time, and may not sharply reduce shipping prices when it does. Indeed, the industry --which historically operates on thin margins, and has seen many boom and bust cycles—knows all too well the old Greek phrase: “98 ships, 101 cargoes, profit; 101 ships, 98 cargoes, disaster”. They will want to preserve as much of the current profitability as possible, which a concentrated ‘Big 3’ makes easier. Tellingly, a recent article stressed: “Ship-owners and financiers should avoid sinking money into new container vessels despite a global crunch because record orders have driven up prices, according to industry insiders.” True, CMA CGM just froze shipping spot rates until February 2022, joining Hapag-Lloyd. Yet in both cases the new implied benchmark is of price freezes at what were once unthinkable levels – not price falls. To conclude, shipping prices are arguably very high for structural reasons, and are likely to stay high ahead – if those structures do not change. On which, we even need to look at the structure of ships themselves. Too Big to Sail Shipping, like much else, has become much larger over the years. Small feeder ships of up to 1,000TEU are dwarfed by the largest Ultra-Large Container Vessels (ULCVs), which start from 14,501 TEUS up, and are larger than the US Navy’s aircraft carriers. Of course, there is a reason for this gigantism: economy of scale. It is a sound argument. However, the same was said in other industries where painful experience, after the fact, has shown such commercial logic is not the best template for systemic stability. In banking we are aware of the phenomenon, and danger, of “Too Big to Fail”. In shipping, ULCVs and their associated industry patterns could perhaps be seen as representing “Too Big to Sail”. After all, there are downsides to so much topside beyond the obvious incident with the Ever Given earlier in the year: ULVCs cannot fit through the Panama Canal; Not all ports can handle ULCVs; They are slow at sea; They are slow to load and unload; They require more complex cargo placement / handling; They force carriers to maximize efficiency to cover costs; They force all in-land logistics to adapt to their scale; They force a hub-and-spokes global trade model; and They are vulnerable to accident or disruption, i.e., they were designed for an entirely peaceful shipping environment at a time of rising geopolitical tensions (which we will return to later). In short, current ULCV hub-and-spokes trade models are the antithesis of a nimble, distributed, flexible, resilient system, and actually help create and exacerbate the cascading supply-chain failures we are currently experiencing. However, we do not have a global shipping regulator to order shippers to change their commercial practices! Specifically, building ULVCs takes time, and shipyard capacity is more limited. As shown, the issue is not so much a lack of ULCVs, but limited capacity from ports onwards. That means we need to expand ports, which is a far slower and more difficult process than adding new containers or ships, given the constraints of geography, and the layers of local and international planning and politics involved in such developments. There is also then a need for matching warehousing, roads, trucks, truckers, rail, and retailer warehousing, etc. As we already see today, just finding truckers is already a huge issue in many  economies. Meanwhile, any incident that impacts on a ULCV port --a Covid lockdown, a weather event, power-cuts, or a physical action-- exacerbates feedback loops of supply-chain disruption more than any one, or several, smaller ports servicing smaller feeder ships would do. So why are we not adapting? Economic thinking, partly dictated by the need to survive in a tough industry; massive sunk costs; and equally massive vested interests – which we can collectively call “Too Big to Sail”. Naturally, some parties do not wish to move to a nimbler, less concentrated, more widely-distributed, locally-produced, more resilient supply-chain system --with lower economies of scale-- while some do: and this is ultimately a political stand-off. Crucially, nobody is going to make much-needed new investments in maritime logistics until they know what the future map of global production looks like. Post-Covid, do we still make most things in China, or will it be back in the US, EU, and Japan – or India, etc.? Are we Building Back Better? Where? Resolving that will help resolve our shipping problems: but it will of course create lots of new ones while doing so. Tidal Wave of Politics Against this backdrop, is it any surprise that a tsunami of politics could soon sweep over global shipping? In July, US President Biden introduced Executive Order 14036, “Promoting Competition in the American Economy”. This puts forward initiatives for federal agencies to establish policies to address corporate consolidation and decreased competition - which will include shipping. Ironically, the US encouraged “Too Big to Sail” for decades, but real and political tides both turn. Indeed, in August a bipartisan bill was introduced in Congress --“The Ocean Shipping Reform Act of 2021”-- which proposes radical changes to: Establish reciprocal trade to promote US exports as part of the Federal Maritime Commission’s (FMC) mission; Require ocean carriers to adhere to minimum service standards that meet the public interest, reflecting best practices in the global shipping industry; Require ocean carriers or marine terminal operators to certify that any late fees --known in maritime parlance as “detention and demurrage” charges-- comply with federal regulations or face penalties; Potentially eliminate “demurrage” charges for importers; Prohibit ocean carriers from declining opportunities for US exports unreasonably, as determined by the FMC in new required rulemaking; Require ocean common carriers to report to the FMC each calendar quarter on total import/export tonnage and TEUs (loaded/empty) per vessel that makes port in the US; and Authorizes the FMC to self-initiate investigations of ocean common carrier’s business practices and apply enforcement measures, as appropriate. Promoting reciprocal US trade would either slow global trade flows dramatically and/or force more US goods production. While that would help address the global container imbalance, it would also unbalance our economic and financial architecture. Fining carriers who refuse to pick up US exports would also rock many boats. Moreover, forcing carriers to carry the cost of demurrage would change shipping market dynamics hugely. At the moment, the profits of the shipping snarl sit with carriers and ports, and the rising costs with importers: the US wants to reverse that status quo. While global carriers and US ports obviously say this bill is “doomed to fail”, and will promote a “protectionist race to the bottom”, it is bipartisan, and has been endorsed by a large number of US organisations, agricultural producers and retailers. Even smaller global players are responding similarly. For example, Thailand is considering re-launching a national shipping carrier to help support its economic growth: will others follow suite ahead? Meanwhile, shipping will also be impacted by another political decision - the planned green energy transition. The EU will tax carbon in shipping from 2023, and new vessels will need to be built. For what presumed global trade map, as we just asked? The green transition will also see a huge increase in the demand for resources such as cobalt, lithium, and rare earths. Economies that lack these, e.g., Japan and the EU, will need to import them from locations such as Africa and Australia. That will require new infrastructure, new ports, and new shipping routes – which is also geopolitical. Indeed, the US, China, the EU, UK, and Japan have all made clear that they wish to hold commanding positions in new green value chains - yet not all will be able to do so if resources are limited. Therefore, green shipping threatens to be a zero-sum game akin to the 19th century scramble for resources. As Foreign Affairs noted back in July: “Electricity is the new oil” – meant in terms of ugly power politics, not more beautiful power production. Before the green transition, energy prices are soaring (see our “Gasflation” report). On one hand, this may lift bulk shipping rates; on another, we again see the need for resilient supply chains, in which shipping plays a key role. In short, current zero-sum supply-chains snarls, already seeing a growing backlash, are soon likely to be matched by a zero-sum shift to new green industrial technologies and related raw materials. In both dimensions, shipping will become as (geo)political as it is logistical. Notably, while tides may be turning, we can’t ‘just’ reshape the global shipping system, or get from “just in time” to “just in case”, or to a more localized “just for me” just like that: it will just get messy in the process. Cold War Icebergs The US is now pushing “extreme competition” between “liberal democracy and autocracy”; China counters that US hegemony is over. For both, part of this will run through global shipping. Both giants are happy to decouple supply chains from the other where it benefits them. However, the larger geostrategic implications are even more significant. Piracy and national/imperial exclusion zones used to be maritime problems, but post-WW2, the US Navy has kept the seas safe and open to trade for all carriers equally. This duty is extremely expensive, and will get more so as new ships have to be built to replace an ageing fleet. Meanwhile, China is building its own navy at breath-taking speed, and a maritime Belt and Road (BRI). As a result, a clear shift has occurred in US maritime strategy: 2007’s “A Co-operative Strategy for 21st Century Sea Power”, stressed: “We believe that preventing wars is as important as winning wars.” 2015’s update argued: “Our responsibility to the American people dictates an efficient use of our fiscal resources.” 2020’s title was changed to “Advantage at Sea: Prevailing with Integrated All-Domain Naval Power”, and stressed: “...the rules-based international order is once again under assault. We must prepare as a unified Naval Service to ensure that we are equal to the challenge.” The US is also pressing ahead with the AUKUS defence alliance and the ‘Quad’ of Japan, India, and Australia to maintain naval superiority in the Indo-Pacific. This is generating geopolitical frictions, and fears of further escalation of maritime clashes in the region. The Quad has also agreed to key tech and supply-chain cooperation, with Australia a key part of a new green minerals strategy – a race in which China is still well ahead, and the EU lags. Should any kind of major incident occur, shipping costs would escalate enormously, as can easily be seen in the case of US-UK shipping from 1887-1939: this leaped 1,600% during WW1, and these shipping data stopped entirely in September 1939 due to WW2. Crucially, US naval strategy is rooted in the post-WW2 power structure in which it benefitted from such control commercially. That architecture is crumbling - and there is a matching US consensus to shift towards “America First”, or “Made in America”. The thought progression from here is surely: “Why are we paying to protect shipping from China, or economies that do not support us against China?” In short, the strategic and financial logic is: surrender control of the seas, or ensure commercial gains from it. There are enormous implications for shipping if such a shift in thinking were to occur - and such discussions are already taking place. July 2020’s “Hidden Harbours: China’s State-backed Shipping Industry” from the Center for Strategic and International Studies argued: “The time is long overdue for the US to reinvigorate its maritime industries and challenge the Chinese in the same game by using the very same techniques the Chinese have used to gain dominance in the global maritime industry. The private-sector maritime industry cannot do this alone—the US maritime industry simply cannot compete against the power of the Chinese state. The US and allied governments must bring to bear substantial and sustained political action, policies, and financial support. To do anything less is to cede control of the world’s maritime industry and global supply chains to China, and perhaps to force the US and its allies to enter their own ‘century of shame.’” Meanwhile, stories link ports and shipping to national security (see here and here), underlining logistics are no longer seen as purely commercial areas, but rather fall within the “grey zone” between war and peace – as was the case pre-WW2. This again has major implications for the shipping business. Expect that trend to continue ahead if the maritime past as guide, as we shall now explore. The Ship of Things to Come? US maritime history in particular holds some clear lessons for today’s shipping world if looked at carefully. First, the importance of the sea to what we now think of as a land-based US: the US merchant marine helped it win independence from the powerful naval forces of the British, and the first piece of legislation Congress passed in 1789 was a 10% tariff on British imports, both to build US industry and merchant shipping. Indeed, the underlying message of US maritime history is that the US is a major commercial force at sea – but only when it sees this as a national-security goal. Following independence, US commercial shipping and industry surged in tandem, with an understandable dip only due to war with the British in 1812. The gradual normalisation of maritime trade with the UK after that saw a gradual decline in the share of trade US shipping carried, which accelerated with the end of steamship subsidies --which the British maintained-- and the US Civil War. By the start of the 20th century, W. L. Marvin was arguing: “A nation which is reaching out for the commercial mastery of the world cannot long suffer nine-tenths of its ocean-carrying to be monopolized by its foreign rivals.” Yet 1915 saw the welfare-focused US Seaman’s Act passed and US flags move to Panama, where costs were lower. However, WW1 saw US shipping surge, and the Jones Act in 1920 reaffirmed ‘cabotage’ – only US flagged and crewed vessels can trade cargo between US ports. The 1930s saw global trade and the US maritime marine dwindle again – until 1936, when the Federal Maritime Commission was set up "to promote the commerce of the US, and to aid in the national defense." WW2 then saw US mass production of Liberty Ships account for over a third of global merchant shipping – and then post-1945, this lead slipped away again, and the US merchant marine now stands at around just 0.4% of the world fleet. Indeed, in 2020, US sealift capability was reported short on personnel, hulls, and strategy such that the commercial fleet would be unlikely to meet the Pentagon’s needs for a large-scale troop build-up overseas. As we see, the US has been here several times before. If the past is any guide for the future response, this suggests the following US actions could be seen ahead: Use its market size to force shippers to change pricing – which may already be happening; Raise tariffs again (on green grounds?); Refuse to take goods from some foreign ships or ports; Force vessels to re-flag in the US, at higher cost; Build a rival to China’s marine BRI with allies; Massive ship-building, for the 3rd time in the last century; Charter US private firms to bring in green materials; or The US Navy stops protecting some sea lanes/carriers, or forces the costs of their patrols onto others. It goes without saying that any of these steps would have enormous implications for global shipping and the global economy – and yet most of them are compatible with both the strategic military/commercial logic previously underlined, as well as the lessons of history. Wait and Sea? We summarize what we have shown in the key points below: Markets For markets, there are obvious implications for inflation. How can it stay low if imported prices stay high? How will central banks respond? Rate hikes won’t help. Neither will loose monetary policy – and less it is directed to a directly-related government response on supply chains and logistics. This suggests greater impetus for a shift to more localised production on cost grounds, at least at the lower end of the value chain, if not the more-desirable higher end. Yet once this wave starts to build, it may be hard to stop. Look at EU plans for strategic autonomy in semiconductors, for example, which are echoed in the US, China, and Japan. For FX, the countries that ride that wave best will float; the ones that don’t will sink. Helicopter view of ships Clearly, shipping will continue to boom. There are huge opportunities in capex on ships, ports, logistics, and infrastructure ahead – as well as in new production and supply chains. Yet one first needs to be sure what, or whose, map of production will be used for them! As the industry sits and waits for the wind and tide to change, logically one wants to position oneself best for what may be coming next. That implies global consolidation and/or vertical integration: Large shippers looking at smaller shippers to snuff out alternative routes and capacity; shippers looking at ports; ports looking at shippers; giant retailers/producers looking at shippers; importers banding together for negotiating power in ultra-tight markets. Of course, nationally, governments are looking at shippers, or at starting new carriers. If this is to be a realpolitik power struggle for who rules the waves --“Too Big to Sail”, or a new more national/resilient map of production-- then having greater scale now increases your fire-power. Of course, it also makes you a larger target for others. Let’s presume current trends continue. Could we even end up with a return to older patterns of production, e.g., where oil used to be produced by company X, refined in its facilities, shipped on its vessels, to its de facto ports, and on to its retail distribution network. Might we even see the same for consumer goods? That is the logic of globalisation and geopolitics, as well as the accumulation of capital. However, if history is a guide, and (geo)politics is a tsunami, things will look very different on both the surface and at the deepest depths of the shipping industry and the global economy. Much we take as normal today could become flotsam and jetsam. To conclude, who benefits from the huge profits of the current shipping snarl, and who will pay the costs, is ultimately a (geo)political issue, not a market one. Many ports are likely going to be caught up in that storm. Tyler Durden Sun, 10/03/2021 - 12:15.....»»

Category: blogSource: zerohedgeOct 3rd, 2021

As his beliefs have seeped into homes and classrooms, children as young as 11 think Andrew Tate is their "god"

Insider spoke with teachers and parents about Tate's beliefs spreading and infiltrating young boys' perspectives on women. Andrew Tate leaves the HQ of Romania's Directorate for Investigating Organized Crime and Terrorism after being questioned on January 25.MIHAI BARBU/Getty Images Andrew Tate's influence is spreading into homes and classrooms. Boys as young as 11 are quoting Tate and praising him as their god.  Insider spoke with teachers and parents about how Tate's beliefs are seeping into young boys' minds. If you aren't a frequent user of TikTok, you likely hadn't heard of Andrew Tate, a misogynistic influencer and former boxing champion, until his arrest in December 2022. He's been accused by authorities of being involved in a sex-trafficking ring and is currently in pretrial detainment in Romania. Tate rose to fame through controversial social-media posts where he's said, among other things, that women who have been raped should "bear responsibility" and that women are not allowed out of his house. Tate's primary audience is impressionable teenage boys, many of whom have started picking up on his sexist statements and views. Tate's influence affects how preteen boys see the world — particularly how they perceive women.And these views have not stayed confined to a TikTok audience; they've been steadily seeping into homes and classrooms.  Insider spoke with seven teachers who said Tate's words and beliefs have significantly impacted their students — some as young as 11 years old. "They talk about alphas in sixth grade now," one teacher said.Andrew Tate and his brother, Tristan Tate, being escorted by police in Bucharest, Romania, on December 29, 2022.Inquam Photos/Octav Ganea via REUTERSClassrooms are now full of 'blatant misogyny'Cassidy Pope, a high-school biology teacher who asked that her location remain private, said she has started experiencing "blatant misogyny" from the boys in her class, hearing them say that girls belong in the kitchen and only exist for reproduction."They used to be able to kind of just hide behind, like, 'Oh, it's just what my dad thinks,'" Pope told Insider, who added that situation is easier to deal with than "this is what this major influencer has to say, who a lot of people are rallying behind, making it more normalized and more OK to be so vile."Allie Chmielewski, a human-trafficking survivor and educator in Kentucky, told Insider she sees teen and preteen boys at schools all over the US "idolizing" Tate. She said she's heard boys talk about how they want the world to go back to how it was in the 1950s, when "women make zero decisions.""We're gonna just smash them down to the ground, destroy all of their confidence," Chmielewski recalled a teen boy saying. "We're the men, so you're gonna cook and you're gonna clean and you're gonna do this. It's the same mindset my grandpa had — that women take care of us, but we're gonna control you."Brittany Blackwell, a teacher in South Carolina who hosts a podcast that helps overwhelmed educators deal with burnout, told Insider that students see Tate as "the epitome of masculine energy" and talk about him as if he's a god."Because I'm a female, they often don't respect what I have to say when I ask questions or ask them to be responsible," Blackwell said. "It's just disrespectful."In contrast, Blackwell sees boys maintain their respect for male teachers and administrators. She said that misogyny has always been something female teachers have had to deal with, but it's gotten worse."I feel like my students, maybe five years ago or six years ago, had more open minds," she said. "More recently, it just seems as if the students are seeing more of Andrew Tate or other influencers that have these very polarizing points of view about gender roles."Tate's influence is a slippery slope to increasingly dangerous ideasTate discusses a range of topics — from the relatively harmless, like asking "what color is your Bugatti," to more extreme and dangerous views that can lead kids down some dark paths.One teacher, who asked to be referred to as Jane to protect her privacy, told Insider she has a handful of students this year who openly talk about how much they worship Tate. Still, the behavior of one student who yells out the influencer's name when he leaves the classroom is profoundly worrying. This boy, who is just 11 years old, will use any opportunity to "talk about how Andrew Tate is God's gift to men" and spends hours watching his content, she said. "He directs a lot of negativity toward his peers, making fun of peers he perceives to be weaker than him," Jane said. This boy also spends as much time as he can researching fascist governments."He has particular affinities for Russia and Nazi Germany," Jane said. "And I've caught him a couple of times in my classroom targeting students that he perceives to potentially be Jewish and showing them Nazi memorabilia."Based on what his mother has told her, the boy has become reclusive at home, Jane said. He has started to ignore and dismiss his mother, while he will still speak to his father, she said. He has figured out how to "operate under the radar," Jane said, by keeping his laptop screen partially closed and quietly poking at other students' triggers to try and get them to react. He recently picked on a student who had a stutter."These people who prey on our young children, they are teaching them to hold the cards close to your chest," Jane said. "It's very manipulative, and it's very deliberate."Jane hopes that one day she'll say something that will make her student question his idol's teachings, but it feels like an uphill battle. Recently, a student walked back to class from lunch, "giving the Nazi salute behind my back.""A lot of things right now feel very impossible," Jane said. "Students are being mystified by people like Andrew Tate to believe that the majority of their teachers are useless because they're female."Part of Tate's appeal is his wealth and success.Screenshot/YouTube - TateSpeechStasia Lanpheare, who is from New York, recently left teaching for a number of reasons, including a spike in students' misogynistic views and teachers' inability to combat it. "It's tolerated at schools because teachers, we are not allowed to have influence," she told Insider. "So they're limiting the good influence we can have. It's like our hands are so tied — but we can't let them be tied anymore."Chmielewski said one way to tackle Tate's influence in classrooms is to teach girls to be more self-reliant and independent. She said she's heard girls accepting this misogyny, acquiescing to boys who say they can't do certain things or aren't as smart. "We have so many Andrew Tates out here that are taking advantage of these girls," Chmielewski said. "We need to start building the self-confidence of these girls because they have none."Blackwell said she tries to fight his influence with logic and critical thinking, by asking students to consider why Tate is seen as a reliable source of information."I've seen a little bit of change just kind of driving it in that direction," she said. "But I can't say that it's combating the plague."Boys get sucked in by more benign lessons on self-improvementMany young boys are reeled in by Tate's self-proclaimed success: He says he can teach people how to have a better life, offering exercise tips and paths to financial success. Many young boys are drawn in by this promise of personal development. Mary McCarthy, a mother of four from Dublin, told Insider that Tate seems to have an "intoxicating" effect on her 14-year-old son. Tate sells himself as a man who has overcome hardship to become wildly successful, and whose guidance is indispensable: "I am a mixed race man raised by a single mother. I suffered all of the disadvantages of the old world. I am a fantastic role model for all people, both male, and female," he said when he was banned from TikTok in August 2022 accused of misogyny.Tate had been watched on TikTok 11.6 billion times before the platform kicked him off shortly after he acted out his response to a woman cheating in one video. He said: "Bang out the machete, boom in her face, and grip her by the neck. 'Shut up, bitch.'"Knowing that Tate peddles these violent and misogynistic views, McCarthy was shocked when she heard her son repeat Tate's catchphrase, "Well, what color is your Bugatti?" "Andrew Tate is playing on insecurities, male and female," McCarthy said, adding that this isn't just a problem with Tate. "There are a lot of YouTubers out there, and their content is really questionable," she said, referring to a boom in content creators making videos in which women are often the butt of the joke — being called a bitch, being ranked against their friends based on looks, or being told their place is in the kitchen, to name just a few examples. "But the problem is," McCarthy, a journalist, said, "they're all laughing at us going, 'Oh, she doesn't get it, she doesn't get it's a joke, they've got you, too.'"Tate and other content creators like him "almost makes it OK to call women a 'bitch,' to say awful things, just because you can say it's a joke," McCarthy said. "But it's just not OK. There are impressionable young minds watching your videos."Speaking to the BBC, Nia Williams, a psychologist and academic, addressed why so many young boys get "sucked in" by Tate's image. "During your teenage years, you are finding yourself, developing who you are, your morals, and what you stand for," she said."He is on the social-media sites that appeal to these young people," Williams added. "However, the messages he's giving out are having a detrimental impact on the youth today. That can have a lifelong impact on the type of person you will become."Read the original article on Business Insider.....»»

Category: personnelSource: nytJan 29th, 2023

"Imminent" earnings recession could tank US stocks, Morgan Stanley warns

Morgan Stanley analyst Michael Wilson sees the bear market ending later this year as inflation fades and the Fed pauses its interest rate-hike campaign......»»

Category: topSource: foxnewsJan 25th, 2023