Ads Are Officially Coming to Netflix. Here’s What That Means for You

After years of resisting commercials on its streaming platform, Netflix is now introducing an ad-supported tier to its service. After years of resisting advertisements on its streaming platform, Netflix is introducing commercials to its service. Netflix co-CEO Ted Sarandos confirmed on Thursday that the company would begin testing an ad-supported, lower-priced subscription tier. The streaming company is speaking to multiple potential partners to help ease its entrance into the ad world, Sarandos said while speaking at the international ad festival Cannes Lions. Those partners reportedly include Comcast, NBCUniversal, and Google. Sarandos’ confirmation comes in the midst of a rough year for Netflix. As competition among entertainment services grows more intense, the streaming giant lost subscribers for the first time in a decade, faced a backlash for cracking down on password sharing, and laid off over 150 employees (or about 1.5% of its global workforce). [time-brightcove not-tgx=”true”] “We’ve left a big customer segment off the table, which is people who say, ‘Hey, Netflix is too expensive for me and I don’t mind advertising,’” Sarandos said. “We’re adding an ad-tier. We’re not adding ads to Netflix as you know it today.” Netflix co-CEO Reed Hastings had telegraphed the advertising plan, suggesting on a first-quarter earnings call in April that ads could be on the way in the next year or two. “Those who have followed Netflix know that I’ve been against the complexity of advertising and a big fan of the simplicity of subscription. But as much as I’m a fan of that, I’m a bigger fan of consumer choice,” he said. “And allowing consumers who like to have a lower price, and are advertising tolerant, to get what they want makes a lot of sense.” Then, the New York Times reported in May that Netflix had told its employees an ad-based plan could launch by the end of the year, sooner than previously expected. Netflix lost 200,000 subscribers in the first three months of 2022 and forecasted greater losses to come in an April shareholder letter. The company’s stock price has plunged more than 70% this year (compared with the S&P 500’s 21% decline), wiping out roughly $70 billion of its market capitalization and prompting shareholders to file a lawsuit alleging that Netflix misled investors about declining subscriber growth. Now, the hope at Netflix is to generate more revenue by embracing ads. And it’s not alone. Competitors like Hulu and HBO Max already offer ad-based plans that are cheaper than their commercial-free services, while Disney+ announced in March that it would be rolling out an ad-supported subscription tier in late 2022. With Netflix’s current monthly subscription model, subscribers in the U.S. can use their account on one, two, or four screens at once and prices reflect the number of screens available—ranging between $9.99 and $19.99. The new ad-supported tier will create a lower-priced option for subscribers who are willing to watch commercials in exchange for paying a little less......»»

Category: topSource: timeJun 24th, 2022

The Mood On Wall Street Has Never Been More Apocalyptic

The Mood On Wall Street Has Never Been More Apocalyptic There has been a distinct pattern to 2022 - every month, when look at the latest BofA Fund Manager Survey, we find that the mood on Wall Street has never been catastrophic, dire, apocalyptic, etc.. and 30 days later we find that said mood has turned even worse. This month's Fund Manager Survey was no difference, and a quick look at the responses to Mike Hartnett's questions by the 300 panelists who manage $834BN in AUM suggests that one should not walk next to tall building on Wall Street, midtown or the Hudson yards. . As FMS survey organizer, Michael Hartnett writes, the US stock market officially entered a bear market on Monday (its 20th of the past 140 years) as the June BofA Fund Manager Survey (FMS) signals deeper investor misery: as we noted last Friday, the BofA Bull & Bear Indicator is now down to just 0.2 (it can't drop below 0.0)... ... and although Wall Street sentiment is dire... ... a "big low" in stocks is unlikely before a big high in yields & inflation, and the latter requires uber-hawkish Fed hikes in June & July (which we will get). On Macro, extending from the record creeping pessimism of last month, Hartnett observes an all time low in global growth optimism (net -73%)... ... stagflation fears have soared to the highest since June’08 (maybe the FMS respondents should have read our warnings from last year about what is coming)... ... the profit outlook is the worse since Lehman... ... even as a near record number of Wall Street professionals expect inflation to fall (compare to March 2020 when everyone was expecting higher prices)... ... means CIOs are telling CEOs to play safe as 44% want stronger balance sheets vs 30% desire for capex & 18% for buybacks (but of course, everyone really just wants buybacks to cash out asap and retire). On Policy: a net 79% expect higher short rates... ... which is surprising compared with prior market lows when net 53% expected lower rates! According to Hartnett, one way to determine the market lows is that everyone will expect the Fed to cut rates, and that's true - in fact, we expect that to happen some time in late August/September when the recession will be plain for all to see. Recession announcement aside (as those are notoriously late), what else would make the Fed pause/pivot? The answer: PCE inflation 300k say 20%, SPX.....»»

Category: blogSource: zerohedgeJun 14th, 2022

Tchir: "Getting Very Nervous", Moving From DEFCON 4 To DEFCON 3

Tchir: "Getting Very Nervous", Moving From DEFCON 4 To DEFCON 3 Authored by Peter Tchir via Academy Securities, Why is DEFCON 1 Higher Than DEFCON 5? I came across this line watching the latest season of Ozark this weekend. Somehow it seemed appropriate given Friday’s economic data and the fact that Andy Robinson, Rachel Washburn, General (ret.) Kearney, and I recorded a podcast on Friday focused on nuclear weapons, proliferation, and nuclear power. It was not the most “uplifting” podcast I’ve been a part of (as you will hear next week when it is released), but it is necessary to think about. Friday’s data and price action also didn’t do anything to raise one’s spirits. The one bright spot, for me, was being able to really introduce the concept of “energy transformation” rather than “energy transition.” One of the energy companies Academy works with got me fixated on the difference between energy transformation vs energy transition. The difference seems subtle, but it is actually quite profound. In the meantime, I’m writing this T-Report having chosen to buy the dip on Friday (T-Report link). Since the S&P 500 hit almost 3,900 by 10:25 am and finished there, I haven’t been hurt by that tactical trade. While I think that it is the right trade coming into the Fed, I’m very nervous now about the state of the economy and markets. I highlighted many of those issues in Friday’s note and the more I dig into them, the worse it looks. CONsumer CONfidence I tend to ignore CONsumer CONfidence (I give credit to Bob Janjuah for putting the CON in consumer confidence), but Friday’s number was so brutal that it is impossible to ignore. As Ian Burdette (Academy’s agency trader) pointed out, Friday’s University of Michigan report was the worst report going back to 1990, which encompasses several periods that we now refer to as “crises”. I don’t think anyone has said that we are “currently” in a “crisis” but maybe the data tells a different story?  That trajectory makes even Phil Mickelson’s recent career decisions look good. When digging into the data, I went straight to the breakout by political affiliation. One year ago, Democrats were at 104.2 and Republicans were at 60.3. While that large disparity still exists, the gap has narrowed as Democrats are down to 71.3 and Republicans are at an almost shocking level of 33.5. I do like looking at the “independent” breakout as well, which was 83.5 a year ago and is down to only 46.5 right now! None of that is any good. The Economic Horserace Scenario As discussed on Friday, Soft Landing has fallen off the lead with Recession Next Year looking strong, but from deep in the pack, Summer Recession is making a move! I remember during the financial crisis that we only “found out” we were in a recession AFTER the group that provides such calculations revised their data. It is, sadly, not unchartered territory to be in a recession and not “officially” know it. Every person living during that time knew it, but the data gods were a little behind. I’m increasingly worried that is the case right now. Just look at the rest of the field in the economic horserace. At this point, European Recession looks like a sure bet to place or show. Bigger Problems in Europe (a late entry) also seems to be gaining momentum (I don’t like what is going on in financials, especially in Europe where the iShares MSCI Financial Index ETF is below where it was at the start of 2019). Relative credit spreads aren’t exactly making anyone feel warm and cozy in Europe. Europe is trading wider than the U.S. which has not been the norm of late. Something to watch. The commodity stables have two contenders with High Energy Prices (an early betting favorite and still running well) starting to look nervously at his stablemate, High Food Prices. They chose not to enter Food Crisis because it seemed too early for that horse to have a shot, but I’m sure the owners are reconsidering that decision now. Inflation was scratched because no one wanted to race against it, but I do believe that the theme of high prices will be even more important than inflation in the coming weeks and months because even if inflation were to slow, prices are still too high! Sadly, China Rebound, after a brief recent surge, has given up a lot of ground. Maybe it can shake off this latest setback and change the trajectory of this race. Finally, Peace in Ukraine has pulled up lame and it is beginning to look like that horse will have to try again next year. Job Growth is still running near the top of the pack but seems to be suffering right now. I can’t tell what is wrong with the horse, but it just doesn’t look right from this announcer’s perspective. The race isn’t over, but looking at the horses that are rising versus those that are faltering, it doesn’t bode well for the markets or the economy. The Fed and Financial Conditions All else being equal, financial conditions are reaching levels where the market might start to expect support. “Easy” financial conditions have been the “norm” for most of the past few decades. In the Chicago study, financial conditions were only “tight” (above 0) in the early 1990’s, during the financial crisis, and during Covid. Certainly from 2007 until 2010, the Fed did everything possible to ease financial conditions. Ditto with Covid. While we still are “easy” (-ve on this chart), the market has been doing a lot of tightening and is far ahead of the Fed already (mortgage rates, in particular, scare me because of what that means for the economy). I understand that the Fed has to fight inflation, so we will get QT and will see hikes, but that seems awkward given what has happened to financial conditions. Remember, the Fed continued with QE all last summer, often pointing to aiding liquidity. Based on financial conditions alone (and yes, I’m aware there are other factors, but sometimes I’m stubborn), the Fed should be more worried about liquidity today than they were last summer. Truly caught in the Damned if You Do, Damned if You Don’t cycle. I won’t even bother drawing a chart showing the number of 1% or more intraday moves the stock market has seen in the past few weeks because it would take too long and we are all (sadly) too well aware of it. The Bond Yield “Glass” Ceiling I’m not there (yet) on this subject, but how high could bond yields go? This fear of much higher bond yields that I’m developing has little to do with central bank policies and everything to do with positioning and lack of liquidity. European bond yields are rising rapidly and changing the “we are the only game in town” narrative for Treasuries. What concerns me more than rising bond yields is the underperformance of Italy versus France. Last summer, the yield difference was ~50 bps. Now it is almost 170 bps. That, coupled with the chart showing credit spreads in Europe versus the U.S., is not comforting. However, I don’t like how Treasuries traded on Friday. Immediately after the CPI number, 2-year yields spiked (more rate hikes). The 10-year yield dropped briefly. Presumably, slower economy, so longer yields are protected. But that didn’t last. Over the course of the day yields crept higher and higher and the 10-year closed at 3.16%, its highest closing yield since 2018. DEFCON 3 I was probably sitting at DEFCON 4 and now have to move us to DEFCON 3. I don’t like what I’m seeing out there. Yes, I’m long for a trade (if markets were open right now, I’d probably close that out), but I’m increasingly concerned that there is a lot more downside for the market. I am less worried about inflation than I am about high prices (similar, but not the same). I am more worried about central banks stifling the economy as they fight the last battle (inflation) when they may need to be focusing on the next battle (an economy wedded/addicted to low yields and leverage may not behave “normally” as those things are taken away). I’ve always felt that QT has the most impact on asset prices and shouldn’t be “translated into some number of hikes” (Rube Goldberg on Translating QT to BPS) and we are now in a period of QT. Bottom Line I want to own Treasuries here at the wide end of the range, but for the first time, I’m scared that we could break out of this range (big problem). Credit spreads should outperform equities here, though both may be weak. Equities could be hit by the double whammy of earnings concerns and multiple reduction. Did I mention I’m regretting buying Friday’s dip? Crypto should remain under pressure. I think bitcoin will be sub $20k before it reaches $35k. Tyler Durden Mon, 06/13/2022 - 09:04.....»»

Category: blogSource: zerohedgeJun 13th, 2022

"The Nightmare Has Ended": Shanghai Reopens After Two-Month COVID Lockdown

"The Nightmare Has Ended": Shanghai Reopens After Two-Month COVID Lockdown Relieved residents danced in the streets after Shanghai on Wednesday officially lifted a two-month virus lockdown that triggered public outrage while dealing a huge blow to the economy, sending it reeling to depths not seen since the global shutdown in Q1 2020. Dozens of cities across China have been under full or partial lockdown for months as the country with the "zero covid" policy battled its worst COVID-19 outbreak since early in the pandemic. But the Shanghai shutdown was the biggest, with most of the city's 25 million residents confined to their homes since late March, turning the once-bustling metropolis into a ghost town. That changed at midnight on Wednesday, when Shanghai authorities started taking down metal barriers and yellow plastic blockades that had blanketed one of the world's biggest cities. Residents spilled into the streets to celebrate what was for many their first taste of freedom since the lockdown orders. As the Nikkei reports, some residents cheered and posed for photos, others danced and drank in the streets until the early hours of Wednesday morning while parks filled up with kids and their parents. The end of the lockdown meant a green light for neighborhood businesses and major manufacturers to restart operations. But dining inside restaurants was still banned, bars are open but don't serve alcohol, and movie theaters and gyms remain closed. Supermarkets, convenience stores and pharmacies were to reopen gradually with capacity limits. Restarted public transit filled up with white-collar workers making their way back to the office. "I am glad the nightmare has ended," said a banker surnamed Chen as he returned to work in the Lujiazui financial district. "But only about half of the staff will be back to the office this week due to COVID-prevention rules before we fully resume next week," Chen said. Chen was among hundreds of thousands of unlucky people hauled off to makeshift quarantine facilities after being suspected of coming into contact with a virus-infected person. He described his two-week stay at the bare-bones site as a "horrifying experience." Some more details from Nikkei: Shanghai lifted the lockdown after confirmed infections this week plunged into the low double digits from highs topping 20,000 a day in April. But the draconian measures sparked widespread anger as they left some homebound people jobless and others desperately struggling to keep businesses afloat. Food shortages and limited access to medical care aggravated the outrage, which often spilled on to social media despite government efforts to portray the shutdown as orderly and well managed. The restrictions in Shanghai and other cities, including the capital Beijing, have taken a bite out of the economy and raised questions about whether China can hit its 5.5% growth target this year. There were signs, however, that factory activity was rebounding modestly as production shutdowns and other virus restrictions are eased. To be sure, China is already "benefiting" from the reopening, with the latest PMI print seeing a bounce from recent lows. Expect these numbers to rise materially in coming months as more lockdowns ease. On Wednesday, people walked their dogs on Shanghai's streets and seniors practiced tai chi in public squares while barbers welcomed shaggy-haired residents in need of a trim. But the jubilation was mixed with caution, as many feared another outbreak could prompt nervous authorities to bring back restrictions. "We feel happy, but at the same time we worry about another outbreak," a husband and wife duo told Nikkei Asia as they walked along the Bund, Shanghai's historic riverside district. "Many people think the pandemic is over ... but it is clearly not." Some shopping malls threw open their doors Wednesday, while many retailers spent the day cleaning and disinfecting shops before welcoming back shoppers. "Customers will likely to stay away for the first few weeks, just like what we went through in 2020," said Jia Hong, a hot bun seller in the Jing'an central business district. "Many are wary about the risks of eating outside." China's biggest lockdown tested President Xi Jinping's signature zero-COVID policy, which relies on heavy restrictions, including mass testing and lockdowns, to quash outbreaks at any cost. The government has said it is sticking with that approach in a bid to save lives and stop its health care system from being overwhelmed, even as much of the world moves toward living with the virus. That means Shanghai residents must now take a PCR test every three days at one of thousands of temporary screening booths in order to use public transit or enter shops. "We will have to do this endlessly," said Bai Ying, a property agent who was getting tested. "The risk of catching the virus is higher here than at home, but we have no choice." Tyler Durden Wed, 06/01/2022 - 17:05.....»»

Category: blogSource: zerohedgeJun 1st, 2022

The US Oil Boycott Of Russia Will Push The Eurozone Into A Recession

The US Oil Boycott Of Russia Will Push The Eurozone Into A Recession Excerpted from Maartje Wijffelaars, Elwin de Groot and Erik-Jan van Harn of Rabobank (full note available to ZH professional subscribers in the usual place). Summary On Tuesday night EU leaders agreed to ban all Russian seaborne oil imports The ban, amid already high inflation and intense supply chain pressure, will push the Eurozone into a recession; this confirms our views expressed earlier this year We expect the Eurozone economy to enter a recession by the end 2022/early 2023 Helped by carry over effects we still expect the Eurozone economy to grow by 2.2% in 2022, yet to contract with 0.1% in 2023 The ban will not lead to lasting energy shortages, but it will take time before Russian oil imports are replaced and oil prices will almost certainly trend higher Our forecast is subject to quite some uncertainty, especially when it comes to the timing and depth of the recession. But, importantly, a grind down is in the works, with neither the ECB nor governments in the position to prevent that EU leaders agree to ban seaborne oil imports On Tuesday night, EU leaders agreed to ban all Russian seaborne oil imports. The sixth sanction package, including the details, still needs to be officially signed off, but based on earlier statements, import of Russian crude oil via seaborne shipments is set to be barred from the end of this year. The ban on seaborne import of petroleum products should then become effective about two months later. A “temporary” exception is being made for pipeline imports, to accommodate concerns over energy security for Hungary, Slovakia and the Czech Republic. When taking into account that Germany and Poland have said to cut Russian oil imports regardless of the exemption, the current agreement effectively means that about 90% of crude oil imports from Russia would be phased out by the end of the year- which represents around one quarter of total annual crude oil imports in the EU in recent years. It has not yet been agreed how long the exclusion of pipeline oil will last. Importantly, the package will also foresee in a provision to limit re-exports of Russian crude arriving via pipelines and petroleum products based on Russian crude oil. Eurozone economy to shrink due to energy crisis The oil boycott pushes us to downgrade our forecast. We had already highlighted this risk in previous research notes. We expect the Eurozone to enter a recession at the end of this year (Figure 1). Combined with carry over effects from the strong second half of 2021 this means that the economy is still set to grow in 2022, yet to contract in 2023. We have pencilled in growth of 2.2% in 2022 and -0.1% in 2023 -compared to, respectively, 2.9% and 1.5% in our previous forecast. Recently we had already lifted our inflation outlook to 7.5% this year and 3.6% next year, based on our expectation of a Russian oil embargo. Oil embargo will fuel non-Russian oil prices In our view, the Russian oil embargo will not lead to large lasting energy shortages. Yet adjustments are likely to take time and it will certainly fuel prices of both crude oil and refined petroleum products. In fact, this morning prices of both crude oil and refined petroleum products such as diesel already pushed higher (Figure 3). It is the price of refined petroleum products that is being felt most by households and hauliers and that price has in fact already seen much sharper increases than crude oil since Russia’s  invasion. Driving factors of the so-called crack spread so far have been capacity constraints at refineries worldwide and less imports from Russia. For now, lockdowns in China will continue to cap the price of crude oil, but once China’s lockdowns are lifted, we envisage that the price of crude oil could peak at over $170 a barrel - as can be read in the oil ban scenario analyses we have conducted earlier. Recession hits once reopening boost fades In the first quarter of the year the Eurozone economy still managed to grow, with 0.3% q/q - revised upwards from 0.2% q/q. We also expect the growth figure to hold just above the zero- mark in the current quarter, on the back of (i) the grand reopening of the economy, (ii) businesses still working their ways through backlogs, (iii) rather strong labour markets in many Member States, and (iv) excess savings that allow households to absorb part of the higher prices regime. Moving on to the third quarter, tourism activity is likely to benefit from the seemingly unstoppable drive of many to go on a holiday. Yet it will be ever more difficult for the economy to continue to post positive growth figures, as the boost of reopening fades amid very high inflation and equipment shortages. In our view, government support, already being ramped up across the block, will alleviate some inflation pressure and this should support economic growth by several decimal points. But it will not be able to prevent a downturn. Indeed, we are dealing with a supply shock induced crisis and you simply cannot solve a supply shock by ramping up demand. In fact, broad scale support might even accomplish the opposite, as it could support demand for which there is too limited supply. Meanwhile, we currently assume China to continue its zero-covid policy, with alternating lockdowns continuing to put pressure on global supply chains. In our projections, we incorporate that it will take until the final quarter of the year for supply chain pressures caused by China to soften materially. We note, however, that China’s reopening -even when gradual- will also feed into higher prices for energy commodities and metals as Chinese demand for these commodities rises. Supply chain disruptions and rising input prices hurt production From a supply side perspective, input and equipment shortages are likely to continue to hamper industrial production over the coming quarters, as will increased input prices to the extent that they cannot be fully passed on to customers. In past months, production of energy intensive products in the EU, such as fertilizers, paper, and construction materials, has already been cut back due to elevated energy prices. Meanwhile, in surveys, businesses report lengthening delivery times and record equipment shortages (Figure 4). Important sources of the supply chain disruptions are lockdowns in China and the war in Ukraine. We expect input deliveries from China to continue to be hampered for the better part of the year, while we also don’t envisage the end of the war or a reduction in energy price -quite the opposite in fact when it comes to the price of oil, as explained. On a positive note, the price of natural gas has come down over the past weeks and is almost back at its pre-war level, which should exercise some downward pressure on energy price inflation and support energy intensive production in the Eurozone. That said, it remains very high in historical context and has the potential to trend higher again. Inflation and uncertainty hurt demand From a demand side perspective, we expect the sharp and persisting price rises and growing uncertainty (Figure 5) to slowly ‘kill’ households’ ability and willingness to consume. Even though extra savings at European bank accounts accumulated during the pandemic (some 5% of annual GDP) will help to absorb the higher prices, a contraction in consumption is all but a given in our view. Both the magnitude of the inflation and the fact that savings are unequally distributed among households -with a decumulation of savings among low-income households- feed into this view. We foresee consumer spending to contract for several quarters, starting in the third quarter of this year. It usually takes time for higher inflation and uncertainty to translate into lower consumption growth, although the magnitude of both could well speed things up little when compared to history. We also believe that higher input costs and increased pessimism over the outlook will eventually lower the ability and willingness of businesses to invest, create jobs and raise wages. In addition, over time, increasing financing cost are also expected to bite. Although the ECB still hasn't raised rates so far, we expect it to start a tightening cycle in July, taking its deposit facility rate back to +0.25% by the end of the year. Market developments since the beginning of the year have already led to a considerable tightening of financial conditions; risk-free government bond yields, term and inflation risk premiums as well as corporate risk premiums have contributed to this. Whilst it could be argued that rates – both at the short and at the long end of the maturity spectrum – have not kept up with actual inflation rates, the fact that the bulk of the rise in inflation is due to a deterioration in the terms of trade, implies that one cannot compare these one for one. Indeed, the marked rise in long-term bond yields even when corrected for higher inflation breakeven rates since end-April underscores the higher interest rate environment. Together with the ongoing uncertainty over the outlook, this is also leading to a tightening of bank credit conditions, in terms of higher borrowing costs as well as a tightening in loan conditions. As such, whilst higher inflation and supply shortages remain the key drivers of the economic slowdown, the tightening of financial conditions is likely to contribute to an ‘acceleration’ of the economic slowdown as time progresses. Labor demand to contract Over the coming months, when demand cools and pessimism among businesses increases, we will likely first witness a reduction in outstanding vacancies. An actual contraction of hours worked will then follow further down the line. To what extent this will lead to layoffs and higher unemployment is rather uncertain, however. Short-time work schemes introduced during the pandemic will very likely limit official employment destruction and the rise in unemployment - and hence income losses. Still, we believe that economic growth and unemployment are not fully disconnected, which is why we project unemployment to increase from 7.2% this year to 7.5% in 2023 and 7.8% in 2024 -compared to 8.6% at the pandemic peak. Meanwhile we project wages to grow by 2.5% on average this year and 3% next year. This clearly is an improvement from the growth of 1.5% in collective wage agreements last year, but is largely insufficient to keep up with inflation. Hence real wages, are set to shrink big time, underscoring our view of contracting consumption further down the line. Risks to forecast are balanced We are finding ourselves in uncertain times, yet again. Forecasting a recession, and the timing thereof, is fraught with risks. Whilst the direction of travel is clear to us, the depth of the crisis is less obvious. Indeed, the relationship between inflation, uncertainty and GDP growth is not set in stone -it could either be more or less intense than we currently foresee. Other important sources of uncertainty are the timing and impact of China’s reopening, and of government support in the Eurozone. Finally, we currently only see it as a tail risk that the EU stops importing Russian gas in the short term or that Russia suddenly fully stops exporting gas to the EU on its own account. Admittedly, Russia has already stopped delivering gas to several smaller customers including Finland and particular providers in Germany and the Netherlands. Yet it would be a real financial blow for itself if  it were to fully cut off large countries such as Italy and Germany, for example. Still, more unforeseen things have happened over the past months and both EU sanctions and Russian countermeasures are clearly a moving target. As such we keep a close eye on developments. In any case, while the recent stop in gas flows is likely to cause some price effect already in the countries hit, the consequences of a sudden full stop in Russian gas inflows in the EU would be much larger. All in all, then, we regard the risks to our forecast rather balanced. Importantly, a grind down is in the works, with neither the ECB nor governments in the position to prevent that. Tyler Durden Wed, 06/01/2022 - 13:25.....»»

Category: blogSource: zerohedgeJun 1st, 2022

Fed Mission Accomplished: Real-Time Indicators Show The Labor Market Just Cratered

Fed Mission Accomplished: Real-Time Indicators Show The Labor Market Just Cratered How much longer will the Fed keep hammering stocks and pushing the market - and the US economy - lower? That is the question every trader is asking now that the S&P has brushed against a bear market three times in just the past week and threatening to careen lower, especially as it now appears that the Fed has given up on a soft landing, and is willing to gamble everything to contain inflation, even if it means a hard-landing, which according to a SocGen strategist can only happen if rates rise to 4.5% or higher. The answer is simple: now that Wall Street is convinced that inflation has peaked, both on the sellside (as this Goldman chart shows)... ... and the buyside, with the latest Fund Manager Survey showing a record 68% of respondents expect inflation to drop in coming quarters... ... with GDP on the verge of a technical recession (just one more negative quarter and you're out), and with housing about to crater... ... only strong employment remains. In other words, those who want to know when the Fed will capitulated on its market-crushing tightening are exclusively focused on negative inflections in the labor market, because as even Bank of America's economists wrote last week (the note is available to professional subscribers), the Fed will be hard-pressed to drive inflation down towards its 2% target without raising the unemployment rate meaningfully, which in turn will require a significant downshift in labor demand. In other words, the Fed wants a mild recession (but certainly not a depression) to hammer labor demand and short-circuit the wage-price spiral. So what data should traders be looking at? Well, job postings are perhaps the best leading indicator of unfilled labor demand. The official government source is the Job Openings and Labor Turnover Survey (JOLTS) from the BLS, which we profiled every month. As of March, the latest available data, there were a record 11.5M total job postings, nearly double the number of unemployed persons. A drawback of JOLTS is that the data are rather lagged (it tracks one month behind the latest payrolls report) and, in the current environment, trends can change quickly.  To get a more accurate answer,Bank of America has used data from Revelio labs on job postings to get a better sense of incremental labor demand in real-time. Unlike JOLTS, Revelio measures new instead of total job postings, which tracks total job postings closely with a correlation of 93%. So here is the big news: in April, new job postings fell by 2.0M to 6.6M according to Revelio’s data. This is a huge deal as it represents the largest monthly drop in the available history going back to May 2019!  Furthermore, the decline was broad-based with 146 of the 147 industries - virtually everyone - reported by Revelio recording a sequential decline in new postings. Moreover, the share of industries with a Y/Y decline in new postings rose to 22.5%, highest since last Feb. In short, as BofA economist Stephene Juneau writes, the drop in job postings is a sign that labor demand is beginning to cool, although there will be a distinct lag between the crack seen by such 3rd party data collectors as Revelio and the US Department of Labor (just like a year ago we warned that housing inflation was about to soar by looking not at lagging government housing data but real-time metrics from Apartment List and Zillow, see our June 2021 article "And Now Prices Are Really Soaring: June Rent Jump Is Biggest On Record"). Furthermore, the gap between new postings and voluntary separations will likely narrow when we get the April data from JOLTS, but it is unlikely to close completely (unless the BLS kitchen sinks the April/May data ahead of the midterms). The upshot is that we will likely need to see new job postings fall much further in order to cool down the labor market, and subsequently wage and price pressures. Fine, the skeptics will counter, "this is just one indicator. What about other real-time reads of the job market?" Well, aside from the Revelio data, there are plenty of other signs of moderating labor demand. Consider the following: 1) The share of businesses planning to increase employment in the NFIB small business survey has fallen by 8%  since December 2021 to 20% in April. 2) Challenger Job cuts increased by 6% Y/Y in April, the first annual increase in fifteen months. 3) In an ominous return to the "normlacy" that defined the stagnating Obama presidency, the number of workers with multiple jobs continues to pick up. This is the clearest indicator yet that the "Great Resignation" post-covid trends are now actively in retirement. 4) Even clearer proof that "unretirements" continue to rise is the latest data from Indeed, which shows that 3.3% of the workers who "retired" a year ago are once again employed. 5.) It's not just Revelio seeing a drop in job posting. Bank of America's own analysts (in this case in a note from Sara Senatore) show that job posting growth across restaurant categories decelerated sharply on a sequential basis. Job postings growth slowed most in Beverages – to +23% y/y from +268% in March. For the remaining categories, y/y growth in postings slowed most in Fast Food (-16% y/y vs +126% in Mar), followed by Full Service (-67% y/y vs +13% in Mar) and Fast Casual (-66% y/y vs +7% in Mar). In April, y/y growth in job postings for engineers increased for Beverages & Snacks and Fast Casual while Full Service categories and Fast Food postings growth decreased (the full BofA note is available to pro subs in the usual place) . Last but not least, there is growing anecdotal evidence that the labor market just hit a brick wall, with the likes of Amazon, Facebook, Walmart, Target, and Netflix all recently giving negative guidance on employment. Indeed, last week, Bank of America's trading desk called it "the end of the labor shortage" to wit: "Did co's double-order people? WMT and AMZN are the 2 biggest private employers... and both have made comments on their calls... on being "overstaffed." The desk's conclusion: "the 'labor shortage' narrative officially died in the past week." And from there to a spike in the unemployment rate and a collapse in wages it's at most a few months. Which confirms what we (and Morgan Stanley and BofA's Michael Hartnett) said previously: the recession will begin in the second half of 2022, with the Fed ending its rate hike cycle well ahead of schedule, and proceeding to cuts rates and launch its latest QE some time in early 2023. Tyler Durden Sat, 05/21/2022 - 20:00.....»»

Category: dealsSource: nytMay 21st, 2022

African Nations Resisting Bitcoin Only Delay The Inevitable

African Nations Resisting Bitcoin Only Delay The Inevitable Authored by 'BEAUTYON' via, Countries in Africa have the opportunity to become global leaders by adopting Bitcoin and providing a pathway for innovation. All fiat leads to Bitcoin. There are two forward-looking countries on Earth when it comes to Bitcoin: El Salvador and the Central African Republic. These two very different countries on different sides of the globe have both come to the same conclusion: Bitcoin is the best money ever invented and embracing it early will be beneficial both for the people of the adopting nation and to the benefit and preservation of the concept of the nation-state itself. There are other countries on the other hand, that are not led by gifted and insightful people. Uganda may be one such example, the central bank of which has just made this very ill-advised announcement, demonstrating a complete lack of understanding of all the matters to do with money and the great changes that are coming to how it is accounted for. (Source) Their first error is to believe there is such a thing as a “crypto asset.” This term does not describe a real thing and their insertion of this phrase into their announcement shows that their thinking is not original at all, but gleaned from what they’ve read on the internet or what they've been told to say by the Bank of International Settlement or the International Monetary Fund. Compare and contrast with the statements, plans and laws passed by El Salvador, demonstrating a complete understanding of Bitcoin and what it means to the future of that country. There is a clear divide here; on the one hand, profound ignorance and, on the other, deep insight, responsible stewardship, future-oriented thinking and ethics. Future-oriented governments will be desperate to fully embrace Bitcoin and its dynamics, knowing that the probability that it will become the world’s reserve currency is one. (That means an absolute certainty, math-challenged readers.) Bitcoin was designed to protect everyone on Earth from stupid people, but before Bitcoin can protect you from stupid people, it needs to be adopted by those same stupid people that are the threat to you. This is the conundrum. How can you get stupid people to buy and hold and use bitcoin? And what happens when they’re running the government? The answer for people living in ethically-run countries is that people like President Nayib Bukele and President Faustin-Archange Touadéra must take the reins of power and use them responsibly to free their countries from the yoke of penury-entrenching Western fiat currencies. The Central African Republic is symbolically placed on the continent to become the center of African bitcoin-based ecommerce, being roughly equidistant from all points on the continent. That country could be transformed from being one of the poorest to one of the richest in very short order, should it harness the transformation made possible by adopting Bitcoin and then become a continental hub for Bitcoin. This is no more strange than El Salvador becoming a focus for Bitcoin, for those of you with a goldfish memory who believe this is unimaginable. Doing business on the continent of Africa is very difficult. It is difficult to get payments in and very difficult to get payments out. For example, there is a black market exchange rate, and the government-sanctioned exchange rate in Nigeria, meaning that there are two economies running in parallel, on top of the difficulty of moving money out. Bitcoin fixes all of this because anyone can send and receive bitcoin in any amount at any time, without permission, and its price is determined by the market, not the State. Saying “without permission” or “permissionless” as Bitcoiners do, is a phrase loaded with so much benefit that it is hard to describe to Westerners who have no idea of what it is like to do business on the continent of Africa. They take for granted that doing business and sending and receiving fiat money is a matter of pressing a button. In Nigeria, for example, real life is not so. Moving money is fraught with difficulties and multiple ways of making a loss on a transfer. These piled-up losses can make it impossible to earn a profit, and if you do, impossible to spend or recycle it where you need to spend or recycle it. Bitcoin makes all of this go away, as well as adding extraordinary speed to all transactions that are without precedent for Nigerians and many people living on the African continent. Given all of the advantages of Bitcoin, an intelligent person would ask, “Why then hasn’t Nigeria officially embraced bitcoin as a means of payment?” This is the correct question, and there are many answers to this, some cultural, that are preventing the Nigerian government from embracing reality and acting boldly like a leader nation as El Salvador and the Central African Republic has. Trying to do any sort of Bitcoin business in Nigeria very often involves the invocation of the Central Bank of Nigeria (CBN), which has a stranglehold on all businesses and bank accounts in Nigeria. Bitcoin would abolish their societal status and the reign of terror that they’ve unleashed on the great people of Nigeria. It is a sure bet that this is one of the key reasons why they’re trying so hard to stamp out Bitcoin, rather than do their duty to serve the Nigerian people by embracing this new tool. That the most populous country on the continent of Africa is the number two nation on Earth for Bitcoin adoption (one-third of all Nigerians use it) in the face of withering and unethical restrictions is a testament to the powerful and resourceful character of the Nigerian people who are born futurists, natural capitalists and extraordinary entrepreneurs: highly intelligent, capable and motivated. What is holding back the Nigerian people is the totally corrupt, protectionist and anti-Nigeria CBN, which is preventing the flow of money and flourishing of innovation there, for no good reason other than a nauseating lust for power and a cargo cult mentality about the role of the State and necessity for a central bank. In Nigeria, more than any other country “Bitcoin fixes this” by removing the need for the naira from people’s lives as they switch to bitcoin. Nigeria could become the African capital of Bitcoin if the Nigerian people used it without permission en masse, squeezing out the naira as the people’s money, exposing their businesses and personal finances to the free flow of money bitcoin facilitates. It could become the African capital of Bitcoin with an El Salvador-style embracing of reality if Nigeria made bitcoin legal tender. Were the Nigerian government to do this, it would be the most powerful signal imaginable, and establish them as the absolute leader nation on the continent. It would not only signal that Bitcoin is changing the world, but that the so called “third-world countries” are taking their destinies into their own hands, opting for sound money over sycophancy, for reliability over rapaciousness, for transparency over tyranny, for clarity over corruption, for freedom over fiat. The choice is simple. Nigeria must go full Bitcoin by law. The Nigerian people desire and deserve it. But it appears that the backwards actors and cargo cultists in Nigeria may not presently be prepared to hear these words. The Nigerian government’s version of a Securities and Exchange Commission, a cargo cult imitation of the American SEC, has just released a totally absurd document on the offering and custody of “Digital Assets.” In it, is one of many hilarious sections on the issuance of initial coin offerings (ICOs) which are already dead everywhere else on earth, and were they not, would never be issued in Nigeria by anyone. This shows that the people who authored this “regulation” are simply copying text from the internet or have been spoon-fed it; in fact, everything about them is copied all the way down. They even have a totally insane section mandating the publishing of white papers. It is obvious by this that they don’t know the origin of the white paper phenomenon in “the space” and are simply making things up as they go along, regulating and mandating anything that moves without any understanding of how anything works or why it exists. Remember also, that every novel offering made available over the internet is now fully accessible by every Nigerian citizen, whether the Nigerian government likes it or not, because these offers are freely accessible and usable on commodity mobile phones. All these ridiculous copycat regulations do is ensure that Nigerians are excluded from writing and releasing software inside their own country. And the Nigerian government doesn’t have the technical capability to prevent Nigerians from using Bitcoin or any other communication tool. In effect, this means that Nigerians (presently one-third of them) are openly rejecting the system there and voluntarily opting into a nongovernmental system of money and finance because it is better and more suited to the Nigerian character of innovation. To a foreigner, the idea that Nigerians have a character of innovation may seem odd, but there is no other explanation for that great country being number two in the world for Bitcoin adoption. It is the Nigerian government that is Luddite and getting in the way of Nigerians and their inevitable joining of the global network as leaders and peers. Finally (and thankfully), the position of the Nigerian government appears to be open to change. It is attending the extraordinary meeting in El Salvador with the governments of central bankers from Angola, Armenia, Bangladesh, Burundi, Congo, Costa Rica, Egypt, Gambia, Ghana, India, Namibia, Senegal, Sundan, Uganda, Zambia and 25 other developing countries flying in to find out how to embrace Bitcoin. Nigeria being on this list of countries is highly significant. As a group, countries on this list are bigger than BRICS. If they all “go Bitcoin,” it will be one of the most significant events in modern history and the removal of the yoke of the dollar from the necks of billions of people. Bringing them together outside the U.N./U.S. context is a stroke of genius. Now, together with common cause, common complaints and common animus, Bitcoin will serve as the basis for a new pole in the emerging multipolar world: one where financial coordination doesn't require trust and there is no leader, just the absolutely fair, transparent and totally ethical Bitcoin. Tyler Durden Thu, 05/19/2022 - 05:00.....»»

Category: dealsSource: nytMay 19th, 2022

Rabobank: If The US Is Going To Win This War, It Needs Higher Rates, A Stronger Dollar, And Lower Commodity Prices

Rabobank: If The US Is Going To Win This War, It Needs Higher Rates, A Stronger Dollar, And Lower Commodity Prices By Michael Every of Rabobank Everything Old is New Again Using the matrix of both bond yields AND commodity prices I suggested yesterday as a judge of what the market is thinking vs. what the Fed then needs to be doing seems to have held water. Amid the usual “why bother paying attention to facts when one can buy dips” equity action, US 10-year yields surged 8bp back to 2.99% and 2-year yields 12bps to 2.69%, AND oil and wheat moved higher, the former to over $115 before dipping back to around $113, the latter starting lower but closing at a new record high. Bonds sold off after we got a hawkish Powell interview that showed he was looking at the continued rise in commodities, not any falls in demand. Specifically, Powell stated ”There’s an overwhelming need to get inflation under control”; that “this is not a time for tremendously nuanced readings of inflation: we need to bring it down in a convincing way. We do not see that right now. Some signs are promising, others are not”; and that the Fed “will push ahead with rate increases until we get as far as we need to get – we’ll keep going.” Indeed, Powell stressed, “Neutral is not necessarily a stopping point. If we have to go beyond neutral, we will not hesitate.” He also underlined “We will tighten until we are at a place where financial conditions are appropriate, and inflation is coming down.” In other words, bond yields cannot truly come down before key commodities do. Whocouldanooed? For those rightly thinking that rate hikes don’t help inflation driven by the supply side, which is seeing real incomes fall sharply for those outside Wall Street, there was no succour. Powell added the Ukraine war could last longer than expected, as could Chinese lockdowns, and that “there is a real possibility that globalisation does into reverse to some extent.” Indeed, while inflation is partly driven by supply bottlenecks, the Fed is not seeing much evidence of it “healing,” and, crucially, “is not setting policy based on the view we get relief from the supply side.” As such, “we clearly have a job to do on the demand side.” But what of the Fed’s 2020 shift to focus on the lowest possible unemployment rate for all Americans in order to bridge socio-economic chasms? Well, now Powell sees the natural rate of unemployment as likely higher than 3.6%, where it sits, and implied he expects joblessness to rise ahead, adding he wants to see only “healthy” nominal wage inflation consistent with 2% CPI, which it currently exceeding in many places. (Australia just saw a 2.4% y-o-y print for Q1, which was below consensus, and may take some heat out of Aussie markets.) Overall, Powell said there would be “pain involved” in doing what was necessary, and a “soft-ish” landing was only now “plausible”. So, yes, the implication is the recession Mr Market is talking of – just not the rates easing-of-financial-conditions Fed response he was already starting to price for. That was followed up by Evans arguing the Fed should raise rates to a 2.25%-2.5% neutral range “expeditiously”, and favours “front-Loaded” hikes to transition to a more measured pace, which would give them time to monitor supply chains --which are being noticed and have no resolution-- in order to evaluate tighter policy. In short, everything old is new again: hawkishness; wanting higher unemployment and lower nominal (and real) wage growth; and a Fed that is prepared to talk the talk – although walking the walk, or walking and chewing gum at the same time, is yet to be seen. Meanwhile, we got more central bank news from Europe, where Reuters says, ‘Exclusive-ECB's Lagarde gives national central bank chiefs louder voice on policy’. The details are that ECB President Lagarde “has given national central bank chiefs a bigger say in policy meetings, asking her own board to speak less and set aside more time for debate,” according to sources. Chief economist Lane and fellow board member Schnabel have been told to limit their presentations and leave more space for the central banks of the euro’s 19 countries to air their views. This is implied as being introduced because “a few voices typically dominate,” and “criticism has grown since last summer as Lane and his staff repeatedly underestimated the size and duration of inflationary pressures. The surge in prices, which some ECB policymakers warned were persistent, eventually prompted the central bank to change tack and open the door to higher interest rates.” So, this is not so much about democracy as the fact that the loudest voices on inflation have been completely wrong (by not seeing everything everywhere all at once, as noted yesterday). Regardless, it takes us back to an older era when a wider variety of speakers had a say. On which, wouldn’t it be nice if we also got business, trade/logistics, and union voices heard around the central bank table too today, rather than just the financial sector and academic economists like Lane? Their input would certainly be relevant, it appears. And why not national security figures too? The first modern central bank, the BOE, was set up to finance a major war, as were its European counterparts. (As the EU and UK are daggers drawn again over Northern Ireland, with trade war in the wind.) Today they cannot even do a good job of fighting inflation, let alone defending Western interests. Yet everything old may be new again there too due to the Ukraine metacrisis. US Treasury Secretary Yellen is now talking of a new Marshall Plan, which takes us back to the 1950s. Inconveniently, that involves winning the war first, which means US Lease-Lease, which is already in place, taking us back to the 1940s, and integrating military, economic, and financial components: after all, the measurement of ‘GDP’ originated in the US in WW2 as a tool to win it, not to set up the quarterly ‘guess the weight of the cake and make billions’ competition it has since become. If the US is going to win this war, it needs to address the economic component – which implies higher rates, a stronger dollar, and lower commodity prices to tame its inflation and reduce Russian income. Others might want similar FX movement, as the EIA notes today: “A strong US dollar means that countries that use currencies other than the US dollar pay more as crude oil prices increase. Since June 1, 2021, the Brent crude oil price has increased by 59% in US dollars and by 86% in euros.” Now imagine your currency collapses because you try to do ‘new normal’ QE while running commodity-driven trade deficits - and you don’t get Fed swap lines,… as Turkey’s TRY stumbles further over geopolitics, and China stops reporting foreign investor bond trades as capital outflows accelerate, and new home prices just dropped 0.3% m-o-m. Yet the US will also need to address the financial component. Being *very* charitable, that might explain why there are rumors flying around that the White House is considering de facto forcing Russia to default on its foreign debt by not extending a soon-to-lapse rule allowing Moscow to make such dollar payments. It will also involve joined-up actions such as offering India $500m in US military aid, approaching the levels offered to Egypt and Israel, to persuade it to switch from Russian to US weapons, as part of a broader geopolitical realignment. (Which was already underway via The Quad: this is also to help tip the balance as India decides between French and US planes.) Yet at the same time, this links back to supply chains. There are reports that Ukraine has already depleted a quarter and a third of the total US stock of Javelin and Stinger missiles, and current US production is in no way capable of replacing them: they are being fired far faster than they can roll off of production lines. Imagine what happens if the war drags on beyond the end of the year. Imagine if a new war begins somewhere else. Imagine the global military hegemon without the weaponry it needs to fight. And that dilemma brings us back to integrating military, economic, and financial components. Relatedly, we recently got another ‘old is new’ shift from the IMF, who are now officially more supportive of capital controls, pre-emptively in some cases. Those who follow a Godley approach to balance sheets would point out that there are many good reasons for introducing capital controls like the ones we had under Bretton Woods, which takes us back to 1945-1971. If you don’t have destabilizing global capital flows, you don’t have destabilizing global trade deficits, because the former drives the latter. Meanwhile, those who follow a geopolitical-realist approach to markets will extend the argument to say it is the US which is most likely to ultimately introduce capital controls (and more tariffs) against some countries which it runs large bilateral trade deficits with, i.e., no US capital outflows to China, and no capital inflows to the US from China, which would effectively decouple the two. And when one says ‘ultimately’, one is not looking too far into the future at the rate things are shifting and given the train of thought from the US Trade Representative. One is not only looking at China in this regard. Germany could be in the cross-hairs too if the country fails to follow through on its promise to rearm before the 2024 US presidential election, and instead goes for more appeasing ‘trundle durch bumble’. Imagine the rates impact of this kind of US policy shift towards trade only within an Anglosphere, or a Network of Liberty, or ‘Freedom Trade’ not free trade. Yet is not out of the question based on the current political and geopolitical trends and the iron logic of war. Far from it. Rather, everything old is new again. ”Don't throw the past away; You might need it some rainy day; Dreams can come true again; When everything old is new again Get out your white suit, your tap shoes and tails; Put it on backwards when forward fails; Better leave Greta Garbo alone; Be a movie star on your own” Tyler Durden Wed, 05/18/2022 - 11:05.....»»

Category: blogSource: zerohedgeMay 18th, 2022

The year workers said "no"

In the thick of the pandemic, workers were left to fend for themselves. Now they've learned how to demand more from their employers. People marching on East Pine Street during the "Fight Starbucks' Union Busting" rally and march in Seattle on April 23.Jason Redmond/AFP via Getty Images In April 2021, a record-breaking number of workers quit their jobs — a trend that hasn't let up. At the same time, an organizing wave has spread across retailers, such as Starbucks and Amazon. And some workers are coming together to protest low pay or poor conditions without unionizing. A year ago, if you'd asked Hope Liepe if she'd be working at a unionized Starbucks, she "would've probably said that was, like, insane and would never happen — especially at Starbucks."But last month, the store in Ithaca, New York, where the 18-year-old works as a barista joined a wave of Starbucks stores officially voting to unionize. "I remember that day. We all came together in this big watch party," Liepe said. "Just the excitement and just the joy that you could feel from all of us of having completed something together, and being able to move together to form a better workplace for all of us."Since then, all three locations in Ithaca have voted to unionize, along with over 50 Starbucks stores nationwide. Apple workers in Atlanta and New York are looking to follow their lead. And the Amazon Labor Union pulled off an upset victory, marking the retail giant's first-ever unionized warehouse. "We are listening and learning from the partners in these stores as we always do across the country," Starbucks said in a comment to Insider. "From the beginning, we've been clear in our belief that we are better together as partners, without a union between us, and that conviction has not changed." Liz Shuler, the president of the AFL-CIO, the country's largest labor federation, said the past year has shown "workers in motion.""Coming out of the pandemic, working people have not only shown their resilience, but they've shown that they are ready to draw a line and demand more," she said.From left: David Woods, the secretary treasurer of international BCTGM; Liz Shuler, the president of the AFL-CIO; Dan Osborn, a worker; and Sue Martin, the president of Nebraska's AFL-CIO.Dan OsbornIt's hard to say unionization is at a tipping point. While Gallup found 68% of Americans approve of unions, a high unseen since 1965, actual membership fell yet again in 2021.But one thing is clear: The culture of work in America changed drastically in the past year. Demand for higher wages, a rise in so-called anti-work attitudes, "slowing up," and a thirst for organizing are just some of the tools workers wielded with mighty force. The year workers said "no" to what they viewed as low wages and poor conditions began last April when Americans walked off the job in an unorganized fashion to the tune of a record 4 million resignations — and it hasn't let up since."I think the pace of the change has surprised me," Shuler said. "We always knew the potential was there." "It's a time where people are finding their voice and ready to stand up and say, 'We're not gonna take it anymore,'" Shuler added. "So whether you're in a union or not, I think workers have been pretty dissatisfied with their jobs — and they're taking action."Saying 'no' means quitting, unionizing, slowing up, or protesting for moreApril 2021 kickstarted a wave of quitting felt around the country.It was around that time that vaccines started to become widely available, and people who held off on quitting during the thick of the pandemic took the leap. There was also pure discontent: Entering a new wave of the pandemic, workers began to reflect on how they were treated — and for many, it didn't measure up."Listen, we can try to come up with a fancy answer on why are people resigning," Secretary of Labor Marty Walsh told Insider. "The bottom line is the pandemic really gave people time to think about where they are in their own personal life, where they are financially with their families and putting food on the table."A lot of these workers haven't really stopped working. Many seem to be reshuffling, moving into roles that pay better or fit their lifestyle or aspirations."Why are people leaving work? People are leaving their jobs because they're not satisfied," Walsh said. They probably want more money, and many workers have succeeded in getting it — but with a whole lot of inflation tacked on.It turns out, there's an organized way to fight for more money, better benefits, and job security without leaving your job: unionizing. "I think a lot of people are looking at organizing as an opportunity to collectively support increasing wages, increasing benefits, increasing worker protections and job safety on the job site," Walsh said. Unionized workers in the US make $1,169 in median weekly earnings, while nonunion workers make $975, the Bureau of Labor Statistics said.But despite Americans signaling that they want higher pay and better working conditions, union membership has been on the decline since a high in 1954, and 2021 was no exception. "It's a complicated battle because in America, there's this resistance toward labor movements," said Andres Felipe Almeida Gomez, a restaurant worker in New York who's part of the worker advocacy group One Fair Wage. "It's almost considered evil, but now people are kind of waking up."Signs of "waking up" don't always involve unionizing. Some workers are purposefully decreasing their productivity, known as a "slow up" in pursuit of better work-life balance.And, there's the third of work stoppages in 2021 that were by nonunionized workers, according to researchers at Cornell University's ILR School — like the nine Burger King workers who all left over understaffing and high temperatures, putting up a sign that said, "We all quit — sorry for the inconvenience."One such worker hitting the streets sans union is Goma Yonjan Gurung, a nail-salon worker who's involved in a push to pass the Nail Salon Minimum Standards Council Act. She, her nail salon "sisters," and local politicians rallied in Manhattan's Zucotti Park to advocate that employers introduce higher wages and standards and give workers more of a say. "They have worked very hard in this industry, and they know the struggle," she said through a translator.Nail-salon workers rallying in New York.NY Healthy Nail Salons CoalitionGurung said they were asking for "a very bare minimum," and that nail salon workers were entitled to paid leave and pensions, just like any other worker."I've spent half of my life working in this industry, over 25 years. After working that many years, I have nothing when I look back at it," Gurung told Insider. But she was hopeful that nail-salon workers would have "something" in the future. "And not end up like me — like pension, holiday, vacation, and paid sick leave," she added. The 'Forever Resignation' is hereEmployers still hold the power — they're the ones hiring and firing, after all — but with what could be a "Forever Resignation" on their hands, they'll need to step it up to attract workers.Some white-collar workers would rather quit than return to the office — or won't even entertain a job interview for an in-person job. A November survey from the ADP Research Institute found that 71% of 18- to 24-year-olds said they'd consider looking for another job if they had to return full time. Service workers are turning their backs on the low-paid industry altogether for better pay, benefits, and conditions. In Wisconsin, where nurses at UW Health have been trying to unionize since 2019, getting a union back would "go a long way toward both recruitment and retention," said Zach Sielaff, a 38-year-old registered nurse in the children's operating room.UW nurses on an informational picket.UW nursesOn top of all of that, the perception of organized labor has "changed dramatically" over the past year, Shuler said, driven in no small part by a court of public opinion watching the workers organizing.So what's happened since April 2021? Workers, especially low-wage ones, emerged from a pandemic where, for the most part, they had to fend for themselves when it came to safety and financial stability. When economic recovery came, workers remembered the position they'd been left in — and the sacrifices they'd been forced to make. Now, they had more options.For some, that was quitting. For others, it was realizing that the people who'd been standing next to them as they struggled to find masks and dealt with abusive customers were fending for themselves, too — and realizing that they could change that together."Personally, I think that the labor movement is long overdue for a movement like this," said Laura Garza, a Starbucks partner and union organizer who traveled to the White House. "I think the pandemic really opened everybody's eyes that, 'Hey, we should be working with better conditions, not the conditions that we had been working under, and we deserve a dignity to organize.'"Read the original article on Business Insider.....»»

Category: topSource: businessinsiderMay 15th, 2022

The US Navy"s newest fleet is keeping an eye on the North Atlantic with a first-of-its-kind deployment

"Live interaction" with another navy's ships "is something you can't replicate," Vice Adm. Daniel Dwyer said. US Navy aircraft carrier USS Harry S. Truman, left, receives fuel from USNS Supply, center, as USS Mitscher pulls alongside, in the Mediterranean Sea, February 17, 2022.Norwegian Armed Forces/PO Marius Vaagenes Villanger The US Navy's 2nd Fleet surged ships to the North Atlantic this spring to support forces in Europe. The deployment comes amid heightened tensions with Russia, which has grown more active in the Atlantic. The deployment was meant to reassure allies and give US crews new experience, the fleet commander said. The US Navy's 2nd Fleet surged forces to the North Atlantic between January and April, responding to a request from the top US commander in the region amid heightened tensions with Russia.The short-notice deployment was the first time 2nd Fleet has had command-and-control of forces in Europe outside of an exercise and it demonstrated the fleet's flexibility and responsiveness, fleet commander Vice Adm. Daniel Dwyer told reporters on April 29.Second Fleet was reestablished in 2018 in response to increasing Russian naval activity in the North Atlantic, but Dwyer avoided linking the deployment to Russia's attack on Ukraine.Asked whether the surge was connected to Russian military activity, Dwyer would only say that it demonstrated the US's ability to "surge certified, ready naval forces" — as in, deploying ships whose crews are fully trained ahead of an anticipated departure date — and its commitment to the defense of European allies and partners.A US Navy sailor assigned to USS The Sullivans stands watch as the ship enters Copenhagen, March 21, 2022.US Navy/MCS3 Class Mark KlimenkoDuring the deployment, 2nd Fleet, which is based in Virginia, had command and control of the destroyers USS Forest Sherman, USS The Sullivans, USS Donald Cook, and USS Mitscher.A fifth destroyer, USS Gonzalez, deployed from the US in January as part of the surge but was later redirected to the Mediterranean and then to the Middle East.Dwyer also embarked Destroyer Squadron 22 as a forward command element aboard a destroyer and later on USS Mount Whitney, the flagship of the Navy's Italy-based 6th Fleet, which 2nd Fleet had tactical command of and used to direct ships in the North Atlantic.Second Fleet is officially responsible for the western Atlantic from the Caribbean to the North Pole, but it can also act as "a maneuver arm" for a four-star headquarters — in this case US Naval Forces Europe and Africa."At time of need I can surge forward and support a four-star naval headquarters with my maritime operations center commanding-and-controlling ships that are outside of my normal area of responsibilities," Dwyer said. "This operation was the first time that we actually put it in practice, and we showed and proved that unique, agile, mobile capability."USS Forrest Sherman and USS Donald Cook train with German frigate FGS Sachsen, center, in the Baltic Sea, March 9, 2022.US Navy/Naval Air Crewman (Helicopter) 2nd Class Reuben RichardsonThe US Navy has been trying to reacclimate crews to the high north and the Arctic, which are increasingly accessible but remain tough environments for sailors and ships.Upon arriving in the region in February, "those crews did encounter weather they're not accustomed to," and the fleet took precautions so they could be safe and effective, Dwyer said. "But again, that builds that experience of those ships being able to operate in areas that they're unfamiliar with."Over the following weeks, the US ships trained with the Italian, British, Danish, Polish, German, and Swedish navies in the North Sea and the Baltic Sea, conducting what Dwyer called "a full range of maritime missions, from maneuvering, from communicating, from establishing networks and links."US Navy ships do extensive training on the East Coast, Dwyer said, "but to actually sail alongside a naval vessel from one of our NATO allies or one of our partners, you just can't do that in training.""That live interaction — actually coming up on bridge-to-bridge and having that communication and then discussing how they're going to execute the assigned mission together — is something you can't replicate," Dwyer added.Avenues of approachSailors man the rails aboard USS Forrest Sherman in Kiel, Germany, March 21, 2022.US Navy/MCS Seaman Eric MoserAs head of both US 2nd Fleet and NATO's Joint Forces Command Norfolk, Dwyer is responsible for keeping open the ocean between North America and Europe.While Dwyer did not link 2nd Fleet's recent activity directly to Russia, NATO leaders have warned repeatedly about Russian naval activity and the risk it poses on both sides of the Atlantic. Dwyer's predecessor led several exercises to simulate a contested transatlantic crossing.Since reaching full operational capability in July, "JFC Norfolk has been actively monitoring the North Atlantic through to the Arctic to ensure NATO's strategic transatlantic lines of communication remain open in order to support the sustainment of Europe," Dwyer told NATO commanders this month.NATO leaders have warned specifically about Russia's submarines, which are more active and have new, longer-range weapons. US officials have said those subs' presence in the Atlantic means the US mainland is "no longer a sanctuary.""In the past few years Russian submarine activity in the high north has already increased noticeably. This is a worrying development," Iceland's foreign minister, Thórdís Kolbrún R. Gylfadóttir, said in April.Norwegian frigate HNoMOS Thor Heyerdahl, French frigate FS Latouche-Tréville, and FGS Sachsen in the North Atlantic during Northern Viking 2022.French NavyIceland sits in the middle of the Greenland-Iceland-UK Gap linking the Atlantic and the Arctic, where the ships and subs of Russia's powerful Northern Fleet are based. NATO militaries have put renewed emphasis on that strategically important waterway."Iceland will do its utmost to facilitate the ongoing monitoring of such activities and any response that may be required," Gylfadóttir said of Russian submarine activity.That emphasis was reflected in Northern Viking 22, an exercise held in Iceland in April. Its focus on anti-submarine warfare was of "specific relevance," according to German Navy Cmdr. Arne Pfingst, who said the GIUK Gap is of "great interest" to Germany's Navy.Second Fleet did not command forces involved in Northern Viking, but Dwyer, speaking to reporters in April, said the North Atlantic is "without a doubt" becoming "a more dynamic environment."Second Fleet's mission is "to deter and defeat potential adversaries in our area of responsibility, wherever that happens to be," Dwyer added. "At its core, it's to defend the avenues of approach between Europe and North America."Read the original article on Business Insider.....»»

Category: topSource: businessinsiderMay 9th, 2022

Russia is still sliding towards a bond default in the coming weeks. It"s up to the US Treasury whether it actually happens.

The Russian government narrowly avoided defaulting on its bonds this week, but its difficulties are far from over. Russian President Vladimir Putin, right, and Finance Minister Anton Siluanov, left, face tricky decisions over the government's foreign bonds.Olga Maltseva/AP The Russian government could still default on its foreign bonds within weeks, despite making key payments last week. That's because a key US Treasury rule, which has allowed payments to go through, is set to expire later in May. If the Treasury doesn't extend the exemption, Russia will find it very hard to get its payments to bondholders. Like Indiana Jones screeching under a closing door in The Temple of Doom, Russia managed to avoid default at the very last moment on Tuesday, as bond payments started finding their way into investors' accounts.Yet there is still one big obstacle in Russia's path that means it could easily tumble into default when its next bond payments fall due on May 27.The US could cut Russia offUp until now, Western bondholders have only been allowed to receive sovereign bond payments from Russia because of a special rule put in place by the US Treasury in late February.The exemption — officially called General License 9A — "authorizes US persons to receive interest, dividend, or maturity payments on debt or equity" of the Russian government. It has allowed money to squeak out of Russia, despite the increasingly thick layer of sanctions suffocating the country's financial system.The problem for Moscow is that the exemption runs out on May 25.That's two days before it must send investors $71 million in coupon payments on a dollar bond, and 36 million euros ($38 million) on a euro bond.Bondholders and analysts have been left guessing whether the US Treasury will extend the carve-out. A Treasury spokesperson declined to comment."They may or may not extend the General License," Timothy Ash, emerging markets strategist at BlueBay Asset Management, told Insider. "If they give an extension, it'll be temporary. It could be a month, could be three months. We'll wait and see."Moscow must cough up dollarsRussia is allowed to pay in rubles on the euro-denominated bond, thanks to a fall-back provision in the contract. But it has to cough up the $71 million in dollars.If investors don't get their cash, Russia will have defaulted in the eyes of Western financial institutions. Until the country sent through the dollar payments last week, a global committee of banks was poised to declare that Moscow had officially reneged on its debts.Andy Sparks, an analyst at financial data company MSCI, said in a note this week that market pricing suggests investors still think Russia is highly likely to default.He said the prices of credit-default swaps — financial contracts that insure investors against default — suggest there's a 67% chance of a default within the year and an 88% chance of a default in five years."A high level of uncertainty continues to hang over the Russian sovereign-bond market," Sparks said.Russia claims a default would be 'artificial'Russia has argued that Western sanctions are pushing towards an "artificial" default, even though it has the money to pay. The government is still receiving significant revenue from energy exports, and it has access to hundreds of billions of dollars of currency reserves, despite sanctions freezing much of the stockpile.Yet such an argument is "ludicrous," according to Ash. "Geopolitics is a key part of the country's credit story. You can't ignore it."Including the $109 million due May 27, Russia still has to make almost $2 billion of bond payments this year.It had around $39 billion of foreign-currency denominated bonds outstanding as of January, according to analysts at JPMorgan, $20 billion of which was owned by foreign investors.Read more: There's a better-than 50% chance that a recession is coming in the next 12 months as inflation stays hot and consumer spending weakens, warns a strategist at Putnam Investments who says that commodities are the best way to protect your portfolioRead the original article on Business Insider.....»»

Category: topSource: businessinsiderMay 7th, 2022

The Federal Reserve lifts interest rates in first double-sized hike since 2000 — paving the way for much pricier mortgages, car loans, and other borrowing

The central bank raised its benchmark interest rate by a half percentage point on Wednesday, signaling a more aggressive plan to fight inflation. Chairman of the Federal Reserve nominee Jerome Powell testifies during his confirmation hearing before the Senate Banking, Housing and Urban Affairs Committee November 28, 2017 on Capitol Hill in Washington, DC.Alex Wong/Getty The Fed raised interest rates by 0.5 percentage point, doubling the size of its usual rate hikes. The move escalates the central bank's fight to slow the fastest price growth in decades. The hike will drive up borrowing costs for mortgages, car loans, and credit-card debt. The Federal Reserve has officially doubled its pace for pulling inflation lower.The Fed raised its benchmark interest rate on Wednesday by 0.5 percentage points, marking a considerably more aggressive move toward reversing pandemic-era support and cooling demand. The hike doubles the size of the central bank's typical quarter-point increases and is the first of its magnitude since May 2000."With appropriate firming in the stance of monetary policy, the Committee expects inflation to return to its 2 percent objective and the labor market to remain strong," the Fed said in a statement. "In support of these goals, the Committee decided to raise the target range for the federal funds rate to 3/4 to 1 percent and anticipates that ongoing increases in the target range will be appropriate."The increase is the second of the central bank's current hiking cycle following the 0.25-point uptick announced in March. The benchmark rate now has an upper limit of 1%, up from the 0.25% limit seen through much of the pandemic. The rate hike was unanimously approved by the committee's 10 voting members.Economists and market participants widely expected a 0.5-point hike at the Federal Open Market Committee's May meeting. Markets are currently pricing in similarly sized increases at the central bank's June and July meetings before returning to 0.25-point hikes in the fall.The double-sized increase will have dramatic effects on the economy in the coming weeks. The federal funds rate influences interest rates on practically every kind of borrowing. The 0.5-point hike will directly translate to higher mortgage rates, pricier car loans, and larger interest payments on credit card debt.Savers, however, will benefit, as a higher benchmark rate means greater interest from savings accounts. By raising rates, the Fed can cool spending and make saving more attractive. That puts the brakes on economic growth and helps to close the gap between supply and demand that's led to such high inflation.Policymakers also announced plans to start reducing the Fed's holdings of Treasurys and mortgage-backed securities on June 1. The central bank scooped up nearly $6 trillion in assets through the pandemic in an effort to support market functioning. That buying spree wound down in March, and by reducing its holdings, the Fed will further tighten its policy stance.The Fed will initially cap its runoff of Treasurys at $30 billion per month and boost the limit to $60 billion after three months, according to a Wednesday statement. The cap for agency debt and mortgage-backed securities will first be set at $17.5 billion per month and climb to $35 billion after three months.By issuing a larger-than-usual hike, the Fed is betting that the economy is strong enough to keep recovering without as much monetary aid. It's also accelerating its plans to counter the fastest price growth since 1981. Inflation became the US's biggest economic ill as the Omicron wave faded in early 2022, and Russia's invasion of Ukraine has only exacerbated the issue. The double-sized rate hike effectively lets the Fed pull forward some of its future increases in hopes of cooling inflation sooner."Inflation may well peak in the coming months, but the broadening and intensification of price pressures imply that inflation will decline very gradually," Seema Shah, chief strategist at Principal Global Investors, said. "The first back-to-back hikes of over 0.25% since 1984 are beckoning."Many aren't too confident the central bank can solve the inflation issue without posing new problems for the economy. Bearish voices ranging from Wall Street banks to former Treasury Secretaries have raised concerns that the faster hiking cycle will slam the brakes on the recovery and possibly spark a new recession.It's too early to say whether the Fed can achieve a so-called soft landing, in which inflation slows without a rise in unemployment. But as prices continue to surge higher and the economy continues to heal, the Fed's Wednesday action marks a major escalation of the US's war against inflation.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderMay 4th, 2022

Oil and natural gas jump in Europe after EU unveils plans to phase out Russian crude within 6 months

Europe will gradually phase out Russian imports of crude oil and refined products in the coming six months, as it cuts off capital flows to Moscow. Russia is Europe's biggest oil supplier.Andrey Rudakov/Bloomberg via Getty Images Oil rallied on Wednesday, after the EU unveiled a proposal to phase out Russian crude imports within six months. European Commission President Ursula von der Leyen said the aim is to ratchet up pressure on Moscow for its war in Ukraine. "Russian fossil fuels are soon going to be history for western Europe and its allies," one analyst said. Oil and natural gas prices soared in Europe on Wednesday, after the EU unveiled a long-awaited proposal that would phase out imports of Russian crude in six months. EU Commission President Ursula von der Leyen said this latest round of sanctions will include a complete import ban on all Russian oil, which covers both crude and refined products. It would affect all shipments, both seaborne and via pipeline. Brent crude futures jumped 3.25% on the day to $108.39 a barrel. The oil price has risen nearly 40% so far in 2022, topping $100 a barrel for the first time in years, driven in part by the prospect of direct sanctions on Russia's energy sector. The EU, which in 2021 relied on Russia for about 25% of its oil and 40% of its natural gas, has been under intense pressure to stop imports of crude as a means of cutting off financing for Moscow's war in Ukraine. "While an oil embargo still hasn't been officially voted through, it is very, very clear that it is only one way forward for the EU (and its allies) — and that is full exit from Russian energy," SEB's head of commodity strategy, Bjarne Schieldrop, said."Russian fossil fuels are soon going to be history for western Europe and its allies," he said.Von der Leyen said Wednesday the oil will be phased out in an orderly fashion, giving member states enough time to find alternative supply and with minimal disruption to global energy markets. "This is why we will phase out Russian supply of crude oil within six months, and refined products by the end of the year," she said in a speech to the European Parliament. "Thus, we maximize pressure on Russia, while at the same time minimizing collateral damage to us and our partners around the globe." Russia produces some 11 million barrels of crude a day — roughly equal to 10% of total world daily output. It exports around 7 million barrels a day, and Europe buys more than half of that, according to the US Energy Information Administration. About two-thirds of the supplies arrive by ship, and the remaining one-third by pipelines stretching thousands of miles across the continent.Since its invasion of Ukraine in late February, Russia has been the target of punitive sanctions, particularly from Western nations. But its huge energy sector had mostly escaped unscathed, save for import bans from countries like the US and UK, which buy very little in the way of Russian oil, natural gas or coal.The market has been losing about 1 million barrels of Russian oil a day in April from traders shunning cargoes, analysts assume, and existing EU sanctions already restricted purchases of Russian crude to only those "strictly necessary" from May 15. BP boss Brian Looney on Tuesday said he expected an additional 1 million barrels a day to vanish on top of that in May.A trickier issue will be replacing Russian refined product imports, particularly so-called middle distillates. These include fuels such as diesel, fuel oil that runs heavy-duty vehicles and machinery, and inputs for petrochemicals. "The middle distillate market is extremely tight in most regions around the globe. Risks around Russian supply, lower Chinese exports, recovering demand following Covid, and limited ability of refiners to respond has meant that inventories in the US, Europe and Asia are at multiyear lows," ING strategist Warren Patterson said.Natural gas is a far less likely target for restrictions, not least because of the EU's dependence on it. But the relationship is mutual. According to EIA data, the bloc takes 89% of all Russia's gas exports.Even though gas is immune for now, benchmark European prices have shot up by 50% this year alone. Dutch gas futures were up 5.35% on the day at 104.75 euros per megawatt hour.Reports citing EU sources said Hungary and Slovakia, which are reliant on the imports, will get longer to phase out purchases of Russian crude oil. They will be able to keep buying under existing contracts until the end of 2023, Reuters reported, while the Wall Street Journal said they will have a 20-month phaseout.Read more: Gen Z investors are starting to re-shape stock and crypto markets. They're savvier than you might think — and some are even influenced by Warren Buffett, according to a new reportRead the original article on Business Insider.....»»

Category: topSource: businessinsiderMay 4th, 2022

Bill Hwang Released After Posting $100 Million Bail, Says He "Lost His Passport"

Bill Hwang Released After Posting $100 Million Bail, Says He "Lost His Passport" Update (3:30pm ET): Bill Hwang may have blown through tens of billions of personal money, but he still had at least $100 million left, because that's how much he just paid to post bail and be freed after pleading not guilty. This means only one thing: Hwang is about to get on a private jet (conveniently, he lives just 10 minutes away from Teterboro where he can find a plethora of one way tickets to purchase) and next week's megaparty featuring Hwang and Jho Low will be superlit. In his first appearance since being arrested at 6 a.m. Wednesday, Hwang agreed to fork over $5 million in cash and pledged two properties including his personal home to secure his bond, Bloomberg reported. Wearing a face mask, green shirt and tan pants, Hwang agreed not to travel outside of the New York-New Jersey-Connecticut area. Hwang told prosecutors that he lost his passport, so his wife will surrender her passport instead, Bloomberg reports. His co-defendant, Chief Financial Officer Patrick Halligan, also pleaded not guilty and will be freed on $1 million bail and have limited travel. Both men will be released Wednesday. They are due back in court in lower Manhattan on May 19. The size of Hwang's bail matches some of the more high-profile white-collar cases of the past year. Trump ally Tom Barrack was freed from jail for $250 million and Nikola Corp. founder Trevor Milton was released for $100 million. While those levels are high, the highest U.S. bail is believed to be $3 billion, set in 2003 by a Texas judge for real estate heir Robert Durst, after he already jumped bail once. An appeals court later slashed the amount to $450,000. In addition, Galleon Group LLC’s Raj Rajaratnam was freed on $100 million bail in 2009 and junk bond king Michael Milken faced a quarter-billion dollar demand in 1989. Bernie Madoff’s bail was set at $10 million and he struggled to meet it, unable to find four people to co-sign for him. And while Bill - passport in tow - is about to flee, one of his accomplices is about to get a knock on the door. According to Bloomberg, as Bill Hwang’s Archegos Capital Management piled up billions in an attempt to squeeze shorts in a handful of highly shorted names, he coordinated trades with an old acolyte atop another hedge fund, according to U.S. prosecutors. Sometimes Hwang allegedly enlisted his help to sidestep bank policies threatening to end the buying spree. Well, according to Bloomberg, that mystery fund manager, identified only as “Adviser-1” in Hwang’s indictment unsealed Wednesday, is Tao Li, the head of Teng Yue Partners, a New York-based hedge fund that oversaw $4 billion as of last year, according to people with knowledge of the investigation. Li and Teng Yue haven’t been accused of wrongdoing by U.S. authorities. Teng Yue didn’t respond to messages seeking comment. Hwang was arrested Wednesday on charges of fraud for allegedly manipulating markets and deceiving banks that lost billions of dollars. Lawrence Lustberg, an attorney for Hwang, said his client is “entirely innocent.” Bloomberg previously reported that by January of last year Li had taken an intense interest in GSX, amassing a position that was unusually big even among Teng Yue’s concentrated bets. At one point that month, as the stock rocketed, GSX accounted for about 40% of the fund’s portfolio, according to people familiar with the holdings. GSX later changed its name to Gaotu Techedu Inc. While we doubt that Toi won't be accused for long, many were relieved (or maybe disappointed) to find out that this mystery accomplice was not Cathie Wood, head of the infamous ARK Invest, and who we already knew was quite close with Hwang. * * * After the spectacular collapse of Archegos Capital Management, the SEC announced last October that they were investigating whether the firm engaged in market manipulation. On Wednesday, owner Bill Hwang and his former CFO, Patrick Halligan, were arrested at their homes and charged with racketeering conspiracy, securities fraud and wire fraud in connection with a scheme to manipulate the share prices of public companies in order to boost profits, according to Bloomberg. They said the plan, which relied heavily on leverage, helped pump up the firm’s portfolio from $1.5 billion to $35 billion in a single year. -Bloomberg Bill Hwang's RIDICULOUS year, as officially documented by the U.S. DOJ: Hwang's personal fortune grew from $1.5 bln to **$35 billion** within a year. The total size of Archegos's market position with the use of leverage increased from $10 billion to **$160 billion** at its PEAK. — Sridhar Natarajan (@sridinats) April 27, 2022 According to the 40-page indictment, Hwang engaged in a "fraudulent scheme" that included "interlocking deceptive acts and misconduct, through false and misleading statements to security-based swap ("SBS") counterparties and prime brokers and manipulative trading designed to artificially move the market, which, in tandem, increased Archegos’s assets under management from around $4 billion to over $36 billion in just under six months." From March 2020 until its collapse in March 2021, Archegos, at Hwang’s direction, underwent a period of rapid and exponential growth, achieved largely through the entry into SBSs with about a dozen Counterparties, which subjected Archegos to significant exposure to rising and falling share prices of the issuers referenced in its SBSs. Archegos’s growth thus presented the firm with a predicament. To continue growing, and otherwise maintain the gains it had achieved through its ramp-up of exposures, Archegos needed to ensure that (1) the value of those exposures would continue to appreciate, and (2) its Counterparties would continue to extend credit margin and trading capacity necessary for Archegos to enter into even more SBSs. In order to overcome this issue, Archegos "chose not to rely on ordinary market forces," and instead "engaged in a brazen scheme to manipulate the market for the securities of the issuers that represented Archegos’s top 10 holdings" by purchasing both securities and SBSs related to those issuers. Archegos, through Hwang and Tomita, effected this scheme by dominating the market for its Top 10 Holdings, as well as by “setting the tone” (i.e., engaging in large pre-market trading), bidding up prices by entering incrementally higher limit orders throughout the trading day, and “marking the close” (i.e., engaging in large trading in the last 30 minutes of the trading day) and by other non-economic trading, all with the goal of artificially inflating the share prices of its Top 10 Holdings. To fuel the alleged manipulation, Archegos used margin extended by counterparties - which Hwang and crew 'deliberately misled', because had they answered truthfully after they began asking questions, it "would have led Archegos to exhaust the finite trading resource that its Counterparties provided." As part of the scheme, Archegos knowingly provided these Counterparties with false assurances concerning its portfolio composition, its concentrated exposure, and its liquidity  profile. As Archegos intended, these deceptions fraudulently convinced its Counterparties that Archegos’s overall positioning was less concentrated and more liquid than it actually was. These deceptions induced Archegos’s Counterparties to continue to transact with it and extend leverage beyond what the Counterparties’ risk tolerance would have otherwise permitted had they known the truth – thus allowing Archegos to continue to grow its positions and, thereby, drive up and sustain the stock prices of the Top 10 Holdings. Eventually, the weight of Defendants’ fraudulent and manipulative scheme was too much for Archegos to bear, and over the course of less than a week in late March 2021, the house of cards collapsed. Price declines in some of Archegos’s Top 10 Holdings triggered significant margin calls that Archegos was unable to meet. In turn, without its trading activity to artificially inflate the prices of the Top 10 Holdings, those stock prices collapsed. And, Archegos’s subsequent default resulted in billions of dollars in credit losses among its Counterparties and significant losses to the market participants who invested in the stocks at inflated prices. Hwang's plan was to spark massive rolling short squeezes. He was inspired by SoftBank's gamma squeeze in August 2020 and starting Sept 2020 used tens of billions in TRS to bid up and squeeze the most heavily shorted names. Only problem is by the end he had nobody to sell to. — zerohedge (@zerohedge) April 27, 2022 As a reminder, Archegos amassed a concentrated portfolio of stocks well in excess of $100 billion by using borrowed money in the form of TRS, which kept the exposure on the books of the various prime brokers working with Archegos, thus allowing Hwang to hide his full exposure. His funded imploded in March as some of the stocks tumbled, triggering margin calls from banks, which then dumped Hwang’s holdings. The pain was especially acute for the fund's prime brokers such as Credit Suisse, Nomura and Morgan Stanley, who collectively lost more than $10 billion, prompting internal investigations and the forced departures of senior executives. Remember when we used to speculate about where all the buying power was coming from? — FlowPoint Partners, LLC (@cppinvest) April 27, 2022 Credit Suisse came under fire last May for the paltry fees they received from Archegos, which FT said at the time "raises further questions about the risks the lender was prepared to shoulder in pursuit of relationships with ultra-wealthy clients," adding that "the low level of fees and high risk exposure have caused concern among the board and senior executives, who are investigating the arrangement, according to two people with knowledge of the process." It also caused a flood of layoffs and terminations as the bank belatedly looked at its books and realized just how massive its exposure had been. As first reported, Credit Suisse demanded a margin of only 10% for the equity swaps it traded with Archegos and allowed the family office 10-times leverage on some transactions. That was about double the leverage offered by fellow prime broker Goldman Sachs, which took minimal losses when unwinding its positions. In 2012, Hwang pleaded guilty to insider trading in Chinese bank stocks, and paid $44 million to settle the SEC's charges when he was head of Tiger Asia Management and Tiger Asia Partners. Hwang shorted three Chinese bank stocks based on insider information they received in private placement offerings. Tiger Asia became one of the largest Asia-focused hedge funds after its 2001 founding - running more than $5 billion at its peak. It was dealt a major blow in 2008 after Volkswagen AG's share price savaged short sellers. Hwang is a former protégé of hedge-fund titan Julian Robertson, who founded Tiger Management in 1980, which as the Wall Street Journal reports, turned $8.8 million into nearly $22 billion. Several investors trained by Robertson became known as the "Tiger cubs." I dont think Hwang will just "carry on " Julian — Marc Cohodes (@AlderLaneEggs) April 27, 2022 More on Hwang's indictment: According to the complaint, once Archegos would approach 5% position in a stock, Bill Hwang would allegedly require any additional exposure be limited to total return swap to avoid any public disclosures — Rebecca Jarvis (@RebeccaJarvis) April 27, 2022 The central aim of Bill Hwang/ Archegos was to control the price and artificially increase the value of securities in Archegos portfolio, according to the charges these securities included the following stocks: — Rebecca Jarvis (@RebeccaJarvis) April 27, 2022 According to charges, Hwang and others working at Archegos would routinely buy/sell more than 10-15% of a stock’s daily trading volume knowing this would influence the price. — Rebecca Jarvis (@RebeccaJarvis) April 27, 2022 And read the entire indictment below: Tyler Durden Wed, 04/27/2022 - 15:50.....»»

Category: personnelSource: nytApr 27th, 2022

My Energy Is Your Problem - The Birth Of A New Europe

My Energy Is Your Problem - The Birth Of A New Europe Authored by Tom Luongo via Gold, Goats, 'n Guns blog, “Energy makes energy anyhow So spend yourself and get rich right now” - Marillion “Rich” This day has been a long time coming. From the moment, more than a decade ago, when it was finally admitted that Europe was destined to be an energy importer, we were going to see the climax of the showdown between the West and Russia. Europe as energy importer always meant that time was on Russia’s side. All it had to do was draw the conflict out long enough, survive long enough, to force Europe into submission. Russia has the energy Europe needs, no one else can supply it, therefore the final decision will be to accept this fate. No amount of financial wizardry, pathetic virtue signaling about Climate Change, malinvestment into inefficient and unsustainable ‘renewables,’ or military threats would ultimately change the outcome of this story. Output off the North Slope has fallen off and Groningen’s gas fields are drying up faster than Hillary’s va-jay-jay with each twist of John Durham’s investigation into RussiaGate. Every gambit to secure energy from Ukraine (Donbass coal, gas fields in the Sea of Azov) and the Middle East (Syria, EastMed Pipeline, Iran) have also failed. This is the basic problem the EU faces in its quest for political hegemony. How does it get around this basic fact without fomenting 1) a political crisis at home and 2) a war with Russia and the rest of the Global South who support her, it cannot win? Force Majeure Since the start of the war in Ukraine, a conflict created by EU complicity in NATO’s long-standing war on Russia, the EU has tried to play the victim of US/UK aggressiveness while happily going along with it for their own purposes. That purpose is to advance their agenda of erecting a total surveillance state under the guise of a radical response to Climate Change. Their problem is they have no viable replacement for Russian energy, be it oil, coal or gas, that is capable of sustaining them in the interim. All of their refusals were met with Russian intransigence. After gleefully going along with the theft of Russian foreign exchange reserves, as well as forcing the abandonment of Russian state assets like seizing Gazprom’s subsidiary in Germany, Europe still tried to say Russia had no legal right change the terms of payment for Russian energy. It was hilarious to watch as EU sycophants tried to argue Russia had no legal right to claim to force majeure after the EU prohibited Gazprom from spending the euros they would be paid for its gas. The Russian government responded with a demand for payment for all exports to legally-defined ‘unfriendly countries’ in either gold or Russian rubles. And the howls were heard all around the world. Even though acts of war, including sanctions, are a typical clause in all Gazprom supply contracts: Force Majeure clause in Gazprom contracts. Looks like changing the terms is fine given both war and sanctions have triggered force majeure. Deal with it, europoors. — Zee (@CrierStone) March 28, 2022 So, after a couple of weeks of denying reality, of playing to the moral high ground about punishing Vladimir Putin the butcher of Bucha, the EU as always caved to reality. Ruble Roulette The EU finally figured out a way to avoid US sanctions to buy Russian energy in rubles. Moscow has warned Europe it risks having gas supplies cut unless it pays in roubles. In March it issued a decree proposing that energy buyers open accounts at Gazprombank to make payments in euros or dollars, which would then be converted to rubles. The Commission said earlier this month that the decree risked breaching EU sanctions since it would put the effective completion of the purchase – once the payments are converted to rubles – into the hands of the Russian authorities. In an advisory document sent to member states on Thursday, however, the Commission said Moscow’s proposal does not necessarily prevent a payment process that would comply with EU sanctions against Russia over the Ukraine conflict. This is their way out. As always, the EU will just define things however they need to in order to save face, while ultimately capitulating when forced to show their hole cards. We watched this same pathetic display for more than three years over Brexit. And if not for a complicit, nee treasonous performance by Former Prime Minister Theresa May, Brexit negotiations would have been finalized in around six months. All she had to do was set terms and walk away from these people. All she had to do was what Putin just did. This isn’t to say Putin’s handling of this growing crisis has been perfect. His biggest fault as Russia’s leader has been his continued underestimating the duplicity and sheer evil emanating from the European Commission. However, I also feel Putin knew that Russia’s best strategy was to be the best neighbor it could be despite the obvious provocations. It cost him politically for years. This is why he tried so hard for so long to find common ground with these folks, attempting where he could to make allies and create political leverage. This is why Putin has refused to shut off the gas to the EU, even while they dragged their feet on paying in rubles. He always knew where this would end up, and if you asked the Eurocrats in Brussels quietly, so did they. The political costs to Brussels for turning off the gas would be too high a price for them to pay. This issue has caused fracturing in German’s fragile ruling coalition. It has harmed France’s Emmanuel Macron’s re-election chances in France. It will cost Mario Draghi his government next year. Of course, by then Draghi’s destruction of Italy as a country will be nearly complete. One can only hope the Italians find their voice between now and then. Hungry, Hungary Hypocrites Putin’s most obvious victory was in Hungary, where Viktor Orban just won a major election. Orban has already leveraged that victory into frustrating the EU’s plans to sever energy ties with Russia and steadfastly refusing to up the military pressure on Russia, which I talked about on the eve of the election. For this reason Hungary will be in the EU’s crosshairs going forward. It will be marginalized, if not kicked out eventually, over these issues. There are ideologues at the helm in Brussels and they will not be stopped in their quest to bring Europe to its knees under their control. If Hungary say no to this, they will be punished for it. But punishing Hungary at this point is like trying to punish Russia. It’s actually a blessing for them. For Hungary, once it is freed from the EU, will be the destination for foreign capital in a way that it is cannot be today. These are Orban’s hole cards, and they are powerful ones. In the meantime, he will stay in the EU to be a thorn in their side until they get rid of him. The biggest embarrassment for Brussels would be for Hungary to thrive outside of the EU framework, the same fear that was on the table during Brexit negotiations. The difference, of course, is that the UK political establishment is all in on the Brussels agenda, it’s the people outside of London who aren’t. Hungarians just proved that Orban doesn’t have that problem. So, the benefits of ending its future relationship with the EU will be much more immediately apparent, when it happens. European Unionicide No matter what happens in the long run, however, the reality is that a new Europe is on the horizon. And it isn’t a pretty sight. The EU will, at best, muddle through without a couple of current pieces — Hungary, Bulgaria and Romania — and at worst break back apart as the common currency experiment reaches an ignominious end broken on the shores of a new energy-based reserve standard which it simply cannot compete against. Just like Ukraine is quickly being carved up by Russia into a smaller pieces, so too will Europe balkanize over the EU’s failures to secure a reliable energy future for its people. Russia’s demands that Europe pay for Russian exports through the unsanctioned Gazprombank, who will process the currency conversion (at the importer’s expense) into rubles, now give it the upper hand in all future trade dealings with the EU. And since the ruble is now loosely tied to physical gold this means the possibility of the euro ever challenging the US dollar as a reserve currency is now officially over. That fate was sealed with Draghi’s move to negative interest rates back in 2014, turning it into the ultimate carry currency. That status is quickly unwinding to the detriment of the Japanese Yen which is now grabbing the headlines caught in the middle between the war between the Fed and the ECB. At the same time, the Eurodollar system has come under existential threat thanks to the coming end of LIBOR blunting the desires of a hawkish Fed. Because of this, the ECB is trapped in a maze where the exits have all been blocked off. There is no reason now for anyone to hold euros or convert euros into European sovereign debt. The Russians are no longer going to support the eurodollar market by recycling its trade surplus into the European banking system, exactly as was predicted when the EU followed the US by seizing Russia’s foreign exchange reserves. Who in their right mind would hold euros on your balance sheet beyond what you need to pay for goods is a losing proposition if Ursula Von der Leyen has deemed you an Untermensch? Gazprombank will simply flip those euros into physical gold and add them to the country’s balance sheet, making it even stronger. This will ensure that the euro itself becomes a pariah currency and force the ECB to continue the path towards hyperinflation. The birth of a new Europe is one where the currency risk is now all on the importer of commodities, not the exporter of commodities. I’ve been saying for years that Europe always thought that its huge share of Russian energy exports would give it monopsony power over Russia. That, they thought, without Europe as a buyer, Russia would be at their mercy. In a hyper-financialized world, that assumption had always held true. But, in a new monetary regime, where the world is beyond debt saturation, the bills are due and there’s no more road to kick the can down, it simply isn’t true anymore. By Russia tying the ruble to gold and both the US and EU weaponizing offshore dollar markets, that misperception of buying power is being laid bare. Sure, the EU has euros to offer but it does so into the revaluation of commodities versus fiat currencies which have ever-shrinking use cases. This only feeds the downward spiral of the euro and the eurodollar system into the vortex that is physical gold and the demand for commodities on which all of its value is derived. The mouse in Hungary has roared loud enough to finally get the apparatchiks in Brussels to listen to the tune the Russian bear has been quietly humming to itself for years. *  *  * Join my Patreon if you like humming tunes BTC: 3GSkAe8PhENyMWQb7orjtnJK9VX8mMf7ZfBCH: qq9pvwq26d8fjfk0f6k5mmnn09vzkmeh3sffxd6rytDCR: DsV2x4kJ4gWCPSpHmS4czbLz2fJNqms78oELTC: MWWdCHbMmn1yuyMSZX55ENJnQo8DXCFg5kDASH: XjWQKXJuxYzaNV6WMC4zhuQ43uBw8mN4VaWAVES: 3PF58yzAghxPJad5rM44ZpH5fUZJug4kBSaETH: 0x1dd2e6cddb02e3839700b33e9dd45859344c9edcDGB: SXygreEdaAWESbgW6mG15dgfH6qVUE5FSEARRR: zs132w864erce9x8lmcmlnv8vw05p646kp0uxy29q82ak4n9504at0sut3eu3kmscn5yqhtje2yjyv Tyler Durden Sun, 04/24/2022 - 07:00.....»»

Category: blogSource: zerohedgeApr 24th, 2022

"I"m So Bearish, Even I"m Miserable": One Bank"s Clients Crack... Yet The Real Selling Is Only Just Starting

"I'm So Bearish, Even I'm Miserable": One Bank's Clients Crack... Yet The Real Selling Is Only Just Starting It is hardly a secret that over the past two years, JPMorgan's Marko Kolanovic, who previously provided extensive original and insightful market analysis and commentary, has become synonymous the market's permabullish, cleerleading "ying", and is why after his latest weekly appeal to JPM retail clients to buy the dip (unlike the institutional clients who get a decidedly more balanced and skeptical assessment from the bank's flow desk)... ... without prejudice, and in fact to buy both "growth and value" stocks, we said that this "should be the clearest signal that one should take chips off the table and go short." And judging by the market's Friday "trapdoor" performance, we were right. But while Marko's recent "market value added" is all about getting faded, the same can not be said to the Croatian's bearish nemesis, Bank of America's Chief Investment Strategist Michael Hartnett, whose latest note was a chilling reminder of our favorite market maxim, namely that every Fed hiking cycle ends in crisis, or as Hartnett put it, "with default and bankruptcy of government, banks and investors." And since we now live in a time when hedge funds are selling every rip and deleveraging aggressively as even the Fed itself is pushing investors to sell - because somehow that will slow supply-driven inflation - Hartnett has something new and exciting to discuss every week, and in his latest Flow Show note, titled ominously enough "The Metacurse & the Charge of the Hike Brigade" (and available to all professional subscribers in the usual place), he talks about - you guessed it - the collapse of social media ETFs and the stunning hawkish reversal among central banks, which not only Hartnett but many other strategist are now convinced, will lead to the next market crisis (especially with the BOJ on the other end of the hawk-dove spectrum and China moving ever closer to a massive stimulus). Hartett as usual starts with his usual market "flows to know" assessments, which last week saw the largest equity outflow in 2022 at $17.5BN, and with another $8.7 billion in outflows from bonds and a whopping $55.4 billion from cash/money markets, investors only allocated a paltry $0.9BN to gold. Expect much more capital going to the yellow metal. Here are some other notable flows: $6.9bn from IG/HY/EM (note LQD/HYG/EMB @ new lows) largest outflow US large cap since Feb’18 ($19.6bn); 10th straight week outflow from Europe ($2.9bn); big $1.6bn outflow financials; buy-the-dip in tech  (8th week of outflows) Record 8-week inflow to materials, just as China starts devaluing. Here, a bit of a challenge emerges - with everyone knowing that the Fed's aggressive tightening means that a crisis is now only a matter of when not if, the question is what catalysts to look for to decide if the crisis has officially begun. Well, according to Hartnett, one place to look at is the ongoing (and soon to get much worse) implosion in tech stocks in general, and social media in particular, something the BofA strategist calls "the Metacurse." Warning that in a world of extreme inflation the rates shock is only just beginning (indeed, as Friday's dismal action showed, "75bps is the new 25bps") Hartnett sees an acceleration in the secular flip from QE-winners to QT-winners which is already well-underway - see natural resources vs biotech... ... as the era of higher global rates begins; Indeed the every stronger “rates shock” = tech trauma, which means that social media stocks are now back at spring 2018 levels! The biggest culprit behind the tech collapse are the same entities that enabled the biggest bubble in history (and which they are all trying to pop in a way that does not spark a "hard landing"). Calling it the "charge of the Hike Brigade", Hartnett shows no less than 75 global rate hikes YTD – the highest net % central banks hiking since 2008… ... and says that "the era of higher volatility has begun" which of course is another word for lots more pain: the reason - the "hawkish" central banks have a lot of catching up to do - the "Charge of Hike Brigade" follows >1000 cuts since Lehman and $23tn of QE; asset, housing, consumer, commodity, consumer inflation of 2022 demands that coming Quantitative Tightening is draconian. Of course, much more hiking is coming in no small part due to soaring prices as a result of the Ukraine war. Referencing the Weimar hyperinflation, Hartnett says that "Russia-Ukraine is 488th European military conflict of past 2000 years" yet it was more than sufficient to push German PPI up 30.9% YoY, the highest since 1923 (aftermath WW1) & 1948 (aftermath WW2). Of course, back then rates were higher... much higher: according to Hartnett, double "peak inflation" rates of 1974 when Bundesbank deposit rate was 7%, which is why the BofA strategist says that "ECB repo rate won’t remain -0.5% for long." The problem is the crash that will follow the ECB's rate hike but we'll cross that bridge in time. Then again, we didn't really need Putin to send prices into overdrive - the Fed was already doing a bang up job on its own, having stocks the second massive housing bubble in under two decades. As the next chart shows, house prices in Miami were up 28% YoY in Jan, which Miami rents have shot up 58% past 2 years. And with US house prices up 19% YoY, strong US housing activity in Q1 (the lead indicator for US consumer), and continued strong US labor market (the lagging indicator), the Fed's and market's zeitgeist has shifted from Fed 25/50bps to 50/75bps each meeting. It's why both  homebuiilders -25% & banks are down, while yields are up, a combination which  hints necessary rate hikes won’t be positive for growth. And while the economy will slow down (initially), then slide into a recessionary abyss (with the traditional lag), the earnings picture is already imploding and BofA's Global EPS Model predicts deceleration in global EPS growth from 21% into negative territory by year-end driven by PMI's, Asian exports, China FCI and the US yield curve model. The silver lining: the recent resilience of Asian exports & global PMIs mean more moderate deceleration in EPS growth next 6 months. * * * Going back to central banks and the mass tightening, recall that as we noted on Friday, a major divergence has emerged: while most western central banks can't hike fast enough, the BoJ is the last central bank left fighting the last war. As Hartnett notes, "BoJ Kuroda continues to vow unlimited bond buying in order to achieve…what exactl|: since BoJ introduced Yield Curve Control in 2016 Japan GDP growth has been 0.0%, CPI 0.2%; it’s always the unintended consequences that are the most consequential." Albert Edwards had much more to say on the divergence in policies between the Fed and BOJ and we will address that in a latter post. In any case, with the BOJ actively devaluting the local currewncy, the Japanese yen has been devalued to cheapest level vs Chinese renminbi in almost 30 years (Chart 10); Meanwhile, already suffering the consequences of a strong currency and a major slowdown, China's new orders are contracting, retail sales are down 3.5% YoY, and most ominously of all, the Chinese unemployment rate has jumped to 5.8% (Chart 11), largely due to the latest shutdown rounds. More importantly, as we also discussed on Friday, China is now responding to weak Japanese yen & Korean won via currency weakness, which in turn will lead to even more yen and won weakness, and so on. Looking ahead, Hartnett writes that the growing "FX war in Asia" could see super-spike in US dollar and signal temporary break in commodity fever (overbought, overloved). Too much bearishness to process in one sitting? Well, that's Harnett for you, but it's also why as he wraps up his latest weekly thought, the Heard on the Street line this week is: "I’m so bearish, and even I’m miserable." But just wait until the real selling begins: as Hartnett wraps up echoing what we pointed out was the biggest paradox in the latest Fund Manager Survey in which everyone was bullish, yet where virtually nobody wanted to sell stocks, the Bank of America Private Wealth Clients (i.e., Ultra high net worth) have $3.2 trillion in AUM of which 64.5% in stocks (well above the 55.7% average since ’05), 16.9% bonds, and 11.6% cash. Still, as noted above, last week saw that biggest cash outflow since Sep'20. Stocks are next, and as Hartnett concludes, "Everyone bearish, but redemptions just starting." Indeed, paradoxically since Nov 2021 Nasdaq peak inflows to stocks in 16 of 20 weeks ($229bn), private clients bought stocks 17/20 weeks. The selling has only now begun. One final observation from Hartnett has to do with how to trade bear markets, because no matter how much Marko Kolanovic says the opposite, we are in one now: Trading bear markets: bear sentiment, waning war fear (see Russian ruble), inflation “peak”, set-up for bear rally not bad; but central banks the oncoming freight train, and will tighten until credit and/or consumer break; technicals to confirm SPX floor of 4200 tested before SPX ceiling of 4800… MOVE (Treasury volatility) index >150 & DXY >105 means “credit event” imminent, while copper breaking down, oil.....»»

Category: blogSource: zerohedgeApr 23rd, 2022

Deutsche Sours On Auto Sector, Citing Ukraine War As Reason For "Broad Risk" Across The Sector

Deutsche Sours On Auto Sector, Citing Ukraine War As Reason For "Broad Risk" Across The Sector Deutsche Bank is officially souring on auto stocks due to concerns over the outlook for the entire industry. This morning, the bank released a note outlining its Q1 earnings and 2022 guidance preview and playbook. The takeaway is that the bank expects Q1 results to be slightly below consensus and that it sees "broad risk" for 2022 outlook, mostly driven by the war in Ukraine and the spiking of input costs for manufacturers.  The firm noted risks to names like Ford and General Motors, stating: Among automakers, while Q1 earnings could benefit from stronger pricing than  expected, we see downside risk to 2022 outlooks from GM and F reflecting steeper  commodity cost headwinds. Vehicle pricing has so far remained strong, but we believe OEMs may be reluctant to raise their full-year assumption further in light of  some early signs of industry pricing normalization, and broader investor concerns  around health of the consumer. Instead, the firm notes that it "favors" Tesla: On the OEM side, we believe traditional automakers could  struggle to attract investor attention due to concerns around the consumer. We  continue to favor TSLA for which 2022 should be important, with the ramp up of  2 new factories, considerable growth in volumes despite Shanghai shutdown,  strong pricing power, favorable raw material contracts, FSD deployment, and initial  production of its own battery cells and Cybertruck. Here is a look at the bank's revised estimates for names in the industry: "...we see risk that 2022 guidance from several suppliers may need to be revised down and in some cases, come in lower than ingoing consensus estimates," the bank's note reads.  The firm also revised price targets lower for numerous names in the sector: Finally, the bank noted the correlation between supplier performance and rates: "On the supplier side, we favor those that could still see multi-year production volume recovery, eventual moderation in raw mats headwind, possibly large recoveries from OEMs in 2H, and potential stock pop on Ukraine crisis resolution. At the same time, we dust off the old supplier playbook to evaluate names that could outperform over the coming fed fund rate hike cycle. Historically, suppliers start underperforming the market as soon as rates start being raised from the bottom." Deutsche also noted that a rise in commodity prices is “directionally negative for all autos names,” although not all companies will be impacted to the same degree. We have written about these challenges for automakers extensively.  Yesterday we noted that Tesla is facing challenges in procuring raw materials necessary for battery production. Prior to that, we noted a couple weeks ago that Tesla had secured a "secret deal" that helped it sidestep rising nickel prices.  Additionally, Bloomberg reported last month that a multiyear supply deal for nickel has been in place and covers nickel from Canada. "Unlike most of its peer automakers, Tesla has spent years focusing on how to secure its own nickel supplies," the report says.  We also noted last week that Chinese and Japanese EV manufacturers have both been grappling with rising costs. Many EV manufacturers are doing the only thing they can to help alleviate the pressure - and that means raising prices for consumers.  Companies like Tesla, BYD, Xpeng and Li Auto all hiked prices in March. Among the manufacturers raising prices was also Contemporary Amperex Technology, the world’s biggest EV battery maker. They said they were making “dynamic adjustments to the prices of some of our battery products”. Remember, we just wrote days ago that Japanese automakers were also grappling with the skyrocketing cost of raw materials and a shortage of semiconductors still.  Even as some parts have become unavailable, raw materials for other parts have skyrocketed in price. For example, palladium, nickel and aluminum have all surged to record highs this month. The metals are used in automobile catalytic converters, batteries and other car parts. The price hikes are likely due to the fact that 40% of palladium production comes from Russia. This has forced auto manufacturers to abandon buying from Russia and seek out alternative sources.  If Deutsche's outlook is accurate, it looks like there could still be plenty more bumps in the road for autos heading into the second half of 2022.  Tyler Durden Fri, 04/22/2022 - 07:00.....»»

Category: blogSource: zerohedgeApr 22nd, 2022

The Naked Sniper... And Other Lessons On Markets And Investing

The Naked Sniper... And Other Lessons On Markets And Investing By Alex of the MacroOps Substack I’m drinking some mead from the local meadery here in town, while sitting on my deck overlooking about a quarter-mile of forest and rivers that stretch out to the tip of Anchor Point, AK. From my view here I can see the cone-shaped active volcano that makes up Augustine Island about 30-miles out on the other side of Cook inlet, along with the six others that make up Lake Clark National Park, all of which sits along the Circum-Pacific belt, otherwise known as the Ring of Fire.  It’s a little after 9 pm and the sun is just starting to set. The only sounds I hear are the river which runs about 500-yards from where I sit, the slight breeze rustling the pine, and the occasional piping note of a bald eagle passing overhead. It’s 42 degrees, which to be honest, after this past winter, feels like beach weather. I’m wearing flip-flops, jeans, a hoodie and feel great.  I heard it was the native Aleutians who named this unforgiving terrain. They called it “Alyeska” which means “The Great Land”.  And indeed it is. Words fail when trying to relate what can only be felt in a place like this, but the best effort I’ve come across is from the naturalist John Muir, who wrote in his 1915 book “Travels in Alaska”: "The very thought of this Alaska garden is a joyful exhilaration. Out of all the cold darkness and glacial crushing and grinding comes this warm, abounding beauty and life to teach us that what we, in our faithless ignorance and fear call destruction, is creation finer and finer." …in our faithless ignorance and fear call destruction, is creation finer and finer. That… is a killer line, my friends... This note is meant to be a bit of a freewheeling stream of unedited thoughts on trading and markets. Just gonna drink some mead, give myself an hour, and see what comes out. And tonight I want to talk about the problem of optimizing for the wrong things in markets. It’s an observation of mine that the majority of investors/traders, both professional and piker alike, optimize for the wrong stuff. And this is why they don’t consistently win.  To do this I’m gonna first share the story of the Naked Sniper.  This story starts about 18-years ago, which puts us back in 2004. I had recently passed the initial selection for Scout Sniper platoon and was in the 6-month training (hazing) weeding out phase, think Buds but with less swimming. 18 of us were competing for just 4 slots to go to sniper school. To be a designated shooter and team leader you had to get one of those slots and then actually make it through the school. These weren’t great odds… Back then Marine Corp’s Sniper School had an attrition rate of over 80%.  I knew I was going to get one of those slots though. I was a competitive motherfucker back then. All the guys I was competing with were tough, smart as hell, and driven. But my ace up my sleeve has always been my ability to outsuffer almost anyone and keep a smile on my face while doing so.  That ability doesn’t come from a super healthy place, I now know, but that devil on my shoulder drove me to lengths and I leaned all the way into it during my military service. Which I kinda had to because I was never anywhere close to being the most athletic or physically fit of the bunch. So I compensated in the ways I could. During the 6-months of constant thrashing, we were training in the critical skills needed to be in a sniper platoon and to make it through school. So it was a lot of shooting, stalking (dressing up like a bush and moving slowly), reconnaissance and intelligence collection, etc… There’s a lot that goes into the job. Not all of it is sexy either, there’s a ton of plain grunt work involved.  Can you guess what the absolute hardest thing was?  Most people say shooting. And, yeah, shooting out to a 10-inch diameter target from a kilometer away is tough, sure. But only about 20% of those who make it to school get dropped for shooting. The fact is, if you’ve made it far enough to get to sniper school, you’re already an excellent shot. The real killer is stalking. Everybody struggles with stalking. It’s a bitch. A complete kick in the nuts when you’re first starting out.  We all sucked at stalking during training. I especially sucked. This scared me. I, like all the others, knew the stats. Snipers from the Seals, Green Berets, Secret Service, foreign special forces groups, what have you, would come to our Sniper School, cause it was the best. And most would fail. They’d get sent home early with their pride knocked down a few notches. All because of stalking. The objective in stalking is pretty straightforward. You have what’s called a stalk lane. This is usually a piece of vegetated but not too vegetated terrain. It typically takes the shape of a rectangle about 100m wide and 1km or so in length. You, the sniper, start at one end of the rectangle. The spotters (sniper instructors) are your targets. They typically sit high up on the roof of a humvee with very expensive optics at the other end of said rectangle.  Your job is to get within 200 meters of the spotters and fire off two shots (blanks) at the target, without being spotted. The spotters get three tries to walk on your position (there’s an instructor on the stalk lane with a radio who the spotters give directions to try and walk onto you).  If at any time you’re spotted and walked on, you fail. If you don’t get within 200-meters and take your shot within the allotted time (usually 2-4 hours), you fail. If you get within 200m, take your two shots, don’t get walked on, but can’t perfectly identify, three small cards the spotters hold up above their heads, you fail.  Okay, so now you get the drift of what stalking is. Now let me tell you why I sucked so badly at it during initial training.  At some point in my earlier years, I had watched the 1992 blockbuster “The Patriot Games” starring Harrison Ford. It was a Jack Ryan story where Ford was some CIA agent who at some point visits a stalk lane in progress. The sniper on the lane takes some shots, you have no clue where the shots are coming from, and then all of a sudden the sniper stands up revealing that he was only 20m away looking just like all the other tall grass on the ground.  This movie fucked my head up, royally. Mine and all the other snipers in training (we were called PIGs, Professionally Instructed Gunmen who were training to be HOGs, Hunter of Gunmen). Because of this movie and others like it, we PIGs thought stalking was tying a bunch of vegetation into our ghillies and then moving painstakingly slow across the lane. Just like in the Jack Ryan movie.  Little did we know, that that is not how you stalk. I mean, it’s part of it. But it’s not how you really do it. It’s not the meat of it, the essence. None of us knew that yet, though. Especially not me. And I was getting worried because, towards the end of our 6-months, I had gotten word that I would get the first slot for school. But I had only gotten marginally better at stalking by then. I would still bust out about 60% of the time. This was not okay. I had to improve and improve fast.  So I went to the best stalker out of all my seniors, the guys training us. His name was Desy. He was a ghost on the stalk lane. You couldn’t ever find his ass. I asked him his secret. But the problem with stalking is that the instructions are really simple; use cover and concealment, good terrain management, and burn windows through the vegetation using your scope.  This is essentially all that Desy could tell me about his “secret”. It’s not that he wasn’t trying to help. It’s that stalking is an art form and it’s one thing to be able to recite the instructions and another to really know them. But what saved me, what completely and immediately flipped my conception upside down, was what Desy told me next.  He told me a funny story. A story he had been told by the instructors when he had gone through the school years earlier. It was the story of the naked sniper.  Now, I don’t know if this is lore or legend but I’d heard it retold by plenty of others over the following years.  The story is about some guy who had gone through sniper school long ago. And this guy was invisible on the stalk lane apparently. He didn’t bust once while in school, which is unheard of. He was cocky too and on the last stalk before graduation, he bet the instructors a night of drinks, that he could do a perfect stalk on them, butt ass naked. Not only that but he’d do it only wearing a bright orange road vest and boots. He drank for free that night… When I first heard this story fucking fireworks went off. Everything changed for me. You know why?  Because right then is when it clicked. I knew that my previous uninformed conception of what stalking was and how to do it had gotten in my way of learning what it actually is, and how to do it well. It really was just the simple instructions of cover and concealment, good terrain management, and burning windows using vegetation.  You see, I was trying to be what I thought a sniper was. Which wasn’t a sniper at all but a fucking Hollywood portrayal of one. I thought stalking was about being a slow-moving bush. But that’s only a very small part of it. It’s not the secret.  The secret is that sometimes you need to move fast, when you can. When you have clear cover. You move fast so you can really move slow later if you need.  The secret is that it’s less about your camouflage than it is about your terrain management, your skill at putting things in between you and the spotters.  It’s less about moving within 20-meters looking like tall grass and more about putting yourself behind multiple thick pieces of vegetation and exploiting the fact that since you're closer to this vegetation than the spotters, you can burn a hole (peer through it) with your scope better than they can, since they’re at a further distance. That’s the fucking magic sauce right there. The secret is that there was no secret. Just a true understanding... An embodiment… A burning away of misguided ignorance. Once that light switch flipped for me, it went from night to day. I was unstoppable on the lane. I went to Quantico sniper school and graduated with honors and as top stalker. That class had two Seals, two Secret Servicemen, two Norwegian Coastal Ranger Commandos, two Singaporean Special Forces, and a bunch of hard-charging Marines, making for a total of 32 that started. Only two officially finished. Me and my partner Spence.  I say officially because when some Full Bird heard that only two of us were going to graduate, he put his foot down and demanded they graduate more since the war was just getting going and everything. So they lowered the bar and 8 others were given the HOGs tooth.  90% of the others failed because of stalking. Because they never had their aha!’ moment. They were optimizing for their misconceptions of the world. They were trying to be a Hollywood movie sniper. This prevented them from learning the first principles of what stalking were. What being a scout sniper was actually all about. A long-winded story, I know. Hopefully, I’m not boring you. But I think this is a very important point. And I’m going to bring everything together now, and tie this into investing.  You see when I first got started in markets many years ago now. I started off by reading all the books, quite literally hundreds of them. I wanted to know the secrets, you know the inside info and superpowers that made the Soros’, Kovners’, and Druckenmillers’ all so great. And I quickly became annoyed because all any of these books ever talked about were what sounded like empty platitudes and tired adages. The trend is your friend…risk management above all… strong opinions weakly held… price is king… ride your winners and cut your losers…  yada, yada, yada… This didn’t tell me how to pick a winning stock or how to know when to bet against the pound and break the fucking Bank of England, book billions, and sow fear in the hearts of central bankers across the world!  I wanted to know how to do that. I wanted to know those secrets. I carried misconceptions about what trading was really about. And these prevented me from learning about how things actually were.  I wish I could tell you that I remembered my lightbulb moment as a sniper and immediately went to thinking about first principles. But that didn’t happen…  I spent years floundering. Blowing up accounts. Losing money. Cursing the market Gods. Quitting trading for good. Coming back 2-weeks later hell-bent on becoming the next Market Wizard. This sad period went on for about 5-years… And, if I’m being honest, it lasted closer 7-years. I, like most people, was optimizing for the wrong things. I was optimizing for my misconception about trading and investing. This prevented me from learning what the actual sauce was all about.  I thought it was about finding good trades. How do you pick a good stock? How do you know when a currency is going to go up/down? How do you know when to short the housing market or to back up the truck on gold?  Do you see all that’s wrong with this?  These were the sexy narrative things… The things punters believe there are secrets behind and being able to figure these things out before everyone else would show how smart and amazing you are. And then finally you’d get the respect that you didn’t get in high school and your parents would love you more, so you too could have a cult gathering in middle America every year where you spout hand-wavy masturbatory nonsense and get celebrated for it. I paid a few Harvard-sized tuitions until the lightbulb finally clicked for me. And when it did, just like on the stalk lane, my world flipped and it was like the reality of trading came into focus for the first time.  And this is what I now know. This is the not a secret, secret sauce of trading.  Trading (and investing) is not about knowing things. That’s like maybe 10% of the game if I’m being generous. You know what’s a more apt descriptor of a successful trader?  An UNcertainty manager. Someone who can successfully manage not knowing things. Someone who can make money over a full cycle, while knowing that he only knows maybe 30% of everything that’s critically important to his trade or investment successfully working out.  Being a successful trader isn’t in fact about knowing the inner workings of central banks, advanced monetary plumbing, finding indicators that tell you where price is headed, or modeling out what a company will earn in 3 years' time. These are all part of the game, sure. Useful knowledge to know, depending on your strategy, absolutely. But it’s not the IT, it. It’s not the meat. Not the essence. The meat is full-heartedly accepting your ignorance, embracing your fallibility. And then designing a system, a process, that gives you an edge. An edge that tilts the odds in your favor. And then ruthlessly hitting that edge over and over and over again.  And there are a number of things that are foundational to building out and executing on an edge. These are the “empty” platitudes and “tired” adages… risk management above all else… respecting the tape and being humble… not wedding yourself to an opinion, etc…  It’s one thing to hear these things. It’s an entirely different thing to know them. To embody them.  I was chatting the other day with a Market Wizard. An OG trader who got his start at the iconic Commodities Corporation (CC). To this day, CC holds the record for being the single greatest producer of trading talent ever. I’ve written about its storied history here.  Anyways, he was telling me that when he first visited CC’s Princeton HQ, he was nervous as hell. He was walking into the trading equivalent of the 98’ Yankees dugout. He thought he would be challenged with brainy questions on weather patterns affecting that season’s cocoa crop,  what the Fed was signaling, the implications of the US current account deficit, etc…. But what he quickly realized, was that yes, these guys paid attention to those things. But it was more background supplemental to the real work. The majority of what they did was study charts, look at positioning, develop a feel for sentiment, and ruthlessly manage their risk. Skillfully managing uncertainty was the real work. That was the sauce. That’s what made them great.  One last example. The Chandler Brothers. The greatest investors you’ve never heard of. I wrote about them here.  You read their story, and like every other story about a successful investor, you think that they’re just these really smart guys who can see the world differently and have the cojones to bet big on their convictions. But that is not at all the truth. That’s the Hollywoodized sexy but untrue version of their success. These narratives highlight all the wrong things.  I’m fortunate to know two traders who used to PM for the Chandler brothers. One of them is a fellow Collective member. And he’s told me all about their “secrets” and “special” skills in how they turned a couple million into billions of dollars.  And you know what these secrets are?  They were pros in managing risk… NEVER letting the market dig too deep into their pockets. They kept strong opinions weakly held. They’d talk high conviction on an investment but when a key data point changed, they just as quickly changed their minds, and their positioning…   These fundamental value investing legends known for making big high conviction bets would study charts and they respected price above all else. They actively managed around positions, reducing their size when certain technical levels were hit or when they felt they didn’t have a good grasp on what was driving the action.  Simply put, they excelled at the basic and boring fundamentals of trading. That’s their secret! Okay, I’m running up on my hour now so I’m going to finish this off.  Here’s the main takeaway I want you to have from this piece.  Truth: Most people don’t think for themselves. They don’t think in first principles. Instead, they regurgitate buzzy soundbites without ever truly understanding what it is they're saying. Their unconscious misconceptions stand in the way of they’re knowing what actually is and getting to where they want to be. This is even more true amongst the professional class where status-seeking trumps truth-seeking. And it’s infinitely true within fields that deal with complex systems (trading and investing being prime examples). So ask yourself, what is your “Patriots Game”? What are your beliefs about what’s important in markets? Where do you truly focus your energies?  If you can really think that through and truthfully answer those questions. Perhaps you’ll have your aha moment and you’ll make it to the other side. Perhaps you’ll run the lane naked and drink for free… Tyler Durden Sun, 04/17/2022 - 10:30.....»»

Category: dealsSource: nytApr 17th, 2022

COVID-19 Linked To Alzheimer"s-Like Brain Changes, Study Suggests

COVID-19 Linked To Alzheimer's-Like Brain Changes, Study Suggests Authored by Jennifer Margulis via The Epoch Times (emphasis ours), For some, it’s just a sniffle. But for others, COVID-19 can hit hard. Either way, some people who get COVID-19 will suffer from long-term effects. This is known as “long COVID,” and its sufferers are often referred to as “long haulers.” Chances are you already know about long COVID and you may even have been affected by it or have friends or family who are. What is less well known, however, is that neurological issues are common in long COVID. New research may explain one way COVID-19 may contribute to neurological ailments.(Photo_imagery/Shutterstock) Broken Brains Brain inflammation, stroke, chronic headache, disturbed consciousness, cognitive impairment, and “brain fog” (an all-encompassing phrase to describe a condition that usually manifests as slow thinking, memory lapses, and difficulty concentrating) can all result after infection with the virus known as SARS-CoV-2. Even the illness’s unusual hallmarks, hyposmia, and hypogeusia—better known to us non-scientists as loss of smell and taste—are thought to be due to changes in nervous system function. But while both clinicians and patients have noticed a myriad of brain issues post infection, scientists don’t know very much about how SARS-CoV-2 infections can lead to impaired brain function. That may be changing. A study published on Feb. 3 in Alzheimer’s & Dementia sheds light on a potential physiological mechanism behind the neurological problems COVID-19 survivors experience. While the deeper insight into what is going on is good news, unfortunately, there’s bad news, too. The new study, “Alzheimer’s-Like Signaling in Brains of COVID-19 Patients,” includes some disturbing findings. Attacking ACE2 Receptors The study, led by Andrew R. Marks, a cardiologist and chair of the Department of Physiology and Cellular Biophysics at the Vagelos College of Physicians and Surgeons at Columbia University in Manhattan, consisted of analysis of brain tissue collected from 10 people who died from COVID-19. Marks’s team looked posthumously at the brains of four women who ranged in age from 38 to 80, and six men, ages 57 to 84. It’s already known that the spike protein of SARS-CoV-2 binds to ACE2 receptors all over the body, including in the heart, lungs, kidneys, and epithelial cells that line the blood vessels. Scientists also believe that the multi-system failure that can result in death from COVID-19 is likely due to this invasion of heart and lung cells via these ACE2 receptors. Since the receptors have been invaded by the virus, the activity of the enzyme associated with the receptors (angiotensin-converting enzyme) is reduced, as scientists explained in a 2021 article published on The Conversation. The damage to the lungs and heart is usually uppermost in doctors’ minds when patients are experiencing severe illness. But, it turns out, there are also ACE2 receptors in the brain. Unless you’re a neuroscientist, this is pretty technical. Stay with me anyway. Decreased ACE2 activity is associated with increased activity in transforming growth factor-beta (“TGF-beta”). And high levels of TGF-beta in the brain are associated with irregularities in the “tau” proteins that stabilize nerve cells, specifically due to something called “hyperphosphorylation.” Phosphorylation, a normal biological process, is the addition of phosphate to an organic molecule, in this case, the tau protein. Hyperphosphorylation is the addition of too many phosphate groups at too many sites. Hyperphosphorylation can result in proteins with excess filaments that get tangled up. And these tau filament “tangles” are associated with Alzheimer’s disease. Leaky Brains Marks and his five colleagues at Columbia University investigated whether people who died of COVID-19 exhibited evidence of tau protein irregularities that are associated with Alzheimer’s. A significant body of recent research suggests that calcium ions “leaking” from certain ion channels in the brain, known as ryanodine receptors, may cause these tau irregularities. Ion channels enable the flow of ions through cell membranes, including brain cells (neurons). In a nutshell, ions enable the flow of electrical charges throughout the body and this flow is critical to the function of all cells. It’s, in one sense, the communication system of the body and one of the primary mechanisms of brain function. Healthy brain function relies on ion channels, such as the ryanodine receptors just mentioned, operating as they should. Just as there are dangers when an electrical wire is “leaking” electricity due to a short, there are risks when these ion channels leak ions. Oxidative stress may be responsible for depleting calbindin, a protein that helps keep these channels closed, preventing them from leaking. When the levels of calbindin are low, channels that should remain closed may start to leak calcium. Too many calcium ions floating around in the brain or anywhere else in the body can cause a number of health problems. Marks’s team examined the brain tissue of the 10 people who died from COVID to see if there was evidence of leaks. More specifically, they analyzed the contents of the brain tissue for markers of TGF-beta activity. They found evidence of increased TGF-beta activity in both the cortex and the cerebellum. They also found evidence of increased oxidative stress. Cerebellum Concerns People who suffer from Alzheimer’s show evidence of tau filament “tangles” only in the cortexes of their brains, not in the cerebellum. However, this Columbia University research indicated that, unlike with Alzheimer’s, COVID may cause disturbances in the cerebellum as well. The cerebellum is involved in balance, coordination of movement, language, and posture, according to the University of Texas Health Science Center. Other recent research has shown that 74 percent of hospitalized COVID patients have had coordination problems. If COVID is compromising the cerebellum as well as the cortex, this may help explain the coordination issues clinicians have observed. Interestingly, though this was a small study, all the people who died had evidence of brain pathology. The TGF-beta marker was found in all the brains, even those of the younger patients who had exhibited no sign of dementia prior to coming down with COVID-19. Most people have heard that the presence of beta-amyloid plaques in the brain is an indication of Alzheimer’s. Even though lowered ACE2 activity is also associated with an increase in beta-amyloid plaques, the Columbia team didn’t find any changes in the pathways that lead to the formation of amyloid beta in the brains of the patients who died from COVID (with the exception of one 84-year-old male who was previously suffering from dementia). This is one notable distinction between the pathology of COVID-19 and Alzheimer’s or dementia. Treating Neurological Symptoms Marks’s interest in the ryanodine ion channels is long-standing, and his recent COVID-related research may lead to financial benefits should other researchers affirm his findings. In 2011, a research team led by Marks demonstrated that a class of drugs, Rycals, may be effective in treating heart failure and muscle disorders by stabilizing the same ryanodine ion channels this new research indicates may be affected by COVID-19 infections. One drug from this class, ARM210, has been in the clinical-trial stage but has been officially classified as an orphan drug because the illness it was intended to treat was so rare. Marks told ScienceDaily that his study indicates a potential target for therapeutic interventions for the neurological symptoms of COVID. “My greatest hope is that other laboratories will look into our findings, and if they are validated, generate interest in a clinical trial for long COVID,” he said. Both Columbia University and Marks own stock in ARMGO Pharma, Inc., the company that has been developing drugs to target ryanodine channels. They also own patents on Rycals, according to a conflict of interest statement at the bottom of this study. Another of the study’s co-authors, Steven Reiken, has been consulting for ARMGO. While conflicts of interest like these are fairly typical for published scientific research, and they don’t invalidate the research, they are an important part of the overall picture that shouldn’t be ignored. It also isn’t unusual for a drug created for one purpose to find new life treating other conditions. In some cases, these new uses prove more important than the original intended use of the drug. In their paper, the Columbia team wrote that “ex vivo treatment of COVID-19 patient brain samples with the Rycal drug ARM210 … fixed the channel leak.” While that may suggest a promising avenue for further investigation, applying a drug to brain tissue in the lab is a long way from giving it to living patients. Vaccine-Linked Neurological Damage While COVID is linked to neurological issues, the same also appears to be true with the vaccine itself. My colleague Stephanie Seneff, a senior research scientist at the Massachusetts Institute of Technology and author of the book “Toxic Legacy,” is concerned that COVID-19 vaccines also have the potential to cause brain damage. “Vaccines produce the spike protein, which is the part of the virus that binds to the ACE2 receptors,” said Seneff, who wasn’t involved in the Columbia research. “I suspect this means that the vaccine could also disable the receptors and cause the same neurological damage.” In fact, Seneff said, brain damage from the vaccine may be more common than brain damage from the naturally acquired infection. Vaccine-induced spike proteins “get into the brain more easily than the virus does,” she said. “The virus only gets into the brain when a person has a compromised immune system. But the vaccine is injected into the muscle, which means it bypasses natural barriers that would normally keep the virus out of the brain.” In May 2021, Seneff and her colleague Dr. Greg Nigh, an oncologist based in Portland, Oregon, published a paper in the peer-reviewed International Journal of Vaccine Theory, Practice, and Research explaining their hypothesis that the mRNA vaccines may be worse than the disease itself. Since then, she said, she has been studying the reports of vaccine adverse events that are collected by the Centers for Disease Control and Prevention. In this new research, Seneff has found that 96 percent of all of the reported adverse outcomes in the year 2021 that have been related to neurological issues are connected to COVID vaccines. These adverse neurological events include memory disorders, mobility issues, difficulty swallowing, and loss of sense of smell. “All these things that are showing up in VAERS are striking,” Seneff said. “Overwhelmingly, the events that show neurological issues are following COVID-19 vaccines. I honestly don’t know why people aren’t absolutely shocked by these numbers. Compared to the other vaccines, these vaccines seem tremendously dangerous.” *  *  * Jennifer Margulis, Ph.D., is an award-winning journalist and author of “Your Baby, Your Way: Taking Charge of Your Pregnancy, Childbirth, and Parenting Decisions for a Happier, Healthier Family.” A Fulbright awardee and mother of four, she has worked on a child survival campaign in West Africa, advocated for an end to child slavery in Pakistan on prime-time TV in Paris, and taught post-colonial literature to non-traditional students in inner-city Atlanta. Learn more about her at Tyler Durden Sat, 04/16/2022 - 21:30.....»»

Category: smallbizSource: nytApr 16th, 2022

The Failure Of Fiat Currencies & The Implications For Gold & Silver

The Failure Of Fiat Currencies & The Implications For Gold & Silver Authored by Alasdair Macleod via, This is the background text of my Keynote Speech given yesterday to European Gold Forum yesterday, 13 April. To explain why fiat currencies are failing I started by defining money. I then described the relationship between fiat money and its purchasing power, the role of bank credit, and the interests of central banks. Undoubtedly, the recent sanctions over Russia will have a catastrophic effect for financialised currencies, possibly leading to the end of fifty-one years of the dollar regime. Russia and China plan to escape this fate for the rouble and yuan by tying their currencies to commodities and production instead of collapsing financial assets. The only way for those of us in the West to protect ourselves is with physical gold, which over time is tied to commodity and energy prices. What is money? To understand why all fiat currency systems fail, we must start by understanding what money is, and how it differs from other forms of currency and credit. These are long-standing relationships which transcend our times and have their origin in Roman law and the practice of medieval merchants who evolved a lex mercatoria, which extended money’s legal status to instruments that evolved out of money, such as bills of exchange, cheques, and other securities for money. And while as circulating media, historically currencies have been almost indistinguishable from money proper, in the last century issuers of currencies split them off from money so that they have become pure fiat. At the end of the day, what constitutes money has always been determined by its users as the means of exchanging their production for consumption in an economy based on the division of labour. Money is the bridge between the two, and while over the millennia different media of exchange have come and gone, only metallic money has survived to be trusted. These are principally gold, silver, and copper. Today the term usually refers to gold, which is still in government reserves, as the only asset with no counterparty risk. Silver, which as a monetary asset declined in importance as money after Germany moved to a gold standard following the Franco-Prussian war, remains a monetary metal, though with a gold to silver ratio currently over 70 times, it is not priced as such. For historical reasons, the world’s monetary system evolved based on English law. Britain, or more accurately England and Wales, still respects Roman, or natural law with respect to money. To this day, gold sovereign coins are legal tender. Strictly speaking, metallic gold and silver are themselves credit, representing yet-to-be-spent production. But uniquely, they are no one’s liability, unlike banknotes and bank deposits. Metallic money therefore has this exceptional status, and that fact alone means that it tends not to circulate, in accordance with Gresham’s Law, so long as lesser forms of credit are available. Money shares with its currency and credit substitutes a unique position in criminal law. If a thief steals money, he can be apprehended and charged with theft along with any accomplices. But if he passes the money on to another party who receives it in good faith and is not aware that it is stolen, the original owner has no recourse against the innocent receiver, or against anyone else who subsequently comes into possession of the money. It is quite unlike any other form of property, which despite passing into innocent hands, remains the property of the original owner. In law, cryptocurrencies and the mooted central bank digital currencies are not money, money-substitutes, or currencies. Given that a previous owner of stolen bitcoin sold on to a buyer unaware it was criminally obtained can subsequently claim it, there is no clear title without full provenance. In accordance with property law, the United States has ruled that cryptocurrencies are property, reclaimable as stolen items, differentiating cryptocurrencies from money and currency proper. And we can expect similar rulings in other jurisdictions to exclude cryptocurrencies from the legal status as money, whereas the position of CBDCs in this regard has yet to be clarified. We can therefore nail to the floor any claims that bitcoin or any other cryptocurrency can possibly have the legal status required of money. Under a proper gold standard, currency in the form of banknotes in public circulation was freely exchangeable for gold coin. So long as they were freely exchangeable, banknotes took on the exchange value of gold, allowing for the credit standing of the issuer. One of the issues Sir Isaac Newton considered as Master of the Royal Mint was to what degree of backing a currency required to retain credibility as a gold substitute. He concluded that that level should be 40%, though Ludwig von Mises, the Austrian economist who was as sound a sound money economist as it was possible to be appeared to be less prescriptive on the subject. The effect of a working gold standard is to ensure that money of the people’s choice is properly represented in the monetary system. Both currency and credit become bound to its virtues. The general level of prices will fluctuate influenced by changes in the quantity of currency and credit in circulation, but the discipline of the limits of credit and currency creation brings prices back to a norm. This discipline is disliked by governments who believe that money is the responsibility of a government acting in the interests of the people, and not of the people themselves. This was expressed in Georg Knapp’s State Theory of Money, published in 1905 and became Germany’s justification for paying for armaments by inflationary means ahead of the First World War, and continuing to use currency debasement as the principal means of government finance until the paper mark collapsed in 1923. Through an evolutionary process, modern governments first eroded then took away from the public for itself the determination of what constitutes money. The removal of all discipline of the gold standard has allowed governments to inflate the quantities of currency and credit as a means of transferring the public wealth to itself. As a broad representation of this dilution, Figure 1 shows the growth of broad dollar currency since the last vestige of a gold standard under the Bretton Woods Agreement was suspended by President Nixon in August 1971. From that date, currency and bank credit have increased from $685 billion to $21.84 trillion, that is thirty-two times. And this excludes an unknown increase in the quantity of dollars not in the US financial system, commonly referred to as Eurodollars, which perhaps account for several trillion more. Gold priced in fiat dollars has risen from $35 when Bretton Woods was suspended, to $1970 currently. A better way of expressing this debasement of the dollar is to say that priced in gold, the dollar has lost 98.3% of its purchasing power (see Figure 4 later in this article). While it is a mistake to think of the relationship between the quantity of currency and credit in circulation and the purchasing power of the dollar as linear (as monetarists claim), not only has the rate of debasement accelerated in recent years, but it has become impossible for the destruction of purchasing power to be stopped. That would require governments reneging on mandated welfare commitments and for them to stand back from economic intervention. It would require them to accept that the economy is not the government’s business, but that of those who produce goods and services for the benefit of others. The state’s economic role would have to be minimised. This is not just a capitalistic plea. It has been confirmed as true countless times through history. Capitalistic nations always do better at creating personal wealth than socialistic ones. This is why the Berlin Wall was demolished by angry crowds, finally driven to do so by the failure of communism relative to capitalism just a stone’s throw away. The relative performance of Hong Kong compared with China when Mao Zedong was starving his masses on some sort of revolutionary whim, also showed how the same ethnicity performed under socialism compared with free markets. The relationship between fiat currency and its purchasing power One can see from the increase in the quantity of US dollar M3 currency and credit and the fall in the purchasing power measured against gold that the government’s monetary statistic does not square with the market. Part of the reason is that government statistics do not capture all the credit in an economy (only bank credit issued by licenced banks is recorded), dollars created outside the system such as Eurodollars are additional, and market prices fluctuate. Monetarists make little or no allowance for these factors, claiming that the purchasing power of a currency is inversely proportional to its quantity. While there is much truth in this statement, it is only suited for a proper gold-backed currency, when one community’s relative valuations between currency and goods are brought into line with the those of its neighbours through arbitrage, neutralising any subjectivity of valuation. The classical representation of the monetary theory of prices does not apply in conditions whereby faith in an unbacked currency is paramount in deciding its utility. A population which loses faith in its government’s currency can reject it entirely despite changes in its circulating quantity. This is what wipes out all fiat currencies eventually, ensuring that if a currency is to survive it must eventually return to a credible gold exchange standard. The weakness of a fiat currency was famously demonstrated in Europe in the 1920s when the Austrian crown and German paper mark were destroyed. Following the Second World War, the Japanese military yen suffered the same fate in Hong Kong, and Germany’s mark for a second time in the mid 1940s. More recently, the Zimbabwean dollar and Venezuelan bolivar have sunk to their value as wastepaper — and they are not the only ones. Ultimately it is the public which always determines the use value of a circulating medium. Figure 2 below, of the oil price measured in goldgrams, dollars, pounds, and euros shows that between 1950 and 1974 a gold standard even in the incomplete form that existed under the Bretton Woods Agreement coincided with price stability. It took just a few years from the ending of Bretton Woods for the consequences of the loss of a gold anchor to materialise. Until then, oil suppliers, principally Saudi Arabia and other OPEC members, had faith in the dollar and other currencies. It was only when they realised the implications of being paid in pure fiat that they insisted on compensation for currency debasement. That they were free to raise oil prices was the condition upon which the Saudis and the rest of OPEC accepted payment solely in US dollars. In the post-war years between 1950 and 1970, US broad money grew by 167%, yet the dollar price of oil was unchanged for all that time. Similar price stability was shown in other commodities, clearly demonstrating that the quantity of currency and credit in circulation was not the sole determinant of the dollar’s purchasing power. The role of bank credit While the relationship between bank credit and the sum of the quantity of currency and bank reserves varies, the larger quantity by far is the quantity of bank credit. The behaviour of the banking cohort therefore has the largest impact on the overall quantity of credit in the economy. Under the British gold standard of the nineteenth century, the fluctuations in the willingness of banks to lend resulted in periodic booms and slumps, so it is worthwhile examining this phenomenon, which has become the excuse for state intervention in financial markets and ultimately the abandonment of gold standards entirely. Banks are dealers in credit, lending at a higher rate of interest than they pay to depositors. They do not deploy their own money, except in a general balance sheet sense. A bank’s own capital is the basis upon which a bank can expand its credit. The process of credit creation is widely misunderstood but is essentially simple. If a bank agrees to lend money to a borrowing customer, the loan appears as an asset on the bank’s balance sheet. Through the process of double entry bookkeeping, this loan must immediately have a balancing entry, crediting the borrower’s current account. The customer is informed that the loan is agreed, and he can draw down the funds credited to his current account from that moment. No other bank, nor any other source of funding is involved. With merely two ledger entries the bank’s balance sheet has expanded by the amount of the loan. For a banker, the ability to create bank credit in this way is, so long as the lending is prudent, an extremely profitable business. The amount of credit outstanding can be many multiples of the bank’s own capital. So, if a bank’s ratio of balance sheet assets to equity is eight times, and the gross margin between lending and deposits is 3%, then that becomes a gross return of 24% on the bank’s own equity. The restriction on a bank’s balance sheet leverage comes from two considerations. There is lending risk itself, which will vary with economic conditions, and depositor risk, which is the depositors’ collective faith in the bank’s financial condition. Depositor risk, which can lead to depositors withdrawing their credit in the bank in favour of currency or a deposit with another bank, can in turn originate from a bank offering an interest rate below that of other banks, or alternatively depositors concerned about the soundness of the bank itself. It is the combination of lending and depositor risk that determines a banker’s view on the maximum level of profits that can be safely earned by dealing in credit. An expansion in the quantity of credit in an economy stimulates economic activity because businesses are tricked into thinking that the extra money available is due to improved trading conditions. Furthermore, the apparent improvement in trading conditions encourages bankers to increase lending even further. A virtuous cycle of lending and apparent economic improvement gets under way as the banking cohort takes its average balance sheet assets to equity ratio from, say, five to eight times, to perhaps ten or twelve. Competition for credit business then persuades banks to cut their margins to attract new business customers. Customers end up borrowing for borrowing’s sake, initiating investment projects which would not normally be profitable. Even under a gold standard lending exuberance begins to drive up prices. Businesses find that their costs begin to rise, eating into their profits. Keeping a close eye on lending risk, bankers are acutely aware of deteriorating profit prospects for their borrowers and therefore of an increasing lending risk. They then try to reduce their asset to equity ratios. As a cohort whose members are driven by the same considerations, banks begin to withdraw credit from the economy, reversing the earlier stimulus and the economy enters a slump. This is a simplistic description of a regular cycle of fluctuating bank credit, which historically varied approximately every ten years or so, but could fluctuate between seven and twelve. Figure 3 illustrates how these fluctuations were reflected in the inflation rate in nineteenth century Britain following the introduction of the sovereign gold coin until just before the First World War. Besides illustrating the regularity of the consequences of a cycle of bank credit expansion and contraction marked by the inflationary consequences, Figure 3 shows there is no correlation between the rate of price inflation and wholesale borrowing costs. In other words, modern central bank monetary policies which use interest rates to control inflation are misconstrued. The effect was known and named Gibson’s paradox by Keynes. But because there was no explanation for it in Keynesian economics, it has been ignored ever since. Believing that Gibson’s paradox could be ignored is central to central bank policies aimed at taming the cycle of price inflation. The interests of central banks Notionally, central banks’ primary interest is to intervene in the economy to promote maximum employment consistent with moderate price inflation, targeted at 2% measured by the consumer price index. It is a policy aimed at stimulating the economy but not overstimulating it. We shall return to the fallacies involved in a moment. In the second half of the nineteenth century, central bank intervention started with the Bank of England assuming for itself the role of lender of last resort in the interests of ensuring economically destabilising bank crises were prevented. Intervention in the form of buying commercial bank credit stopped there, with no further interest rate manipulation or economic intervention. The last true slump in America was in 1920-21. As it had always done in the past the government ignored it in the sense that no intervention or economic stimulus were provided, and the recovery was rapid. It was following that slump that the problems started in the form of a new federal banking system led by Benjamin Strong who firmly believed in monetary stimulation. The Roaring Twenties followed on a sea of expanding credit, which led to a stock market boom — a financial bubble. But it was little more than an exaggerated cycle of bank credit expansion, which when it ended collapsed Wall Street with stock prices falling 89% measured by the Dow Jones Industrial Index. Coupled with the boom in agricultural production exaggerated by mechanisation, the depression that followed was particularly hard on the large agricultural sector, undermining agriculture prices worldwide until the Second World War. It is a fact ignored by inflationists that first President Herbert Hoover, and then Franklin Roosevelt extended the depression to the longest on record by trying to stop it. They supported prices, which meant products went unsold. And at the very beginning, by enacting the Smoot Hawley Tariff Act they collapsed not only domestic demand but all domestic production that relied on imported raw materials and semi-manufactured products. These disastrous policies were supported by a new breed of economist epitomised by Keynes, who believed that capitalism was flawed and required government intervention. But proto-Keynesian attempts to stimulate the American economy out of the depression continually failed. As late as 1940, eleven years after the Wall Street Crash, US unemployment was still as high as 15%. What the economists in the Keynesian camp ignored was the true cause of the Wall Street crash and the subsequent depression, rooted in the credit inflation which drove the Roaring Twenties. As we saw in Figure 3, it was no more than the turning of the long-established repeating cycle of bank credit, this time fuelled additionally by Benjamin Strong’s inflationary credit expansion as Chairman of the new Fed. The cause of the depression was not private enterprise, but government intervention. It is still misread by the establishment to this day, with universities pushing Keynesianism to the exclusion of classic economics and common sense. Additionally, the statistics which have become a religion for policymakers and everyone else are corrupted by state interests. Soon after wages and pensions were indexed in 1980, government statisticians at the Bureau of Labor Statistics began working on how to reduce the impact on consumer prices. An independent estimate of US consumer inflation put it at well over 15% recently, when the official rate was 8%. Particularly egregious is the state’s insistence that a target of 2% inflation for consumer prices stimulates demand, when the transfer of wealth suffered by savers, the low paid and pensioners deprived of their inflation compensation at the hands of the BLS is glossed over. So is the benefit to the government, the banks, and their favoured borrowers from this wealth transfer. The problem we now face in this fiat money environment is not only that monetary policy has become corrupted by the state’s self-interest, but that no one in charge of it appears to understand money and credit. Technically, they may be very well qualified. But it is now over fifty years since money was suspended from the monetary system. Not only have policymakers ignored indicators such as Gibson’s paradox. Not only do they believe their own statistics. And not only do they think that debasing the currency is a good thing, but we find that monetary policy committees would have us believe that money has nothing to do with rising prices. All this is facilitated by presenting inflation as rising prices, when in fact it is declining purchasing power. Figure 4 shows how purchasing power of currencies should be read. Only now, it seems, we are aware that inflation of prices is not transient. Referring to Figure 1, the M3 broad money supply measure has almost tripled since Lehman failed, so there’s plenty of fuel driving a lower purchasing power for the dollar yet. And as discussed above, it is not just quantities of currency and credit we should be watching, but changes in consumer behaviour and whether consumers tend to dispose of currency liquidity in favour of goods. The indications are that this is likely to happen, accelerated by sanctions against Russia, and the threat that they will bring in a new currency era, undermining the dollar’s global status. Alerted to higher prices in the coming months, there is no doubt that there is an increased level of consumer stockpiling, which put another way is the disposal of personal liquidity before it buys less. So far, the phases of currency evolution have been marked by the end of the Bretton Woods Agreement in 1971. The start of the petrodollar era in 1973 led to a second phase, the financialisation of the global economy. And finally, from now the return to a commodity standard brought about by sanctions against Russia is driving prices in the Western alliance’s currencies higher, which means their purchasing power is falling anew. The faux pas over Russia With respect to the evolution of money and credit, this brings us up to date with current events. Before Russia invaded Ukraine and the Western alliance imposed sanctions on Russia, we were already seeing prices soaring, fuelled by the expansion of currency and credit in recent years. Monetary planners blamed supply chain problems and covid dislocations, both of which they believed would right themselves over time. But the extent of these price rises had already exceeded their expectations, and the sanctions against Russia have made the situation even worse. While America might feel some comfort that the security of its energy supplies is unaffected, that is not the case for Europe. In recent years Europe has been closing its fossil fuel production and Germany’s zeal to go green has even extended to decommissioning nuclear plants. It seems that going fossil-free is only within national borders, increasing reliance on imported oil, gas, and coal. In Europe’s case, the largest source of these imports by far is Russia. Russia has responded by the Russian central bank announcing that it is prepared to buy gold from domestic credit institutions, first at a fixed price or 5,000 roubles per gramme, and then when the rouble unexpectedly strengthened at a price to be agreed on a case-by-case basis. The signal is clear: the Russian central bank understands that gold plays an important role in price stability. At the same time, the Kremlin announced that it would only sell oil and gas to unfriendly nations (i.e. those imposing sanctions) in return for payments in roubles. The latter announcement was targeted primarily at EU nations and amounts to an offer at reasonable prices in roubles, or for them to bid up for supplies in euros or dollars from elsewhere. While the price of oil shot up and has since retreated by a third, natural gas prices are still close to their all-time highs. Despite the northern hemisphere emerging from spring the cost of energy seems set to continue to rise. The effect on the Eurozone economies is little short of catastrophic. While the rouble has now recovered all the fall following the sanctions announcement, the euro is becoming a disaster. The ECB still has a negative deposit rate and enormous losses on its extensive bond portfolio from rapidly rising yields. The national central banks, which are its shareholders also have losses which in nearly all cases wipes out their equity (balance sheet equity being defined as the difference between a bank’s assets and its liabilities — a difference which should always be positive). Furthermore, these central banks as the NCB’s shareholders make a recapitalisation of the whole euro system a complex event, likely to question faith in the euro system. As if that was not enough, the large commercial banks are extremely highly leveraged, averaging over 20 times with Credit Agricole about 30 times. The whole system is riddled with bad and doubtful debts, many of which are concealed within the TARGET2 cross-border settlement system. We cannot believe any banking statistics. Unlike the US, Eurozone banks have used the repo markets as a source of zero cost liquidity, driving the market size to over €10 trillion. The sheer size of this market, plus the reliance on bond investment for a significant proportion of commercial bank assets means that an increase in interest rates into positive territory risks destabilising the whole system. The ECB is sitting on interest rates to stop them rising and stands ready to buy yet more members’ government bonds to stop yields rising even more. But even Germany, which is the most conservative of the member states, faces enormous price pressures, with producer prices of industrial products officially increasing by 25.9% in the year to March, 68% for energy, and 21% for intermediate goods. There can be no doubt that markets will apply increasing pressure for substantial rises in Eurozone bond yields, made significantly worse by US sanctions policies against Russia. As an importer of commodities and raw materials Japan is similarly afflicted. Both currencies are illustrated in Figure 5. The yen appears to be in the most immediate danger with its collapse accelerating in recent weeks, but as both the Bank of Japan and the ECB continue to resist rising bond yields, their currencies will suffer even more. The Bank of Japan has been indulging in quantitative easing since 2000 and has accumulated substantial quantities of government and corporate bonds and even equities in ETFs. Already, the BOJ is in negative equity due to falling bond prices. To prevent its balance sheet from deteriorating even further, it has drawn a line in the sand: the yield on the 10-year JGB will not be permitted to rise above 0.25%. With commodity and energy prices soaring, it appears to be only a matter of time before the BOJ is forced to give way, triggering a banking crisis in its highly leveraged commercial banking sector which like the Eurozone has asset to equity ratios exceeding 20 times. It would appear therefore that the emerging order of events with respect to currency crises is the yen collapses followed in short order by the euro. The shock to the US banking system must be obvious. That the US banks are considerably less geared than their Japanese and euro system counterparts will not save them from global systemic risk contamination. Furthermore, with its large holdings of US Treasuries and agency debt, current plans to run them off simply exposes the Fed to losses, which will almost certainly require its recapitalisation. The yield on the US 10-year Treasury Bond is soaring and given the consequences of sanctions on global commodity prices, it has much further to go. The end of the financial regime for currencies From London’s big bang in the mid-eighties, the major currencies, particularly the US dollar and sterling became increasingly financialised. It occurred at a time when production of consumer goods migrated to Asia, particularly China. The entire focus of bank lending and loan collateral moved towards financial assets and away from production. And as interest rates declined, in general terms these assets improved in value, offering greater security to lenders, and reinforcing the trend. This is now changing, with interest rates set to rise significantly, bursting a financial bubble which has been inflating for decades. While bond yields have started to rise, there is further for them to go, undermining not just the collateral position, but government finances as well. And further rises in bond yields will turn equity markets into bear markets, potentially rivalling the 1929-1932 performance of the Dow Jones Industrial Index. That being the case, the collapse already underway in the yen and the euro will begin to undermine the dollar, not on the foreign exchanges, but in terms of its purchasing power. We can be reasonably certain that the Fed’s mandate will give preference to supporting asset prices over stabilising the currency, until it is too late. China and Russia appear to be deliberately isolating themselves from this fate for their own currencies by increasing the importance of commodities. It was noticeable how China began to aggressively accumulate commodities, including grain stocks, almost immediately after the Fed cut its funds rate to zero and instituted QE at $120 billion per month in March 2020. This sent a signal that the Chinese leadership were and still are fully aware of the inflationary implications of US monetary policy. Today China has stockpiled well over half the world’s maize, rice, wheat and soybean stocks, securing basics foodstuffs for 20% of the world’s population. As a subsequent development, the war in Ukraine has ensured that global grain supplies this year will be short, and sanctions against Russia have effectively cut off her exports from the unfriendly nations. Together with fertiliser shortages for the same reasons, not only will the world’s crop yields fall below last year’s, but grain prices are sure to be bid up against the poorer nations. Russia has effectively tied the rouble to energy prices by insisting roubles are used for payment, principally by the EU. Russia’s other two large markets are China and India, from which she is accepting yuan and rupees respectively. Putting sales to India to one side, Russia is not only commoditising the rouble, but her largest trading partner not just for energy but for all her other commodity exports is China. And China is following similar monetary policies. There are good reasons for it. The Western alliance is undermining their own currencies, of that there can be no question. Financial asset values will collapse as interest rates rise. Contrastingly, not only is Russia’s trade surplus increasing, but the central bank has begun to ease interest rates and exchange controls and will continue to liberate her economy against a background of a strong currency. The era of the commodity backed currency is arriving to replace the financialised. And lastly, we should refer to Figure 2, of the price of oil in goldgrams. The link to commodity prices is gold. It is time to abandon financial assets for their supposed investment returns and take a stake in the new commoditised currencies. Gold is the link. Business of all sorts, not just mining enterprises which accumulate cash surpluses, would be well advised to question whether they should retain deposits in the banks, or alternatively, gain the protection of possessing some gold bullion vaulted independently from the banking system. Tyler Durden Fri, 04/15/2022 - 15:00.....»»

Category: dealsSource: nytApr 15th, 2022

Bretton Woods III: The New Big Bang - "Suicidal Europe Saved By Gold"?

Bretton Woods III: The New Big Bang - "Suicidal Europe Saved By Gold"? Authored by Jorge Vilches, The unstoppable momentum behind Russia´s new Bretton Woods III finances added to the lack of official gold data available worldwide last week prompted the article “NATO´s internal gold war” to publically ask (1) how hard would it be for most countries to repatriate their now much-needed gold - theoretically still safely vaulted in ´custody´ at the Bank of England — specially if many of them tried to do it at once as most probably would happen…? (2) why isn't the current price of gold anywhere near its genuine market value? Is it due to silent daily central bank interventions that hinder true free-market price-discovery mechanisms? Gold matters The above is terribly important vis-á-vis the spanking-new payment system for Russia´s much-needed oil & gas and other essential produce now per Western “sanctions” only buyable either with rubles or gold. With rubles thru yet-not-so-clear–nor-yet-vetted banking procedures of unknown sustainability not been tried out even once yet — think revoking clawbacks…or ´artificial defaults´. While with gold it´d be thru old-fashioned sale of tangible bullion. Furthermore, in order to substantially increase its purchasing power, it would be highly meaningfull to be able to sell such gold – possibly with the buyer taking physical delivery — with a genuine market-reference price most probably very significantly above today´s sharply downward-manipulated quotes thru constant central bank interventions since time immemorial. Thus, we would avoid the coming chaos as the “blitzkrieg sanctions” imposed on Russia are not only not working but visibly having the opposite effect. Stubbornly opposing deeply immature EU wishfull thinking, the ruble today is even stronger than before the Ukraine armed conflict. The Anthony Quinn ´gold in Aqaba´ scene in “Lawrence of Arabia” brightly comes to mind. The hungry 800-pound gorilla So clearly Europe is not only shooting itself in the foot right now but rather both feet, plus knee-caps and elbows… and very soon in the temple (both sides) as exquisitely described by Pepe Escobar in the link below. So this article would be Part II of “NATO´s internal gold war” … or, in other words, a tentative draft Plan to AVOID the terrorizing scenario now looming the Old World. This means that the political adults in the room must immediately stop the EU self-shooting spree and face off this hungry 800-pound gorilla with no good intentions in his purposefull mind. Beware Agreed, time is of the essence…and the schedule for this draft Plan to succeed may impress as too demanding and/or politically difficult. True enough, it requires careful massaging and political buy-in… and obviously LOTS of hard work, energy, good will and effort from every stakeholder involved. But please beware that this Plan has two huge advantages i.e. (1) having no visible competition and (2) counting with the automatic UK approval as the Brits will not survive without a relatively healthy EU to sell to. Yes, it´s TINA once again…but for a very different Big Bang Skeptics If you believe otherwise please just sit back and get the memo from Pepe Escobar re “Europe commits suicide” So this Plan could very well be the only chance for the Western world to literally avoid many millions of its people from starving or freezing to death amidst an economic devastation and scarcity of basic staples that no war has ever inflicted so widespread. There are no brilliant ideas to look forward to with a worsening outlook as we speak, with ever more serious infighting and unsolvable conflicts throughout Europe ´AWKI´ and very soon elsewhere too. Tourism is 25% of EU GDP but without A/C and typical food & essential fuel it´d be dead on arrival at the border. Europeans, this is it In a nutshell, right now our Western Graeco-Roman Judeo-Christian millenary culture needs to rise to the occasion. Dear “Europa”, as the cradle of Western civilization that you are supposed to be, please be advised that this is it. Otherwise, not just our culture but also our species could soon become functionally disabled. Or, in financial terms which technocrats enjoy so much, we can soon become a forever ´non-performing asset´ a.k.a. wasted garbage. The Plan Accordingly, this draft Plan attempts to AVOID the UK-EU Armageddon that “NATO´s internal gold war” would necessarily bring about. And also please be advised that our success would be the only way at hand to prove the Davos agenda wrong which actually was what brought us to the situation we are now facing in the first place. The philosopy of The Plan The basic philosophy behind this über urgent project is probably best represented by a photograph taken at Verdun in 1984 wherein French President Francois Mitterand and German Chancellor Helmut Kohl are firmly holding each other´s hand like two school children both looking straight at the camera for the whole world to see. These two most serious, intelligent and very powerfull elderly statesmen were silently screaming something instantly understood by everyone after French and Germans had killed, maimed and hatefully destroyed each other for decades. Say no more The math of The Plan Lacking public domain data, let´s accept a spitball yet trustworthy “back-of-the-envelope” guesstimate of 5000 tons of gold deposited by EU members for custody at the Bank of England. So, if such tonnage were now physically available at today´s ultra low central-bank-manipulated prices it would pay for all of Europe´s oil & gas imports for one full year …while if gold were priced at USD $ 5000 per ounce Troy it would pay for 2.5 years of Europe´s oil & gas needs… And if gold were priced at USD $ 50,000 per ounce (something quite possible if genuine price-discovery mechanisms were set free without central bank manipulation…) those 5000 metric tons of gold at current oil & gas prices (which could be lower due to deflationary pressures) would pay for 25 years of EU´s fuel needs, or more. 2022 goals of The Plan Goal (A) is having all countries being able to gradually repatriate their gold bullion now theoretically in custody at the Bank of England if they so desire with a serious and foreseeable schedule in place to be unequivocally complied with. Goal (B) being able to sell such gold bullion even with buyers taking physical delivery but always at a genuine market price most probably very much higher than today´s fully manipulated quotes thru central bank daily interventions. Governance & Management of The Plan 1. Arbiter Czar Immediate appointment of a high caliber Arbiter Czar — with proper staffing & facilities + open budget + funding both in London and Brussels – preferably of non-European or US origin, irrefutably knowledgeable and impartial to be duly followed by UK & EU leaders and institutions in the implementation of this Plan as per guidelines herein. Both the UK and EU Parliaments must immediately approve the political appointment of this Czar ( and substitute sub-Czar ) under these terms with unequivocal and unmitigated support behind his/her role. 2. Full legal open-ended amnesty Full legal amnesty & indefinite end-of-story “forgiveness forever” to both UK and EU on this topic reconfirmed by ECJ + ECB + BoE + British Judiciary & BIS Basel III thru specific legal homologation by July 1 while setting this topic separate from pending Brexit negotiations with plenty of shared UK + EU blame all around. 3. UK & BoE gold bullion all-inclusive official public domain status Report Full-disclosure UK & BoE transparent gold-holdings & historical evolution Report + Audits Stages #1 & #2 4. UK official public domain gold bullion transparent Repatriation Plan Proposed fully-descriptive UK official gold bullion repatriation Plan with time-table & schedule per (3) above. 1. Gold at real free-market price Definitive and conclusive end to Ponzi scheme derivatives & option futures and central bank interventions etc etc etc allowing gold price to freely reach its own price-discovery + elimination of VAT and other taxes etc 2. “Financial Equivalence” Protocol “Financial Equivalence” Protocol approval under normal Brexit mechanisms already foreseen. 3. Political reconfirmation and legal homologation EU Parliament + UK Parliament + BIS Basel III + ECB + BoE + ECJ + British Judiciary of points (2) + (4) & (5). The all-losers “blame game” (… which badly requires amnesty…) “ALL-losers”… ALL as in ´everyone´ so don´t even think of it … so just please hold your nose and stick to The Plan. But to clear the air and thus never coming back to this aspect ever again, let´s leave on record that there was plenty of shameless blame BOTH sides of the English Channel, fog or no fog. Clearly, they were both non-compliant. The UK of course, but also EU members which faked to “trust” the UK while playing parallel games to reap huge benefits from EU membership, economics & subsidies despite clear non-compliance with Maastricht inclusion criteria. a full euro “free ride” with no questions asked despite the fact that EU financial strategy was unsustainable from get-go like a bunch of drunken sailors coming out of a pub very late at night leaning on each other. so they all swept it under the rug, whistled the mess away, and “one hand washes the other” so to speak both sides played hardball “for keeps” the only problem being that Russia has now taken their ball away… Per reknown internationally published experts, everybody that mattered knew and knows - ECB and BIS included - that Western central banks deploy daily surrepticious derivatives & options interventions in the futures market to control commodity prices and protect government fiat currencies against the public’s recognition of their devaluation. Thus, for decades the price of gold was artificially maintained at ULTRA low levels so nobody in the EU cared much… Now Russia has changed all that with a BigBang commodities-based Bretton Woods III deal and suddenly gold bullion matters lots because it buys oil & gas and everything Russian that Europe badly needs, or else…. So there was NO due diligence nothing meaningful done by the EU or the UK, sheer negligence & carelessness. NO world-class fully independent full-scale & depth public domain audits from anyone nor UK nor EU. The ´Authorized Custodian´ incurred in guiltfull non-compliance of known tasks, duties & malfeasance With deceitfull impunity, BOTH sides always irresponsibly stonewalled every question, doubt or query. Initial schedule of The Plan To be expanded and modified on the fly under the leadership and directions of the all-powerfull Arbiter Czar in order to achieve Goal (A) + Goal (B) described before by November 30, 2022. May 1 Meeting to be held in London between UK Prime Minister Boris Johnson and President Ursula von der Leyen of the European Commission and President Charles Michel of the European Council in order to officially submit candidates for Arbiter Czar + substitute both to be agreed upon by mutual UK-EU consent. discuss and agree on the general framework of the tentative draft plan outlined herein as possibly modified. discuss and agree and formally approve the tentative procedures and schedule for execution + open budget June 1 Both the UK and EU Parliaments must have already approved the political appointment of the Arbiter Czar + substitute under the terms of this outline thru an over-arching Law superseding and over-imposed above any other law, ruling, treaty or order. The above should also include proper staffing & facilities + open budget + funding both in London and Brussels plus objectives, goals and procedures to be followed per (A) + (B) + (C). July 1 Approval of full legal amnesty law & indefinite end-of-story “forgiveness forever” concept for both UK and EU and everyone else on this topic, as approved simultaneously by ECJ + ECB + BoE + British Judiciary & BIS re Basel III with specific legal homologation from whomever else is needed while setting this matter completely separate from any possible pending Brexit negotiations. Repeat Granted The Plan is very tight and politically difficult. But there is no other plan for the EU-UK survival as we know them, unless with BoJo´s help we readily welcome the very angry pitchforks to come inside the Palace and warm up *  *  * Jorge Vilches is proud to have been introduced many times as “ the quintessence of the independent columnist ”. Former op-ed contributor for The Wall Street Journal – New York and other financial media, has studied this topic in depth for the past 20 years. WSJ-NY “The Americas” column, editor David Asman today Fox Business News anchor. Tyler Durden Fri, 04/15/2022 - 04:00.....»»

Category: personnelSource: nytApr 15th, 2022