Change of course: Modernization, Covid-19 pandemic help revitalize golf

MESA – After a boom in golf’s popularity that followed the emergence of Tiger Woods as a sports superstar, the game slipped into a post-Tiger effect downtrend. Over a 15-year period from 2003 to 2018, the number of golfers declined in the United States by 6.8 million. More than 1,200 courses closed across the country over that same span, golf manufacturers saw sales sink and considerable hand-wringing followed over what could be done to bring golfers back and also attract a new generation to….....»»

Category: topSource: bizjournalsMay 14th, 2022

Futures Ramp On China Stimulus Hopes Ahead Of Central Bank Barrage

Futures Ramp On China Stimulus Hopes Ahead Of Central Bank Barrage U.S. futures rose again, starting the Santa rally predicted over the weekend by Goldman, after the underlying index surged to a record on Friday with risk appetite returning ahead of this week’s barrage of central bank meetings including the Fed on Wednesday, followed by the Bank of England and ECB. Nasdaq 100 futures climbed 0.4% as major technology and internet stocks rose in premarket trading with Apple inching closer to a $3 trillion market valuation; S&P 500 futures rose 11 points or 0.2%; with Dow Jones futures also rising 0.2%. Chinese developers’ bonds and shares experienced a wave of selling after the sudden plunge in Shimao Group's notes restarted concern over the health of the sector 10-year Treasury yields inched lower to 1.4684% and the dollar pushed higher. Bitcoin extended losses toward $48,000 as Binance bailed on plans for a Singapore exchange. Traders pared bets that the BOE will raise rates next year as concerns over fresh Covid restrictions outweighed inflation fears. Risk sentiment got a boost from predictions China will start adding fiscal stimulus in early 2022, said Ipek Ozkardeskaya, a senior analyst at Swissquote. “The chances of a massive hawkish surprise are limited, and the actual expectation doesn’t interfere with equity investors’ craving for a Santa rally to close a record-breaking year with one last record,” she wrote. Indeed, as we have been expecting for much of the past 6 months, China’s top decision makers last week signaled policies may become more supportive of growth next year. Economists predict China will start adding fiscal stimulus in early 2022. US stocks close Friday at a new record after in-line inflation data did not surprise to the upside for the first time in months and spurred bets that the Federal Reserve won’t have to accelerate plans to tighten monetary policy. That came amid a backdrop of uncertainty from the omicron coronavirus variant, a factor that traders are likely to also monitor closely as the week starts. Volatility should remain high as several central banks will decide on interest rates this week, Pierre Veyret, a technical analyst at ActivTrades, said in written comments. The “policies should set the trading tone, providing investors with more clues on next year’s investing environment.” The Federal Reserve on Wednesday is expected to speed up stimulus withdrawal and perhaps open the door to earlier interest-rate hikes in 2022 if price pressures stay near a four-decade peak. After repeated jawboning, it would be a major surprise if the bank doesn't announce a faster tapering, and the bond market will have to adapt to the new approach. “Global equities had a solid run last week and we’ll see if the goodwill lasts into what is a behemoth when it comes to event risk,” Chris Weston, head of research with Pepperstone Financial Pty Ltd., wrote in a note. Omicron and the Fed should dictate sentiment, he added. Meanwhile, in the world of covid, at least 30 U.S. states have reported omicron cases, with Anthony Fauci of course stepping up calls for boosters to increase protection and making pharma CEOs even richer. That said, all cases for which there's available information were asymptomatic or mild, European health chiefs said. That did not stop Boris Johnson from warning that the U.K. faces a tidal wave of infections and set a year-end deadline for its booster program. South Africa's Cyril Ramaphosa tested positive. Here are some of the biggest U.S. movers today: Arena Pharmaceuticals soars after Pfizer agrees to buy it for $100/Shr in Cash Apple shares rose 1%, leaving the stock close to hitting $3t market capitalization if the move holds. Airbnb, Lucid, Zscaler and Datadog shares all rise in U.S. premarket trading with the companies set to be added to the Nasdaq 100 index later this month. Peloton Interactive shares gain after the home-exercise firm put out an advert responding to a scene in the TV show “And Just Like That...” where a character dies using its product. The stock closed 5.4% lower on Friday, the day after the episode aired. TherapeuticsMD fell 25% in premarket trading after the FDA said it couldn’t approve revisions to some manufacturing testing limits for the Annovera birth-control ring requested by the company through a supplemental new drug application. European stocks also advanced, led by technology and mining stocks. The Euro Stoxx 50 rose as much as 1%, DAX outperforming at the margin.  In the U.K., traders are paring back bets on Bank of England rate hikes over the next year as concerns over fresh Covid restrictions outweigh inflation fears. Asian stocks erased an early advance as deepening losses in shares of Chinese property developers and persistent concerns over the omicron coronavirus variant soured sentiment. The MSCI Asia Pacific Index was down 0.2% after having climbed as much as 0.8%. Equity benchmarks in India and South Korea led regional declines. While stocks in China and Hong Kong rallied in morning trade on signals policies may become more pro-growth next year, the Hang Seng Index erased a gain of as much as 1.6%. That was owing to a selloff in real estate names after a plunge in the bonds and shares of Shimao Group sparked renewed concern over the health of the sector. Monday’s trading in Asia also highlighted investor caution as markets confront potential economic risks from omicron’s spread and a series of central bank meetings this week, including the Federal Reserve. The Fed on Wednesday is expected to speed up stimulus withdrawal and perhaps open the door to earlier interest-rate hikes in 2022 if price pressures stay near a four-decade peak. “We are in the last three weeks of the year -- no investor is going to place new bets and are more likely to be taking profits off the table,” said Justin Tang, head of Asian research at United First Partners. “Any negative news will be taken as a reason to press the sell button.” Meanwhile, China’s stocks climbed for the fourth day in five after the nation’s annual economic conference ended Friday with a vow to ensure “stability” and “front load” policies. Foreign investors on Monday added to record purchases of mainland shares last week. Focus now shifts to data due later in the week, including industrial production, retail sales and fixed-asset investment. India’s benchmark stock index dropped, with a fall in Reliance Industries Ltd. weighing on the market. The S&P BSE Sensex slipped 0.9% to close at 58,283.42 in Mumbai, reversing gains of as much as 0.7%. The index had posted its best weekly performance since mid-October on Friday. The NSE Nifty 50 Index also fell 0.8% on Monday. Still, a measure of small-cap companies gained 0.2%. Reliance, the nation’s most valuable company, dropped 2%. Out of 30 shares in the Sensex, 23 fell and seven rose. All but one of the 19 sector sub-indexes compiled by BSE Ltd. declined, led by a gauge of energy companies. “Selling is more evident in benchmark indices as overseas investors are booking at least a part of their profits ahead of the U.S. Fed’s rate-setting meeting that is likely to speed up the policy normalization process,” Abhay Agarwal, founder of Mumbai-based Piper Serica Advisors Pvt., an investment management company with assets of 5 billion rupees under management, said by phone.  The Fed.’s policy announcement is due Wednesday, where it is expected to speed up stimulus withdrawal and perhaps open the door to earlier interest-rate hikes in 2022. “Post-event, we expect to see a reallocation, though at a slower pace as FPIs will factor in the possible hike in interest rates, apart from the tapering of stimulus,” Agarwal said. Locally, the government will release its consumer inflation print for the month of November later on Monday. Inflation likely rose to 5.1% year-on-year in November from 4.5% in the previous month, according to a Bloomberg survey. Fixed income drifts higher with bund and UST curves bull flattening. Treasury yields were lower as the U.S. trading day begins, with the 10Y sliding to 1.46% and short-term little changed, prolonging the curve-flattening trend. With no U.S. economic data slated and Fed speakers silent ahead of Wednesday’s policy meeting, supply is a focal point, and Fed is slated to buy long-end sectors with no coupon supply until next week’s 20-year reopening. 10- to 30-year yields lower by about 1bp-2bp, 10-year by 1.5b at ~1.468%; 2- to 5-year yields little changed, narrowing 2s10s and 5s30s by 1bp-2bp.Peripheral spreads tighten slightly with short-dated BTPs leading a cautious move higher. Gilts bull steepen, trading ~2.5bps richer across the short end as money markets continue to price out hikes in light of the latest Covid restrictions. In FX, Bloomberg Dollar index drifts 0.3% higher, erasing Friday’s decline and rallying against all its peers with the focus on Wednesday’s Federal Reserve meeting amid speculation officials might accelerate the pace of policy normalization. Flows in the spot market are running at 70% of the recent average, a Europe-based trader told Bloomberg. Volatility term structures in the major currencies remain inverted as the market awaits forward guidance that could shape trading for the better part of 2022 U.S. inflation data in line with expectations on Friday “almost certainly won’t change the balance-of-risk assessment for the Fed, and the communications of late expressing concern over inflation risks remain valid,” says MUFG’s Derek Halpenny. “The week starts quietly in terms of data today but it remains likely that the dollar will remain supported into the FOMC on Wednesday with anticipation high of some hawkish rhetoric to accompany the decision to speed up QE tapering.” GBP/USD fell 0.2% to 1.3244 after gaining 0.5% over the previous two sessions. The Bank of England is set to opt for caution over Covid rather than worries about inflation, pushing back its first rate increase since the pandemic into 2022, according to economists. U.K. Health Secretary Sajid Javid said there’s no certainty the government will be able to keep schools in England open, as it battles to contain the spread of the omicron Covid-19 variant.  “This week is interesting for GBP as markets scrutinize labor-market report tomorrow ahead of BOE,” said Christopher Wong, senior foreign-exchange strategist at Malayan Banking Bhd. in Singapore. “There are concerns unemployment will spike if workers are made redundant or if people cannot find jobs, and this labor report will provide the first assessment.” The Yen outperformed amid broad dollar strength; USD/JPY still up 0.2% at 113.69. AUD and NOK are the weakest in G-10.  Turkish lira crashed again, plunging to a new record low in early London trade with USD/TRY initially rallying over 6% to highs of 14.7590, before fading some of the move after another intervention from the Turkish central bank. In commodities, crude futures give back Asia’s gains; WTI is little changed near $71.78, Brent dips below $75.50. Spot gold holds a narrow range near $1,785/oz. Most base metals are in the green with LME aluminum outperforming.  Bitcoin once again failed to rise above $50,000, extending losses toward $48,000 as Binance bailed on plans for a Singapore exchange There are no major economic developments on today's calendar, but it's a busy week with about 20 central banks making monetary policy announcements, including the Fed, the BOE and ECB, and the divergence of their paths will be evident. Jerome Powell may turn more hawkish as he fights rising inflation, while the ECB joins China in leaning dovish and playing down soaring prices. Market Snapshot S&P 500 futures up 0.4% to 4,728.00 STOXX Europe 600 up 0.7% to 478.82 MXAP down 0.2% to 193.62 MXAPJ down 0.3% to 630.93 Nikkei up 0.7% to 28,640.49 Topix up 0.1% to 1,978.13 Hang Seng Index down 0.2% to 23,954.58 Shanghai Composite up 0.4% to 3,681.08 Sensex down 0.9% to 58,278.65 Australia S&P/ASX 200 up 0.4% to 7,379.26 Kospi down 0.3% to 3,001.66 Brent Futures up 0.8% to $75.74/bbl Gold spot up 0.1% to $1,784.20 U.S. Dollar Index up 0.34% to 96.42 German 10Y yield little changed at -0.36% Euro down 0.4% to $1.1265 Top Overnight News from Bloomberg Almost 20 central banks meet this week, including the world’s biggest. No surprise that volatility term structures in the major currencies remain inverted as the market awaits forward guidance that could shape trading for the better part of 2022 The Bank of Japan offered to buy 2 trillion yen ($17.6 billion) of government bonds under repurchase agreements after repo rates jumped to a two-year high Turkey’s central bank intervened in the market by selling FX after the lira tumbled past 14 to the dollar for the first time, piling pressure on a central bank that’s forecast to keep cutting interest rates this week despite rising inflation. The decline came after S&P Global Ratings lowered the outlook on the nation’s sovereign credit rating to negative on Friday, citing risks from the “extreme currency volatility” The ECB’s biggest decision this week is to decide if it can still call the current inflation spike “transitory.” The answer will have a huge bearing on the euro-area economy, which is already dealing with resurgent coronavirus infections, new restrictions and lockdowns, and uncertainty about the omicron variant ECB Vice President Luis de Guindos is self-isolating after testing positive for Covid-19 on Saturday, the ECB said in a statement posted on its website. Guindos hasn’t been in close contact with ECB President Christine Lagarde over the past week, according to the statement. The Spaniard, who is double- vaccinated and has very mild symptoms, will work from home until further notice Two doses of the Pfizer Inc. and AstraZeneca Plc. vaccines induced lower levels of antibodies against the omicron variant, increasing the risk of Covid infection, according to researchers from the University of Oxford. A more detailed breakdown of overnight news from Newsquawk Asia-Pac equity markets took their cues from last Friday’s gains on Wall Street where the S&P 500 notched a fresh record close and its best weekly performance since February, with markets now bracing for a risk-packed week including a busy schedule of central bank meetings. The ASX 200 (+0.4%) traded higher with risk appetite supported by the reopening of Australia’s borders to international students and skilled workers from Wednesday, while the government will also partially underwrite up to AUD 7bln in new loans for small businesses impacted by lockdowns. The Nikkei 225 (+0.7%) benefitted from the mild outflows from the JPY, with the index unphased by mixed Tankan and Machinery Orders data in which the Tankan Large Manufacturers Index and Outlook missed expectations but sentiment among Large Non-Manufacturers and Small Manufacturers improved for the sixth consecutive quarter. The Hang Seng (-0.2%) and Shanghai Comp. (+0.4%) predominantly conformed to the upbeat mood amid economists' expectations for China to add fiscal stimulus from early next year following last week’s conclusion to the Central Economic Work Conference, which noted that China's economy faces shrinking demand, supply shock, and weakening expectations but added that economic operations are to be kept within a reasonable range. Alibaba shares were among the biggest gainers in Hong Kong as it extended its rebound from YTD lows. Finally, 10yr JGBs were rangebound with March futures contained by resistance at the key 152.00 level and amid the positive mood across riskier assets, although JGBs were off the lows seen late last week where there were source reports that the BoJ is likely to scale back its pandemic relief programs in March with a potential announcement as early as this week’s meeting. Top Asian News Shriram Units Merge to Form Largest India Retail Financier Intel to Spend $7 Billion on Big Malaysia Chipmaking Expansion Shimao Group Appoints Xie Kun as Executive Director Daimler Reveals Chinese Partner BAIC Raised Stake to Almost 10% Stocks in Europe have continued to gain since the cash open (Euro Stoxx 50 +1.0%; Stoxx 600 +0.5%) as the APAC sentiment reverberates through the region following a fleeting blip lower in early European trade. US equity futures are also firmer but to a lesser magnitude – with the RTY (+0.3%) narrowly outpacing the ES (+0.%), NQ (+0.4%) and YM (+0.2%). Focus this week will be on the slew of central bank updates which kicks off with the FOMC on Wednesday, followed by the BoE and ECB on Thursday - with Flash PMIs, Christmas liquidity and Quad Witching also part of this week’s concoction. Add to that the potential tail-risk from geopolitics and headline risk from COVID. Nonetheless, European cash markets at the moment seem unfazed by what’s ahead. Sectors are pro-cyclical with Basic Resources and Autos topping the charts, whilst the defensive Healthcare, Telecoms and Personal & Household goods reside at the bottom. A recent Citi note suggests that rising earnings should keep European stocks moving higher and offset expansive valuations and tightening monetary policy in the US. Citi targets some 9% upside for the Stoxx 600 next year, with a target of 520 (vs current c.477), whilst 12% upside is targeted in the FTSE 100 to 8,200 (vs current c. 7,303). Citi leans in favour of cyclicals vs defensives - with overweights in Banks, Insurance, Basic Resources, Industrials, Media, Luxury Goods and Chemicals. Citi is underweight Utilities, Telecoms, Food & Beverages, Personal Care, Travel, Autos and Financial Services. The bank has also added to its focus list: AstraZeneca (+0.1%), Aviva (+0.7%), Capgemini (+1.2%), Faurecia (+0.9%), Iberdrola (-0.3%), Lloyds (-0.7%), Prosus (+1.5%), Royal Mail (+1.6%), Sanofi (Unch), Tesco (+0.4%), UBS (+0.2%), Vodafone (Unch), Volvo (+1.1%). Separately, Goldman Sachs sees muted returns for global stocks next year amid negative real rates coupled with high equity risk premia and in the absence of a growth shock. GS suggests that risks are growing in the US on a relative basis and sees a maximum drawdown of between -5 to -10% over the next 12 months. Top European News European Gas, Power Prices Surge on Nord Stream 2 Worries U.K. Says Can’t Rule Out Shutting Schools as Omicron Spreads UBS Global Wealth Management Discontinues USDTRY Coverage Vivendi Has ‘Never Been a Threat’ to Lagardere: Arnaud Lagardere In FX, the Greenback has clawed back all and a bit more of its post-US inflation data losses, partly on reflection perhaps that the CPI prints were broadly in line, and actually a tad above consensus in terms of the m/m headline rate, so highly unlikely to derail the Fed from upping the pace of QE tapering this week and probably won’t deter the more hawkish FOMC members from pencilling in a steeper lift-off. Hence, having ended Friday’s session fractionally below a Fib retracement level (96.098), the index subsequently eclipsed the intraday peak (96.429) to turn what was a bearish technical close into a constructive start to the new week within a 96.080-450 range and a ‘close’ above 96.500 would be deemed positive, if not bullish. CHF/EUR/AUD - Very little traction from latest signs of building inflation pressure in the Eurozone via German wholesale prices reaching a record high 16.6% y/y in November, but the Euro has held above 1.0400 against the Franc in wake of latest weekly Swiss sight deposits showing a rise in domestic bank balances. Meanwhile, the single currency has absorbed some stops triggered on a breach of 1.1265 vs the Buck and could derive underlying support from decent option expiry interest at 1.1250 (1.5 bn) at the base of a band extending to 1.1320 (2 bn) through 1.1270-1.1300 (1.1 bn), and Usd/Chf is hovering around 0.9250 at the upper end of a 0.9257-00 band ahead of producer/import prices on Tuesday. Elsewhere, the Aussie has not been able to benefit from good news in the form of Australia opening its borders to international students and skilled workers from Wednesday, Government plans to partially underwrite up to Aud 7 bn new loans for small businesses impacted by lockdowns, or buoyant risk appetite, as it straddles 0.7150 against its US counterpart. JPY/NZD/CAD/GBP - Also conceding ground to their US peer, with the Yen back below 113.50 and hardly helped by mixed Japanese macro releases including December’s Tankan survey and October machinery orders, while the Kiwi is back under 0.6800 even though NZ PM Ardern said the COVID-19 alert level for Auckland is to be eased on December 30 and the next review is scheduled for January 17. The Loonie is slipping alongside WTI between 1.2753-06 parameters and Cable has tested Fib support into 1.3200 at 1.3200 amidst ongoing UK political furore over Conservative Party transgressions during lockdown last year and heightened Omicron restrictions to prevent a tidal wave of infections. In commodities, WTI and Brent front-month futures have been drifting lower since the European morning after the former tested USD 73/bbl to the upside and the latter briefly topped USD 76/bbl. Newsflow for the complex has been light but there have been further positive omens regarding the Iranian nuclear talks - Iran’s top nuclear negotiator said good progress was made in nuclear talks and can quickly pave the way for serious negotiations, whilst Russia's Deputy Foreign Minister said they have reason to anticipate some progress. That being said, we are yet to hear from some of the western nations. Meanwhile, on the OPEC front, Iraq’s Oil Minister said he expects OPEC to maintain its current policy of gradual monthly increases of 400k BPD at the next meeting – slated for early January. On the COVID front, the UK opted not to further tighten restrictions over the weekend but instead boosted the booster programme, whilst reports surrounding the Omicron variant have all highlighted a mild illness. The geopolitical space may require some more attention as tensions remain high on the Ukraine/Russia and Taiwan/China front, with the US involved in both. Russian Deputy Foreign Minister, according to reports this morning, said if the US and NATO do not provide them with guarantees around security, it may lead to confrontation – and emphasised that the lack of progress on this would lead to a military response. Further, there were reports that Saudi Arabia and Iran held security talks. Ahead, the monthly OPEC oil market report is due to be released, but focus this week will likely remain on the slew of central bank meetings. Elsewhere, spot gold and silver are constrained to recent ranges ahead of a risk-packed week, with the former still in a purgatory zone below its 50 DMA (1,789/oz), 200 DMA (1,793/oz) and 100 DMA (1,795/oz). Meanwhile, LME copper is firmer on the mild market optimism but has receded south of the USD 9,500/t mark. US Event Calendar Nothing major scheduled DB's Jim Reid concludes the overnight wrap We had our first Xmas lunch yesterday with my golf club hosting Santa (arriving on a golf buggy up the 18th fairway) and welcoming kids to the dinning room. I spent the whole lunch worrying their behaviour would get me black balled and banned from golf. Before we went my wife and I took lateral flow tests and Maisie asked if this was to stop Santa getting the virus? She then asked who would deliver all the presents if he had to self isolate. I must admit that I thought this was a very good question, especially as she’s starting to slowly question his existence. I said it was likely ok as Santa had just got his booster as he is over 50. I remember when the third week of December was one long string of Xmas client lunches that you desperately tried the leave as early as you could politely do so even if that was 8pm. This week they’ll be no time for lunches and we’ll be glued to our screens with just the eight G20 central banks deciding on monetary policy. The Fed’s decision on Wednesday will be key of course, with anticipation that they might accelerate the tapering of their asset purchases, but there’s also the ECB and Bank of England meetings to watch out for as well. All of them are very much “live” meetings. Elsewhere the flash PMIs for December (Thursday) could give us an initial indication as to how increased restrictions have begun to affect economic activity. US retail sales and UK CPI (both Wednesday) might be other interesting data points. Reviewing the main highlights in more details now. The Fed’s decision on Wednesday will be the focal point of the week. In terms of what to expect, our US economists write in their preview (link here) that they anticipate a doubling in the pace of tapering, which would bring the monthly drawdown of Treasury and MBS to $20bn and $10bn per month respectively. That would see the process of tapering conclude in March, giving them greater optionality for an earlier liftoff. Bear in mind that this meeting will also see the release of the latest dot plot, as well as the projections for inflation, growth and unemployment. On that, our economists see the median dot in 2022 likely showing two rate hikes, with risks of more, up from September when only half the dots saw any hikes by the end of 2022. The ECB’s decision will then follow on Thursday. In our European economists’ preview (link here) they write that until the arrival of the Omicron variant, the ECB appeared on track to initiate a transition to a monetary policy stance based more on policy rates and rates guidance and less on liquidity provision. They were also set to create a policy framework with more optionality to better respond to inflation uncertainties. The Omicron variant reinforces the need for optionality, but until there’s greater clarity on what it means for the pandemic and the recovery, the ECB may stall the expected decisions in part or in whole until early 2022. As with the Fed, it’ll be interesting to see the December staff forecasts on inflation, which could influence the market view on lift-off timing. The Bank of England’s decision will then take place on Thursday, and our UK economist expects the MPC will raise Bank Rate by +15bps to 0.25%. In the preview (link here) it argues that news of the Omicron variant has changed little on the medium-term economic outlook, with the labour market remaining as tight as it has been in recent memory, and inflation continuing to outpace staff forecasts. Nevertheless, the risks to this view are finely balanced, and risk management considerations may lead them to delay a rate hike, as they instead opt to find out more information on Omicron’s impact. Finally on the central bank front, the Bank of Japan will be holding their final monetary policy meeting of the year on Friday. In our economist’s preview (link here), it says that although there had been an expectation that the bank would revise their special pandemic corporate financing support program at this meeting, the emergence of the Omicron variant has changed the situation. Given the next meeting is only a month later, the view is now that they’ll maintain a wait-and-see stance in this meeting and adjust the policy in January, although a revision remains possible this week if more positive evidence is found on the new variant. Moving on to the data, the main highlight will be the flash PMIs for December from around the world on Thursday which will offer an initial indication as to whether there’s been any economic reaction yet to rise in restrictions and the emergence of the Omicron variant. There’ll also be an increasing amount of hard data out of the US for November, including retail sales (Wednesday), industrial production, housing starts and building permits (all Thursday). In China, Wednesday will see the release of their own retail sales and industrial production data for November, and in Germany on Friday there’s the Ifo’s business climate indicator for December. Finally on the inflation side, releases will include the US PPI data for November tomorrow, along with the UK and Canadian CPI readings for November on Wednesday. Late on Friday the UK released a paper looking at vaccine effectiveness against the Omicron variant. The good news is it suggested those who’d been boosted at least a couple of weeks ago still had decent protection, with 3 doses of Pfizer offering 75.5% effectiveness against symptomatic disease, and those who’d had two doses of AstraZeneca followed by a Pfizer booster had 71.4% effectiveness. Those are both lower than the 90+% effectiveness against delta with a booster, but is still much better than some of the worst outcomes had feared. Furthermore, if the past variants are anything to go by, then the protection against severe disease and hospitalisation could be even higher. However, the bad news is it indicated those who’ve been double-jabbed for some months now have significantly waning protection against this new variant from a purely symptomatic basis without a booster, so this will only encourage governments to ramp up their booster campaigns. The UK last night accelerated their plans to get all over 18s offered a booster. It’s now by the end of the year which will be a Herculean task. This follows PM Johnson last night telling the nation that there’s a tidal wave of Omicron cases coming. The government expects it to become the dominant strain very soon in what will be an incredibly short space of time. Overnight in Asia, markets are trading notably higher with the CSI (+1.31%), Hang Seng (+1.01%), Shanghai Composite (+1.00%), the Nikkei (+0.89%) and KOSPI (+0.28%) all strong after China's policymakers' hinted at more stimulus at the end of annual Central Economic Work Conference on Friday. Indeed our economists suggest that this is the decisive policy shift that markets have been waiting for and believe it’s a big deal. See their report on it here. This optimism is being reflected in the near 6% jump in Iron Ore trading overnight. DM futures are indicating a positive start to markets in the US and Europe with S&P 500 (+0.37%) and DAX (+0.44%) futures both in the green. Looking back at last week now and the focus remained squarely on Omicron, where the lack of any concrete bad news lent a more optimistic tone. This modestly improved risk sentiment sent equities and yields higher, and pushed volatility lower with the VIX ending the week -11.88 ppts lower at 18.79. The S&P 500 and Stoxx 600 gained +3.82% and +2.76% over the week (+0.95% and -0.30% Friday respectively). Cyclical sectors and tech stocks led the gains in the US. The small cap Russell 2000 advanced +2.43% (-0.38% Friday) while the Nasdaq climbed +3.61% (+0.73% Friday). The optimism also pushed yields higher and yield curves slightly steeper, with the 10yr treasury gaining +14.1bps this week after a poor close the previous week (-1.5bps Friday) and 10yr bunds climbing +5.1bps (+0.7bps Friday). The 2s10s treasury curve steepened +7.2bps (+1.6bps Friday). Ahead of the Fed’s meeting this week, the market is pricing the first full Fed rate hike by June. In the world of central banking, the Bank of Canada kept policy on hold and reinforced expectations for their inflation target to be sustainably achieved in the middle of 2022, enabling policy rate hikes. Like most DM central banks, they are focused on persistently elevated inflation, which they ascribe to supply constraints that will take time to alleviate. The Reserve Bank of Australia also left its benchmark interest rate unchanged while cautioning that price pressures remain subdued, in contrast to the rest of the DM space. In China, the PBoC cut the required reserve ratio by -50bps to support the economy, while FX reserve ratio was lifted +2.0% to lean against an appreciating renminbi. Property developers Evergrande and Kaisa defaulted on dollar debt. Chinese officials asserted the defaults would be dealt with “in a market-oriented way”. Geopolitical rumblings out of Europe also garnered focus. Presidents Biden and Putin held a phone call to discuss tensions following the build-up of Russian forces on the Ukrainian border. The readouts following the call offered few details but signalled both sides would follow up. President Biden has cautioned severe economic sanctions would be levied should Russia invade Ukraine, including sanctions on Putin’s inner circle, energy companies, and banks. The US would also consider severing Russian access to the US-run international payments system, SWIFT. On Friday, US CPI increased 0.8% and core US CPI increased 0.5% month-over-month in November, with the headline reading a tenth ahead of expectations. Commensurate year-over-year readings were 6.8% and 4.9%, the highest readings since 1982 and 1991, respectively. Measures of underlying and trend inflation continued to move higher, suggesting the Fed’s recent hawkish pivot will continue to be embraced by policymakers. Tyler Durden Mon, 12/13/2021 - 07:56.....»»

Category: blogSource: zerohedgeDec 13th, 2021

Bullwhip Effect Ends With A Bang: Why Prices Are About To Fall Off A Cliff

Bullwhip Effect Ends With A Bang: Why Prices Are About To Fall Off A Cliff It was exactly a year ago, when Deutsche Bank strategist Luke Templeman said that amid the panicked scramble by US wholesalers to stock up on scarce inventory as a result of snarled supply chains, it was only a matter of time before the US economy was roiled by a "bullwhip" (or whiplash) effect. Some details for those unfamiliar with this concept: the bullwhip effect occurs when a drop in customer demand causes retailers to under stock. In turn, wholesalers respond to a lack of retail orders by understocking themselves. That then causes manufacturers to slow production. Eventually the reverse occurs. As customer demand comes back, retailers quickly order more goods, often too much, and wholesalers and factories are caught short. Shortages occur, prices increase. Eventually production ramps up at levels that are far beyond equilibrium levels and this cascades down the chain. These violent swings in availability of goods then continue back and forth until an equilibrium is eventually established. Last May, the beginning of the bullwhip effect was seen in the way retailers and wholesalers managed their inventory levels since the outbreak of covid. Specifically, retailers kept a supply of inventory at a relatively constant level, above that of wholesalers. As covid hit, supply chains from Asia were cut which caused a fright amongst retailers in the West who immediately began to put in orders for more inventory. A whole lot more of it. Subsequent lockdowns saw demand plummet and inventories along with it. In both cases, the actions of wholesalers followed those of retailers by a month or so. In the context of a starting bullwhip effect, Templeman's conclusion was accurate: "As inventory levels have fallen to multi-decade lows at retailers, there are likely many businesses that will not have enough inventory to satisfy customers as economies recover and pent-up demand is unleashed. This is particularly the case as retailers are far more reliant on just-in-time supply chains than they were in decades past." Among other things, this is also why last May is when a historic bout of inflation was unleashed (one which not a single career economist or Fed official predicted correctly) as collapsing inventories and lack of restocking by jammed up supply chains meant that prices for goods would keep rising and rising and rising. And they did. Of course, for much of the past year, the big story was the congestion at west coast ports due to both external (China covid breakouts, port closures, changing legislation) and internal factors (lack of port workers, downstream supply jams including trucking and trains, etc) but that has now changed and as the latest Supply Chain Congestion Monitor report from JPMorgan (available to pro subscribers in the usual place) shows, the number of ships at anchor and on approach to L.A. and Long Beach has collapsed since the January high mark, and is back to levels first seen at the start of the covid pandemic. Why does this matter? Well, for a simple but critical reason: if one year ago we saw the hyperinflationary start of the bullwhip effect, we have entered the terminal phase of the "bullwhip effect", where plunging inventory-to-sales ratios reverse violently higher, where supply chains unclog suddenly and rapidly amid a sudden chill in the economy, and where prices for so-called "core" goods collapse almost overnight, even as non-core prices (food and energy) explode even higher. This is how Freight Waves discussed this effect on Friday when commenting on the recent dire earnings (and outlook) from the largest US retailers such as Walmart and Target, which saw their prices crater as management warned that inflation is now crippling demand and snuffing profit margins: "furniture, home furnishings and appliances, building materials and garden equipment, and a category known as “other general merchandise,” which includes Walmart and Target, among others, reported higher inventory-to-sales ratios, according to government data analyzed by Michigan State." How much higher? A quick look at the latest data reveals the following stunning chart of the Inventory to Sales ratio at the Walmarts of the world at the highest level since just before the deflationary flashbang that was the Global Financial Crisis: Think: widespread inventory liquidations. As Freight Waves continues, "the change has happened fast, according to Jason Miller, logistics professor at MSU’s Eli Broad College of Business. As of November, inventory-to-sales ratios were at pre-COVID levels, Miller said. They have since exploded upward. Miller said he expects a “cooldown” in retailer order volumes, even if inflation-adjusted sales stay constant, as retailers look to reduce their existing stock." And here is the punchline: Miller "also expects retailers to launch major discounting programs to expedite the inventory burn." In short: we are about to see the mother of all liquidations as retailers scramble to unload inventory in a time off rampant demand destruction. The immediate result is the freight recession that was first (correctly) forecast by FreightWaves CEO Craig Fuller at the end of March and which is now coming true as the crashing stock price of countless trucker and other freight stocks has demonstrated. Some more on this: high inventory levels are an expected occurrence and should be welcomed. In a Tuesday note, Amit Mehrotra, transport analyst at Deutsche Bank, said rising buffer stock is part of retailers’ desire to have goods available when consumers scan the shelves. Mehrotra added, however, that the data points translate into a likely slowdown in freight flows in the coming months and quarters. He said that a recession is already priced into most transportation equities, noting that the shares of most trucking companies are higher over the past 30 days while the broader market is about 7% lower. The latest data also confirms what FreightWaves' Fuller said in a subsequent post when he wondered if "Deflation Was Next" as "the Bullwhip was about do the Fed's job on inflation." To be sure, not every product will see its price cut: commodities, whose bullwhip effect take much longer to manifest itself, usually lasting several years in either direction, are only just starting to see their price cycle higher. However, other products - like those carried by the Walmarts and Targets of the world - are about to see a deflationary plunge the likes of which we have not seen since the global financial crisis as retailers commence a voluntary destocking wave the likes of which have not been seen in over a decade. Tyler Durden Sun, 05/22/2022 - 21:45.....»»

Category: blogSource: zerohedge4 hr. 4 min. ago

Deere Reports Second Quarter Net Income of $2.098 Billion

Quarterly earnings rise 17% on increase in net sales of 9%. Market conditions and industry fundamentals support continuation of robust environment. Full-year earnings forecast increased to $7.0 to $7.4 billion, including special items. MOLINE, Ill., May 20, 2022 /PRNewswire/ -- Deere & Company (NYSE:DE) reported net income of $2.098 billion for the second quarter ended May 1, 2022, or $6.81 per share, compared with net income of $1.790 billion, or $5.68 per share, for the quarter ended May 2, 2021. For the first six months of the year, net income attributable to Deere & Company was $3.001 billion, or $9.72 per share, compared with $3.013 billion, or $9.55 per share, for the same period last year. Net sales and revenues increased 11 percent, to $13.370 billion, for the second quarter of 2022 and rose 8 percent, to $22.939 billion, for six months. Net sales were $12.034 billion for the quarter and $20.565 billion for six months, compared with $10.998 billion and $19.049 billion last year. "Deere's second-quarter performance reflected a continuation of strong demand even as we face supply-chain pressures affecting production levels and delivery schedules," said John C. May, chairman and chief executive officer. "Deere employees, suppliers, and dealers are working hard to address these challenges. We are proud of their extraordinary efforts to get products to our customers as soon as possible under the challenging circumstances." Company Outlook & Summary Net income attributable to Deere & Company for fiscal 2022 is forecast to be in a range of $7.0 billion to $7.4 billion, which includes a net $220 million gain from special items in the second quarter of 2022. For further details on special items, see Note 1 of the press release financial statements. "Looking ahead, we believe demand for farm equipment will continue benefiting from positive fundamentals in spite of availability concerns and inflationary pressures affecting our customers' input costs," May said. "The company's smart industrial strategy and recently announced Leap Ambitions are focused on helping customers manage higher costs and increasingly scarce inputs, while improving their yields, through the use of our integrated technologies." Deere & Company Second Quarter Year to Date $ in millions, except per share amounts 2022 2021 % Change 2022 2021 % Change Net sales and revenues $ 13,370 $ 12,058 11% $ 22,939 $ 21,170 8% Net income $ 2,098 $ 1,790 17% $ 3,001 $ 3,013 Fully diluted EPS $ 6.81 $ 5.68 $ 9.72 $ 9.55 Results for the second quarter of 2022 and year-to-date periods of 2022 and 2021 were impacted by special items. For further details, see Note 1 of the press release financial statements.  Production & Precision Agriculture Second Quarter $ in millions 2022 2021 % Change Net sales $ 5,117 $ 4,529 13% Operating profit $ 1,057 $ 1,007 5% Operating margin 20.7% 22.2% Production and precision agriculture sales increased for the quarter due to price realization and higher shipment volumes. Operating profit rose primarily due to price realization and higher shipment volumes / sales mix. These items were partially offset by higher production costs, higher research and development and selling, administrative, and general expenses, and impairments related to events in Russia / Ukraine.   Small Agriculture & Turf Second Quarter $ in millions 2022 2021 % Change Net sales $ 3,570 $ 3,390 5% Operating profit $ 520 $ 648 -20% Operating margin 14.6% 19.1% Small agriculture and turf sales for the quarter increased due to price realization partially offset by the unfavorable impact of currency translation. Operating profit decreased primarily due to higher production costs, a less-favorable sales mix, and higher selling, administrative, and general and research and development expenses. These items were partially offset by price realization.   Construction & Forestry Second Quarter $ in millions 2022 2021 % Change Net sales $ 3,347 $ 3,079 9% Operating profit $ 814 $ 489 66% Operating margin 24.3% 15.9% Construction and forestry sales moved higher for the quarter primarily due to price realization and higher shipment volumes, partially offset by the unfavorable impact of currency translation. Operating profit increased due to a non-cash gain on the remeasurement of the previously held equity investment in the Deere-Hitachi joint venture and price realization. These items were partially offset by higher production costs, impairments related to the events in Russia / Ukraine, and a less-favorable product mix.   Financial Services Second Quarter $ in millions 2022 2021 % Change Net income $ 208 $ 222 -6% The decrease in financial services net income for the quarter was mainly due to higher reserves for credit losses related to the events in Russia / Ukraine, partially offset by income earned on a higher average portfolio. The prior year also benefited from a favorable adjustment to the provision for credit losses. Industry Outlook for Fiscal 2022 Agriculture & Turf U.S. & Canada: Large Ag Up ~ 20% Small Ag & Turf ~ Flat Europe Up ~ 5% South America (Tractors & Combines) Up ~ 10% Asia Down moderately Construction & Forestry U.S. & Canada: Construction Equipment Up ~ 10% Compact Construction Equipment Flat to Up 5% Global Forestry Flat to Up 5% Global Roadbuilding Flat to Up 5% Deere Segment Outlook for Fiscal 2022 Currency Price $ in millions Net Sales Translation Realization Production & Precision Ag Up 25 to 30% -1% +13% Small Ag & Turf Up ~ 15% -3% +8% Construction & Forestry Up 10 to 15% -2% +9% Financial Services Net Income $ 870 Financial Services. Full-year 2022 results are expected to be slightly lower than fiscal 2021 due to a higher provision for credit losses and higher selling, administrative, and general expenses. These factors are expected to be partially offset by income earned on a higher average portfolio. John Deere Capital Corporation The following is disclosed on behalf of the company's financial services subsidiary, John Deere Capital Corporation (JDCC), in connection with the disclosure requirements applicable to its periodic issuance of debt securities in the public market. Second Quarter Year to Date $ in millions 2022 2021 % Change 2022 2021 % Change Revenue $ 651 $ 675 -4% $ 1,294 $ 1,332 -3% Net income $ 159 $ 177 -10% $ 348 $ 344 1% Ending portfolio balance $ 42,543 $ 40,613 5% Results in the quarter decreased due to a higher provision for credit losses and less-favorable financing spreads, partially offset by income earned on a higher average portfolio. For the year-to-date period, net income rose mainly due to income earned on a higher average portfolio and improvement on operating-lease residual values, partially offset by a higher provision for credit losses and less-favorable financing spreads. The prior year also benefited from a favorable adjustment to the provision for credit losses. FORWARD-LOOKING STATEMENTS Certain statements contained herein, including in the sections entitled "Company Outlook & Summary," "Industry Outlook," and "Deere Segment Outlook," relating to future events, expectations, and trends constitute "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995 and involve factors that are subject to change, assumptions, risks, and uncertainties that could cause actual results to differ materially. Some of these risks and uncertainties could affect all lines of the company's operations, generally, while others could more heavily affect a particular line of business. Forward-looking statements are based on currently available information and current assumptions, expectations, and projections about future events. Except as required by law, the company undertakes no obligation to update or revise its forward-looking statements. Further information concerning the company and its businesses, including factors that could materially affect the company's financial results, is included in the company's other filings with the SEC (including, but not limited to, the factors discussed in Item 1A. "Risk Factors" of the company's most recent Annual Report on Form 10-K and the company's subsequent Quarterly Reports on Form 10-Q). Factors Affecting All Lines of Business All of the company's businesses and their results are affected by general economic conditions in the global markets and industries in which the company operates; customer confidence in general economic conditions; government spending and taxing; foreign currency exchange rates and their volatility, especially fluctuations in the value of the U.S. dollar; changing interest rates; inflation and deflation rates; changes in weather and climate patterns; the political and social stability of the global markets in which the company operates; the effects of, or response to, terrorism and security threats; wars and other conflicts, including the current military conflict between Russia and Ukraine; natural disasters; and the spread of major epidemics or pandemics (including the COVID-19 pandemic). Significant changes in market liquidity conditions, changes in the company's credit ratings, and any failure to comply with financial covenants in credit agreements could impact access to funding and funding costs, which could reduce the company's earnings and cash flows. Financial market conditions could also negatively impact customer access to capital for purchases of the company's products and purchase decisions, financing and repayment practices, and the number and size of customer delinquencies and defaults. A debt crisis in Europe, Latin America, or elsewhere could negatively impact currencies, global financial markets, funding sources and costs, asset and obligation values, customers, suppliers, and demand for equipment. The company's investment management activities could be impaired by changes in the equity, bond, and other financial markets, which would negatively affect earnings. Additional factors that could materially affect the company's operations, access to capital, expenses, and results include changes in, uncertainty surrounding, and the impact of governmental trade, banking, monetary, and fiscal policies, including financial regulatory reform and its effects on the consumer finance industry, derivatives, funding costs, governmental programs, policies, and tariffs for the benefit of certain industries or sectors; retaliatory actions to such changes in trade, banking, monetary, and fiscal policies; actions by central banks; actions by financial and securities regulators; actions by environmental, health, and safety regulatory agencies, including those related to engine emissions, carbon and other greenhouse gas emissions, and the effects of climate change; changes to GPS radio frequency bands or their permitted uses; changes in labor and immigration regulations; changes to accounting standards; changes in tax rates, estimates, laws, and regulations and company actions related thereto; changes to and compliance with privacy, banking, and other regulations; changes to and compliance with economic sanctions and export controls laws and regulations; and compliance with U.S. and foreign laws when expanding to new markets and otherwise. Other factors that could materially affect the company's results and operations include security breaches, cybersecurity attacks, technology failures, and other disruptions to the information technology infrastructure of the company and its suppliers and dealers; security breaches with respect to the company's products; production, design, and technological innovations and difficulties, including capacity and supply constraints and prices; the loss of or challenges to intellectual property rights, whether through theft, infringement, counterfeiting, or otherwise; the availability and prices of strategically sourced materials, components, and whole goods; delays or disruptions in the company's supply chain, including work stoppages or disputes by suppliers with their unionized labor; the failure of customers, dealers, suppliers, or the company to comply with laws, regulations, and company policy pertaining to employment, human rights, health, safety, the environment, sanctions, export controls, anti-corruption, privacy and data protection, and other ethical business practices; introduction of legislation that could affect the company's business model and intellectual property, such as right to repair or right to modify; events that damage the company's reputation or brand; significant investigations, claims, lawsuits, or other legal proceedings; start-up of new plants and products; the success of new product initiatives or business strategies; changes in customer product preferences and sales mix; gaps or limitations in rural broadband coverage, capacity, and speed needed to support technology solutions; oil and energy prices, supplies, and volatility; the availability and cost of freight; actions of competitors in the various industries in which the company competes, particularly price discounting; dealer practices, especially as to levels of new and used field inventories; changes in demand and pricing for used equipment and resulting impacts on lease residual values; labor relations and contracts, including work stoppages and other disruptions; changes in the ability to attract, develop, engage, and retain qualified personnel; acquisitions and divestitures of businesses; greater-than-anticipated transaction costs; the integration of acquired businesses; the failure or delay in closing or realizing anticipated benefits of acquisitions, joint ventures, or divestitures; the inability to deliver precision technology and agricultural solutions to customers; and the failure to realize anticipated savings or benefits of cost reduction, productivity, or efficiency efforts. COVID-19 Uncertainties related to the continued effects of the COVID-19 pandemic have adversely affected and may continue to affect the company's business and outlook. These uncertainties include, among other things: the duration and impact of any resurgence in COVID-19; disruptions in the supply chain, including those caused by industry capacity constraints, material availability, and global logistics delays and constraints arising from, among other things, the transportation capacity of ocean shipping containers, and continued disruptions in the operations of one or more key suppliers, or the failure of any key suppliers; an increasingly competitive labor market due to a sustained labor shortage or increased turnover caused by the COVID-19 pandemic; the sustainability of the economic recovery from the pandemic remains unclear and significant volatility could continue for a prolonged period. Agricultural Equipment Operations The company's agricultural equipment operations are subject to a number of uncertainties, including certain factors that affect farmers' confidence and financial condition. These factors include demand for agricultural products; world grain stocks; soil conditions; harvest yields; prices for commodities and livestock; crop and livestock production expenses; availability of fertilizer; availability of transport for crops; trade restrictions and tariffs; global trade agreements; the level of farm product exports; the growth and sustainability of non-food uses for some crops (including ethanol and biodiesel production); real estate values; available acreage for farming; changes in government farm programs and policies; international reaction to such programs; changes in and effects of crop insurance programs; changes in environmental regulations and their impact on farming practices; animal diseases and their effects on poultry, beef, and pork consumption and prices on livestock feed demand; and crop pests and diseases. Production and Precision Agriculture Operations The production and precision agriculture operations rely in part on hardware and software, guidance, connectivity and digital solutions, and automation and machine intelligence. Many factors contribute to the company's precision agriculture sales and results, including the impact to customers' profitability and/or sustainability outcomes; the rate of adoption and use by customers; availability of technological innovations; speed of research and development; effectiveness of partnerships with third parties; and the dealer channel's ability to support and service precision technology solutions. Small Agriculture and Turf Equipment Factors affecting the company's small agriculture and turf equipment operations include customer profitability; labor supply; consumer borrowing patterns; consumer purchasing preferences; housing starts and supply; infrastructure investment; spending by municipalities and golf courses; and consumable input costs. Construction and Forestry Factors affecting the company's construction and forestry equipment operations include consumer spending patterns; real estate and housing prices; the number of housing starts; interest rates; commodity prices such as oil and gas; the levels of public and non-residential construction; and investment in infrastructure. Prices for pulp, paper, lumber, and structural panels affect sales of forestry equipment. John Deere Financial The liquidity and ongoing profitability of John Deere Capital Corporation and the company's other financial services subsidiaries depend on timely access to capital in order to meet future cash flow requirements, and to fund operations, costs, and purchases of the company's products. If general economic conditions deteriorate or capital markets become more volatile, funding could be unavailable or insufficient. Additionally, customer confidence levels may result in declines in credit applications and increases in delinquencies and default rates, which could materially impact write-offs and provisions for credit losses.   DEERE & COMPANYSECOND QUARTER 2022 PRESS RELEASE(In millions of dollars) Unaudited Three Months Ended Six Months Ended May 1 May 2  % May 1 May 2  % 2022 2021 Change 2022 2021 Change Net sales and revenues:    Production & precision ag net sales $ 5,117 $ 4,529 +13 $ 8,473 $ 7,599 +12    Small ag & turf net sales 3,570 3,390 +5 6,201 5,904 +5    Construction & forestry net sales 3,347 3,079 +9 5,891 5,546 +6    Financial services revenues 864 892 -3 1,734 1,776 -2    Other revenues 472 168 +181 640 345 +86      Total net sales and revenues $ 13,370 $ 12,058 +11 $ 22,939 $ 21,170 +8 Operating profit: *    Production & precision ag $ 1,057 $ 1,007 +5 $ 1,353 $ 1,651 -18    Small ag & turf 520 648 -20 891 1,117 -20    Construction & forestry 814 489 +66 1,085 756 +44    Financial services 279 295 -5 577 553 +4      Total operating profit 2,670 2,439 +9 3,906 4,077 -4 Reconciling items ** (111) (119) -7 (195) (226) -14 Income taxes (461) (530) -13 (710) (838) -15      Net income attributable to Deere & Company $ 2,098 $ 1,790 +17 $ 3,001 $ 3,013 *      Operating profit is income from continuing operations before corporate expenses, certain external interest expense, certain foreign exchange gains and losses, and income taxes. Operating profit of the financial services segment includes the effect of interest expense and foreign exchange gains or losses. **      Reconciling items are primarily corporate expenses, certain external interest expense, certain foreign exchange gains and losses, pension and postretirement benefit costs excluding the service cost component, and net income attributable to noncontrolling interests.   DEERE & COMPANYSTATEMENTS OF CONSOLIDATED INCOMEFor the Three Months Ended May 1, 2022 and May 2, 2021(In millions of dollars and shares except per share amounts) Unaudited 2022 2021 Net Sales and Revenues Net sales $ 12,034 $ 10,998 Finance and interest income 796 809 Other income 540 251    Total 13,370 12,058 Costs and Expenses Cost of sales 8,918 7,928 Research and development expenses 453 377 Selling, administrative and general expenses 932 838 Interest expense 187 268 Other operating expenses 328 335    Total 10,818 9,746 Income of Consolidated Group before Income Taxes 2,552 2,312 Provision for income taxes 461 530 Income of Consolidated Group 2,091 1,782 Equity in income of unconsolidated affiliates 6 8 Net Income 2,097 1,790    Less: Net loss attributable to noncontrolling interests (1) Net Income Attributable to Deere & Company $ 2,098 $ 1,790 Per Share Data Basic $ 6.85 $ 5.72 Diluted $ 6.81 $ 5.68 Dividends declared $ 1.05 $ .90 Dividends paid $ 1.05 $ .76 Average Shares Outstanding Basic 306.2 312.8 Diluted 308.1 315.2 See Condensed Notes to Interim Consolidated Financial Statements.   DEERE & COMPANYSTATEMENTS OF CONSOLIDATED INCOMEFor the Six Months Ended May 1, 2022 and May 2, 2021(In millions of dollars and shares except per share amounts) Unaudited 2022 2021 Net Sales and Revenues Net sales $ 20,565 $ 19,049 Finance and interest income 1,595 1,644 Other income 779 477     Total 22,939 21,170 Costs and Expenses Cost of sales 15,613 13,734 Research and development expenses 855 743 Selling, administrative and general expenses 1,713 1,607 Interest expense 417 538 Other operating expenses 638 708     Total 19,236 17,330 Income of Consolidated Group before Income Taxes 3,703 3,840 Provision for income taxes 710 838 Income of Consolidated Group 2,993 3,002 Equity in income of unconsolidated affiliates 8 12 Net Income 3,001 3,014     Less: Net income attributable to noncontrolling interests 1 Net Income Attributable to Deere & Company $ 3,001 $ 3,013 Per Share Data Basic $ 9.78 $ 9.62 Diluted $ 9.72 $ 9.55 Dividends declared $ 2.10 $ 1.66 Dividends paid $ 2.10 $ 1.52 Average Shares Outstanding Basic 306.8 313.1 Diluted 308.8 315.6 See Condensed Notes to Interim Consolidated Financial Statements.   DEERE & COMPANYCONDENSED CONSOLIDATED BALANCE SHEETS(In millions of dollars) Unaudited May 1 October 31 May 2  2022 2021 2021 Assets Cash and cash equivalents $ 3,878 $ 8,017 $ 7,182 Marketable securities 682 728 668 Trade accounts and notes receivable - net 6,258 4,208 6,158 Financing receivables - net 34,085 33,799 30,994 Financing receivables securitized - net 4,073 4,659 4,107 Other receivables 2,306 1,765 1,504 Equipment on operating leases - net 6,465 6,988 7,108 Inventories 9,030 6,781 6,042 Property and equipment - net 5,715 5,820 5,704 Goodwill 3,812 3,291 3,190 Other intangible assets - net 1,352 1,275 1,310 Retirement benefits 3,059 3,601 951 Deferred income taxes 1,104 1,037 1,724 Other assets 2,280 2,145 2,337 Total Assets $ 84,099 $ 84,114 $ 78,979 Liabilities and Stockholders' Equity Liabilities Short-term borrowings $ 12,413 $ 10,919 $ 9,911 Short-term securitization borrowings 4,006 4,605 4,106 Accounts payable and accrued expenses 12,679 12,348 10,682 Deferred income taxes 584 576 533 Long-term borrowings 32,447 32,888 33,346 Retirement benefits and other liabilities 2,964 4,344 5,305     Total liabilities 65,093 65,680 63,883 Redeemable noncontrolling interest 99 Stockholders' Equity Total Deere & Company stockholders' equity 18,904 18,431 15,092 Noncontrolling interests 3 3 4    Total stockholders' equity 18,907 18,434 15,096 Total Liabilities and Stockholders' Equity $ 84,099 $ 84,114 $ 78,979 See Condensed Notes to Interim Consolidated Financial Statements.    DEERE & COMPANYSTATEMENTS OF CONSOLIDATED CASH FLOWSFor the Six Months Ended May 1, 2022 and May 2, 2021(In millions of dollars) Unaudited 2022 2021 Cash Flows from Operating Activities Net income $ 3,001 $ 3,014 Adjustments to reconcile net income to net cash provided by (used for) operating activities:    Provision (credit) for credit losses 45 (24)    Provision for depreciation and amortization 933 1,054    Impairment charges 77 50    Share-based compensation expense 44 45    Gain on remeasurement of previously held equity investment (326)    Undistributed earnings of unconsolidated affiliates (2) 11    Provision (credit) for deferred income taxes 37 (213)    Changes in assets and liabilities:      Trade, notes, and financing receivables related to sales (1,535) (1,124)      Inventories (2,265) (1,193)      Accounts payable and accrued expenses (443) 318      Accrued income taxes payable/receivable (139) 54      Retirement benefits (1,020) (5)    Other (169) (201)      Net cash provided by (used for) operating activities (1,762) 1,786 Cash Flows from Investing Activities Collections of receivables (excluding receivables related to sales) 11,190 10,367 Proceeds from sales of equipment on operating leases 1,035 1,011 Cost of receivables acquired (excluding receivables related to sales) (11,971) (11,359) Acquisitions of businesses, net of cash acquired (473) (19) Purchases of property and equipment (346) (320) Cost of equipment on operating leases acquired (1,004) (764) Collateral on derivatives – net (248) (255) Other (71) (48)      Net cash used for investing activities (1,888) (1,387) Cash Flows from Financing Activities Increase in total short-term borrowings 812 212 Proceeds from long-term borrowings 4,298 3,967 Payments of long-term borrowings (3,625) (3,157) Proceeds from issuance of common stock.....»»

Category: earningsSource: benzingaMay 20th, 2022

The Battle For Control Of Your Mind

The Battle For Control Of Your Mind Authored by Aaron Kheriaty via The Brownstone Institute In his classic dystopian novel 1984, George Orwell famously wrote, “If you want a picture of the future, imagine a boot stamping on a human face—for ever.” This striking image served as a potent symbol for totalitarianism in the 20th Century. But as Caylan Ford recently observed, with the advent of digital health passports in the emerging biomedical security state, the new symbol of totalitarian repression is “not a boot, but an algorithm in the cloud: emotionless, impervious to appeal, silently shaping the biomass.” These new digital surveillance and control mechanisms will be no less oppressive for being virtual rather than physical. Contact tracing apps, for example, have proliferated with at least 120 different apps in used in 71 different states, and 60 other digital contact-tracing measures have been used across 38 countries. There is currently no evidence that contact tracing apps or other methods of digital surveillance have helped to slow the spread of covid; but as with so many of our pandemic policies, this does not seem to have deterred their use. Other advanced technologies were deployed in what one writer has called, with a nod to Orwell, “the stomp reflex,” to describe governments’ propensity to abuse emergency powers. Twenty-two countries used surveillance drones to monitor their populations for covid rule-breakers, others deployed facial recognition technologies, twenty-eight countries used internet censorship and thirteen countries resorted to internet shutdowns to manage populations during covid. A total of thirty-two countries have used militaries or military ordnances to enforce rules, which has included casualties. In Angola, for example, police shot and killed several citizens while imposing a lockdown. Orwell explored the power of language to shape our thinking, including the power of sloppy or degraded language to distort thought. He articulated these concerns not only in his novels Animal Farm and 1984 but in his classic essay, “Politics and the English Language,” where he argues that “if thought corrupts language, language can also corrupt thought.” The totalitarian regime depicted in 1984 requires citizens to communicate in Newspeak, a carefully controlled language of simplified grammar and restricted vocabulary designed to limit the individual’s ability to think or articulate subversive concepts such as personal identity, self-expression, and free will. With this bastardization of language, complete thoughts are reduced to simple terms conveying only simplistic meaning.   Newspeak eliminates the possibility of nuance, rendering impossible consideration and communication of shades of meaning. The Party also intends with Newspeak’s short words to make speech physically automatic and thereby make speech largely unconscious, which further diminishes the possibility of genuinely critical thought. In the novel, character Syme discusses his editorial work on the latest edition of the Newspeak Dictionary: By 2050—earlier, probably—all real knowledge of Oldspeak [standard English] will have disappeared. The whole literature of the past will have been destroyed. Chaucer, Shakespeare, Milton, Byron—they’ll exist only in Newspeak versions, not merely changed into something different, but actually contradictory of what they used to be. Even the literature of The Party will change. Even the slogans will change. How could you have a slogan like Freedom is Slavery when the concept of freedom has been abolished? The whole climate of thought will be different. In fact, there will be no thought, as we understand it now. Orthodoxy means not thinking—not needing to think. Orthodoxy is unconsciousness. Several terms of disparagement were repeatedly deployed during the pandemic, phrases whose only function was to halt the possibility of critical thought. These included, among others, ‘covid denier,’ ‘anti-vax,’ and ‘conspiracy theorist’. Some commentators will doubtless mischaracterize this book, and particularly this chapter, using these and similar terms—ready-made shortcuts that save critics the trouble of reading the book or critically engaging my evidence or arguments. A brief comment on each of these may be helpful in illustrating how they function. The first term, ‘covid denier,’ requires little attention. Those who sling this charge at any critic of our pandemic response recklessly equate covid with the Holocaust, which suggests that antisemitism continues to infect discourse on both the right and the left. We need not detain ourselves with more commentary on this phrase. The epithet ‘anti-vax,’ deployed to characterize anyone who raises questions about the mass vaccination campaign or the safety and efficacy of covid vaccines, functions similarly as a conversation stopper rather than an accurately descriptive label. When people ask me whether I am anti-vax for challenging vaccine mandates I can only respond that the question makes about as much sense to me as the question, “Dr. Kheriaty, are you ‘pro-medication’ or ‘anti-medication’?” The answer is obviously contingent and nuanced: which medication, for which patient or patient population, under what circumstances, and for what indications? There is clearly no such thing as a medication, or a vaccine for that matter, that’s always good for everyone in every circumstance and all the time. Regarding the term “conspiracy theorist,” Agamben notes that its indiscriminate deployment “demonstrates a surprising historical ignorance.” For anyone familiar with history knows that the stories historians recount retrace and reconstruct the actions of individuals, groups, and factions working in common purpose to achieve their goals using all available means. He mentions three examples from among thousands in the historical record. In 415 B.C. Alcibiades deployed his influence and money to convince the Athenians to embark on an expedition to Sicily, a venture that turned out disastrously and marked the end of Athenian supremacy. In retaliation, Alcibiades enemies hired false witnesses and conspired against him to condemn him to death. In 1799 Napoleon Bonaparte violated his oath of fidelity to the Republic’s Constitution, overthrowing the directory in a coup, assumed full powers, and ending the Revolution. Days prior, he had met with co-conspirators to fine-tune their strategy against the anticipated opposition of the Council of Five Hundred. Closer to our own day, he mentions the March on Rome by 25,000 Italian fascists in October 1922. Leading up to this even, Mussolini prepared the march with three collaborators, initiated contacts with the Prime Minister and powerful figures from the business world (some even maintain that Mussolini secretly met with the King to explore possible allegiances). The fascists rehearsed their occupation of Rome by a military occupation of Ancona two months prior. Countless other examples, from the murder of Julius Caesar to the Bolshevik revolution, will occur to any student of history. In all these cases, individuals gathering in groups or parties to strategize goals and tactics, anticipate obstacles, then act resolutely to achieve their aims. Agamben acknowledges that this does not mean it is always necessary to aver to ‘conspiracies’ to explain historical events. “But anyone who labelled a historical who tried to reconstruct in detail the plots that triggered such events as a ‘conspiracy theorist’ would most definitely be demonstrating their own ignorance, if not idiocy.” Anyone who mentioned “The Great Reset” in 2019 was accused of buying into a conspiracy theory—that is, until World Economic Forum founder and executive chairman Klaus Schwab published a book in 2020 laying out the WEF agenda with the helpful title,Covid-19: The Great Reset. Following new revelations about the lab leak hypothesis, U.S. funding of gain-of-function research at the Wuhan Institute of Virology, vaccine safety issues willfully suppressed, and coordinated media censorship and government smear campaigns against dissident voices, it seems the only difference between a conspiracy theory and credible news was about six months. *  *  * Originally posted at 'Human Flourishing' Substack. Tyler Durden Mon, 05/16/2022 - 23:45.....»»

Category: blogSource: zerohedgeMay 17th, 2022

Futures Slide After China"s "Huge" Data Miss Sparks "Broad-Based Recession Talk"

Futures Slide After China's "Huge" Data Miss Sparks "Broad-Based Recession Talk" Friday's bear market rally dead-cat bounce appears to be over, and global stocks have started the new week in the red with US equity futures lower after a "huge miss", as Bloomberg put it, in Chinese data fueled concerns over the impact of a slowdown in the world’s second-largest economy. As reported last night, China’s industrial output and consumer spending hit the worst levels since the pandemic began, hurt by Covid lockdowns. And even though officials took another round of measured steps to help the economy by cutting the interest rate for new mortgages over the weekend to bolster an ailing housing market, even as they left the one-year policy loan rate was left unchanged Monday, few believe that any of these actions will have a tangible impact and most continue to expect much more from Beijing.  As such, after a weekend that saw even Goldman's perpetually optimistic equity strategists slash their S&P target (again) from 4,700 to 4,300, and amid growing fears that a recession is now inevitable, Nasdaq 100 futures slid as much as 1.2%, before paring losses to 0.4% as of 730 a.m. in New York. S&P 500 futures were down 0.3%. 10Y Treasury yields were flat at 2.91% and the dollar dipped modestly while bitcoin traded just above $30,000 dropping from $31,000 earlier in the session. Among notable moves in premarket trading, Spirit Airlines jumped as much as 21% following a report that JetBlue Airways is planning a tender offer at $30 a share in cash. Major US technology and internet stocks were down after rebounding on Friday, while Tesla shares dropped, with the electric-vehicle maker set to recall 107,293 cars in China over a potential safety risk. Twitter shares fall 3.4% in premarket trading on Monday, on course to wipe out all the gains the stock has made since billionaire Elon Musk disclosed his stake in the social media platform. Twitter fell to as low as $37.86 -- below the the April 1 close of $39.31, before Musk disclosed his stake. US stocks have been roiled this year, with the S&P 500 on tick away from a bear market as recently as last Thursday, on worries of an aggressive pace of rate hikes by the Federal Reserve at a time when macroeconomic data showed a slowdown in growth. Data from China on Monday highlighted a massive toll on the economy from Covid-19 lockdowns, with retail sales and industrial output both contracting. Although lower valuations sparked a rally in stocks on Friday, strategists including Morgan Stanley’s Michael Wilson warned of more losses ahead as equity markets also price in slower corporate earnings growth. Goldman Sachs strategists led by David Kostin cut their year-end target for the S&P 500 on Friday to 4,300 points from 4,700.  "The broad-based recession talk is the major catalyzer this Monday,” Ipek Ozkardeskaya, a senior analyst at Swissquote, wrote in a note. “Activity in US futures hint that Friday’s rebound was certainly nothing more than a dead cat bounce” just as we said at the time.  The risk of an economic downturn amid price pressures and rising borrowing costs remains the major worry for markets. Goldman Sachs Group Senior Chairman Lloyd Blankfein urged companies and consumers to gird for a US recession, saying it’s a “very, very high risk.” Traders remain wary of calling a bottom for equities despite a 17% drop in global shares this year, with Morgan Stanley warning that any bounce in US stocks would be a bear-market rally and more declines lie ahead. In Europe, the Stoxx Europe 600 index fell as much as 0.8% before paring losses, with declines for tech and travel stocks offsetting gains for basic resources as industrial metals rallied. The Euro Stoxx 50 falls 0.4%. IBEX outperforms, adding 0.3%. Tech, personal care and consumer products are the worst performing sectors. Here are some of the biggest European movers today: Basic Resources stocks outperformed with broad gains among mining and steel companies; ArcelorMittal +3.5%; SSAB +2.6%; Glencore +2.1%; Voestalpine +3.1%. Sartorius AG and Sartorius Stedim shares gain as UBS upgrades both stocks to buy following a “significant de-rating” for the lab-equipment companies, seeing supportive global trends. Carl Zeiss Meditec gains as much as 4.9% after HSBC raised its recommendation to buy from hold, saying the medical optical manufacturer is “well-equipped to deal with supply chain challenges.” Interpump rises as much as 7.6%, extending winning streak to five days, as Banca Akros upgrades the stock to buy from accumulate following Friday’s 1Q results. Casino shares jump as much 5.8% after the French grocer said it’s started a process to sell its GreenYellow renewable energy arm, confirming a Bloomberg News report from Friday. Ryanair shares decline as much as 4.3% on FY results, with analysts focusing on the low-budget carrier’s recovery outlook. They note management is cautiously optimistic about summer travel. Vantage Towers shares decline after the company posted FY23 adjusted Ebitda after leases and recurring free cash flow forecasts that missed analyst estimates at mid- points. Unilever falls after a 13-F filing from Nelson Peltz’s Trian shows no position in the company, according to Jefferies, damping speculation after press reports earlier this year that the fund had built a stake. Michelin shares fall as much as 3.7% after being downgraded to neutral from overweight at JPMorgan, which says it writes off any chance of seeing a recovery in volume production growth in FY22. Earlier in the session, Asian stocks eked out modest gains as surprisingly weak Chinese economic data spurred volatility and caused traders to reassess their outlook on the region. The MSCI Asia-Pacific Index was up 0.1%, paring an earlier advance of as much as 0.9%  on stimulus hopes. The region’s information technology index rose as much as 1.5%, with TMSC giving the biggest boost. A sub-gauge on materials shares fell the most. Equities in China led losses, as Beijing’s moves to cut the mortgage rate for first-time home buyers and ease lockdown restrictions in Shanghai failed to reverse the downbeat mood. Asian stocks were trading higher early Monday, building on Friday’s rally, only to trim or reverse gains as data showed a sharper-than-expected contraction in Chinese activity in April. Signs of an earnings recovery in China are needed for investors to come back, Arnout van Rijn, chief investment officer for APAC at Robeco Hong Kong Ltd., said on Bloomberg Television. “It looks like China is not going to meet the 15% earnings growth that people were looking for just a couple of months ago. So now we’re looking for five, 10, maybe it’s even going to fall to zero.”   Meanwhile, JPMorgan analysts, who had called China tech “uninvestable” in March, upgraded some tech heavyweights including Alibaba in a Monday report, citing less regulatory uncertainties. Benchmarks in Japan, Australia, India and Taiwan maintained gains while Hong Kong also recovered some ground later in the day. Markets in Singapore, Thailand, Malaysia and Indonesia were closed for holidays.      Japanese equities were mixed, with the Topix closing slightly lower after worse-than-expected Chinese economic data amid the impact from virus-related lockdowns. The Topix fell 0.1% to close at 1,863.26, with Honda Motor contributing the most to the decline after its forecast for the current year missed analyst expectations. The Nikkei advanced 0.5% to 26,547.05, with KDDI among the biggest boosts after announcing its results and a 200 billion yen buyback. “Though the lockdowns in China are pushing down the economy and causing supply chain difficulties, there’s a positive outlook since the weekend that there could be a gradual easing of the lockdowns as it seems that virus cases have peaked out,” said Masashi Akutsu, chief strategist at SMBC Nikko Securities. In Australia, the S&P/ASX 200 index rose 0.3% to 7,093.00, trimming an earlier advance of as much as 1.1% after soft Chinese economic data stoked concerns about global growth. Read: Aussie, Kiwi Slump After Weak China Data: Inside Australia/NZ Brambles was the top performer after confirming it’s in talks with private equity firm CVC Capital Partners on a takeover proposal. Qube also climbed after completing a A$400 million share buyback.  In New Zealand, the S&P/NZX 50 index fell 0.1% to 11,157.66. In rates, Treasuries were steady with yields within 1bp of Friday’s close. US 10-year yield near flat ~2.91% with bunds cheaper by ~5bp, gilts ~3.5bp amid heavy. German 10-year yield up 5 bps, trading narrowly below 1%. Italian 10-year bonds underperform, with the 10-year yield up 8 bps to 2.93%. Peripheral spreads are mixed to Germany; Italy and Spain widen and Portugal tightens. The Italy 10-year was cheaper by more than 6bp on the day amid renewed ECB jawboning. Core European rates are higher, pricing in ECB policy tightening. During Asia session, Chinese data showed industrial output and consumer spending at worst levels since the pandemic began. The dollar issuance slate includes CBA 3T covered SOFR; $30b expected for this week as syndicate desks seek opportunities for pent-up supply. Three-month dollar Libor +1.13bp at 1.45500%. In FX, the Bloomberg Dollar Spot Index was little changed while the greenback advanced against most of its Group-of-10 peers. Treasuries inched lower, led by the front end, and outperformed European bonds. The euro inched up against the dollar. Italian bonds dropped, leading peripheral underperformance against euro- area peers, while money markets showed increased ECB tightening wagers after policy maker Francois Villeroy de Galhau said a consensus is “clearly emerging” at the central bank on normalizing monetary policy and that June’s meeting will be “decisive.” He also signaled that the weakness of the euro is focusing the minds of ECB policy makers at a time when the currency is heading toward parity with the dollar. The euro may resume its rally versus the pound in the spot market as options traders pile up bullish wagers. The pound fell against both the dollar and euro, staying under selling pressure on concerns that high UK inflation will weigh on the economy. Markets await testimony from Bank of England Governor Andrew Bailey and other central bank officials later in the day, ahead of a reading of April inflation later in the week. Australian and New Zealand dollars fell after Chinese industrial and consumer data fanned concerns of a further slowdown in the world’s second-largest economy. In commodities, WTI drifts 0.4% lower to trade above $110. Spot gold pares some declines, down some $6, but still around $1,800/oz. Most base metals trade in the green; LME tin rises 3.4%, outperforming peers. Bitcoin falls 4.6% to trade below $30,000 Looking ahead, we get the US May Empire manufacturing index, Canada April housing starts, March manufacturing, wholesale trade sales. Central bank speakers include the Fed's Williams, ECB's Lane, Villeroy and Panetta, BOE's Bailey, Ramsden, Haskel and Saunders. We get earnings from Ryanair, Take-Two Interactive. Market Snapshot S&P 500 futures down 0.3% to 4,008.75 STOXX Europe 600 little changed at 433.33 MXAP up 0.2% to 160.34 MXAPJ up 0.2% to 523.32 Nikkei up 0.5% to 26,547.05 Topix little changed at 1,863.26 Hang Seng Index up 0.3% to 19,950.21 Shanghai Composite down 0.3% to 3,073.75 Sensex up 0.6% to 53,119.79 Australia S&P/ASX 200 up 0.3% to 7,093.03 Kospi down 0.3% to 2,596.58 German 10Y yield little changed at 0.98% Euro up 0.1% to $1.0424 Brent Futures down 1.4% to $109.98/bbl Gold spot down 0.8% to $1,797.30 US Dollar Index little changed at 104.46 Top Overnight News from Bloomberg NATO members rallied around Finland and Sweden on Sunday after they announced plans to join the alliance, marking another dramatic change in Europe’s security architecture triggered by Russia’s war in Ukraine The euro area’s pandemic recovery would almost grind to a halt, while prices would surge even more quickly if there are serious disruptions to natural-gas supplies from Russia, according to new projections from the European Commission UK energy regulator Ofgem plans to adjust its price cap every three months instead of every six. Changing the level more often would help consumers to take advantage of falling wholesale prices more quickly, it said in a statement Monday. This would also mean higher prices filter through bills quicker Boris Johnson has warned Brussels that the UK government will press ahead with unilateral changes to parts of the Brexit agreement if it does not engage in “genuine dialogue” While debt bulls on Wall Street have been crushed all year, market sentiment has shifted markedly over the past week from inflation fears to growth. That theme gathered more strength Monday, when data showing China’s economy contracted sharply in April set off fresh gains for Treasuries China’s economy is paying the price for the government’s Covid Zero policy, with industrial output and consumer spending sliding to the worst levels since the pandemic began and analysts warning of no quick recovery. Industrial output unexpectedly fell 2.9% in April from a year ago, while retail sales contracted 11.1% in the period, weaker than a projected 6.6% drop Japanese manufacturers are increasingly looking to move offshore operations to their home market, according to a Tokyo Steel Manufacturing Co. executive. The rapidly weakening yen, global supply-chain constraints, geopolitical risks and shifting wages patterns are prompting the switch, Kiyoshi Imamura, a managing director of the steelmaker, said in an interview in Tokyo last week A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded mixed after disappointing Chinese activity data clouded over the early momentum from Friday’s rally on Wall St. ASX 200 was higher as tech stocks were inspired by US counterparts and amid M&A related newsflow with Brambles enjoying a double-digit percentage gain after it confirmed it had talks with CVC regarding a potential takeover by the latter. Nikkei 225 kept afloat as earnings releases provided the catalysts for individual stocks but with gains capped by a choppy currency. Hang Seng and Shanghai Comp initially gained with property names underpinned after China permitted a further reduction in mortgage loan interest rates for first-time home purchases and with casino stocks also firmer in the hope of a tax reduction on gaming revenue. However, the mood was then spoiled by weak Chinese data and after the PBoC maintained its 1-year MLF rate. Top Asian News PBoC conducted a CNY 100bln in 1-year MLF with the rate kept unchanged at 2.85% and stated the MLF and Reverse Repo aim to keep liquidity reasonably ample, according to Bloomberg. Beijing extended work from home guidance in several districts and announced three additional rounds of mass COVID-19 testing in most districts including its largest district Chaoyang, according to Reuters. Shanghai will gradually start reopening businesses including shopping malls and hair salons in China's financial and manufacturing hub beginning on Monday following weeks of a strict lockdown, according to Reuters. Shanghai city official said 15 out of the 16 districts achieved zero-COVID outside quarantine areas and the city's epidemic is under control but added that risks of a rebound remain and they will need to continue to stick to controls. The official said the focus until May 21st will be to prevent risks of a rebound and many movement restrictions are to remain, while they will look to allow normal life to resume in Shanghai from June 1st and will begin to reopen supermarkets, convenience stores and pharmacies from today, according to Reuters. Chinese financial authorities permitted a further reduction in mortgage loan interest rates for some home buyers whereby commercial banks can lower the lower limit of interest rates on home loans by 20bps based on the corresponding tenor of benchmark Loan Prime Rates for purchases of first homes, according to Reuters. China's stats bureau spokesman said economic operations are expected to improve in May and that China is steadily pushing forward production resumption in COVID-hit areas, while they expect China's economic recovery and rebound in consumption to quicken but noted that exports face some pressure as the global economy slows, according to Reuters. Macau is reportedly considering a tax cut for casinos amid a decline in gaming revenue in which a cut could be as much as 5% off the current 40% levied on casino gaming revenue, according to Bloomberg. European bourses are mixed, Euro Stoxx 50 -0.6%, following a similar APAC session with impetus from Shanghai's reopening offset by activity data and geopolitics. Stateside, futures are lower across the board, ES -0.4%, with the NQ marginally lagging as yields lift; Fed's Williams due later before Powell on Tuesday. US players are focused on whether the end-week bounce is a turnaround from technical bear-market levels or not. China's market regulator says Tesla (TSLA) has recalled 107.3k Model 3 & Y vehicles, which were made in China. JetBlue (JBLU) is to launch a tender offer for Spirit Airlines (SAVE); JetBlue is to offer USD 30/shr, but prepared to pay USD 33/shr if Spirit provides JetBlue with requested data, WSJ sources say. Elon Musk tweeted that Twitter’s (TWTR) legal team called to complain that he violated their NDA by revealing the bot check sample size and he also tweeted there is some chance that over 90% of Twitter’s daily active users might be bots. Top European News UK PM Johnson is reportedly set to give the green light for a bill on the Northern Ireland protocol, according to the Guardian. UK PM Johnson said he hopes the EU changes its position on the Northern Ireland protocol and if not, he must act, while he sees a sensible landing spot for a protocol deal and will set out the next steps on the protocol in the coming days, according to Reuters. UK PM Johnson is expected to visit Northern Ireland on Monday for talks with party leaders in an effort to break the political deadlock at Stormont, according to Sky News. Irish Foreign Minister Coveney says the EU is prepared to move on reducing checks on goods coming into the region from Britain, via Politico. UK Cabinet ministers have turned on the BoE regarding rising inflation, whereby one minister warned that the Bank was failing to "get things right" and another suggested that it had failed a "big test", according to The Telegraph. Group of over 50 economists warned that the UK's post-Brexit plans to boost the competitiveness of its finance industry risk creating the sort of problems that resulted in the GFC, according to Reuters. European Commission Spring Economic Forecasts: cuts 2022 GDP forecast to 2.7% from the 4.0% projected in February. Click here for more detail. Central Banks ECB's Villeroy expects a decisive June meeting and an active summer meeting, pace of further steps will account for actual activity/inflation data with some optionality and gradualism; but, should at least move towards the neutral rate. Will carefully monitor developments in the effective FX rate, as a significant driver of imported inflation; EUR that is too weak would go against the objective of price stability.   ECB’s de Cos said the central bank will likely decide at the next meeting to end its stimulus program in July and raise rates very soon after that, while he added that they are not seeing second-round effects and are monitoring it, according to Reuters. FX Euro firmer following verbal intervention from ECB’s Villeroy and spike in EGB yields EUR/USD rebounds from sub-1.0400 to 1.0435 at best. Dollar up elsewhere as DXY pivots 104.500, but Yen resilient on risk grounds as Chinese data misses consensus by some distance; USD/JPY capped into 129.50. Franc falls across the board after IMM specs raise short bets and Swiss sight deposits show SNB remaining on the sidelines; USD/CHF above 1.0050 at one stage. However, HKMA continues to defend HKD peg amidst CNY, CNH weakness in wake of disappointing Chinese industrial production and retail sales releases. Norwegian Crown undermined by pullback in Brent and narrower trade surplus, EUR/NOK over 10.2100. SA Rand soft as Gold retreats to test support around and under Usd 1800/oz. Loonie slips with WTI ahead of Canadian housing starts, manufacturing sales and wholesale trade, Sterling dips before BoE testimony; USD/CAD 1.2900+, Cable sub-1.2250. Fixed income EGBs rattled by ECB rhetoric inferring key policy meetings kicking off in June and extending through summer. Bunds down towards 153.00 and 10 year yield back up around 1%, Gilts almost 1/2 point adrift and T-note erasing gains from 12/32+ above par at best. Eurozone periphery underperforming with added risk-off angst following much weaker than expected Chinese data. In commodities WTI and Brent are pressured, but well off lows, and torn between China's lockdown easing and poor activity data amid numerous other catalysts Specifically, the benchmarks are around USD 110/bbl and USD 111/bbl respectively, Saudi Aramco Q1 net income rose 82% Y/Y to INR 39.5bln for its highest quarterly profit since listing, according to Sky News. Saudi Energy Minister says they are going to get to 13.2-13.4mln BPD, subject to what is done in the divided zone, by end-2026/start-2027; can maintain production when there, if the market demands this. OPEC+ to continue with monthly output increases, according to Bahrain's oil minister via Reuters. Iraqi state-run North Oil Company said Kurdish armed forces took control of some oil wells in northern Kirkuk, according to Reuters. Iraq oil minister says they aim to increase oil production to 6mln BPD by end-2027, OPEC is targeting a energy market balance not a price; adding, current production capacity is 4.9mln BPD, will reach 5mln BPD before the end of 2022. China is to increase fuel prices from Tuesday, according to China's NDRC; gasoline by CNY 285/t and diesel by CNY 270/t. US Event Calendar 08:30: May Empire Manufacturing, est. 15.0, prior 24.6 16:00: March Total Net TIC Flows, prior $162.6b DB's Jim Reid concludes the overnight wrap Markets managed a big bounce on Friday but the mood has soured again in the Asian session after a weak slew of data from China as covid lockdowns had an even worse impact than expected. Industrial production (-2.9% vs +0.5% expected), retail sales (-11.1% vs -6.6% expected) and property investment (-2.7% vs -1.5% expected) all crashed through estimates by a large margin. The slump in retail sales and industrial production was the weakest since March 2020. The latter also had the lowest print on record, with the worst decline coming from auto manufacturing (-31.8%). The surveyed jobless rate (6.1% vs estimates of 6.0%) also ticked up by more than expected from 5.8% in March and is now close to the high of 6.2% in February 2020. Although the 1-year policy loan rate was left unchanged today, the PBoC did ease the rate on new mortgages this weekend. In other data releases, Japan’s April PPI (+10.0%) came in above estimates of +9.4%, the highest since 1980. Amid this, the Shanghai Composite (-0.51%) and the Hang Seng (-0.43%) are in the red, and outperformed by the KOSPI (-0.21%) and the Nikkei (+0.46%). The sentiment has soured in American markets too, with S&P 500 futures also trading lower (-0.68%) and the US 10y yield declining by -2.2bps. Oil (-1.48%) is edging lower too on growth concerns. After last week’s meltdown in crypto markets, Bitcoin is back at above $30k this morning – a jump since the lows of nearly $26k last Thursday but way short of the $38k it traded at in the beginning of the month and $68k early last November. The infamous TerraUSD, the stablecoin that fuelled the crypto slide, is at $0.18. It is supposed to trade at $1 at all times. Looking forward now and there's not a standout event to focus on this week but they'll be plenty to keep us all occupied. US retail sales (tomorrow) looks like the highlight alongside Powell's speech the same day. There will also be US housing data smattered across the week and UK and Japanese inflation on Wednesday and Friday respectively. Let's start with US retail sales as it will be a good early guide for Q2 GDP. Our US economists are anticipating a +1.7% print, up from +0.7% in March. Rebounding auto sales should help the headline number. For more on the consumer, Brett Ryan put out this chartbook last week on the US consumer (link here). US industrial production is out the same day. We have a long list of central bank speakers this week headed by Powell and Lagarde (tomorrow) and BoE Bailey today. There are many more spread across the week and you can see the list in the day by day event list at the end. We do have the last ECB meeting minutes on Thursday but the subsequent push towards a July hike might make these quite dated. US housing will be a big focus next week. It's probably too early for the highest mortgage rates since 2009 to kick in but with these rates around 220bps higher YTD, some damage will surely soon be done after the highest YoY price appreciation outside of an immediate post WWII bounce, in our 120 year plus housing database. On this we will see the NAHB housing market index (tomorrow), April’s US building permits and housing starts (Wednesday), and existing home sales (Thursday). Turning to corporate earnings, it will be another quiet week after 457 of the S&P 500 companies and 368 of the STOXX 600 companies have reported earnings this season so far. Yet, it will be an important one to gauge how the US consumer is faring amid inflation at multi-decade highs, including reports such as Walmart, Home Depot (tomorrow), Target and TJX (Wednesday). Results will also be due from China's key tech and ecommerce companies like (tomorrow), Tencent (Wednesday) and Xiaomi (Thursday). Other notable corporate reporters will include Cisco (Wednesday), Applied Materials, Palo Alto Networks (Thursday) and Deere (Friday). A quick recap of last week’s markets now. Fears that global growth would slow due to the tightening task at hand for central banks sent ripples across markets, without a clear specific catalyst. Equities declined, credit spreads widened, the dollar rallied, and sovereign yields declined. The S&P 500 fell for the sixth consecutive week for the first time since 2011, falling -13.0% over that time. Even with a +2.39% rally on Friday, it fell -2.41% last week. Large cap technology firms underperformed, with the NASDAQ falling -2.80% (+3.82% Friday), while the FANG+ index fell -3.48% (+5.45% Friday). Volatility was elevated, with the Vix closing above 30 for 6 straight days for the first time since immediately following the invasion, narrowly avoiding a 7th straight day above 30 by closing the week at 28.8. European equities outperformed, with the STOXX 600 climbing +0.83% after a banner +2.14% gain Friday. The Itraxx crossover ended the week at 446bps, its widest level since June 2020. Crypto assets sharply declined, with Bitcoin down -12.51% and Coinbase -34.58% over the week, with a number of so-called ‘stablecoins’ breaking their pledged parity, forcing some to stop trading. The growth fears drove a flight to quality. The dollar index increased +0.87% (-0.27% Friday) to its highest levels since 2002. Only the yen outperformed the US dollar in the G10 space. Sovereign yields rallied significantly, with 10yr Treasuries, bunds, and gilts falling -19.3bps (+8.5bps Friday), -23.0bps (+6.2bps Friday), and -28.7bps (+4.7bps Friday), respectively. Reports that the EU was considering softening their oil-related sanctions due to member resistance combined with growth fears to send oil prices much lower at the beginning of the week, with Brent crude futures almost breaking $100/bbl. When all was said and done, a gradual rally over the back half of the week saw Brent merely -1.04% lower (+3.82% Friday). On the back of disappointing data from China it is down -1.48% this morning. There was a lot of high-profile central bank speak to work through, as there will be this week. The main takeaways included Fed officials aligning behind a series of +50bp hikes the next few meetings, downplaying the chances of +75bp hikes until September at the earliest. Meanwhile, momentum in the ECB is growing toward a July policy rate hike, with policy rates breaching positive territory by the end of the year. In terms of data Friday, the University of Michigan survey of inflation expectations for the next five years was unchanged at 3 percent, though inflation has weighed on consumers’ perception of the current situation. Tyler Durden Mon, 05/16/2022 - 08:02.....»»

Category: blogSource: zerohedgeMay 16th, 2022

Change of course: Modernization, Covid-19 pandemic help revitalize golf

MESA – After a boom in golf’s popularity that followed the emergence of Tiger Woods as a sports superstar, the game slipped into a post-Tiger effect downtrend. Over a 15-year period from 2003 to 2018, the number of golfers declined in the United States by 6.8 million. More than 1,200 courses closed across the country over that same span, golf manufacturers saw sales sink and considerable hand-wringing followed over what could be done to bring golfers back and also attract a new generation to….....»»

Category: topSource: bizjournalsMay 14th, 2022

China Credit Creation Craters, Sparking Speculation Of A Growth, Stock Bounce

China Credit Creation Craters, Sparking Speculation Of A Growth, Stock Bounce While we wait for China's economic data dump due Monday, when industrial production and retail sales are expected to crater to deep negative territory as a result of the ongoing covid lockdowns, this morning we got a harsh reminder just how hard the world's 2nd biggest economy has been hit when Beijing reported that April total social financing and RMB loans came in much below market expectations, even as M2 growth accelerated and was above market expectations on the back of the RRR cut and more expansionary fiscal policy stance. Here are the details: New CNY loans: RMB 645.4 bn in April, badly missing consensus of RMB 1520bn. Outstanding CNY loan growth: 10.9% yoy in April vs March 11.4% yoy; Overall CNY loans growth decelerated materially and grew 6.6% mom annualized sa from 18.1% in March. Total social financing RMB 910bn in April, badly missing consensus growth of RMB 2200bn; Total social financing (TSF) was well below expectations after a strong acceleration in March. The sequential growth of TSF stock decelerated to 3.9% mom annualized in April, the slowest sequential growth in the past decade. TSF stock growth was 10.2% yoy in April, slower than the 10.6% in March. The implied month-on-month growth of TSF stock decelerated to 3.9% from 14.4% in March. M2: 10.5% yoy in April vs. above consensus of 9.9% yoy. March: 9.7% yoy; M2 year-on-year growth accelerated on the other hand to 10.5% yoy in April, vs 9.7% in March, and expanded by 13.8% in month-over-month annualized terms, vs 24.4% in March. Among major TSF components, shadow banking credit continued to contract in April at a much faster pace compared with March. Trust, entrusted loans and undiscounted bankers’ acceptance bills fell RMB275bn in April, vs the RMB113bn contraction in March. Based on loans to different sectors, weakness in loan growth was broad-based, with the only exception being bill financing. Corporate mid-to-long term loan growth was 6% vs 22.5% mom annualized in March. Corporate bill financing rose strongly by 102.4% mom annualized from 97.3% in March. On loans to households, total household loans declined by 1.7% month-over-month annualized, vs an expansion of 6.6% in March. PBOC changed their categorization of household loans and now focuses on usage of loans (housing related vs consumption related, for example), rather than by maturity. April data are thus not strictly comparable with March data. However, on a net basis, new mortgages were -61bn RMB in April, in comparison with household new medium to long term loans (which are mostly mortgages) of 492bn RMB in April 2021, or +374bn RMB in March 2022 (NSA basis). Government and corporate bond issuance also slowed in April. According to Goldman, "the composition of RMB loans suggests corporate loan growth decelerated and household loans stock declined in April", which is painfully obvious of course. The question is why, and according to the PBOC, credit demand tumbled due to the Covid resurgence which was cited as one main reason behind the weak RMB loans and TSF data. Medium to long term loan growth was still much slower than short term loans (such as bill financing) growth, and loans to the real economy was also much lower than overall RMB new loans (which include lending between financial institutions). "These all implied very weak credit demand despite monetary policy easing", according to Goldman. What does China's collapsing credit data means? Well, as Bloomberg's Simon White writes, liquidity and lending data in China looks to be forming a trough, which points to a bottom in growth and stocks. However, there are two important caveats: growth is likely to be lower than its previous trend as internal imbalances rise again; and any growth is vulnerable to a wage-price spiral if CPI takes off. Echoing what we wrote above, White writes that on the surface, April lending data for China released today looked dismal, showing a Covid-driven slump for aggregate financing and new CNY loans, "but monthly numbers are noisy and impacted by seasonal effects. Looking at the 1-year aggregate sum’s change over the last year gives a more stable picture, and on this basis new CNY loans look to be bottoming." Meanwhile, today’s announcement that China will build more Covid hospitals and increased testing suggests they are making the first steps towards “endemicity”, or living with Covid according to White. Moreover, the PBoC has recently introduced new relending programs and further loosened restrictions to aid beleaguered property developers. Lending going forward should thus begin to pick up steam, which points to growth soon turning up. Still, the total figures mask the sharp decline in lending to the household sector, in a sign imbalances are worsening again. As the Bloomberg strategist explains, a key feature of China’s economy has been to repress the household sector to the benefit of the export-orientated corporate sector. The household sector is a net importer so inhibiting its demand widens the trade surplus. Further household repression has resulted in even larger trade surpluses through the pandemic, which China must foist upon the rest of the world. Of course, the flipside of trade surpluses is capital outflow, and capital outflow from China has been depressing domestic credit (it will also soon prove a major tailwind to bitcoin once Chinese households with $35 trillion in deposits realize more devaluation is coming and scramble to park their capital offshore using the only possible mechanism available). Rising trade surpluses and falling FX reserves (some of which is due to the rising dollar and rising US yields) betray increasing capital leakage. In an economy with a managed exchange rate and capital controls, capital outflow leads to a destruction of domestic credit. This is why the yuan has been allowed to weaken, as it lessens the fall in domestic credit from capital outflow. However, as White warns, it also adds to imbalances, and globally it requires a greater trade deficit in the US. These are bad for China’s and the US’s growth in the medium term. Bottom line: growth in China should soon bottom, but rise at a slower pace than before. Nevertheless, all bets are off if food prices drive an acceleration in China’s CPI - the way they did in 2011 - risking a wage-price spiral, a significantly weaker yuan, and a rise in global trade protectionism. Tyler Durden Fri, 05/13/2022 - 15:05.....»»

Category: worldSource: nytMay 13th, 2022

Futures Dead Cat Bounced As BTFDers Emerge On Turnaround Tuesday

Futures Dead Cat Bounced As BTFDers Emerge On Turnaround Tuesday The relentless rout that erased $3.4 trillion from the Nasdaq 100 in the past month paused on Turnaround Tuesday as battered tech valuations attracted scattered dip buyers, but nothing like the full-throttled BTFD buying parade observed in months gone by. Futures on the tech-heavy gauge advanced as much 1.4% as bargain hunters returned after the Nasdaq 100 slumped to the lowest since November 2020 on Monday, capping three days of major losses. S&P 500 futures were 0.7% higher to 4,016 after rising as much as 1.2% earlier but also after plunging to as low as 3,961. After rising as high as 3.20% on Monday, 10-year Treasury yields dropped for a second day, sliding below 3.0% and providing further relief to technology shares. The dollar erased a loss and Treasuries edged higher, signaling the return of some haven demand amid nervousness over the path of Federal Reserve policy. European bonds rallied. The Nasdaq’s 14-day relative-strength index (RSI) closed at 33 on Monday, getting closer to the level of 30, which to some analysts indicates a security is oversold and is poised to rise. Another sharp selloff “seems unlikely without an external trigger,” said Ulrich Urbahn, head of multi-asset strategy and research at Berenberg. “Nevertheless, as long as the problems persist, we do not expect a big recovery and have used the relief rally to move our equity exposure to neutral.” Indeed, traders have been caught between stubbornly high inflation that erodes asset values and central-bank tightening that threatens to slow economic growth, or even push some nations into recession. Recent U.S. data suggesting the Federal Reserve will stay on an aggressive rate-hike path have sparked the latest bout of risk-off trades. Fresh outbreaks of Covid in China, and the nation’s stringent measures to control them, have worsened sentiment. “For now, investors need to be prepared for continued volatility,” Solita Marcelli, Americas chief investment officer at UBS Global Wealth Management, wrote in a note. She added “sentiment is bearish” but not capitulating. In premarket trading, electric vehicle makers are up, with Tesla, Rivian and Lucid set to rebound after losing $188 billion in three days. AMC Entertainment is 6.4% higher after reporting better-than-expected quarterly results as hits like “Spider-Man: No Way Home” lured people back to movie theaters. Bank stocks edge higher in premarket trading amid a broader rebound for equity markets after Monday’s rout. S&P 500 futures are up about 0.8% this morning, while the U.S. 10-year yield retreats for a second day to sit at roughly 3%. In corporate news, BlackRock said it won’t support efforts by shareholders who try to micromanage companies on climate change. Meanwhile, Bitcoin rebounded back above $30,000 after briefly sinking below the closely watched level. Here are some of the biggest U.S. movers today: Most large cap U.S. technology and internet stocks rose in premarket trading, on course to recoup some of the heavy losses they suffered in a steep selloff over the last three sessions. Apple (AAPL US) is up 1.2%, Microsoft (MSFT US) +1.2% and Meta (FB US) +2.8%. AMC Entertainment (AMC US) is up 3.8% in premarket trading after reporting better-than-expected quarterly results as hits like “Spider-Man: No Way Home” lured people back to movie theaters. Electric vehicle makers Tesla (TSLA US), Rivian (RIVN US) and Lucid (LCID US) are rebounding after losing $188 billion in three days of heavy selling in technology and growth stocks. Shockwave Medical (SWAV US) may move after it raised its revenue guidance for the full year, with analysts saying that the company’s performance was boosted by its coronary business. Shares rose 11% in extended trading on Monday. Upstart Holdings (UPST US) shares plunge 48% in premarket trading after the cloud-based artificial intelligence lending platform cut full- year revenue guidance on macro uncertainties. Piper Sandler cut the stock to neutral. Novavax (NVAX US) is down 21% premarket, with analysts saying that the biotech firm’s revenue for the first quarter missed expectations. Plug Power (PLUG US) shares are 5.6% lower premarket after the fuel cell company reported net revenue for the first quarter that missed the average analyst estimate, with KeyBanc noting pressure on margins and higher costs. Video game stocks may move after Sony’s earnings fell short of estimates amid supply constraints and component shortages. Watch shares in Activision Blizzard (ATVI US), Electronic Arts (EA US) and Take-Two Interactive (TTWO US). U.S. stocks and particularly the Nasdaq 100 have been crushed this year (amid a tireless tirade from JPM's Marko Kolanovic to buy each and every dip) as investors fret over recession risks from the Federal Reserve embarking on aggressive monetary tightening amid surging inflation. Higher interest rates mean a bigger discount for the present value of future profits, hurting growth and in particular tech stocks with the highest valuations.  European stocks trade well, with most cash indexes gaining over 1% to recover roughly half of Monday’s losses when the index slumped to its lowest level in two months. Euro Stoxx 50 rose as much as 1.75%, FTSE MIB outperforms slightly, FTSE 100 lags but still adds 1%. Construction, banks and autos lead broad-based Stoxx 600 sectoral gains. The Stoxx 600 energy sub-index edges lower, being one of the worst-performing sectors in a rising broader market for European stocks, as oil keeps falling. Shell declines as much as 1.5%, TotalEnergies SE -1.6%, Equinor -4.5%. Here are some of the biggest European movers today: Luxury stocks such as Kering (+0.5%) and Watches of Switzerland (+4.2%) rebounded after the declines of the previous sessions, with investors hopeful that the Covid-19 situation in the key market of China may be slightly improving. Hermes rises as much as +1.6%, LVMH +2.4% Airbus gains as much as 3.7% in Paris trading after being raised to buy from hold at Societe Generale, with the broker highlighting the planned production ramp-up of the “highly profitable” A320 family. Swedish Match rises as much as 28% after Philip Morris International said it’s in talks to buy the company. While a deal would make strategic sense, a counter-bid can’t be ruled out, analysts said. Centrica climbs as much as 6.5%, the most since Feb. 25, after the company guided adjusted earnings per share to be at the top end of the consensus range. Euroapi soars as much as 9.5% after the Sanofi spinoff is initiated with a buy recommendation and EU20 price target at Deutsche Bank, which sees “good value” and an attractive business. E-commerce stocks rise in Europe, with many outperforming the benchmark Stoxx 600 Index, buoyed by dip buyers returning to growth and technology shares that have been battered this year. Zalando up as much as 4.9%, Home24 +12%, Moonpig +3.6% Earlier in the session, Asian stocks extended their decline to a seventh day as the specter of rapid credit tightening in the U.S. and protracted lockdowns in Chinese cities prompted some investors around the region to reduce holdings of riskier assets.  The MSCI Asia Pacific Index fell as much as 2.1% to its lowest level since July 2020, weighed down tech shares after a three-day selloff in the Nasdaq 100. Hong Kong’s Hang Seng Index ended 1.8% lower as the market reopened after a holiday, though benchmarks in mainland China rebounded from early-trading lows on hopes for easier monetary conditions. MSCI Asia Pacific Index down 0.7% Japan’s Topix index down 0.9%; Nikkei 225 down 0.6% Hong Kong’s Hang Seng Index down 1.8%; Hang Seng China Enterprises down 2.2%; Shanghai Composite up 1.1%; CSI 300 up 1.1% Taiwan’s Taiex index up 0.1% South Korea’s Kospi index down 0.5%; Kospi 200 down 0.5% Australia’s S&P/ASX 200 down 1%; New Zealand’s S&P/NZX 50 down 1.3% India’s S&P BSE Sensex Index down 0.2%; NSE Nifty 50 down 0.4% “There’s nowhere to escape so it’s pretty tough,” said Yuya Fukue, a trader at Rheos Capital Works. “Economic data appears to be deteriorating of late, though that has seemed to have gone little noticed while the markets were so focused on the Fed’s policy. It feels as if the game is changing.” Among Chinese tech giants, Alibaba tumbled 4.8% in Hong Kong, while Tencent dropped 2.3%. Regional declines were broad, with investors dumping even this year’s star energy shares as oil prices eased.  Singapore’s Straits Times Index and Australia’s S&P/ASX 200 both dropped about 1%. The Philippine benchmark ended 0.6% lower, recovering after skidding more than 3%, after Ferdinand Marcos Jr. won a landslide victory in the country’s presidential election. Mainland Chinese shares closed higher after the People’s Bank of China repeated a pledge to proactively address mounting economic pressure and highlighted a drop in deposit rates, which could spur banks to lower the cost of borrowing for the first time in months. “The market was a bit oversold. In addition, PBOC is also mentioning a drop in deposit rates, raising expectations of more room for banks to increase lending,” said Aw Hsi Lien, a strategist at Tokai Tokyo Research. India’s benchmark equity index slipped to a two-month low amid a weaker trend in Asia as surging oil prices and inflationary pressures weighed on investor sentiment. The S&P BSE Sensex fell 0.2% to 54,364.85 in Mumbai, after swinging between gains and losses several times during the session. The NSE Nifty 50 Index slipped 0.4% to 16,240.05. This is the third consecutive session of declines for the key indexes.  Sixteen of the 19 sector sub-indexes compiled by BSE Ltd. dropped, led by metal stocks. Reliance Industries Ltd. slipped 1.7% to a seven-week low and was the biggest drag on the Sensex, which saw 18 out of its 30 member-stocks trading lower.   In earnings, among the 27 Nifty 50 companies that have announced results so far, 10 have missed estimates while 17 either exceeded or met forecasts.  In FX, the Bloomberg Dollar Spot Index fell 0.1% after climbing to a two-year high on Monday, and the greenback was steady or weaker against all of its Group-of-10 peers. The euro consolidated and the region’s yields fell as Italian bonds led an advance. The pound was steady against both the dollar and euro while gilts outperformed peers. Domestic focus is on the Queen’s speech laying out the government’s agenda for the next parliamentary session and Brexit risks after reports the U.K. is preparing to scrap parts of the Northern Ireland protocol. U.K. retail sales are falling on an annual basis for the first time since the start of last year as the cost of living crisis crushes consumer confidence and puts the brakes on spending. Scandinavian currencies led gains among G-10 pairs after both currencies fell to the weakest level in around two years versus the dollar on Monday. The Australian and New Zealand dollars also bounced off two-year lows as stock indexes trimmed an intraday decline. Aussie’s gains were tempered as iron ore fell for a third day to bring the three-day slide to about 15%. The yen edged lower as Treasury yields recovered from a sharp overnight drop. Bonds pared earlier gain after the 10-year debt sale. Bank of Japan Executive Director Shinichi Uchida says that widening the central bank’s yield target band would be equivalent to a rate hike and wouldn’t be favorable for Japan’s economy In rates, Treasuries rose in early U.S. trading with belly leading gains and the curve flattening modestly after Monday’s bull-steepening. Yields are richer by ~4bp across in belly of the curve, steepening 5s30s spread by ~3bp as long-end yields lag; 10-year trading just around 3%, richer by ~3bp on the day, trailing gilts by ~7bp in the sector. Core European rates outperform led by gilts while stocks and U.S. futures recover a portion of Monday’s steep losses. Bunds bull-flatten, while peripheral spreads tightened to Germany with short-dated BTPs outperforming. Treasury auction cycle begins with 3-year note sale, and several Fed speakers are slated. U.S. new-issue auction cycle consists of $45b 3-year note, followed by 10- and 30-year sales Wednesday and Thursday. WI 3-year yield ~2.800% is higher than auction stops since 2018 and ~6bp cheaper than last month’s, which stopped through by 0.1bp. Three-month dollar Libor +0.13bp at 1.39986% In commodities, crude futures are choppy, WTI dips back into the red having stalled near $104. Spot gold rises ~$9 near $1,863/oz. Much of the base metals complex trades poorly. LME copper outperforms, holding in the green but off best levels after a test of $9,400/MT. Bitcoin reclaimed the $31K handle, but is yet to make a concerted move higher. Looking ahead, we get the April NFIB Small Business Optimism print (93.2, Exp. 92.9), Chinese M2, Speeches from Fed's Williams, Waller, Bostic, Barkin, Kashkari, Mester, ECB's de Guindos & BoE's Saunders, Supply from the US. Earnings from Norwegian Cruise Line & Warner Music. Biden speaks on soaring inflation at 11am EDT. Biden will also meet with Italian Prime Minister Draghi at the White House, and the UK state opening of Parliament is taking place, where the government outlines its legislative programme for the year ahead. Of course, the big event is tomorrow morning when the US CPI print comes. Market Snapshot S&P 500 futures up 1.1% to 4,031.75 STOXX Europe 600 up 1.2% to 422.32 MXAP down 0.8% to 159.98 MXAPJ down 0.8% to 523.71 Nikkei down 0.6% to 26,167.10 Topix down 0.9% to 1,862.38 Hang Seng Index down 1.8% to 19,633.69 Shanghai Composite up 1.1% to 3,035.84 Sensex up 0.4% to 54,674.30 Australia S&P/ASX 200 down 1.0% to 7,051.16 Kospi down 0.5% to 2,596.56 German 10Y yield little changed at 1.07% Euro little changed at $1.0564 Brent Futures up 0.8% to $106.83/bbl Gold spot up 0.5% to $1,862.69 U.S. Dollar Index little changed at 103.65 Top Overnight News from Bloomberg The EU is considering the issuance of joint debt to finance Ukraine’s long-term reconstruction, which may end up costing hundreds of billions of euros, according to an EU official familiar with the plan China’s provinces are set to sell a historic amount of new special bonds by the end of June as part of an infrastructure investment push intended to rescue an economy stymied by Covid outbreaks and lockdowns Hungarian Prime Minister Viktor Orban’s talks with the head of the EU about proposed sanctions on Russian oil imports made progress, but failed to reach a breakthrough, according to both sides Investor confidence in Germany’s pandemic rebound improved, but remained deeply negative as the war in Ukraine darkens the outlook for Europe’s largest economy. The ZEW institute’s gauge of expectations rose to -34.3 in May from -41 the previous month, defying expectations for a third straight deterioration. An index of current conditions worsened Saudi Arabia’s oil minister warned that spare capacity is decreasing in all sectors of the energy market, as prices of products from crude to diesel and natural gas trade at or near multi-year highs in the wake of Russia’s invasion of Ukraine A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were mostly negative after the resumed sell-off on Wall St where the S&P 500 slipped beneath the 4,000 level for the first time since March 2021. ASX 200 briefly gave up the 7,000 status with notable underperformance in the energy and mining-related sectors. Nikkei 225 slumped from the open although moved off its lows as participants digested stronger than expected Household Spending data and after BoJ's Uchida dismissed the prospects of a tweak to the BoJ’s 50bps yield target band. Hang Seng and Shanghai Comp both initially joined in on the selling with heavy losses in the tech sector contributing to the underperformance in Hong Kong on return from the extended weekend, although the downside in the mainland was later reversed after the recent policy support efforts by China’s MIIT and CBIRC. Top Asian News China Tech Stocks Slide as Growth Woes, Global Rout Grip Traders Investor’s Guide to the 2022 Philippine Presidential Election ArcelorMittal Evaluating Bidding for ACC, Ambuja: ET Now Philippine Stocks Fall as Traders Weigh Marcos Win, Global Rout European equities feel some reprieve following the prior session’s selloff; Euro Stoxx 50 +1.2%. Relatively broad-based gains are seen across the majors with some mild underperformance in the FTSE 100. Sectors show some of the more defensive sectors at the bottom of the bunch – alongside energy – whilst Construction, Autos, Banks, and Industrial Goods reside as the current winners. US equity futures are firmer across the board, ES +1.0%, with the NQ narrowly outpacing peers after underperforming yesterday. Top European News Russian Gas Flows to Europe Remain Steady on Key Links Highest Inflation in Three Decades Boosts Czech Rate Hike Case BPER Banca Soars After Earnings Beat, With Fees as Highlight Russia’s Economy Facing Worst Contraction Since 1994 FX The Dollar retains a firm underlying bid ahead of another slew of Fed speakers; risk sentiment remains fluid and fragile. The Swiss Franc has hit a fresh 2022 peak vs the Greenback; USD/JPY is consolidating around 130.00. EUR/USD was unfazed by mixed German ZEW data but later lost ground under 1.0550. Cable rotates either side of 1.2350 awaiting Brexit/N. Ireland news, further political fallout and more comments from BoE hawk Saunders. Crude and commodity FX have gleaned a degree of traction from partial recoveries or stabilisation in underlying prices. CBRT and regulator have asked banks to undertake FX transactions with corporate clients between 10:00-16:00, when the market is liquid, via Reuters citing bankers. Fixed Income Core benchmarks bounce further after a brief breather early on, with little in way of fresh fundamentals behind the upside. Initial highs were faded pre-UK/German issuance; once this cleared, Bunds and Gilts lifted to 152.50+ and 119.00+ peaks. Stateside, USTs are bolstered but far from best, with the curve re-flattening into today's 3yr sale and yet more Fed speak. Commodities Crude futures have come under renewed pressure in recent trade after seeing some gains in the European morning.   The initial downside coincided with the mixed Germany ZEW reports alongside the downbeat commentary from Hungary regarding an imminent oil ban; albeit, benchmarks are off overnight USD 100.44/bbl and USD 103.19/bbl respective lows. Saudi Energy Minister says it is "mind-boggling" why focus is on high oil prices and not on gasoline, diesel or others. World needs to wake up to an existing reality that it is running out of energy capacity at all levels, via Reuters. UAE Energy Minister says oil prices could double or triple in "chaotic" market. US officials reportedly asked Brazil's Petrobras in March to boost output, but it the oil Co. said it could not, according to Reuters sources. China's Shenghong Petrochemical has started a trial operation at its (320k BPD) greenfield refining complex in east China, according to Reuters sources. Germany is said to be shifting away from plans for a strategic national coal reserve, according sources cited by Reuters. Spot gold holds onto mild gains as DXY pulled back from the fresh YTD highs set yesterday. LME futures post mild gains following yesterday’s downside with the market still looking somewhat fragile. DB's Jim Reid concludes the overnight wrap It's school photo day today. After discussing it with my kids last night I said to them that I'd dig out my old school photos so they could see me at school. Without hesitation and with a straight face Maisie said, "Are they in black and white Daddy?". I was half amused and half depressed. Markets are pretty black at the moment with little white on show. Actually the only bright colour is a sea of red. Indeed after a rocky few weeks in markets, there’s been a further rout over the last 24 hours as investor jitters about the global growth outlook have continued to escalate. There has been some respite in Asia but markets remain very shaky. There wasn’t really a single catalyst to yesterday’s steep declines, but ultimately there’s been a growing scepticism in markets as to whether the Fed and other central banks will actually be able to achieve a soft landing without a recession as they seek to bring down inflation. One interesting development though was that rates rallied as the equity slump intensified, rather than both selling off as has been the norm in recent weeks. Although the day lacked a single catalyst, the bond market moves seem to turn around the same time as Atlanta Fed President Bostic spoke. He picked up where Chair Powell left things after last week’s press conference. Bostic signaled that +50bp hikes were part of his core view, placing low odds on anything larger, stating +50bp hikes were “already a pretty aggressive move.” Like other Fed speakers, he signaled a desire to get policy to neutral and then assess. While he isn’t a voter this year, his voice does carry weight at the hawkish end of the committee so the price action likely reflected the market believing that a consensus continues to build for 50bps, and not 75bps, even among the hawks. Sovereign bonds were actually seeing a strong sell-off before his comments but rallied fairly fiercely from around the same time. 10yr Treasury yields hit an intraday high of 3.20% during the European morning (+7.5bps on the day) but ended up closing -9.3bps lower at 3.03%, showing that wide intraday ranges and volatility continue to grip the market. With the Fed continuing to put a perceived ceiling on the near-term pace of hikes, 2yr yields rallied -13.7bps on the day with the curve steepening another +5.3bps. The amount of Fed hikes priced in by the December meeting down by -15.5bps. As I type, 10yr US yields are fairly flat in Asia. The move echoed in Europe, where 10yr bunds rallied -3.5bps to 1.09%. The broader risk-off move meant that there was a further widening in spreads yesterday, with the gap between Italian 10yr BTPs over bunds widening by +4.9bps to 205bps, which is the widest they’ve been since May 2020. And that widening was seen on the credit side as well, where iTraxx Main moved above 100bps for the first time since April 2020 in trading, before falling back somewhat to settle at 98bps (+1.4bps). Against this backdrop, the S&P 500 fell by a sizeable -3.20% that takes the index to its lowest level in over a year. That comes on the backs of 5 consecutive weekly losses, which is already the longest run in over a decade, and given the performance yesterday it would take a strong comeback over the remaining four days this week to avoid that run extending to 6 weeks. See my Chart of the Day yesterday (link here) for more on how rare it has been to see an 11 year run without a 5 successive weekly decline. Energy was the worst performing US sector, falling an astonishing -8.30%, in its worst one-day performance since June 2020, after the fall in oil (more below). The sector is still by far the best performing S&P sector YTD, up +36.79%, with every other sector in the red. Despite the rate rally, it was a bad day for mega-cap and other growth tech stocks. Indeed, the NASDAQ fell a further -4.29% to its lowest level since November 2020, whilst the FANG+ index of 10 megacap tech stocks fell an even larger -5.48%. For reference, that now takes the FANG+ index’s decline since its all-time high in November to a massive -38.22%. Even a high quality component like Amazon is now down -35.75% since March 29th and is pretty much back to pre-covid levels. Over the other side of the pond, Europe saw some sizeable declines as well, with the STOXX 600 down -2.90% to leave the index not far away from its recent lows in early March. With the Fed set to continue their hiking cycle, just as the ECB are still pondering on when to even start hikes and China’s growth prospects are fading, the US dollar has continued to benefit. Yesterday, the Japanese Yen (+0.21% vs USD) was the top-performing G10 currency, in line with its traditional status as a safe haven, but Bitcoin continued to lose ground, falling to its lowest level since July last year, after falling to $31,562. It briefly fell below 30k this morning. It's been interesting that Bitcoin is not getting much mention with all the inflationary issues seen in recent months. It seems to be suffering from a higher dollar, higher real yields and a tech related sell-off. Markets continue to fall in Asia but US futures are up. Hang Seng (-3.06%) is the largest underperformer, but is paring its losses after falling more than -4% as the market returned after a holiday with the Chinese listed tech firms among the worst hit. Elsewhere, the Nikkei (-0.93%) and Kospi (-0.95%) are down. Meanwhile, mainland Chinese stocks are trading in positive territory with the Shanghai Composite (+0.17%) and CSI (+0.15%) somewhat recovering from opening losses. Looking ahead, S&P 500 (+0.56%), NASDAQ 100 (+0.92%) and DAX (+0.25%) futures are moving higher. Early morning data showed that Japan’s household spending declined -2.3% y/y in March, its first drop in three months albeit the fall was less than -3.3% estimated by Bloomberg and followed +1.1% growth in February. Back to inflation and one potentially problematic indicator came from the New York Fed’s latest consumer survey, which found that median inflation expectations for 3 years ahead rose to +3.9%, which is the highest since December, and up from +3.5% back in January. It’s still not as high as the +4.2% readings back in September and October, but will obviously be unwelcome news to the Fed whose path to a soft landing is in part reliant on inflation expectations remaining well anchored around target. Turning to the situation in Ukraine, a key risk event yesterday had been Russia’s Victory Day parade, where it was speculated that President Putin would move towards a general mobilisation. However, in reality it finished with surprisingly little news, and whilst not showing a path towards de-escalation, didn’t move to escalate things further. Separately, it was reported by Bloomberg that the EU would soften its proposed sanctions package on Russian oil exports, with an article saying that they would drop the proposal to ban EU-owned vessels transporting Russian oil to third countries. The sanctions package has already come under criticism from some member states, and the article said that Hungary and Slovakia had been offered a longer time period lasting until end-2024 to comply with the proposals to ban Russian oil imports, with Hungary in particular saying more talks were needed to support oil-related sanctions. So with no further escalation and a softening in sanctions, oil prices fell back significantly amidst weak risk appetite more generally. Brent crude was down -5.74%, whilst WTI fell -6.09%, which follows 2 consecutive weekly gains for both. This morning oil prices are again lower with Brent and WTI futures -1.74% and -1.68% lower respectively. To the day ahead now, and central bank speakers include the Fed’s Williams, Barkin, Waller, Kashkari and Mester, along with ECB Vice President de Guindos and Bundesbank President Nagel. Data releases include Italy’s industrial production for March and Germany’s ZEW survey for May. Finally on the political side, President Biden will meet with Italian Prime Minister Draghi at the White House, and the UK state opening of Parliament is taking place, where the government outlines its legislative programme for the year ahead. Tyler Durden Tue, 05/10/2022 - 07:57.....»»

Category: smallbizSource: nytMay 10th, 2022

April Payrolls Rise More Than Expected But Wage Growth Slows And Participation Rate Drops

April Payrolls Rise More Than Expected But Wage Growth Slows And Participation Rate Drops With bulls hoping and praying for a terrible payrolls print - ideally something in the mins 1 million range - and for a big slowdown in wage growth, moments ago the BLS reported a mixed bag for April data, with headline payrolls rising 428K, above the 380K expected (which is in the "good news is bad news" camp), however at the same time average hourly earnings rose 0.3%, below the 0.4% expected (and 0.5% March increase) while the unemployment rate was flat at 3.6%, above the 3.5% expected (both of which are "bad news is good news"). Amusingly, the March payroll print was downward revised to 428K from 431K, the exact same as the March print. Looking further back, the change in total nonfarm payroll employment for February was revised down by 36,000, from +750,000 to +714,000, and the change for March was revised down by 3,000, from +431,000 to +428,000. With these revisions, employment in February and March combined is 39,000 lower than previously reported. Total payrolls are now about 1.2 million lower than the peak hit before the pandemic. At the April hiring pace, that gap will be made up by July. The unemployment rate was flat at 3.6%, above consensus expectations of a drop to 3.5%. Among the major worker groups, the unemployment rates for adult men (3.5 percent), adult women (3.2 percent), teenagers (10.2 percent), Whites (3.2 percent), Blacks (5.9 percent), Asians (3.1 percent), and Hispanics (4.1 percent) showed little or no change over the month. It is worth noting that the overall unemployment rate is at pre-covid levels, while the rate for blacks and hispanics is now even better than pre-covid. Curiously, even as the unemployment rate was flat, the labor force participation rate actually declined from 62.4% to 62.2%, a move that will disappoint the Fed which has been pushing for an "inclusive" boost to the labor force. The drop was due to a 363K drop in the civilian labor force offset by a 115K increase in the civilian population. Looking at wages, average hourly earnings for all employees on private nonfarm payrolls rose by 10 cents, or 0.3 percent, to $31.85 in April, below the 0.4% expected. Here is a breakdown of the 0.3% by industry: Over the past 12 months, average hourly earnings have increased by 5.5 percent, in line with expectations. The average workweek for all employees on private nonfarm payrolls was unchanged at 34.6 hours in April, below the 34.7 expected. In manufacturing, the average workweek for all employees fell by 0.2 hour to 40.5 hours, and overtime held at 3.4 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was unchanged at 34.1 hours. Some more details from the Household Survey: The number of persons employed part time for economic reasons was little changed at 4.0million in April and is down by 357,000 from its February 2020 level. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs. The number of persons not in the labor force who currently want a job was little changed at 5.9 million in April. This measure is above its February 2020 level of 5.0 million. These individuals were not counted as unemployed because they were not actively looking for work during the 4 weeks preceding the survey or were unavailable to take a job. Among those not in the labor force who wanted a job, the number of persons marginally attached to the labor force increased by 262,000 in April to 1.6 million. These individuals wanted and were available for work and had looked for a job sometime in the prior 12 months but had not looked for work in the 4 weeks preceding the survey. Discouraged workers, a subset of the marginally attached who believed that no jobs were available for them, numbered 456,000 in April, little different from the prior month. In April, 7.7 percent of employed persons teleworked because of the coronavirus pandemic, down from 10.0 percent in the prior month. These data refer to employed persons who teleworked or worked at home for pay at some point in the 4 weeks preceding the survey specifically because of the pandemic. In April, 1.7 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic--that is, they did not work at all or worked fewer hours at some point in the 4 weeks preceding the survey due to the pandemic. This measure is down from 2.5 million in the previous month. Among those who reported in April that they were unable to work because of pandemic-related closures or lost business, 19.0 percent received at least some pay from their employer for the hours not worked, little different from the prior month. Among those not in the labor force in April, 586,000 persons were prevented from looking for work due to the pandemic, down from 874,000 in the prior month. Turning to the Establishment survey, we find the following: Employment in leisure and hospitality increased by 78,000 in April. Job growth continued in food services and drinking places (+44,000) and accommodation (+22,000). Employment in leisure and hospitality is down by 1.4 million, or 8.5 percent, since February 2020. Manufacturing added 55,000 jobs in April. Employment in durable goods rose by 31,000, with gains in transportation equipment (+14,000) and machinery (+7,000). Nondurable goods added 24,000 jobs, with job growth in food manufacturing (+8,000) and plastics and rubber products (+6,000). Since February 2020, manufacturing employment is down by 56,000, or 0.4 percent. Employment in transportation and warehousing rose by 52,000 in April. Within the industry, job gains occurred in warehousing and storage (+17,000), couriers and messengers (+15,000), truck transportation (+13,000), and air transportation (+4,000). Employment in transportation and warehousing is 674,000 above its February 2020 level, led by strong growth in warehousing and storage (+467,000) and in couriers and messengers (+259,000). In April, employment in professional and business services continued to trend up (+41,000). Since February 2020, employment in the industry is up by 738,000. Financial activities added 35,000 jobs in April, led by a gain in insurance carriers and related activities (+20,000). Employment also rose in nondepository credit intermediation (+6,000) and in securities, commodity contracts, and investments (+5,000). Employment in financial activities is 71,000 higher than in February 2020. Health care employment rose by 34,000 in April, reflecting a gain in ambulatory health care services (+28,000). Employment in health care is down by 250,000, or 1.5 percent, since February 2020. Employment in retail trade increased by 29,000 in April. Job gains in food and beverage stores (+24,000) and general merchandise stores (+12,000) were partially offset by losses in building material and garden supply stores (-16,000) and health and personal care stores (-9,000). Retail trade employment is 284,000 above its level in February 2020. In April, wholesale trade employment rose by 22,000. Employment in the industry is down by 57,000, or 1.0 percent, since February 2020. Mining added 9,000 jobs in April, with a gain in oil and gas extraction (+5,000). Mining employment is 73,000 higher than a recent low in February 2021. Employment showed little change over the month in other major industries, including construction, information, other services, and government. And visually: Sources of strength in the print was employment in leisure and hospitality increased by 78,000 in April. Manufacturing added 55,000 jobs -- much more than expected. Employment in transportation and warehousing rose by 52,000 in April. Commenting on the report, Randy Kroszner, economics professor at the University of Chicago Booth School of Business and former Fed governor, tells Bloomberg TV that lots of people are still unsure of entering the labor force. “That’s going to be a continuing constraint on growth because you’re just not going to see as much labor force participation and that’s going to continue wage pressure.” Overall, the April print was "goldilocks", with modest upside strength in the headline print offset by modest wage growth weakness. Then again, at 5.5% annually, it will take a much bigger economic hit to reverse the wage-price spiral and judging by the market reaction which saw 10Y yields initially dip only to spike back over 3.10%,  the Fed has a lot more selling to do before wages stabilize back in the 2-3% range. Tyler Durden Fri, 05/06/2022 - 08:35.....»»

Category: personnelSource: nytMay 6th, 2022

Slower Price Gains and Increased Housing Starts on the Horizon

From surging home prices and inventory shortages to elevated inflation adding to the mix, no one could’ve predicted how the housing market or U.S. economy would rebound from the pandemic. As those changes continue to impact the real estate and economic markets, experts offered their insight into the future during the Urban Land Institute’s (ULI)… The post Slower Price Gains and Increased Housing Starts on the Horizon appeared first on RISMedia. From surging home prices and inventory shortages to elevated inflation adding to the mix, no one could’ve predicted how the housing market or U.S. economy would rebound from the pandemic. As those changes continue to impact the real estate and economic markets, experts offered their insight into the future during the Urban Land Institute’s (ULI) 2022 Spring Real Estate Economic Forecast virtual webinar on May 4. “I think uncertainty is probably the biggest thing that has changed in the last six months,” said Suzanne Mulvee, SVP, research and strategy at GID. Mulvee moderated the event, which unpacked the results of ULI’s economic report. The biannual report surveyed dozens of real estate economists and analysts to develop a three-year prediction on 27 leading economic and real estate indicators. Speakers at the session included Mary Ludgin, senior managing director and director of global investment research at Heitman; Lee Menifee, managing director, head of Americas Investment Research at PGIM Real Estate; and Sabrina Unger, managing director, head of research and strategy at American Realty Advisors. Economic predictions Economists expect the solid economic expansion that started last year to continue over the next three years, albeit slower. The forecasts showed a consensus that real GDP growth would settle at 3.3% this year before moderating to 2.3% and 2.1% growth in 2023 and 2024, respectively. The state of employment growth is also poised for continued growth over the next few years after 2021 mounted a significant recovery of 6.74 million jobs from the loss at the height of the pandemic—almost 9.3 million. Full recovery and growth are expected in 2022 with an additional 4.10 million jobs, while the growth will continue to moderate to 1.87 million and 1.15 million jobs in the following two years. The unemployment rate is expected to sit at 3.5% this year and next year before inching to 3.6% in 2024. Despite a robust expansion of the economic environment since the outset of the pandemic, elevated inflation and the uncertainty that it has produced have also presented one of the most significant changes across all markets. While the consumer price index (CPI) inflation hit a 40-year-high of 8.5% in March, ULI forecasts that 2022 will average 6% before dropping to 3% and 2.5% in 2023 and 2024, respectively. Menifee suggested that the most “dramatic changes” in inflation are primarily connected to foreign circumstances. “The war in Ukraine is the obvious one and the pressure that has put particular pressure on energy prices,” he said, adding that disruptions in China with a zero COVID policy have also contributed. “That leaves some other places in a precarious position, which comes in the backdrop of increased inflation expectations,” Menifee added. “We’re also navigating a very tricky environment where fiscal policy will be much less supportive of growth.” The effects of inflation were also discussed during ULI’s “Learning in Real Time: Experts Share Their Forecasts for Real Estate in ’21, ’22, ’23,” panel featured in the organization’s spring meeting. Moderated by Paige Mueller, managing principal of Eigen10 Advisors, the event featured paniests Mulvee, Tom Errath, managing director for Harrison Street Real Estate and Taylor Mammen, CEO of RCLCO Fund Advisors as panelists. “I think a lot of us felt in the fall that maybe this would start to subside,” Mueller said. “We certainly knew there were lots of things that were tied to supply chains and COVID, and the expectation was that the economy would start to return to normal. “But inflation has become much broader than that, and we’re seeing that now start to be integrated into wage growth, and the concern is that that becomes a more long-term expectation,” she added. Mammen wasn’t convinced that higher inflation would stick around over the long term, but he indicated that short- and medium-term inflation was likely. “The real spikes in inflation that we’ve seen since the middle of 2021 have been largely event-driven,” Mammen said, citing the covid-related outbreaks and geopolitical conflicts. “We can cross our fingers and hope there aren’t any more events like that, but we all know now that you can’t necessarily predict the future,” Mamman added. “But I do think barring other events, the long-term trends support lower inflation or potentially deflation, but it all depends on what happens in the world to a great degree.” Where is real estate heading? As the Fed looks to reel in inflation, Mulvee stated that supply chain and logistics challenges plaguing the construction and real estate markets overall are likely to persist. According to Unger, the efforts by the Fed to raise interest rates will have two direct influences. The first—and probably most obvious—will be its impact on consumers, while the second would be the effect on the housing market. “Ultra-low rates have made it very attractive for buying,” she said. “We know the U.S. is chronically under-housed, which has created this intense home price appreciation backdrop stretching affordability.” Menifee attributed that to several factors, including more than a decade of underbuilding. “That cumulative impact is where we are now and particularly in a lot of places where we normally think of as very easy to build,” he said. Over the last decade, single-family housing starts experienced consistent annual growth from 2012 to 2021, but it has stayed under the 20-year average—only 2020 and 2021 saw starts surpass the average. Housing start increases are expected to continue this year and next year to 1.20 million in 2022 and 1.25 million in 2023. However, economists predict that the housing starts will drop slightly in 2024 to 1.1 million, which is still above the 20-year average. A significant change in the past year has been the surge in home prices and the rise of mortgage rates out of historic lows. According to Muvee, both metrics have led to a 60% increase in mortgage payments for consumers. Price appreciation is expected to remain solid but in 2022, with 10.0% price growth. Forecasts indicated that the pace of appreciation will slow in 2023 and 2024 to 5.0% and 4.4%, respectively. While the mortgage rates weren’t covered in ULI’s forecast, they have been on the rise over the past year, climbing from historic lows in late 2020 to surpassing 5% in recent months. Mulvee predicted that the runup of both metrics could make the undersupply of housing even more acute. “I think that people thinking about selling their home and maybe trading up to a new home are less likely to do it because they are locked into a mortgage rate somewhere in the 3% range versus the spot market, which is 5.4%,” Mulvee said. “That takes inventory out of the market, and it makes the scarcity even more robust.” The post Slower Price Gains and Increased Housing Starts on the Horizon appeared first on RISMedia......»»

Category: realestateSource: rismediaMay 6th, 2022

Inflation, The USDX, Real Yields: The Doom Trio Hangs Over Gold

Despite the reality check, investors keep up their buying spree. Meanwhile, problematic events are starting to gain on gold, silver, and mining stocks. With reality rearing its ugly head recently, the S&P 500 and the GDXJ ETF have suffered mightily. Moreover, while I’ve been warning for months that investors underestimated the implications of rampant inflation, […] Despite the reality check, investors keep up their buying spree. Meanwhile, problematic events are starting to gain on gold, silver, and mining stocks. With reality rearing its ugly head recently, the S&P 500 and the GDXJ ETF have suffered mightily. Moreover, while I’ve been warning for months that investors underestimated the implications of rampant inflation, the chickens have come home to roost. To explain, I wrote on Oct. 26: if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q1 2022 hedge fund letters, conferences and more Originally, the Fed forecasted that it wouldn’t have to taper its asset purchases until well into 2022. However, surging inflation pulled that forecast forward. Now, the Fed forecasts that it won’t have to raise interest rates until well into 2023. However, surging inflation will likely pull that forecast forward as well. Moreover, I added on Nov. 4, following the FOMC meeting: With Fed Chairman Jerome Powell still searching for his inflationary shooting star, the FOMC chief isn’t ready to label inflation as problematic. “I don’t think that we’re behind the curve,” he said. “I actually believe that policy is well-positioned to address the range of plausible outcomes, and that’s what we need to do.” The reality is: while Powell has taken the path of least resistance to help calm inflation (the taper), his inability to understand the realities on the ground leaves plenty of room for hawkish shifts in the coming months (interest rate hikes). Thus, while Powell has shifted his stance materially and Fed officials now expect seven to 12 rate hikes in 2022, the financial markets initially ignored the repercussions. However, always late to the party, the consensus now fears that the medium-term outlook has lost its luster. Please see below: Source: CNBC Likewise, while the fundamental implications have been loud and clear for months, sentiment doesn’t die easily. However, since reality is undefeated, the impact of evaporating liquidity is becoming too much to bear. To explain, I wrote on Feb. 2: If you analyze the right side of the chart, you can see that the FCI has surpassed its pre-COVID-19 high (January 2020). Moreover, the FCI bottomed in January 2021 and has been seeking higher ground ever since. In the process, it's no coincidence that the PMs have suffered mightily since January 2021. Furthermore, with the Fed poised to raise interest rates at its March monetary policy meeting, the FCI should continue its ascent. As a result, the PMs' relief rallies should fall flat, like in 2021.  Likewise, while the USD Index has come down from its recent high, it's no coincidence that the dollar basket bottomed with the FCI in January 2021 and hit a new high with the FCI in January 2022. Thus, while the recent consolidation may seem troubling, the medium-term fundamentals supporting the greenback remain robust. I provided an update on Apr. 13: While the USD Index has surpassed 100 and reflects the fundamental reality of a higher FCI and higher real yields, the PMs do not. However, the PMs are in la la land since the FCI is now at its highest level since the global financial crisis (GFC). Please see below: Also noteworthy, the FCI made quick work of the March 2020 high from the first chart above. Again, Fed officials know that higher real yields and tighter financial conditions are needed to curb inflation. That’s why they keep amplifying their hawkish message and warning investors of what lies ahead. However, with commodities refusing to accept this reality, they’ll likely be the hardest-hit once the Fed’s rate hike cycle truly unfolds. Surprise, surprise: after surpassing its March 2020 highs, the FCI has continued its ascent. Please see below: Who Could’ve Seen This Coming? As a result, while the Russia-Ukraine conflict and misguided optimism disrupted our bearish timeline, the important point is that investors can only ignore technical and fundamental realities for so long. With a resurgent USD Index and rising real yields, which are profoundly bearish for the PMs, the latter have come down from their recent highs. Moreover, with the general stock market's suffering adding to the GDXJ ETF's ills, the junior miners have underperformed their precious metals counterparts, which has been very beneficial for our short position. However, the bearish medium-term thesis remains unchanged: inflation is problematic, the Fed is hawked up, and a higher USD Index and higher real yields should materialize in the coming months. Case in point: while February's lagging data may not reflect the impact of rising mortgage rates, the S&P/Case-Shiller U.S. National Home Price Index surged by more than 20% year-over-year (YoY) on Apr. 26 and outperformed expectations (19%). As a result, the data is profoundly bullish for shelter inflation, which accounts for more than 30% of the headline Consumer Price Index's (CPI) movement. Please see below: Source: Also noteworthy, Whirlpool released its first-quarter earnings on Apr. 25. For context, the company manufacturers home and kitchen appliances like washing machines, dryers, refrigerators, and stand mixers. CEO Marc Bitzer said during the Q1 earnings call: “As our industry and most other industries face historical levels of cost inflation, we observed over $400 million in the fourth quarter, or approximately a 10% increase on cost of goods sold. Despite this, we delivered over 9% ongoing EBIT margins and over 16% EBIT margins in our North America business, again demonstrating the earnings strength of the region and the actions we took, transforming margins over the years.” “We now expect higher levels of inflation to persist throughout the year and have increased our full year cost inflation expectations by $600 million to $1.8 billion.” However, is Whirlpool waiting for the Fed to solve the problem? “Our first quarter results demonstrate that we are a different Whirlpool, delivering structurally improved EBIT margins no matter the operating environment. We have the right actions in place to deliver a solid 2022, including our previously announced cost-based price increases of 5% to 18%, addressing inflation across the globe.” To that point, due to the time lag between incurring costs and implementing price hikes, Bitzer said that more increases are scheduled for the back half of 2022. Please see below: Source: Whirlpool/Seeking Alpha On top of that, Indeed released its latest State of the Labor Market report on Apr. 21. An excerpt read: “Employer demand for seasonal work is growing in line with pre-pandemic trends, with summer job postings on Indeed soaring 40.1% above their February 1, 2022 baseline as of April 10 (…).” “Seasonal postings on Indeed for spring and summer jobs comprise a variety of positions. Some of these jobs, like camp counselor and lifeguard, fit the traditional summer mold. But more general roles, like retail sales associate and cashier, make strong showings too.” However: “Domestic job seeker interest in seasonal jobs lags prior year trends. As of April 10, the 2022 share of domestic job seeker searches for seasonal work was respectively 27.6% and 16.9% below the comparable periods in 2019 and 2021.” Please see below: To explain, the blue and green lines above track U.S. citizens’ interest in seasonal work in 2019 and 2021 (before/after the height of the pandemic), while the pink line above tracks their current interest. As you can see, there is a clear underperformance. More importantly, the combination of normalized demand and insufficient supply is extremely inflationary. With demand “growing in line with pre-pandemic trends,” while supply is roughly 17% to 28% below comparable periods, it should put upward pressure on wage inflation. Moreover, remember what I wrote on Apr. 22? Powell said on Apr. 21 that the U.S. labor market is "too hot" and that the Fed needs to cool it down. "It is a very, very good labor market for workers," he said. "It is our job to get it into a better place where supply and demand are closer together." As a result, he understands the problem. However, reducing 8.6% annualized inflation without impairing the U.S. labor market is like trying to hit a hole in one on the golf course. Please see below: Source: CNBC Finally, The Conference Board released its Consumer Confidence Index on Apr. 26. The headline index decreased from 107.6 in March to 107.3 in April, and Lynn Franco, Senior Director of Economic Indicators at The Conference Board, said: “The Present Situation Index declined, but remains quite high, suggesting the economy continued to expand in early Q2. Expectations, while still weak, did not deteriorate further amid high prices, especially at the gas pump, and the war in Ukraine. Vacation intentions cooled but intentions to buy big-ticket items like automobiles and many appliances rose somewhat.” All in all, the data is largely inconclusive, as there are some good and some bad results. However, since “concerns about inflation retreated from an all-time high in March but remained elevated,” more QE is far from the right medicine. The bottom line? While I warned on Apr. 8 that when sentiment shifts, the PMs will confront one of the worst domestic fundamental environments since late 2018, the troublesome developments are catching up to gold, silver, and mining stocks. However, despite their recent drawdowns, the PMs are still trading well above their medium-term-trend-based fair values. Therefore, more pain should materialize over the medium term. It seems that we might see a sharp rebound in the near future, though (after PMs decline some more). In conclusion, the PMs were mixed on Apr. 26, as mining stocks continued their material underperformance. Moreover, while investors will likely remain in ‘buy the dip’ mode until the very end, lower highs and lower lows should confront the S&P 500 and the PMs over the next few months. As a result, the medium-term outlook for the GDXJ ETF is profoundly bearish. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFA Founder, Editor-in-chief Sunshine Profits: Effective Investment through Diligence & Care All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice. Updated on Apr 27, 2022, 1:36 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkApr 27th, 2022

4 ways Americans will get hammered with benefit cuts once COVID-19 is no longer deemed an official public health emergency

Americans could soon be dealing with food stamp cuts, loss of Medicaid health insurance, and new charges for COVID-19 testing and vaccines. COVID-19 vaccines may start costing more money if the public health emergency ends.Sarah Reingewirtz/MediaNews Group/Los Angeles Daily News/Getty Images The federal government renewed a public health emergency declaration earlier this month. It paves the way for extra federal assistance on food stamps, COVID-19 vaccines, and testing. But unwinding it could spell benefit cuts for many people — here's how. Millions of Americans could soon be dealing with cuts to federal benefits in just a few months.The Department of Health and Human Services extended the COVID-19 public health emergency declaration earlier this month. The 90-day designation was renewed on April 12, setting up a mid-July expiration unless the Biden administration decides to continue it.That emergency declaration opens the door to increased federal funding for a variety of programs, ranging from improved access to Medicaid to more generous food benefits. But if the declaration lapses, that extra funding could vanish."Prematurely declaring an end to the public health emergency hampers the response to COVID-19," Larry Levitt, a health policy expert at the Kaiser Family Foundation, wrote on Twitter.The Biden administration has assured states they will receive 60 days of advance notice before the public health emergency ends. Yet the pandemic is ongoing and while new recorded cases remain far below their winter peak, they're ticking upward once again after an early springtime lull. Here are four ways that Americans could get hammered with abrupt ends to more generous health and nutritional benefits. Extra food assistance from the federal government will expire.A supermarket displays stickers indicating they accept food stamps in West New York, N.J.Seth Wenig/AP PhotoThe declaration paves the way for the federal government to provide more assistance through the Supplemental Nutrition Assistance Program (SNAP), commonly known as food stamps.Eligible families get at least an extra $95 per month in federal aid as a result of the public health emergency, per the left-leaning Center on Budget and Policy Priorities. Once that ends, most SNAP recipients are poised to lose $82 per month in benefits, according to the Food Research and Action Center.Not everyone is accessing this aid. Some GOP-led states like Florida and Missouri pulled the plug on their beefed-up nutritional assistance programs last year. At least five more that are also GOP-controlled intend to cut the aid next month since they ended their state public health emergency declarations, The New Republic reported.The Department of Agriculture will give states one month to transition beneficiaries off the enhanced assistance once the federal government ends the designation.Around 15 million Americans could lose Medicaid coverage.A health worker.Susana Vera/ReutersMillions of low-income Americans will also lose access to free health insurance through Medicaid since the federal government will no longer be picking up the tab for states. The federal government and states share responsibility in financing Medicaid. An earlier pandemic relief law in March 2020 expanded the federal government's share of payments for the duration of the public health emergency.Estimates on the extent of coverage losses once the emergency ends vary. But the Urban Institute projected in late 2021 up to 15 million Americans will lose their Medicaid health insurance over 14 months.A recent analysis from the left-leaning Center on American Progress warned of financial strains on hospitals dealing with a spike in uninsured patients, along with people delaying medical care since they cannot afford it.The report also warned that the policy's end would have an outsized impact on low-income Black and Latino people. Those two groups are twice as likely to be enrolled in Medicaid compared to non-Hispanic Whites — and they have suffered greater hospitalization and death rates from COVID-19.COVID-19 shots won't be free.Public health workers.Halfpoint Images/Getty ImagesFree COVID-19 shots won't be as available as they used to be.The public health emergency designation widened eligibility for free coronavirus vaccines under Medicaid.But that will change for people without health insurance, since they will have start footing the bill for some shots, per the Kaiser Family Foundation.However, those with private insurance will likely be okay. Under changes enacted through the CARES Act in March 2020, insurers must provide access to vaccines at no cost to their beneficiaries since they are now considered preventive care.Covid-19 testing may not come without a charge.A covid-19 researcher.Kristin Palitza/picture alliance via Getty ImagesSome people will have to start paying for COVID-19 testing once federal funding dries up with the end of the emergency designation.The declaration mandates state Medicaid programs to cover testing at no charge to enrollees. A similar rule is in place for private health insurance as well, requiring coverage for up to eight over-the-counter COVID-19 tests per month for their beneficiaries.Americans could soon be left paying out-of-pocket for their COVID-19 testing and medical care. Some testing manufacturers are charging $100 per test, ABC News reported.The Biden administration is pushing Congress to set aside extra COVID-19 funding. But it ran aground last month due to Republican resistance to fresh federal spending that's not redirected from existing programs. Read the original article on Business Insider.....»»

Category: topSource: businessinsiderApr 25th, 2022

The Era Of A Financialized Fiat-Dollar Standard Is Ending

The Era Of A Financialized Fiat-Dollar Standard Is Ending Authored by Alasdair Macleod via, In recent articles I have argued that the era of a financialised fiat dollar standard is ending. This article takes my hypothesis further and explains that it is not just the emergence of new commodity backed currencies in Asia that will threaten the dominance of Western currencies, but the Fed’s failing monetary policies and those of the other major central banks. An unstoppable rise in interest rates will in large part be responsible for their demise. Financial markets in thrall to the state underestimate the forces collapsing the financial bubble. Even the existence of the bubble is disputed by those within its envelope. But financial assets represent most of the collateral securing the banking system, and their collapse triggered by higher interest rates will take out businesses, banks, even central banks and make financing of soaring government deficits impossible without accelerated currency debasement. Will central banks try to preserve financial asset values to stop the West’s financial system from imploding? Keynesian theory demands increased deficit spending to counteract the contraction of bank credit. As long as this is the case, the planners will destroy their currencies - confirmed by the John Law episode in 1715-1720 France. It is from this fate that China, Russia, and the architects planning a new Central Asian trade currency are planning their escape. End of an era and how it all started It’s all about interest rates. Rising interest rates undermine financial asset values and falling rates increase them. From 1981 until March 2020, the trend has been for the inflation of prices to subside and interest rates to decline with them. And following Paul Volcker’s interest rate hikes at that time, this is when the era of economic financialisation commenced. In the early eighties, London underwent a financial revolution with banks taking over stockbrokers and jobbers. It was the end of single capacity, whereby you were either a principal or agent, but never both. America responded to London’s big-bang by rescinding the Glass-Steagall Act, which separated investment from commercial banking following the 1929—1932 Wall Street Crash. Money-centre banking was about to go all-in on financialisation. Increasingly, manufacturing of consumer goods was moving from America and Europe to China and the Far East. The Wall Street megabanks had less of this business as a proportion of total American and European economic activities to finance. Small, local banks, particularly in Europe, continued to be the financing backbone for small enterprises. Banking had begun to split, with financial activities increasingly dominating the business of the larger banks. The rise of derivatives, firstly on new regulated exchanges and then in unregulated over-the-counter markets became a major activity. They promised that risk was eliminated by being hedged — there was a derivative to cover anything and everything. Securitisations became all the rage: mortgage-backed securities, collateralised debt obligations and CDOs-squared. So great was the demand for this business that banks were financing it off-balance sheet due to lack of adequate capital, until the Lehman speedbump temporarily knocked the wheels off from under this business. Since then, government spending has dominated financing requirements, providing high quality collateral for yet further credit expansion, much of it in shadow banking, and leading to a veritable explosion in the size of central bank balance sheets. The decline in interest rates from Paul Volcker’s 20% in 1980 to zero in 2020 drove financial asset values forever upwards, with only brief interruptions. Crises such as in Russia, Asia, the Long-Term Capital Management blow-up, and Lehman merely punctuated the trend. Despite these hiccups the character of collateral for bank lending became increasingly financial as a result. Expanding credit on the back of rising collateral values had become a sure-fire money-spinner for the banks. The aging Western economies had finally evolved from the tangible to ethereal. For market historians it has been an instructive ride, contemporary developments that have matched or even exceeded bubbles of the past. What started as the emergence of yuppies in London wearing red braces, sporting Filofaxes, and earning previously undreamed-of bonuses evolved into a money bubble for anyone who had even a modest portfolio or could get a mortgage to buy a house. The trend of falling interest rates has now ended, and the tide of financialisation is on the ebb. Recent events, covid lockdowns, supply chain disruptions and sanctions against Russia provide the tangible evidence that this must be so. You do not need to be a seer to foretell a commodity price crisis and the prospect of widespread starvation from grain and fertiliser shortages this summer. Common sense tells us that the end of the financialisation era will have far-reaching consequences, yet the outlook is barely discounted in financial markets. With their noses firmly on their valuation grindstones, analysts do not have a grasp of this bigger picture. That is beginning to change, as evidenced by Augustin Carsten’s mea culpa over inflation. Carsten is the General Manager of the Bank for International Settlements, commonly referred to as the central bankers’ central bank, which takes a leadership role in coordinating global monetary policy. The objective of his speech was to assist central banks in coordinating their policy responses to what he belatedly recognises is a new monetary era. Inflation is not about prices: it’s about currency and credit One of the fatal errors made by the macroeconomic establishment is about inflation. The proper definition is that inflation is the debasement of a currency by increasing its quantitiy. It is not about an increase in the general level of prices, which is what the economic establishment would have us believe. The reason this is particularly relevant is because governments through their central banks have come to rely on increases in the quantity of currency and credit to supplement taxes, allowing governments to spend more than they receive in terms of revenue. To properly describe inflation draws unwelcome attention to the facts. Since the Lehman failure in 2008, the combined balance sheets of some of the major central banks have increased from just under $7 trillion to $31 trillion (Fed + ECB + BOJ + PBOC, according to Yardini Research). The steepest part of the rise was from March 2020, when assets for the Fed and ECB soared. While justified, perhaps, by the covid pandemic the effect has been to dilute the purchasing power of each currency unit. And as that dilution works its way into the economy it is reflected in higher prices. That bit is familiar to monetarists. What monetarists fail to account for is the human reaction to the currency dilution. When the public becomes aware that for whatever reason prices are rising at a faster pace, they will increase the ratio between goods purchased and therefore in hand to that of their available currency resources. That drives prices even higher still and there is then a risk that price rises will escalate beyond the authorities’ ability to control them. This phenomenon has been a particular weakness of American and British consumers, who have a low level of savings priority. When Paul Volcker raised interest rates to a penalising 20% in 1980 it was to reverse the tendency for individuals to dispose of their personal liquidity in favour of goods. The sanctions against Russia sent a clear signal to western consumers about rising energy costs, and already they are seeing the impact across a wide range of consumer products. Nothing could be more calculated to convince consumers that they should anticipate and satisfy their future needs now instead of risking yet higher prices and shortages of available goods. And we can be equally sure that governments and their central banks stand ready to ensure that no one need go without. That this has come as a surprise to central banks indicates an appalling failure to anticipate the entirely predictable consequences of inflationary monetary policies. Additionally, central banks have failed to grasp the true relationship between money and interest rates. The errors of interest rate policies Central banks use interest rates as their primary means of managing monetary policy. They make the error of assuming that interest rates are no more than the price of money. If they are raised, demand for money is meant to decrease and if they are lowered demand for money is expected to increase. And through demand for money, demand for goods and their prices can be managed. Therefore, it is assumed that inflation and economic performance are controlled by managing interest rates. This flies in the face of the evidence, as the chart in Figure 1 shows, which is of the relationship between the rate of inflation and interest rates in the form of wholesale borrowing costs in Britain, before the Bank of England muddied the waters by using interest rates to manage monetary and economic outcomes. The correlation was between the general price level and interest rates instead of between the rate of change and interest rates. The distinction might not at first be obvious, but the two are entirely different. Keynes, and all other eminent economists were unable to explain the phenomenon, attributed by Keynes to Arthur Gibson as Gibson’s paradox. The explanation is simple. In his business calculations, an entrepreneur must estimate the price his planned manufactured product would obtain, based on current prices. All his calculations hang on that assessment. It sets the basis of his affordable financing costs, from which he could estimate the profitability of an investment in production after his other costs. If prices were high, he could afford to pay a higher rate of interest and would be willing to bid up interest rates accordingly. If they were low, he could only afford a lower rate. That is why interest rate levels tended to track wholesale price levels and not their rate of change. Thus, it was entrepreneurial borrowers in their business calculations who set interest rates, not, as Keynes assumed, the idle rentier deriving an unearned income by demanding usurious rates of interest from hapless borrowers. If anything, fluctuations in the price level (ie the rate of price inflation) destabilised business calculations. To an investing entrepreneur, interest is certainly a cost. But the position for a lender is entirely different. When he lends money, its usefulness is lost to him over the term of a loan, for which he reasonably expects compensation. This is known as time-preference. Additionally, there is the risk the money might not be returned, if for example, the borrower defaults. This is the risk involved. And in these times of fiat currency, there is the further consideration of its potential debasement by the end of the loan. Unless all these issues are satisfied in the mind of the lender, the availability of monetary capital from savings for business investment and for cash flow purposes will be hampered. Under a gold standard, the debasement issue does not generally apply. An indication of the sum of time preference and lending risk can be judged from the coupons paid on government debt, which in the case of the British government in the nineteenth century was 3% on Consolidated Loan Stock issued between 1751 and 1888, subsequently reduced to 2.75% and then 2.5% in 1902. Even when a currency in which a loan is struck is gold backed, an interest rate of two or three per cent for a prime borrower was shown to be appropriate. For them to go any lower implies, as John Law stated in the quote later in this article, that currency is being expanded with a view to driving interest rates below a natural level. Not only are central bank interest rate policies founded on a misconception proved by Gibson’s paradox and its explanation, but the entire operation distorts economic outcomes and cannot ever succeed in their objective. And as for distortions taking bond yields into unnatural negative territory as has been the case in Japan and the Eurozone, the unwinding thereof promises to result in economic and monetary catastrophe, because borrowers, including governments, have been hoodwinked into irresponsible borrowing for borrowing’s sake. The monetary myths shared by Law and Keynes We know that financial asset values are going to fall, because with consumer and producer prices rising strongly, interest rates and bond yields will continue to rise. So far, the yield on the 10-year US Treasury note has risen from 0.5% in August 2020 to 2.9% this week. The value destruction for this indicator has been over 20% from par so far. But according to government statistics, US consumer prices are rising at 8.5%, and likely to increase at an even faster rate when the consequences of Russian sanctions begin to do their work. Therefore, the yield on US Treasuries of all maturities is set to increase considerably more. Unless, that is, the Fed adopts the policy of the Bank of Japan and intervenes to stop yields rising. We are witnessing the effect of yield suppression on the Japanese yen, which since 4 March has fallen over 12% against the dollar. The relationship between a central bank rigging financial asset values and the effect on the currency is being demonstrated. In 1720 France John Law similarly tried to stop his Mississippi shares from falling by issuing unbacked livres expressly to buy shares in a support operation. It is worth drawing attention to the similarities of that experience with current developments in markets and currencies. Like Keynes over two centuries later, Law believed in stimulating an economy with credit and by suppressing interest rates. Keynes formulated his approach as a response to the great depression, despite (or because of) the US Government’s attempts to fix it having continually failed. Keynes in effect started again, dismissing classical economics and invented macroeconomics in its place. Law similarly recommended a reflationary solution to a struggling French economy burdened by the bankruptcy of royal finances. Law proposed to stimulate it by issuing a new currency, livres, as receipts for deposits in coin. The convenience of notes, which would be accepted as settlement for taxes and other public payments, was expected to ensure they would replace coin. Keynes’ version was the bancor, which was not adopted, but the US dollar acted as the vehicle for global stimulation in its place. Both currency proposals were not overtly inflationary at the outset, nor was the adoption of the dollar in the bancor’s place. But they gave the issuers the flexibility to gradually loosen them from the discipline of metallic money. In October 1715 at a special session at the chateau de Vincennes, Law made his proposal to the Council of Finances, stressing that his proposed bank would only issue notes in return for deposits of coin. In other words, it would be a deposit bank only. The Council turned down Law’s proposal, but in May 1717, he finally got the go-ahead to establish a “general bank”. That became the Royal Bank the following year, a forerunner of today’s central banks. It was then to be merged with Law’s Mississippi venture in February 1720. The Mississippi venture included two other companies which all together represented a monopoly on France’s foreign trade and Law needed to raise funds to build ships. Having obtained his original banking licence, Law proceeded to inflate a financial bubble to finance his project, and to create sufficient revenues to pay down the royal debts. His appointment to the official role of Controller General of Finance in early 1720 enabled him to finance the bubble by expanding a combination of credit and paper currency without having to clear the expansion of currency through Parliament, which was the procedure until then. In late 1719, Law was already buying Mississippi shares using new currency, an action which foreshadowed today’s quantitative easing. Central to Law’s strategy was the suppression of interest rates. As early as 1715, he wrote: “An abundance of money which would lower the interest rate to 2% would in reducing the financing costs of the debts and public offices etc, relieve the King. It would lighten the burden of the indebted noble landowners. This latter group would be enriched because agricultural goods would be sold at higher prices. It would enrich traders who would then be able to borrow at a lower interest rate and give employment to the people.” Today, we know this as Keynesian economic theory. The expansion of the currency was especially dramatic in early-1720, with an already bloated one billion livres in circulation at the end of 1719 from a standing start in only thirty months. In a desperate attempt to support the shares in a falling market, this had expanded to 2.1 billion livres by the middle of May. The addition of all this paper and credit led to prices of goods rising at a monthly rate of over 20% by January 1720. Unsurprisingly, Law refused to pay out gold and silver for the supposedly backed livres, and the collapse of the whole scheme ensued. By September, the Mississippi shares had fallen from 10,000L to 4,000L, but the currency in which the shares were priced was worthless on the London and Amsterdam exchanges. The lessons for today cannot be ignored. Law ruined the French economy with his proto-Keynesian policies. Today, with quantitative easing the same policies are a global phenomenon. Law’s support operations for royal finances are no different from today’s suppression of government bond yields. And now that prices for goods are beginning to rise, in all certainty there will be an even greater crisis for food prices in the coming months, just as there was widespread starvation in France in the summer of 1720. How to profit from these mistakes Not only do we have in 1720s France a precedent for today’s economic and financial conditions, but Richard Cantillon gave us a strategy of how to profit from the situation. He showed that it was not sufficient just to sell financial assets for currency, but the currency itself presented the greater danger of losses. Today, Cantillon is known for his Essay on Economic Theory and the Nature of Trade in General. The Cantillon effect describes how currency debasement gradually progresses through the economy, driving up prices as it enters circulation. Cantillon operated as a banker in Paris during the Mississippi bubble, dealing in both the shares and the currency. He traded both Mississippi shares in Paris and South Sea Company shares in London on the bull tack, selling out before they collapsed. He proved to be an accomplished speculator in these bubble conditions. As a banker, Cantillon extended credit to wealthy speculators, taking in shares as collateral. From the outset he was sceptical of Law’s scheme and would sell the collateral in the market after prices had risen without informing his customers. When Law’s scheme collapsed, he benefited a second time by claiming the debts owed from the original loans, claims that were upheld in a series of court cases in London, because the shares being unnumbered were regarded as fungible property which like money itself could not be specifically identified and reclaimed by an earlier owner. His second fortune was from shorting the currency on the exchanges in London and Amsterdam by selling the livre forward for other currencies which were encashable for specie. And it is that action which can guide us through the end of the era of the dollar’s financialisation and the likely consequences for the currency. Today, the other side of the dollar’s difficulties is the availability of alternatives. Gold is still legally true money in coin form, and it can be expected to protect individual wealth in a livre-style collapse. Today, there are cryptocurrencies, such as bitcoin, but they will never be legal tender and because previous ownership can be traced through the blockchain they can be seized if identified as stolen property. Then there are central bank digital currencies, planned to be issued by the organs of the state that have already made a mess of fiat currencies. Whichever way this question is considered, we always return to gold as the sound money chosen by its users — and that was what Cantillion effectively bought in selling livres for specie-backed currencies. In the current context the concept that future currencies will relate to commodities and not financial assets is particularly interesting. This thinking appears to be embodied in a new pan-Asian replacement for the dollar as a payment medium. The Eurasia Economic Union Russia, China and the members, associates and dialog partners of the Shanghai Cooperation organisation appear to understand the dangers to them from a currency collapse of the dollar, other Western currencies and of associated financial assets. There are three pieces of evidence that this may be so. Firstly, China responded to the Fed reducing its funds rate to zero and the introduction of monthly QE of $120bn in March 2020 by stockpiling commodities, raw materials, and grains. Clearly, China understood the implications for the dollar’s purchasing power. By backing its economy with commodity stocks she was taking steps to protect her own currency from the dollar’s debasement. Secondly, sanctions against Russia rendered the dollar, euro, yen, and pounds valueless in its national reserves. At the same time, sanctions have pushed up commodity prices measured in those currencies. Russia has responded by insisting on payments for energy from “unfriendly nations” in roubles, while the central bank has resumed buying gold from domestic producers. Again, the currency is reflecting its commodity features. And lastly, the Eurasia Economic Union, which combines Russia, Armenia, Belarus, Kazakhstan and Kyrgyzstan, has proposed a new currency in conjunction with China. Details are sketchy, but we have been told that the new currency will combine the national currencies of the nations involved and twenty exchange-traded commodities. It sounds like it will be a statist version of earlier gold standards, with perhaps 40-50% commodity backing, presumably to be fixed against national currencies daily. Like the SDR, it will be supplemental to national currencies, but used for cross-border trade settlement. The involvement of both China and Russia suggests that it might be adopted more widely by the Shanghai Cooperation Organisation, representing 40% of the world’s population and freeing them from the dollar’s hegemony. The original motivation was to remove a weaponised dollar from pan-Asian trade, but recent developments have imparted a new urgency. Rapidly rising prices, in other words an accelerating loss of the dollar’s purchasing power, amounts to a transfer of wealth from dollar balances in Asian hands to the US Government. That is undesirable for the EAEU members. Furthermore, the flaws in the yen and the euro have become obvious as well. All Western currencies will almost certainly be undermined by their central banks’ resistance to rising bond yields as the John Law experience Mark 2 plays out. It might prove impractical for westerners to access this new currency to escape the collapse of their own national currencies. Anyway, a new currency must become established before it can be trusted as a medium of exchange. But the concept appears to be in line with Sir Isaac Newton’s rule of a 40% gold backing for a currency to be always maintained. The difference is that instead of the issuer lacking the flexibility to inflate the currency at will, the composition of the proposed Eurasian currency can be altered by the issuer. Putting this objection to one side, prices of commodities measured in goldgrams appear to have been remarkably stable over long periods of time. Certainly, wholesale prices in nineteenth century Britain under its gold standard confirm this is so. Figure 2 shows a remarkable stability of prices for a century under an uninterrupted gold coin exchange standard. The variations, most noticeable before the 1844 Bank Charter Act, are due to a cycle of expansion and contraction of bank credit. And the gentle increase from the late-1880s reflected the increased supply of gold from the Witwatersrand discoveries in South Africa. Whisper it quietly, but this remarkable price stability, coupled with technological developments, with minimum government saw a relatively small nation come to dominate world trade. If the Eurasia Economic Union manages to establish a stable currency similarly backed by commodities as the British pound was by gold, a pre-industrialised Central Asia holds out the promise of a similar economic advancement. But that will also require a hands-off approach to markets, which is not in character for any government, let alone the authoritarians in Central Asia. The value destruction ahead So far, this article has drawn attention to the ending of an era of fiat currency financialisation, the monetary policy errors, and the contrasting developments in Asia, where a preference for commodity backing for roubles, yuan and a new Eurasian currency is emerging. The success of the Asian currencies is set to destabilise those of the West. But irrespective of the future for Asian currencies, the West’s currencies bear the seeds of value destruction within themselves, simply because their evolution has nowhere further to go other than downhill. There is a complacent assumption that central banks are in control of interest rates and always will be. What is missing is an understanding of markets, which ultimately reflect human action. It is an error which eventually leads to states’ combined actions failing completely. We saw this in the 1970s, after the last vestiges of gold backing for the dollar were abandoned with the suspension of the Bretton Woods Agreement. Not only did the dollar lose its tie to gold, but all other currencies from that moment lost it as well. Consequently, inflation in the form of consumer prices began to rise shortly thereafter, fuelled by a combination of monetary expansion and loss of faith in currencies’ purchasing power — the latter particularly from OPEC members who demanded substantially higher dollar prices for crude oil. Despite the prospects for North Sea oil, the consequences for the UK’s government finances were catastrophic, leading to a bailout from the IMF in September 1976 (IMF bailouts were exclusively for third-world nations — for the UK this was beyond embarrassing). And the Labour government was forced to issue gilts bearing coupons of 15%, 15 ¼%, and 15 ½%. Globally, we have a similar situation today, except instead of entering the post-Bretton Wood years with the US dollar’s Fed Funds Rate at 6.62%, we have entered the new commoditisation era with the FFR at zero. We exited the 1970s with a FFR of over 19%. In August 1971 when the Bretton Woods Agreement was suspended the yield on the 10-year US Treasury constant maturity note was 6.86%. By September 1981 it stood at 15.6%. In August 2020 it was at an unnatural 0.5%, going to —who knows? In 1980, Paul Volker slayed the inflation dragon by hiking interest rates to economically destructive levels. It is hard to envisage a similar action being taken by the Fed today. But what we can see is the potential for consumer prices to rise, driven by currency debasement, to at least similar if not greater levels seen during the 1970s decade. Accordingly, bond yields have much, much further to rise. The bankruptcies of over-indebted businesses, their bankers, the central banks loaded with failing financial assets, and governments themselves all beckon. Financial assets are at the top of their bubble, of that there should be little doubt. As interest rates rise, all financial assets will begin to collapse in value. That cannot be denied. And where financial assets interact with the real world, such as mortgage finance, the disruption will undermine values of physical assets as well. Financial assets represent a higher level of collateral backing for bank credit than on previous credit cycles. Forced collateral liquidation will also drive financial asset prices lower. The potential for a crash on the scale of Wall Street between 1929—1932 should be obvious. Equally obvious is the likely reaction of central banks, which will surely redouble their efforts to prevent it happening. Quantitative easing is set to increase to finance all spendthrift government spending shortfalls, which can only escalate in these conditions. Central banks will be doing it not just because they want to preserve a “wealth effect” for the private sector, but to save themselves from the consequences of earlier currency debasement. The central banks of Japan, the euro system, the UK and the US have all loaded up on government bonds, whose prices are just beginning to collapse, if the higher bond yields seen in the 1970s return. Central bank liabilities are beginning to exceed their assets, a situation which in the private sector requires directors to admit to bankruptcy and cease trading. In most cases, recapitalising a central bank is a simple operation, whereby the central bank makes a loan to its government, and though double entry bookkeeping, instead of the government being credited as a depositor it is credited as a shareholder. Simple, but embarrassing in the middle of a developing financial crisis. When pure fiat currencies are involved. Undoubtedly, this is what the Bank of Japan will be forced to do, but for now it is refusing to accept the reality of higher interest rates and the effect on its extensive portfolio of JGBs, corporate bonds and equity ETFs. Consequently, its currency, the yen, is collapsing. The position of the ECB is more complex because its shareholders are the national central banks in the euro system which in turn will need bailing out. The imbalances in the TARGET2 settlement system are an additional complication, and outstanding repos last estimated at €8.725 trillion are there to be unwound. Between Japan and the Eurozone, we can expect to see their currencies collapse first. Initially, the dollar will appear strong on the foreign exchanges reflecting their decline. But foreigners possess financial assets and deposits totalling over US$33 trillion on current valuations. If the Fed is unable to prevent bond yields from soaring much above current levels, most of this, including the $15 trillion invested in equities, will be wiped out. The destruction of value measured in collapsing currencies will be economically catastrophic. It is to avoid this fate that first China, and now Russia are commoditising their currencies and even planning for a new cross-border settlement medium tied partially to commodity values. They hope to escape from interest rates rising in fiat currencies as they lose purchasing power. If the global conflict is financial, the West has lost it already. The geopolitical consequences are another story for a later day. Tyler Durden Sun, 04/24/2022 - 16:30.....»»

Category: blogSource: zerohedgeApr 24th, 2022

Woke Twitter Elitists Are Too Stupid To Realize Elon Musk Is Saving The Platform

Woke Twitter Elitists Are Too Stupid To Realize Elon Musk Is Saving The Platform Authored by Brandon Smith via, In the past year Big Tech and Big Media are learning a valuable lesson – That “Get Woke, Go Broke” is not just a mantra, it’s a rule. We’ve just seen companies like Netflix take a massive market beating because of their hubris and their presumption that they can simply dictate the path of our culture from on high through leftist propaganda. CNN just shut down their premium “+” service after a single month because no one trusts them enough to pay them pocket change for content. And Disney is about to lose their municipal charter in Florida because they thought they were in charge of the state and its laws, when in fact they are not. Woke corporations are slowly but surely dying and leftists don’t seem to grasp the situation. They’ll never admit openly that the reason these companies are seeing declines is because of their cult-like political stance that justifies the forced indoctrination of everyone, including children. They’ll say it was covid, they’ll say it was inflation, they’ll say it was bigotry, but in reality it was always them. No one likes them, and people are finally realizing they don’t have to spend money buying products from insane leftists they don’t like. In this regard Twitter is a bit of an enigma. The social media company has gone from a relatively innocuous space for people to market online businesses and for politicians and celebrities to engage with their followers or detractors, to a vicious battleground overrun with leftist zealots hellbent on using the platform as a weapon to silence dissent and destroy the lives of people that disagree with them. The platform went from average social media outlet to becoming a birthplace for evil behavior. If I was to describe what Twitter really stands for today, I would say it is an attempt to build a global hive mind; a place where everyone is coerced into conformity with establishment ideals through peer pressure and mob aggression. That is to say, Twitter is the antithesis to a free speech society; a beta test for the future of authoritarianism where you THINK you are allowed to speak your mind but only the “correct” opinions are allowed to pass. How this happened is hard to say. Some theorize that leftist cultists scrambled like rats from the sinking ship of Tumblr and found their way over to Twitter to take up residency. I would argue that maybe Twitter was always intended to become what it now is. Just take a look at the monster’s gallery of its largest shareholders. There’s Vanguard and Blackrock, which together represent a globalist vampire squid of epic proportions. Their tentacles are wrapped around almost every aspect of the economy including media, big pharma (companies like Pfizer), weapons manufacturers, huge swaths of the US housing market, etc. If these two mega conglomerates were to somehow be wiped off the face of the Earth tomorrow, the world would be a much better place. For now, they own almost everything. Then there is Morgan Stanley, another “too big to fail” international banking firm which for some reason has a major stake in the realm of “tweets.” Whenever globalist companies like these pursue major investments in a communications platform there is generally something nefarious afoot. And, it should be noted that almost all the media companies they own push an agenda that leans hard left and is tyrannical in nature. We witnessed this undeniable dynamic in the past two years as media companies attacked anyone that stood against the illegal covid mandates. Why do major globalist institutions have so much interest in Twitter? It’s not because Twitter is a money maker. In 2020 the company suffered a net income loss of over $1.14 billion. In 2021 there was an income loss of $221 million. Twitter still claims it earns a profit, but this is primarily derived from stock buybacks and state and federal government subsidies, meaning, without overnight loans from the Federal Reserve and tax breaks from government Twitter simply would not exist. Twitter is carrying a debt load of around $6.75 billion in total liabilities according to the Wall Street Journal, which might not seem like much in comparison with many other companies but again, Twitter is not a money maker so any sizeable debt is a problem. They suffered dismal stock performance until the pandemic which led to trillions in stimulus dollars flooding into equities markets. Now that the covid checks have dried up, the company’s stock has spiraled down yet again. The only thing propping it up today is the sudden prospect of an Elon Musk buyout. Twitter was bleeding users and was dealing with a declining membership base leading up to 2019, when the company decided they would fix the problem by NOT REPORTING traditional user numbers anymore. They shifted to a new metric which they claimed was designed to discount the removal of “spam and bot accounts.” One has to wonder how much of Twitter’s actual user base is made of real people rather than fake accounts? Even with the new metrics, evidence suggests they have continued to lose users and revenues since 2019, largely due to the hostile political witch hunt environment that Twitter has developed in the past few years. The US government has also been heavily invested in Twitter since at least 2014, throwing millions into various projects the company has undertaken including many overseas. This makes sense because Twitter regularly shares user data with government agencies, often while claiming they don’t. Surveillance requests are kept secret and any releases of information on such requests are blocked by US courts. Overall, Twitter is a cesspool of political and corporate corruption. A sock puppet of massive globalist shareholders and a data clearing house for conglomerates and governments alike. This is why I have never had an account with them, and likely never will. It boggles my mind how all of these facts can be right out in the open, yet the one thing that sends leftists on Twitter into a rage is the notion that Elon Musk might buy up enough stock in the company to determine its future course. Here are some key facts that I think the Twitter elites need to consider: 1) Twitter has been on a downward plunge in terms of user base and revenues for years now. The fact that the company’s board has decided to assert a leftist political agenda and enforce unbalanced censorship rules is killing the company even further. In a few years, Twitter will not exist. Or, if it does, it will be a shell of its former self much like MySpace or Tumblr. The platform you people think you control is dying. Without fair public discourse and equally enforced guidelines Twitter serves no purpose other than to act as an echo chamber for leftist fanatics, and who wants to be a party to that? 2) The Twitter cult and their “blue check mark” gatekeepers are losing their minds over the prospect of a “billionaire” taking over Twitter when in reality the platform has been controlled by the worlds richest and most invasive shareholders for a long time. If you think Vanguard or BlackRock are better stewards than Elon Musk then I suggest you do a little more research on the history of these corporations. 3) Elon Musk’s interest in Twitter has stirred up excitement over a platform that was otherwise destined for the dumpster. I might even suggest that Musk’s activities are prolonging Twitter’s lifespan by drawing in investment that never would have been there otherwise. The blue checkmarks should be thanking him instead of attacking him. 4) What is the primary complaint that Twitter elitists have when it comes to Musk? That he MIGHT bring in more fair and balanced rules which would prevent political censorship. In other words, they are angry because he might allow true free speech within the boundaries of legality for conservatives as well as leftists. This is unacceptable to them. In their minds, free speech is only reserved for those with “correct thinking”, and they believe they get to dictate what “correct thinking” is. It takes a special kind of psychopath to believe that their side is the only side of an issue that deserves to be heard. In terms of Elon Musk, I’m reserving judgment for now. Tesla and SpaceX receive billions in government subsidies and tax incentives, far more than Twitter does. I question the validity of any company that relies on government handouts in order to survive. Musk is also an attendee of the World Government Summit in Dubai, where globalists from various nations meet to talk about the agenda for world centralization. Musk’s discussion was specifically on how he thinks the future of humanity is to “merge with machines”, much like having your cell phone attached to your brain. This sounds like a dystopian nightmare to me; government’s already track and monitor cell phone activity, do you really want them to do the same with your brain? Musk’s anti-woke positions may be legitimate, or maybe it’s just a persona. Setting all that aside, Musk’s surprising pursuit of Twitter is interesting no matter which way it goes. He could take control and shut the whole thing down, which is what I would suggest given the platform is a cancer on society and rife with government and corporate surveillance. Scattering the blue check cult to the four winds would be one of the best gifts Musk could give the the world right now. They can always complain about everything on other platforms, just not with so much concentrated corporate and government power at their disposal. They’ll say this is all an attack on free speech, but these people don’t understand what free speech is. They believe that it is free speech if they walk up to people and say “I’m going to destroy you and your way of life.” And then when those people react to stop them, they cry that they are victims and claim that this is a violation of their rights. Where I come from, you don’t make threats against people and then expect them to do nothing about it. The leftists on Twitter and elsewhere are going to learn this lesson soon, one way or another. *  *  * If you would like to support the work that Alt-Market does while also receiving content on advanced tactics for defeating the globalist agenda, subscribe to our exclusive newsletter The Wild Bunch Dispatch.  Learn more about it HERE. Tyler Durden Fri, 04/22/2022 - 19:00.....»»

Category: smallbizSource: nytApr 22nd, 2022

French Presidential Election Preview: Macron Vs Le Pen... Again

French Presidential Election Preview: Macron Vs Le Pen... Again Authored by Yves Mamou via The Gatestone Institute, While Macron appears well on his way to being re-elected, it is appropriate first to draw a balance sheet of his actions as president. For five years, his term has been marked by political scandals that all had the same origin: the desire of this president, with his background in investment banking, to make the state work like a start-up -- that is to say, to make the state work without the state's services. Macron has tried to create a private militia that works around the security organization of the presidency of the Republic... also in the name of efficiency, he has asked consulting firms (such as McKinsey; Boston Consulting Group, Accenture), in place of the large state institutions and ministries, to formulate polices on the environment, health, security, labor and retirement. Distrust and contempt sparked the Gilets Jaunes ("Yellow Vests") protest movement in 2019, when an increase in fuel prices provoked months of demonstrations by France's working class -- those whom globalization has relegated to the outskirts of large cities and who need their cars to go to work. This protest movement, despised and misunderstood, was repressed by the police with extreme violence. Macron did not, however, despise everyone. He has given the greatest consideration to Islam and Muslim immigration. During his five-year term, immigration from Africa, North Africa and Asia was not considered a danger, but an "opportunity" for France. Despite this catastrophic record, it is likely that Macron will be re-elected on April 24. By whom? Who are his voters? First of all, let us specify that one out of four voters did not even vote. Yet it is precisely Le Pen's electorate who are suffering from this situation: namely, young people and the working classes. Macron's voters are mainly retired people, executives, and inhabitants of big cities. Executives benefit from globalization, and the elderly and retired people do not like what appears to a revolution; they are afraid of the radical changes proposed by candidates such as Zemmour or Le Pen. The elderly are not the majority, but they vote. Marine Le Pen and the incumbent French President Emmanuel Macron will face each other in the second round of the French presidential election on April 24. The results of yesterday's first round, with 97% of the votes tallied, show Macron coming out ahead with 27.6% of the vote, followed by Le Pen at 23.4%. (Photo by Lionel Bonaventure /AFP via Getty Images) The result is a kind of surprise. Four months ago, the journalist Éric Zemmour made a lightning breakthrough in the polls by forcing all his opponents to take up his favorite theme: the fight against mass immigration. Zemmour even appeared to be in a position to supplant Le Pen and to compete with Macron in the second round of presidential elections. Russian President Vladimir Putin, however, upset all forecasts. When Russia invaded Ukraine at the end of February, Zemmour, apparently taken aback, was slow to condemn the Russian assault. The media then recalled that in 2013, Zemmour had named Putin "man of the year" and that the same Zemmour had dreamed in 2018 of a "French Putin" for France. Regarding Ukrainian refugees, Zemmour estimated that they would be better off in Poland than in France, a sentiment that was widely viewed as lacking in compassion. As the Christian Science Monitor wrote, "Europe's far-right parties admired Putin. Now they're stranded." The war in Ukraine has led to another drawback: inflation. Increased prices for energy and food product have made purchasing power a major campaign theme, overshadowing the issue of Muslim immigration, which, until March, was at the heart of the debate. While Macron appears well on his way to being re-elected, it is appropriate first to draw a balance sheet of his actions as president. For five years, his term has been marked by political scandals that all had the same origin: the desire of this president, with his background in investment banking, to make the state work like a start-up -- that is to say, to make the state work without the state's services. For five years, Macron has tried, at the expense of the taxpayer, to build a parallel system that marginalizes intermediary bodies such as parliament, the mayors and the regions. In the name of "efficiency", Macron has tried to create a private militia that works around the security organization of the presidency of the Republic (the Benalla Affair); also in the name of efficiency, he has asked consulting firms (such as McKinsey; Boston Consulting Group, Accenture), in place of the large state institutions and ministries, to formulate polices on the environment, health, security, labor and retirement. The Covid-19 crisis was the height of this functioning of the "State without the State". Although France is one of the most organized countries in terms of healthcare, Macron chose to manage the pandemic directly with the firm of McKinsey. "[T]o manage this crisis (of covid), the political power, notably because of a lack of confidence in the institutions of the Republic, preferred to ignore the existing mechanisms and competences and entrust strategic missions to consulting firms," explains François Alla, a professor of public health and deputy director of the Institute of Public Health, Epidemiology and Development. Barbara Stiegler, an associate professor of political philosophy and the director of the Soin, éthique et santé ("Care, Ethics, and Health") master's program at the University of Bordeaux Montaigne, also said: "[T]his recourse to consulting betrays the deep mistrust of these new leaders, who come from the world of business and enterprise, towards the State and academic knowledge. By locking himself up in his Defense Council, Macron has chosen to decide, both without the state and without researchers, all the major orientations of the health crisis. Macron's distrust of the state also seems coupled with a distrust of the French people. Macron is a man who has regularly insulted the French. Before becoming president, while he was still Minister of the Economy, Macron called female workers at the Gad slaughterhouse in Finistère "illiterate." Additionally: In Lunel, on May 27, 2016, in the Hérault district, he insulted two striking workers, saying, "The best way to afford a suit is to work." In Hénin Beaumont (North), in 2017, he looked down on the working class people, saying, "in this mining basin (...) there is a lot of smoking and alcoholism." In 2017, in Athens, Greece, Macron judged that "France is not a country that reforms itself." In Denmark, he criticized the French, these "Gauls refractory to change..." Distrust and contempt sparked the Gilets Jaunes ("Yellow Vests") protest movement in 2019, when an increase in fuel prices provoked months of demonstrations by France's working class -- those whom globalization has relegated to the outskirts of large cities and who need their cars to go to work. This protest movement, despised and misunderstood, was repressed by the police with extreme violence. Macron did not, however, despise everyone. He has given the greatest consideration to Islam and Muslim immigration. During his five-year term, immigration from Africa, North Africa and Asia was not considered a danger, but an "opportunity" for France. Seine-Saint-Denis, the closest district to Paris and probably also the most Islamized in France, is not perceived by Macron as a nerve center for arms and drug trafficking. Macron "has compared Seine-Saint-Denis to Silicon Valley." During Macron's five-year term, two million more Muslim migrants have settled in France, and the country has experienced a permanent debate about Islam and veiled women. During this same five-year period, insecurity has affected all strata of the country: in France, an assault occurs every 44 seconds and the police are confronted with a refusal to comply every 30 minutes. In France, the political left and the media are waging war on the police, while in the suburbs police patrols are violently attacked on a daily basis. According to figures from the Ministry of the Interior, assaults on police officers increased by 40% between 2009 and 2019, from 26,721 to 37,431. In 2020, Minister of the Interior Gerald Darmanin told the public that "more than 20 assaults per day of police officers" were recorded in France. Under Macron, the national debt has increased from 100% of GDP to 113% of GDP. Despite this catastrophic record, it is likely that Macron will be re-elected on April 24. By whom? Who are his voters? First of all, let us specify that one out of four voters did not even vote. Yet it is precisely Le Pen's electorate who are suffering from this situation: namely, young people and the working classes. "Age and 'social' isolation actually feed abstention very significantly. Clearly, the social categories that benefit little from the current economic and social system -- the poorest, the least educated -- abstain," according to polling specialist Paul Cebille. Finally, Macron's voters are mainly retired people, executives, and inhabitants of big cities. Executives benefit from globalization, and the elderly and retired people do not like what appears to a revolution; they are afraid of the radical changes proposed by candidates such as Zemmour or Le Pen. So "it turns out that (the retired) seem to follow... the French as a whole, who intend... to vote as a majority for Macron." The elderly are not the majority, but they vote. Tyler Durden Fri, 04/22/2022 - 02:00.....»»

Category: blogSource: zerohedgeApr 22nd, 2022

Foreign Buyers See Upside in U.S. Real Estate

It’s a big world out there. One of the many Herculean challenges a real estate agent confronts daily is how to filter out the noise and hone in on what is most important and most relevant to their market—focusing exclusively on one individual neighborhood, a handful of towns or maybe a county. But here in… The post Foreign Buyers See Upside in U.S. Real Estate appeared first on RISMedia. It’s a big world out there. One of the many Herculean challenges a real estate agent confronts daily is how to filter out the noise and hone in on what is most important and most relevant to their market—focusing exclusively on one individual neighborhood, a handful of towns or maybe a county. But here in 2022, is that a mistake? Has our planet grown so interconnected, so accessible that even in the eternally local realm of real estate, agents or brokers can—or should—be looking beyond national borders when planning to grow, protect or bolster their business? And if so, what does this globalism look like, and does it matter to anyone outside of the coasts and major metros? The answer to all of these questions is, to greater or lesser degrees, yes. Almost a fifth of REALTORS® said they had worked with an international client in 2019, before the pandemic, and while right now this influence is concentrated in places like Miami, New York and San Francisco, it is far from being exclusive to these regions. And yes—ignoring the international real estate community could very well mean missing out on some tremendous, long-term opportunities, as well as falling behind the evolution of who is buying and selling homes, and how. “The money flowing in is not what it had been—there’s some limitations,” says John Yen Wong, an associate broker at eXp in the San Francisco Bay Area. “But the interest has not faded.” Wong might have more insight than almost anyone into the recent history, mechanisms and relationships that connect overseas buyers with the domestic real estate market. As co-founder of the Asian American Real Estate Association of America (AAREA), Wong has built relationships with potential buyers and trade organizations in countries around Asia and beyond—including a long-running connection with the incredibly powerful China Real Estate Association—which has allowed members to access new opportunities through both formal and informal channels. At the same time, a pulse of general uncertainty stemming from Russia’s invasion of Ukraine along with a relaxation of pandemic restrictions could push more potential global buyers to U.S. real estate markets—big money investors but also upwardly mobile middle-class families. Marci Rossell is chief economist for the Leading Real Estate Companies of the World® (LeadingRE). Although it is impossible to fully predict consumer reactions to the current geopolitical crisis or attribute any trend to any one outcome, she says that broadly, overseas buyers crave U.S. real estate in times like this. “When political instability occurs, people perceive U.S. real estate to be a safe haven,” she explains. “I think that we have yet to see foreign buyers come back to the U.S. in a meaningful way. But I do think that six months out , this could definitely spur European buying.” Who and why For those agents or brokers who are interested in building connections and expertise in overseas real estate, there might not be a better time to get started. Another factor that will almost certainly increase foreign buyers soon (though again, the timing is hard to predict) is the ending of covid restrictions. As many countries relax their travel restrictions, more and more people are likely to explore a vacation home, or even a permanent move to the U.S. According to Fernando Arencibia Jr., the broker-owner of Arenci Properties Realty in Miami and current chair of the Miami Association of REALTORS®, this is already happening to some degree. “A lot of international buyers were not making their way to the U.S., and now they are,” he says. “The lifting of the sanctions is giving people the freedom to come in.” Foreign buyers purchased 107,000 homes last year in the U.S., according to data collected by the National Association of REALTORS® (NAR), with numbers declining ahead of and during the pandemic from a recent peak of 284,000 in 2017. But a significant number of agents (24%) responding to an NAR survey last year said they expected an increase in the number of real estate deals with foreigners in the next 12 months. The perception has long been that overseas real estate investors are usually deep-pocketed and mysterious, snapping up huge swaths of inventory at a time to the detriment of locals. Canada recently banned many foreign buyers temporarily as the government seeks to cool their hot housing market. According to both Wong and Arencibia, in reality, the pool of foreign buyers is made up of a broadly diverse range of people with both young and old, families and individuals, cash buyers and mortgagors. “Miami is not only a place for the ultra-rich,” Arencibia says. “We do have a healthy number of that middle class, upper-middle class buyers.” Wong says some of the strong sentiment against foreign buyers can easily harm real estate markets, violate fair housing laws and ostracize buyers who are just looking to enjoy the amenities and opportunities available in the U.S. Some of it even takes the form of racism and overt discrimination, which is masked behind what Wong describes as legitmate concerns about the influence of autocratic governments like the Peoples Republic of China. “I think that what AREAA is focused on is that it doesn’t mean you’re oblivious to the risk if you don’t let the risk be the overriding generalization that colors every person who is of Asian descent,” he says. Making it happen Maybe the most salient question regarding overseas buyers is not tied to geopolitics or demographics but is much more practical: is it worthwhile from a business standpoint? Importantly, brokers and agents should not be looking at wooing foreign buyers as a short-term play, according to Wong. Even though a variety of factors have decreased the number of international transactions significantly over the past decade or so, the relationships forged between agents around the world—between AREAA and the China Real Estate Association, for example—are designed to outlast the up-and-down nature of politics. “At some point, the tensions that now exist will moderate and it could be a few years, it might be decades,” Wong says. “But at some point, when it opens up again, the interest will be there.” At the peak of the foreign buyer market, Wong says that close to 40% of his business was foreign nationals. On the other side of the country, Miami has been an international city for decades, with investors and buyers from 43 countries—many in Latin America but with representatives from all over the world. Arencibia says his association has recently signed agreements with real estate associations in Turkey, Tunisia, Indonesia and Nigeria. “We can bring back that exposure to our members and to our Miami REALTORS®,” he says. “It’s always been important for us to bring that exposure, that connectivity. Like anything else in life, if you do it once you might have a little bit of an effect, but anything you do consistently, it pays off exponentially.” Having the foundation, the education and the connections already in place allows agents to be ready at any given moment when overseas transactions pick up, Arencibia adds. The formal connections often facilitate large-scale opportunities—Arencibia mentions the city-wide “Art Basel” show that brings a “captive audience” from all over the world, with many people looking for, or at least interested in a second home or vacation property there. For sellers, AREAA has a for-profit subsidiary that can market overseas properties to U.S. nationals, Wong says, and Miami REALTORS® likewise uses their connections to get domestic buyers to homes in countries around Latin America and beyond. Both organizations also offer formal classes on how to work with clients overseas. But the more informal connections are where almost any agent or broker can start finding referrals and opportunities. Wong describes a huge, diverse and loosely-connected landscape of Facebook, WeChat and other social media groups spanning across the entire world where AREAA members help facilitate real estate transactions—both buyers and sellers, big-money and middle class. “It’s kind of a new stage of networking,” he says. “That, I think, is the best way to do it.” This is also where the foreign markets are creeping into the heartland—a trend that has been gaining steam for many years. Though Florida, California, Texas and New York still attract the majority of foreign buyers, Michigan and Georgia have both tripled their number of overseas buyers in the last decade, and agents in 45 states reported some level of foreign buyers or sellers. Wong says last year, he had a handful of Chinese buyers very specifically interested in Idaho—something he could not immediately make sense of. A few months later, NAR chief economist Lawrence Yun identified Boise, Idaho as one of the hottest housing markets in the country. “When I asked him why, he said he didn’t know—just the stats showed that,” Wong says. Though he admits he cannot be certain, Wong says he believes that these clients—and others—are likely well aware of U.S. real estate trends, and are now more than ever looking beyond the big metros and coasts to where property values are growing and amenities are plentiful. Right now, conditions are not necessarily ideal for people overseas to buy real estate in the U.S. Wong says many big lenders no longer have programs designed to help foreigners get mortgage loans, and there is still government scrutiny looking for potential money laundering activity particularly in higher-end properties. But there are a variety of scenarios that could change this, and other international developments that might bring more foreign money to the U.S. real estate market. Rossell mentions Chinese domestic stock markets that have struggled in the wake of the invasion of Ukraine, potentially pushing more people to put their money in the safer realm of U.S. real estate. Hong Kong and Taiwan are also carefully watching mainland China’s crackdown on dissent and attempts to aggressively consolidate its sphere of influence. Both big money investors and middle-class families in these regions could very well begin looking for a real estate connection in the U.S, she posits. “It wouldn’t surprise me to see a second round of money moving out of Hong Kong and out of Taiwan,” Rossell says. The bottom line is, U.S. real estate remains an attractive option for people all over the world, both in times of crisis and when they want to find relaxation and security. Against the hope of some sort of end to the pandemic along with an increased desire for security and safety, that time might be now. Jesse Williams is RISMedia’s associate online editor. Email him your real estate news ideas, The post Foreign Buyers See Upside in U.S. Real Estate appeared first on RISMedia......»»

Category: realestateSource: rismediaApr 21st, 2022

4 Stocks to Watch Amid Challenges for Homebuilding Industry

In spite of challenges, U.S. homebuilding remains on solid ground, helping stocks like Lennar Corp. (LEN), D.R. Horton (DHI), KB Home (KBH) and Toll Brothers (TOL). The U.S. homebuilding industry has lately seen a slowdown owing to higher mortgage rates and rising costs of raw materials and labor. However, the industry is on solid ground as demand for new homes continues to rise.Needless to say, the homebuilding industry is fighting hard to overcome the challenges and is hopeful that rising demand for new homes single-family homes will continue to help sales in the coming days. Given this scenario stocks likeLennar Corp. LEN, D.R. Horton DHI, KB Home KBH and Toll Brothers TOL are likely to benefit in the near term.Housing Starts, Building Permits IncreaseIn spite of the existing challenges, homebuilders are hopeful that the scenario will change in the coming days. The Commerce Department said on Apr 19 that housing starts rose 0.3% in March to a seasonally adjusted annual rate of 1.793 units, beating analysts’ expectations of 1.745 million units.This follows a revision in February’s numbers from 1.769 million units to 1.788 million units.Also, permits for future buildings increased 0.4% in March to a rate of 1.873 million units.March’s jump in housing starts is also the highest since 2016. Moreover, according to the report, multifamily starts soared 7.5% to 574,000, the highest level since January 2020.The rise in March was unexpected, given the rising interest rates. However, it proves that homebuilders are hopeful about sales rising in the near term as demand for new homes has been on the rise for quite some time.Industry Facing ChallengesDemand for homes was already there, and the pandemic created further need for new homes as people moved to sparsely populated areas on fears of contracting the COVID-19 virus.Higher demand for new homes coupled with record-low mortgage rates helped the homebuilding sector during the peak of the pandemic and even last year, with sales surging to multi-year highs. However, the homebuilding industry started facing challenges since the latter half of 2021.Rising timber and raw material costs coupled with labor shortage started escalating prices of homes, which posed as the first major set of challenges for homebuilders. If that was not enough, rising interest rates also started acting as a dampener for home sales.According to data from mortgage financing firm Freddie Mac, the 30-year fixed-rate mortgage averaged 5% during the week ending Apr 14. This is the highest level since February 2011, up from 4.72% the week earlier.The Fed hiked interest rates by 25 basis points in its last policy meeting in March, the first time since 2018. This has been hurting buyers. Even then, demand for homes has been on the rise and people are still willing to shell out more on new homes. This is one of the reasons why homebuilders are still hopeful about sales rising in the near term.Stocks to WatchThe homebuilding market is still going strong, despite rising prices, and demand for homes is predicted to continue through 2022. As a result, it is an opportune time to buy homebuilding stocks.Lennar Corporation is engaged in homebuilding and financial services in the United States. LEN’s reportable segments consist of Homebuilding, Lennar Financial Services, Rialto and Lennar Multifamily. Despite the varied product portfolio, homebuilding remains Lennar Corporation’s core business.Lennar Corporation’s expected earnings growth rate for the current year is 15.1%. The Zacks Consensus Estimate for current-year earnings has improved 3.9% over the past 60 days. LEN carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.D.R. Horton is one of the leading national homebuilders, primarily engaged in the construction and sale of single-family houses both in the entry-level and move-up markets. DHI’s operations are spread over 91 markets across 29 states in the East, Midwest, Southeast, South Central, Southwest and West regions of the United States. D.R. Horton’s houses are sold under the brand names D.R. Horton - America’s Builder, Emerald Homes, Express Homes and Freedom Homes.D.R. Horton’s expected earnings growth rate for the current year is 39.5%. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the past 60 days.  DHI has a Zacks Rank #3 (Hold).KB Home is a well-known homebuilder in the United States and one of the largest in the state. KB Homes’ revenues are generated from Homebuilding (accounting for 99.7% of fiscal 2021 total revenues) and Financial Services (0.3%) operations. KBH’s homebuilding operations include building and designing homes that cater to first-time, move-up and active adult homebuyers on acquired or developed lands. KB Home also builds attached and detached single-family homes, town homes and condominiums.KB Home’s expected earnings growth rate for the current year is 68.3%. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the past 60 days. KBH has a Zacks Rank #3.Toll Brothers Inc. builds single-family detached and attached home communities; master-planned luxury residential resort-style golf communities; and urban low, mid, and high-rise communities, principally on the land it develops and improves. TOL operates in Arizona, California, Florida, Delaware, Maryland, Pennsylvania, and South Carolina. Toll Brothers offers homes under two segments, namely Traditional Home Building Product and City Living.Toll Brothers’ expected earnings growth rate for the current year is 51.1%. The Zacks Consensus Estimate for current-year earnings improved 0.8% over the past 60 days. TOL has a Zacks Rank #3. Zacks Names "Single Best Pick to Double" From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all. It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time. This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.Free: See Our Top Stock and 4 Runners Up >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Toll Brothers Inc. (TOL): Free Stock Analysis Report KB Home (KBH): Free Stock Analysis Report Lennar Corporation (LEN): Free Stock Analysis Report D.R. Horton, Inc. (DHI): Free Stock Analysis Report To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksApr 20th, 2022

Futures Recover Losses After Netflix Disaster; 10Y Real Yields Turn Positive

Futures Recover Losses After Netflix Disaster; 10Y Real Yields Turn Positive US index futures were little changed, trading in a narrow, 20-point range, and erasing earlier declines as a selloff in bonds reversed with investors also focusing on the catastrophic Q1 earnings report from Netflix. Nasdaq 100 Index futures slipped 0.2% by 7:15 a.m. in New York, recovering from an earlier drop of as much as 1.2%; the Nasdaq 100 has erased $1.3 trillion in market value since April 4 as bond yields have been surging on fears of rate hikes. S&P 500 futures also recouped losses to trade little changed around 4,460. Treasuries rallied and 10Y yields dropped to 2.86% after hitting 2.98% yesterday. The dollar dropped for the first time in 4 days after hitting the highest level since July 2020, and gold was flat while bitcoin rose again, hitting $42K. In perhaps the most notable move overnight, US 10-year real yields turned positive for the first time since March 2020, signaling a potential return to the pre-pandemic normal. But that was quickly followed by a global drop in bond yields as investors assessed growth challenges from the Ukraine war and the potential for a peak in inflation. “Real yields matter for equities,” Esty Dwek, chief investment officer at Flowbank SA, said in an interview with Bloomberg Television. “It’s another aspect for the valuation picture that isn’t helping. It shouldn’t be that much of a surprise to see real yields are back closer to zero again. We’re pricing in so much bad news already between inflation and the hikes and war and supply chains.” 10-year Treasurys yield shed 7 basis points in choppy session after as money managers from Bank of America to Nomura indicated the panic over inflation has gone too far: “Our forecasts point to inflation peaking this quarter and falling steadily into 2023,” BofA analysts including Ralph Axel wrote in a note. “We believe this will reduce the panic level around inflation and allow rates to decline.”  Bank of America also said it has turned long on 10-year Treasuries. Elsewhere, Japan's 10-year yield holds at 0.25%, the top of Bank of Japan’s trading band as the central bank resumes massive intervention. Despite the BOJ's dovish commitment to keep rates low, the Japanese yen rebounded from a 13-day slump and gold extended its decline. Going back to stocks, Netflix shares which have a 1.2% weighting in the Nasdaq, sank 27% in premarket trading after the streaming service said it lost customers for the first time in a decade and forecast that the decline will continue. The shares were downgraded at many firms including UBS Group AG, KGI Securities and Piper Sandler. Other streaming stocks including Walt Disney and Roku also slipped. IBM, on the other hand, rose 2.5% after reporting revenue that beat the average analyst estimate on demand for its hybrid-cloud offerings. Analysts acknowledged the strong quarter of revenue performance. A dimmer outlook for corporate earnings as well as the rise in yields have dented demand for risk assets, with investors preferring defensive stocks such as healthcare to growth-linked stocks, which come under greater pressure from higher interest rates. Some other notable premarket movers: Interactive Brokers (IBKR US) shares fell 1.1% in after-market trading as net income missed analysts’ consensus estimates. Still, analysts at Piper Sandler and Jefferies are positive. Omnicom (OMC US) shares jumped 3.7% in postmarket. Its cautious outlook for the rest of the year could bring some positive surprises, according to analysts, after the company’s 1Q revenue beat estimates In Europe, the Stoxx 600 rose 0.8%, led by banking and technology shares while miners underperformed as metals fell, as investors assessed a mixed bag of corporate results and the outlook for France’s presidential-election runoff on Sunday.  There’s a divergence in performance of European stocks; Euro Stoxx 50 rallies 1.2%. FTSE 100 lags, adding 0.4%. Danone SA rose after reporting its fastest sales growth in seven years, and Heineken NV advanced after sales climbed. Here are some of the biggest European movers today: ASML shares rise as much as 8% with analysts saying the semiconductor-equipment group’s earnings show demand remains strong, even if a timing issue meant its outlook missed expectations. Danone shares gain as much as 9% following a French financial newsletter report that rival Lactalis may be interested in buying its businesses and after the producer of Evian reported a surge in bottled water revenue. Just Eat Takeaway shares rise as much as 7.7% after the company gave mixed guidance and said it is considering selling Grubhub. While analysts note the growth looks weak, they highlight the focus on profitability and the strategic review of Grubhub are positives. Vopak shares rise as much as 7.2%, most since March 2020, after the tank terminal operator reported higher revenues and Ebitda for the first quarter. Heineken shares rise as much as 5% after the Dutch brewer reported 1Q organic beer volume that beat analyst expectations and said net revenue (beia) per hectolitre grew 18.3%. Analysts were impressed by the company’s price-mix during the period. Rio Tinto shares fall as much as 3.9%. A production miss for 1Q could prevent the miner’s shares from recovering after recent underperformance, RBC Capital Markets says. Credit Suisse declines as much as 2.8% after the bank said it anticipates a first-quarter loss owing to a hit to revenue from Russia invading Ukraine and an increase in legal provisions. Oxford Biomedica drops as much as 10% after reporting full-year revenue that was below consensus. RBC Capital said reasons for the revenue miss were “unclear,” adding that there was no new business development news. Asian stocks rose as Japanese equities rallied on the back of a weaker yen, which will support exports. Shares in China fell as investors were disappointed by the decision among banks to keep borrowing rates there unchanged. The MSCI Asia Pacific Index gained as much as 0.9% and was poised to snap a three-day losing streak. Japanese exporters including Toyota and Sony helped lead the way, with shares also stronger in Singapore, Malaysia and the Philippines.  “It looks like the cheap yen may continue for a longer period than originally expected,” said Bloomberg Intelligence auto analyst Tatsuo Yoshida. “The weaker yen is good for all Japanese automakers.” China’s benchmarks bucked the uptrend and dipped more than 1%, as lenders maintained their loan rates for a third month despite the central bank’s call for lower borrowing costs to help an economy hurt by Covid-19 and geopolitical headwinds.  China’s rate stall, together with last week’s smaller-than-expected cut in the reserve requirement, has led some investors to believe broad and significant policy easing is unlikely. “Doubts about access to easier funding remain a bugbear despite headline easing,” Vishnu Varathan, head of economics and strategy at Mizuho Bank, wrote in a note. “Inadvertent restraints on actual lending may mute intended stimulus, revealing risks of ‘too little too late’ stimulus.” In positive news, daily covid cases in Shanghai were in downtrend in recent days and number of communities with more than 100 daily infections fell for three consecutive days, Wu Qianyu, an official with Shanghai’s health commission, says at a briefing. Financial stocks outside of China gained after U.S. 10-year Treasury real yields turned positive for the first time since 2020 as traders continue to bet on a series of aggressive Federal Reserve rate hikes. This may pose more headwinds for Asian tech stocks, which have dragged the broader market lower this year. Japanese equities rose for a second day after the yen weakened against the dollar for a record 13 straight days. Automakers were the biggest boost to the Topix, which climbed 1%. Financials advanced as yields gained. Fast Retailing and SoftBank Group were the largest contributors to a 0.9% gain in the Nikkei 225. The yen strengthened slightly after shedding nearly 6% against the dollar since the start of the month. “It looks like the cheap yen may continue for a longer period than originally expected,” said Bloomberg Intelligence auto analyst Tatsuo Yoshida. “The weaker yen is good for all Japaneseautomakers, “no one loses,” he added. Indian equities snapped their five-day drop as energy companies advanced on expectations of blockbuster earnings, driven by wider refining margins. Software exporters Infosys, Tata Consultancy and lender HDFC Bank bounced back from a slump, triggered by weaker results.  The S&P BSE Sensex gained 1% to 57,037.50 in Mumbai, while the NSE Nifty 50 Index rose 1.1%. The two gauges posted their biggest surge since April 4. Thirteen of the 19 sector sub-indexes compiled by BSE Ltd. climbed, led by a gauge of automobile companies. “A series of sharp negative reactions to minor misses in earnings from large caps points to a precarious state of positioning among investors,” according to S. Hariharan, head of sales trading at Emkay Global Financial. He expects corporate commentary on the margin outlook for FY23 to be key to investors’ reaction to other quarterly results, which will be released over the next couple of weeks. The benchmark Sensex lost about 5% in the five sessions through Tuesday, dragged lower by a selloff in software makers, a slump in HDFC Bank and its parent Housing Development Finance Corp. Foreign investors, who have been net sellers of Indian stocks since the start of October, have withdrawn $1.7 billion from local equities this month through April 18. The IMF slashed its world growth forecast by the most since the early months of the Covid-19 pandemic and projected even faster inflation. It expects India’s economy to grow by 8.2% in fiscal 2023 compared with an earlier estimate of 9%. Reliance Industries contributed the most to the Sensex’s gain, increasing 3%. Out of 30 shares in the Sensex index, 20 rose, while 10 fell. In FX, the Bloomberg Dollar Spot Index fell 0.4%, its first drop in four days, after yesterday reaching its highest level since July 2020, as the greenback weakened against all Group-of-10 peers. Scandinavian and Antipodean currencies led gains followed by the yen, which halted a 13-day rout. The euro advanced a second day and bunds extended gains, underperforming euro-area peers as money markets pared ECB tightening wagers. The yen snapped a historic declining streak amid short covering after the currency approached a key level of 130 per dollar. The Bank of Japan stepped in to cap 10-year yields for the first time since late March as it reiterated its ultra loose monetary policy with four days of unscheduled bond buying. The Australian and New Zealand dollars gained as risk sentiment improved after a selloff in Treasuries paused. The Aussie was supported by offshore funds buying into contracting yield spreads with the U.S. and on demand from exporters for hedging at the week’s low, according to FX traders. The pound edged higher against a broadly weaker dollar, but lagged behind the rest of its Group-of-10 peers, with focus on the risks to the U.K. economy. In rates, Treasuries advanced, reversing a portion of Tuesday’s sharp selloff which pushed the 10Y as high as 2.98%, with gains led by belly of the curve amid bull-flattening in core Focal points of U.S. session include Fed speakers and $16b 20-year bond reopening. US yields were richer by ~7bp across belly of the curve, 10-year yields around 2.87% keeping pace with gilts while outperforming bunds, Fed-dated OIS contracts price in around 222bp of rate hikes for the December FOMC meeting vs 213bp priced at Monday’s close; 49bp of hikes remain priced in for the May policy meeting. Japan 10-year yields held at 0.25%, the top of Bank of Japan’s trading band as the central bank resumes massive intervention. Australian and New Zealand bonds post back-to-back declines. Coupon issuance resumes with $16b 20-year bond sale at 1pm New York time; WI yield at around 3.10% sits ~45bp cheaper than March result, which stopped 1.4bp through.  IG dollar issuance slate includes Development Bank of Japan 5Y SOFR, Canada 3Y and ADB 3Y/10Y SOFR; six deals priced almost $19b Tuesday, headlined by financials including JPMorgan and Bank. In commodities, crude futures advance. WTI trades within Tuesday’s range, adding 1.1% to around $103. Brent rises 0.9% to around $108. Most base metals trade in the red; LME lead falls 1.6%, underperforming peers. Spot gold falls roughly $4 to trade near $1,946/oz. Looking at the day ahead now, and data releases include German PPI for March, Euro Area industrial production for February, US existing home sales for march, and Canadian CPI for March. From central banks, we’ll hear from the Fed’s Bostic, Evans and Daly, as well as the ECB’s Rehn and Nagel, whilst the Federal Reserve will be releasing their Beige Book. Earnings releases include Tesla, Procter & Gamble, and Abbott Laboratories. Finally, French President Macron and Marine Le Pen will debate tonight ahead of Sunday’s presidential election. Market Snapshot S&P 500 futures down 0.4% to 4,443.50 STOXX Europe 600 up 0.4% to 458.21 MXAP up 0.5% to 171.88 MXAPJ up 0.2% to 570.00 Nikkei up 0.9% to 27,217.85 Topix up 1.0% to 1,915.15 Hang Seng Index down 0.4% to 20,944.67 Shanghai Composite down 1.3% to 3,151.05 Sensex up 0.9% to 56,945.14 Australia S&P/ASX 200 little changed at 7,569.23 Kospi little changed at 2,718.69 German 10Y yield little changed at 0.88% Euro up 0.3% to $1.0823 Brent Futures up 1.0% to $108.27/bbl Brent Futures up 1.0% to $108.27/bbl Gold spot down 0.3% to $1,943.30 U.S. Dollar Index down 0.28% to 100.67 Top Overnight News from Bloomberg On the surface the yen looks like the perfect well for carry traders to dip into, under pressure from a Bank of Japan determined to keep local yields anchored to the floor even as interest rates around the world push higher. But despite consensus building for further losses -- peers look like better funding options on certain key metrics Almost eight weeks after Vladimir Putin sent troops into Ukraine, with military losses mounting and Russia facing unprecedented international isolation, a small but growing number of senior Kremlin insiders are quietly questioning his decision to go to war French President Emmanuel Macron and nationalist leader Marine le Pen are gearing up for their only live TV debate on Wednesday evening, a high-stakes event just days before the final ballot of the presidential election this weekend China will continue strengthening strategic ties with Russia, a senior diplomat said, showing the relationship remains solid despite growing concerns over war crimes in Vladimir Putin’s war in Ukraine A more detailed look at global markets courtesy of Newsquawk APAC stocks eventually traded mostly positive after the firm handover from the US despite continued upside in yields. ASX 200 was led by the healthcare sector as shares in Ramsay Health Care surged due to a takeover proposal from a KKR-led consortium, but with gains capped by miners after Rio Tinto's lower quarterly iron ore production and shipments. Nikkei 225 was underpinned by the initial currency depreciation and with the BoJ defending its yield cap. Hang Seng and Shanghai Comp were mixed with the mainland subdued after the PBoC defied expectations for a cut to its benchmark lending rates and instead maintained the 1yr and 5yr Loan Prime Rates at 3.70% and 4.60%, respectively. Top Asian News Fed’s Aggressive Rate Hike Plans Jolt Policy in China and Japan BOJ Further Boosts Bond Buying as Yields Advance to Policy Limit Sunac Bondholders Say They Haven’t Received Interest Due Tuesday Regulators Under Pressure to Ease Loan Curbs: Evergrande Update China Buys Cheap Russian Coal as World Shuns Moscow European bourses and US futures were choppy at the commencement of the European session, but, have since derived impetus in relatively quiet newsflow amid multiple earnings and as yields continue to ease; ES Unch. Currently, Euro Stoxx 50 +1.8%, while US futures are little changed on the session but rapidly approaching positive territory ahead of key earnings incl. TSLA. Netflix Inc (NFLX) - Q1 2022 (USD): EPS 3.53 (exp. 2.89), Revenue 7.87bln (exp. 7.93bln), Net Subscriber Additions: -0.2mln (exp. +2.5mln). Q1 UCAN streaming paid net change -640k (exp.+87.5k). Co. lost 640k subscribers in US/Canada, 300k in EMEA, and 350k in LatAm. Co. Said macro factors, including sluggish economic growth, increasing inflation, geopolitical events such as Russia’s invasion of Ukraine, and some continued disruption from COVID are likely having an impact, via PR Newswire. Click here for the full breakdown. -26% in the pre-market. Chinese Civil Aviation publishes prelim report looking into the China Eastern Airline crash; still recovering and analysing damaged black boxes from the plane: there was no abnormal communication between air crew and air controllers before the aircraft deviated from cruising altitude; no dangerous weather, goods or overdue maintenance. Top European News Le Pen Upset Would Be as Big a Shock to Markets as Brexit Macron and Le Pen Set for High Stakes French Debate Riksbank Governor Leaves Door Open for String of Rate Hikes Danone Gains on Lactalis Takeover Speculation, Evian Rebound Heineken Rises; MS Says Results Were Widely Expected FX: Buck concedes ground to recovering Yen as US Treasury yields recede, USD/JPY over 150 pips below new 20 year high circa 129.42. Yuan on the rocks after PBoC set a soft onshore reference rate and regardless of unchanged LPRs, USD/CNH eyes 6.4500 after breach of 200 DMA. Aussie back in pole position as high betas benefit from Greenback retreat and Kiwi in second spot ahead of NZ CPI data; AUD/USD rebounds through 0.7400 and NZD/USD from under 0.6750. Loonie also bouncing before Canadian inflation metrics, with Usd/Cad closer to 1.2550 than 1.2625, while Euro and Pound are both firmer on 1.0800 and 1.3000 handles respectively as DXY dips below 100.500. Rand shrugs aside mixed SA CPI prints as correction from bull run continues and Gold slips under Usd 1950/oz, USD/ZAR holds above 15.0000. ECB's Kazaks says a rate hike is possible as soon as July this year; ending APP early in Q3 is possible and appropriate; zero is not an a cap for the deposit rate, via Bloomberg. Adds, a gradual approach does not mean a slow approach, do not need to wait for stronger wage growth. Fixed Income: Debt redemption, as futures retrace following tests/probes of cycle lows. Lack of concession not really evident at longer-dated German and UK bond sales, but 20 year US supply may be a separate issue. BoJ ramps up intervention and aims to anchor rather than cap 10 year JGB yield around zero percent, while BoA suggests contra-trend position in 10 year UST to target 2.25% from current levels close to 3.0%. Commodities: Crude benchmarks are firmer on the session in what is more of a consolidation from yesterday's pressured settlement than a concerted effort to move higher, also benefitting from broader equity action. Currently, WTI and Brent reside at the top-end of USD 2/bbl parameters; focus very much on China-COVID, Iran, Libyan supply and Ukraine-Russia developments. US Private Energy Inventory Data (bbls): Crude -4.5mln (exp. +2.5mln), Cushing +0.1mln, Gasoline +2.9mln (exp. -1.0mln), Distillate -1.7mln (exp. -0.8mln). Spot gold/silver are contained at present but have seen bouts of modest pressure, including the loss of the USD 1946.45/oz 21-DMA at worst. US Event Calendar 07:00: April MBA Mortgage Applications, prior -1.3% 10:00: March Existing Home Sales MoM, est. -4.1%, prior -7.2% 10:00: March Home Resales with Condos, est. 5.77m, prior 6.02m 14:00: U.S. Federal Reserve Releases Beige Book Central Bank Speakers 11:25: Fed’s Daly Discusses the Outlook 11:30: Fed’s Evans Discusses the Economic and Policy Outlook 13:00: Fed’s Bostic Discusses Equity in Urban Development DB's Jim Reid concludes the overnight wrap It took me a while to adjust to being back to the office yesterday after two and a half weeks off. No screaming kids, no stealing half their food as I made their meals, and no stepping on endless lego and screaming myself. My team at work are much better behaved, protect their food, and clear up after playing with their toys. Talking of lego, the first day of the holiday was spent in a snow blizzard at LEGOLAND and the last day in shorts and t-shirt on a family bike ride on the Thames. No I haven't been off for that long just a typical April in the UK. When I left you, I was in constant agony due to sciatica in my back and a knee that was very fragile post surgery. On my last day I had a back injection that I wasn't that hopeful about as three previous ones hadn't done anything. However after a second opinion and a new consultant, this injection hit the spot and my sciatica has completely gone and I'm just back to the long-standing normal wear and tear related back stiffness. The consultant can't tell me how long it'll last so Reformer Pilates starts next week. My knee is slowly getting better via some overuse flare ups. So until the next time, I'm in as good a shape as I have been for quite some time! It's hard to guage how good a shape the market is in at the moment as there are lots of conflicting forces. Since I've been off global yields have exploded higher, the US yield curve has resteepened notably and risk is a bit softer. As regular readers know I think a late 2023/early 2024 US recession is likely in this first proper boom and bust cycle for over 40 years. However we're still in some kind of boom phase and I've been trying not to get too bearish too early. While I was off, I published our latest credit spread forecasts and having met our earlier year widening targets, we've moved more neutral for the rest of the year. However into year end 2023, we now have a very big widening of spreads in the forecasts to reflect the likely recession. See the report here. Also while I've been off, the House View is now also that we'll get a US recession at a similar point which as far as I can see is the first Wall Street bank to officially predict this. See the World Outlook here for more. On the steepening I don't have a strong view but ultimately I think 2 year yields will probably have to rise again at some point after a recent pause as the risks are skewed to the Fed having to move faster than the market expects. The long end is complicated by QT but generally I suspect the curve will be fairly flat or inverted for most of the next few months. Coming back after my holidays and the long Easter weekend, the bond market sell-off resumed yesterday with yields climbing to fresh highs. In fact, the losses for Treasuries so far in April now stand at -2.95% on a total return basis, just outperforming the -3.04% decline in March that itself was the worst monthly performance since January 2009, back when the US economy started emerging from the worst phase of the GFC. Elsewhere the US yield curve flattened for the first time in six sessions, with 2yr yields climbing +14.4bps to 2.59%, their highest level since early 2019. Yields on 10yr Treasuries rose +8.3bps to 2.94%, a level unseen since late 2018, on another day marked by heightened rates volatility. Meanwhile 30yr yields breached 3.00% intraday for the first time since early 2019, climbing +5.4bps. And what was also noticeable was the continued rise in real yields, with the 10yr real yield closing at -0.009% yesterday, and briefly trading in positive territory for the first time since March 2020 in early trading this morning. Bear in mind that the 10yr real yield has surged roughly 110bps in around 6 weeks, and since we’ve been able to calculate real yields using TIPS, the only faster moves over such a short time period have been during the GFC and a remarkable 2-week period in March 2020 around the initial Covid-19 wave. On the other hand, as I pointed out in my CoTD yesterday (link here), the 10yr real yield based on spot inflation is currently around -5.6%, so still incredibly negative. The latest moves come ahead of the Fed’s next decision two weeks from now, where futures are placing the odds of a 50bp hike at over 100% now. We’ve been talking about 50bps for some time, and we’d probably have had one last month had it not been for Russia’s invasion of Ukraine, but it would still be a historic moment if it happens, since the last 50bp hike was all the way back in 2000. Nevertheless, we could be about to see a whole run of them, with our economists pencilling in 50bp hikes at the next 3 meetings, whilst St Louis Fed President Bullard (the only dissenting vote at the last meeting who wanted 50bps) said on Monday night that he wouldn’t even rule out a 75bps hike, which probably gave some fuel to the subsequent front end selloff. The bond selloff also took hold in Europe yesterday, where yields on 10yr bunds (+6.9ps), 10yr OATs (+5.0bps) and BTPs (+6.2bps) all hit fresh multi-year highs. Indeed, those on 10yr bunds (0.91%) were at their highest level since 2015, having staged an astonishing turnaround since they closed in negative territory as recently as March 7. Rising inflation expectations have been a driving theme behind this, and yesterday we saw the 5y5y forward inflation swap for the Euro Area close above 2.4%, which is the first time that’s happened in almost a decade, and just shows how investor confidence in the idea of “transitory” inflation is becoming increasingly subdued given that metric is looking at the 5-10 year horizon. Those moves higher in inflation expectations came in spite of the fact that European natural gas prices fell to their lowest level since Russia’s invasion of Ukraine began yesterday. By the close, they’d fallen -1.94% to €93.77/MWh, whilst Brent crude oil prices were down -5.22% to $107.25/bbl. In Asia, oil prices are a touch higher, with Brent futures +0.82% higher as we go to press. Whilst bonds sold off significantly on both sides of the Atlantic, equities put in a much more divergent performance, with the US seeing significant advances just as Europe sold off. By the close of trade, the S&P 500 (+1.61%) had posted its best day in more than a month, as part of a broad-based advance that left 446 companies in the index higher on the day, the most gainers in a month. Tech stocks outperformed in spite of the rise in yields, with the NASDAQ (+2.15%) and the FANG+ index (+1.81%) posting solid advances, and the small-cap Russell 2000 (+2.04%) also outperformed. In Europe however, the STOXX 600 shed -0.77%, with others including the DAX (-0.07%), the CAC 40 (-0.83%) and the FTSE 100 (-0.20%) also losing ground. The S&P was higher despite a day of mixed earnings. Of the ten companies reporting during trading yesterday, only 4 beat both sales and earnings expectations. After hours, Netflix was the main story, losing subscribers for the first quarter in over a decade and forecasting further declines this quarter, which sent the stock as much as -24% lower in after hours trading. It’s 2 bad earnings releases in a row for the world’s largest streaming service, who saw their stock dip -21.79% the day after their fourth quarter earnings in January. Asian equity markets are mixed this morning as the People’s Bank of China (PBOC) defied market expectations by keeping its benchmark lending rates steady. In mainland China, the Shanghai Composite (-0.21%) and the CSI (-0.43%) are lagging on the news. Bucking the trend is the Nikkei (+0.57%) and the Hang Seng (+0.66%). Outside of Asia, stock futures are indicating a negative start in the US with contracts on the S&P 500 (-0.35%) and Nasdaq (-0.75%) both trading in the red partly due to the Netflix earnings miss. Separately, the Bank of Japan (BOJ) reiterated its commitment to purchase an unlimited amount of 10-yr Japanese Government Bonds (JGBs) at 0.25% to contain yields, underscoring its desire for ultra-loose monetary settings, in contrast to the global move in a more hawkish direction. The yen has moved slightly higher (+0.3%) after depreciating for 13 straight days, a streak which hasn’t been matched since the US left the gold standard in the early 70s and effectively brought the global free floating exchange rate regime into being. The pace and magnitude of the depreciation has brought some expressions of consternation from Japanese officials, but no official intervention. The reality is, it would be extraordinarily difficult to credibly support the currency at the same time as maintaining strict control of the yield curve. 10yr JGBs continue to trade just beneath the important 0.25% level. Over in France, we’re now just 4 days away from the French presidential election run-off on Sunday, and tonight will see President Macron face off against Marine Le Pen in a live TV debate. Whilst that will be an important moment, recent days have seen a slight widening in Macron’s poll lead that has also coincided with signs of an easing in market stress, with the spread of French 10yr yields over bunds coming down to its lowest level since the start of the month yesterday, at 46.7bps. In terms of yesterday’s polls, Macron was ahead of Le Pen by 56-44 (Opinionway), 56.5-43.5 (Ipsos), and 55-54 (Ifop), putting his lead beyond the margin of error in all of them. Elsewhere, the IMF released their latest World Economic Outlook yesterday, in which they downgraded their estimates for global growth in light of Russia’s invasion of Ukraine. They now see global growth in both 2022 and 2023 at +3.6%, down from estimates in January of +4.4% in 2022 and +3.8% in 2023. Unsurprisingly it was Russia that saw the biggest downgrades, but they were broadly shared across the advanced and emerging market economies, whilst inflation was revised up at the same time. Otherwise on the data side, US housing starts grew at an annualised rate of 1.793m in March (vs. 1.74m expected), which is their highest level since 2006. Building permits also rose to an annualised rate of 1.873m (vs. 1.82m expected), albeit this was still beneath its post-GFC high reached in January. To the day ahead now, and data releases include German PPI for March, Euro Area industrial production for February, US existing home sales for march, and Canadian CPI for March. From central banks, we’ll hear from the Fed’s Bostic, Evans and Daly, as well as the ECB’s Rehn and Nagel, whilst the Federal Reserve will be releasing their Beige Book. Earnings releases include Tesla, Procter & Gamble, and Abbott Laboratories. Finally, French President Macron and Marine Le Pen will debate tonight ahead of Sunday’s presidential election. Tyler Durden Wed, 04/20/2022 - 08:02.....»»

Category: blogSource: zerohedgeApr 20th, 2022

Cathie Wood On Twitter; Europe In Recession

Cathie Wood on Twitter Inc (NYSE:TWTR), Europe in recession, inflation has peaked & supply chain has gone the other way with fat inventories except autos. Cathie Wood just made these comments in an interview conducted with Melissa Francis on Magnifi Media by TIFIN. Magnifi is a fintech platform that uses artificial intelligence so individuals and advisors […] Cathie Wood on Twitter Inc (NYSE:TWTR), Europe in recession, inflation has peaked & supply chain has gone the other way with fat inventories except autos. Cathie Wood just made these comments in an interview conducted with Melissa Francis on Magnifi Media by TIFIN. Magnifi is a fintech platform that uses artificial intelligence so individuals and advisors can instantly search stocks, ETFs, mutual funds and model portfolios and trade based on their preferences. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q1 2022 hedge fund letters, conferences and more Elon Musk/Twitter Elon Musk will bide is time with his offer and will be interesting if any other bidders show up and I’m hearing that there are some other bidders. One thing that has hampered Twitter: it's advertising model and this scares analysts. Advertisers don't like to have their ads next to questionable content. The idea of a subscription service is a possibility but open sourcing the algorithm is the first thing Elon will do so there is transparency on what is censored or not censored. Even Jack Dorsey thought Twitter tied itself in knots over censorship and he was wondering what to do with censorship. They do need to do something. we know we can unfollow someone , and unfollow, in a civil way. Even Jack was saying we need a change and we have to change and he and Elon are aligned to an open source agorithim to something more subscription based. What is Twitter worth? So much uncertainty but out Our compound annual rate of return is 25% for Twitter and their model will change. we have short term oriented shareholders who want to make a fast buck. the model is going to change. we will revisit once we know what’s going on and we think a lot can be done to improve the model but it may take more than our 5-year timeline investment horizon. We probably would have more confidence in the platform and want to hear what Elon has in mind in terms of perpetuating the platform Need his ideas on becoming a transparent and sustaining product and people will be open to his ideas Are you supportive of Elon taking over? The route Jack was going, which we supported, was opening the algorithm and this is a continuation of that. We have held Twitter because we believe it is a verification platform, it could become a  verification platform for NFTs. There are very few vertification platforms out there. Cathie Wood On Tesla Her call on Tesla Inc (NASDAQ:TSLA) at $4600--we have been building out Tesla model for years and publish 5 year projection which started in 2019 when that was misunderstood. WE felt that open sourcing  and update people how much share Tesla has and keeping in the electric vehicle space and  how capital efficient Tesla and more efficient than any other company out there We keep an eye on battery costs and technology and our biggest assumption changes over the past few years marketshare and keeping it, ability to scale and he says is a manufacturer  or factories, capital efficiency and we’ve been shocked and ability to increase gross margins over time In the five year forecast we had a 50-50 probably of automous vehicles and now its higher We know now autonomous is possible because it’s happening Cathie Wood Defends Criticisms On ARK We give away our research away not because we are altruistic but we want to educate and how the world is changing and how to keep so much is going to change Five change platforms: genomic sequencing, adaptive robotics, energy storage, artificial intelligence and blockchain technology Those platforms are changing and growing at exponential rates and converging. We want the sell side and the buy side and they are used to short term time horizons and they are focused on beating benchmarks but we are focused on new technologies and the technology to transform the future  We have a 5 year investment time horizon. Very few active managers have outperformed the markets in the past five years. In past 10 years 11% of large cap managers have outperformed their benchmarks and 25% of all active managers have outperformed  their benchmarks. We have outperformed the NASDAQ, S&P and MSCI handsomely over the past five years and compounded annual rate of return at 22% For a six week period during covid we had a risk off epoisde and we underperformed but from the bottom to the peak in Feb. 2021 our flagship strategy was up 360% since then at our worst point we were down 60% We believe that disruptive innovation in global public equity markets is valued today at a  $10 trillion market cap and that will go to $210 trillion by 2030 so that is a 35-40% compounded rate of growth When people talk about risk management people think of us a generalist we have risk control We have risk control built into scoring system. When we move to risk off period and concentrate into higher conviction names for our flagship strategy we went from  58 names to 35 names from a risk control point of view.  We push more higher scoring names in risk of periods Long term studies show that the most concentrates strategies are the most successful the strategy. We use volatility to curb the risk by concentrate the portfolio and many people think higher concentrate is riskier and we disagree. What about personal attacks by Morningstar There are companies that don’t understand we don’t fit into their style box and style boxes will become a thing of the past as technology blurs the lines and across the cap range. We are index agnostic and that’s a problem for many companies. Our objective is minimal compounded annual rate of return at 15% over next five years. We are closer you will find like a VC in public market as anyone  they have not seen an animal like ours. If you look at technology in the S&P 500 we  have no overlap on those names and the technologies of the future will be different than the technologies of past. Offer good diversification if you own FANG but our stocks are not in broad based indices ARK has seen $17 Billion in inflows last year and that’s because advisors know we are a diversifier and we will protect against the value traps that are populating broad based portfolios. Our analyst team on innovation domain experts we don’t have MBAs because it’s much easier to teach a biochecmial engineering a financial statement Deflation Deflation---disruptive innovation is inherently deflationary in two ways. The good way is truly disruptive innovation is followed by cost declines  when more people have access and that causes exponential growth because the cost decline opens up a new markets Companies cater to short term shareholder by manufacturing earnings—buying back shares to increase earnings or pay dividends but they are leveraged up to do so and they haven’t invested in innovation. Because the companies haven’t invested in innovation they will need to service their debt and they will have to cut prices and we think that the gas powered autos will have to do that first Big disagreement today is cyclical inflation—we believe inflation is in process of peaking. Some of the early signs that we are seeing mostly in inventory accumulation especially in the retail world, excluding autos, that the inventories are piling up. Many companies double and triple ordered when they couldn’t get supplies and they they will end up with so much inventory on their balance sheet and they will have to cut prices Oil prices is an outlier and food prices with Ukraine There is demand destruction underway in energy sector Russia hasn’t been turned off yet. It’s oil exports going elsewhere Surprised to see oil at $130 and then at $117 and lower high is the first sign demand destruction is having an impact Consumer Sentiment Not sure why people aren’t focused on Consumer sentiment-- U of Michigan and I’ve watched it for 45 years is down to levels in ’08 and ’09 and people were losing home, jobs and cars and oil prices were at $147 Consumers won’t be rushing out to buy and that’s a recipe for decline We could have a global recession Europe is in recession; China feels recessionary and Asia will caught a cold Sri Lanka about to default is like the Asian crisis in 1997 and there many warning signs Bond yields as Fed talking up interest rate the 10 year yield hasn’t even cracked 3% Inflation will start unwinding rapidly now. Last April CPI was up .9 and PPI was up 1.1 and if If we come in below that for April and those YOY cmpareisions will come down and see a lot more economists say they think inflation has peaked and the question is how low will it go Surprise will be on the low side because large inventories, disruptive innovation and creative destruction. Interview Transcript 00:00:01 Melissa Francis Welcome everyone. 00:00:02 Melissa Francis Today we're here to talk about magnifying bigtiff in a marketplace where you can harness real time proprietary data to help individual investors and financial advisors find, compare and buy investment products like stocks and ETFs, mutual funds, and model portfolios to grow and preserve your wealth. 00:00:20 Melissa Francis I'm Melissa Francis. 00:00:21 Melissa Francis I know just a little bit about this subject matter. 00:00:24 Melissa Francis I'm a former CNBC, MSNBC, Fox business and Fox News anchor. 00:00:29 Melissa Francis And you will remember if you've watched us before we talked about the best crypto investment strategies with Anthony Scaramucci, the best bond strategies with the Bond king himself. 00:00:39 Melissa Francis Jeffrey Gundlach. 00:00:40 Melissa Francis And the best private equity strategies with martinis. 00:00:43 Melissa Francis But now we have a very special guest that I'm super excited about to talk about stock. 00:00:48 Melissa Francis Box and everything hot out there. Kathy would. She's the CEO of Ark. She is a board member of Tiffin, which is Magnify's parent company Kathy. 00:00:57 Melissa Francis So thank you so much for being here. 00:00:59 Melissa Francis I want to drill down on your latest blog because there were so many good Nuggets in there and I found some of them kind of counter intuitive. 00:01:05 Melissa Francis So I want to get into those. 00:01:06 Melissa Francis But first, if I could take you to. 00:01:08 Melissa Francis The hot story of the day, which of course is. 00:01:12 Melissa Francis Twitter and I wanted to ask you looking at where things stand today and I know it's fast moving. 00:01:18 Melissa Francis It keeps changing, but if. 00:01:21 Melissa Francis You were Elon. 00:01:22 Melissa Francis Musk, what would your next move be? 00:01:24 Melissa Francis What would you do from? 00:01:24 Cathie Wood Here, well, he's got a $54.00 I guess is $54.20 offer out there. 00:01:32 Cathie Wood So I think he'll bide his time. 00:01:34 Cathie Wood It will be interesting to see if other bidders show up I'm I'm. 00:01:40 Cathie Wood I'm hearing that there are some so, so let's see. 00:01:43 Cathie Wood Not not quite sure. 00:01:44 Cathie Wood It's still quite fluid, right? 00:01:46 Melissa Francis Yeah no. 00:01:46 Melissa Francis And he says that if this doesn't work, he has. 00:01:48 Melissa Francis Plan B, what do you think that is? 00:01:51 Cathie Wood Goodness, I don't know if it would be something a little more hostile. 00:01:54 Cathie Wood Just I have no idea. 00:01:55 Cathie Wood You know, Elon Musk is has his own mind and and and is I'm, I'm sure, thinking very creatively about this. 00:02:04 Melissa Francis If he does succeed. 00:02:05 Melissa Francis And you were him again. 00:02:07 Melissa Francis What would you do with the company? 00:02:08 Melissa Francis What do you think that they need to correct? 00:02:11 Cathie Wood Well, one of the things that I think has Hanford Twitter is its advertising model and. 00:02:17 Cathie Wood This is what? 00:02:17 Cathie Wood Scares analysts out there. 00:02:20 Cathie Wood Oh my gosh, you know he's going to upend the advertising model. 00:02:26 Cathie Wood Because advertisers don't like to be to have their ads shown next to questionable content, which is something different for everyone, right? 00:02:36 Cathie Wood And so, this idea of perhaps a subscription service is a possibility. 00:02:41 Cathie Wood Or a tipping service, but certainly open sourcing the algorithm. 00:02:46 Cathie Wood Will be the first thing he'll do so that there's transparency associated with what is and is not censored. 00:02:56 Melissa Francis So do you think that's a good or a bad thing for the company? 00:02:59 Melissa Francis I mean, it might be a good thing for freedom of speech, or however, may you. 00:03:02 Melissa Francis You may look at it politically, but if you are a shareholder, is it a good idea for him to get that out there so everybody knows how the algorithm really works? 00:03:11 Cathie Wood Well, I think. 00:03:12 Cathie Wood Even Jack Dorsey thought that Twitter was beginning to tie itself. 00:03:16 Cathie Wood And not over the the censorship. 00:03:19 Cathie Wood And so he was trying to figure out what can we do to overcome this monster really, and so I think they do need to do something and many people would describe what's happened to Twitter as becoming a cesspool. 00:03:35 Cathie Wood Now we don't think that we use Twitter, it's. 00:03:39 Cathie Wood It's become quite important to our business, as have other social media platforms. 00:03:45 Cathie Wood And so we know that we can unfollow someone that is hampering our research or our ability to engage with others in a civil way. 00:03:57 Cathie Wood But I I think that I think that even Jack was saying, OK, we need a change. 00:04:03 Cathie Wood We have to change what we're doing. 00:04:05 Cathie Wood And I think he and Ellen probably are aligned. 00:04:08 Cathie Wood And this idea of an open source algorithm, a shift away from the advertising model towards something more subscription based. 00:04:17 Cathie Wood And you know more transparency? 00:04:19 Cathie Wood I mean, Ark is radically transparent. 00:04:22 Cathie Wood Everything we do is transfer. 00:04:25 Cathie Wood And it has done nothing but help our business. 00:04:28 Cathie Wood Sure, you've got people out there who are denigrating our work. 00:04:34 Cathie Wood But we know those people as we're as we drill into what they're saying. 00:04:38 Cathie Wood They're not doing any research we're really interested in engaging with people who are doing real research, and I think. 00:04:45 Cathie Wood Transparency would make that make our experience with Twitter even better. 00:04:51 Melissa Francis Yeah, the fact that you're not afraid to engage like that, and to you know, hear from those who might oppose you shows how confident you are about what you're doing. 00:04:59 Melissa Francis You have to wonder about a company that wants to hide what they're doing. 00:05:02 Melissa Francis Let me ask you though. On the Twitter front. So what do you think the company is worth? I mean, I know I want to talk to you about your Tesla target, but as you look at what Elon's willing to pay, what do you think? 00:05:14 Melissa Francis If you had to put a price target on the stock two years down the road, or four years. 00:05:18 Melissa Francis Down the road, what would you say? 00:05:19 Cathie Wood Well, I think there's so much uncertainty right now that I I couldn't give you one hour based on their existing. 00:05:28 Cathie Wood Model our compound annual rate of return expectation for Twitter is roughly 25% now their model is going to change. 00:05:40 Cathie Wood There are going to be a lot of dislocations. 00:05:42 Cathie Wood We have a lot of very short term oriented shareholders who are probably now have moved into Twitter. 00:05:48 Cathie Wood To make a fast buck 5420 fifty $4.20. 00:05:52 Cathie Wood Sense, but the model is going to change, and so we will revisit once we understand what's going on, we will revisit the upside to the model and we do think that a lot can be done to improve the model so, but it may take more time than even our five year investment time horizon. 00:06:12 Melissa Francis So if you. 00:06:13 Melissa Francis If Elon Musk does get control of the company, would you adjust that upward? 00:06:17 Melissa Francis You think it has more potential with him in charge. 00:06:19 Melissa Francis Or would it be more of a wait and see? 00:06:21 Melissa Francis How would you feel? 00:06:23 Cathie Wood We probably probably would have more confidence in the platform. 00:06:28 Cathie Wood Arm would want to hear what Elon. 00:06:31 Cathie Wood And what he has in mind in terms of perpetuating the platform. 00:06:36 Cathie Wood I'm sure he does not want to run it as a charitable organization or a non profit, so we'd like to see how he thinks it could become. 00:06:46 Cathie Wood A very transparent but also self sustaining. 00:06:50 Cathie Wood Model and you know he's very creative and I think that it is our global town square and and that a lot of people would miss it. 00:07:01 Cathie Wood So I think there will be a lot of people very supportive and very open to his ideas. 00:07:06 Melissa Francis So putting politics aside entirely and just thinking about. 00:07:10 Melissa Francis Pure money. 00:07:11 Melissa Francis As a shareholder, you would be in favor of Elon Musk taking over. 00:07:15 Cathie Wood Well, I do think that the route Jack was going, which we supported was opening up the algorithm or open sourcing it in some way. 00:07:27 Cathie Wood And so I think this is a continuation of that. 00:07:31 Cathie Wood We also think one of the reasons we have held Twitter is because we believe it is a verification platform. 00:07:39 Cathie Wood You know, the little blue check and we believe that it could become a verification platform for shifts. 00:07:47 Cathie Wood As well and so. 00:07:49 Cathie Wood You know there are. 00:07:50 Cathie Wood Few call options here and there. 00:07:53 Cathie Wood Verification algorithms we think are well respected out there and so I think Elon would also build on. 00:08:02 Melissa Francis Wow, fascinating stuff. 00:08:03 Melissa Francis That's great. 00:08:04 Melissa Francis I'm sure you just made some news there without question before we stray too far from Elon 'cause he is such a fascinating character. 00:08:10 Melissa Francis I know that you put a 2026 target on Tesla of $4600. How did you work that math and how? 00:08:17 Melissa Francis Do you feel about that call? 00:08:19 Cathie Wood Yes, well we as we have been building out the Tesla model for years of course, and each year we publish our five year projection, we started doing this. I believe in 2019 when we believe Tesla was so misunderstood. 00:08:38 Cathie Wood And I think our projections were so much closer to the mark for for 2020, two 2324 that we we felt that open sourcing it and and continuing to update people would help them understand number one. 00:08:57 Cathie Wood How much share Tesla has and is keeping in the electric vehicle space how? 00:09:06 Cathie Wood Capital efficient the company is. 00:09:09 Cathie Wood We're even shocked at how capital efficient it is more efficient than any other company. 00:09:15 Cathie Wood Out there we keep a constant. 00:09:19 Cathie Wood Eye on batteries and battery costs and and battery technology. 00:09:26 Cathie Wood So we like to update that, but I think our biggest assumption changes over the last few years have been market share keeping a lot more than we expected. 00:09:37 Cathie Wood Ability to. 00:09:38 Cathie Wood GAIL, in fact, Elon is saying he's now a manufacturer of factories. 00:09:44 Cathie Wood That's one of their core competencies, and we agree with that and capital efficiency. 00:09:49 Cathie Wood We've been shocked at how good that is, and you know, their ability to increase their gross margins. 00:09:58 Cathie Wood Overtime much, much higher than I think most people might have anticipated, and in our five year forecast was. 00:10:05 Cathie Wood Uh, last year we we had a 5050 shot at autonomous being a reality now as you can see from the model, we put a 25 percentile, 75 percentile probabilities and we have price targets associated with those. Sort of the the the low end and. 00:10:25 Cathie Wood High end, we know now that autonomous is possible because cruise automation is autonomous in San Francisco. 00:10:34 Cathie Wood A big city Waymo has done it in Arizona, so it is possible we no longer have to answer that. 00:10:43 Melissa Francis Yeah, I can't wait to not drive my kids around, but I hear you. 00:10:47 Melissa Francis I I want to ask you specifically about Ark. 00:10:51 Melissa Francis You talk a lot about your risk management and your research. 00:10:55 Melissa Francis Can you get into a little bit more specifics about why your risk and research your research and risk management is so proprietary? 00:11:02 Melissa Francis I mean, I, I know it's proprietary, so you can't talk detail. 00:11:05 Melissa Francis But can you give me, you know, a little sketch of? 00:11:07 Cathie Wood It well, our research is is not proprietary we. 00:11:10 Cathie Wood Give it away. 00:11:11 Cathie Wood And so we, that's that's one of the powers of social media, our social media and marketing strategy. 00:11:19 Cathie Wood We give our research away not because we are altruistic, although we do. 00:11:25 Cathie Wood Want to educate? 00:11:27 Cathie Wood Not just investors. 00:11:28 Cathie Wood But parents and grandparents about how the world is changing and how rapidly is it's changing and how to keep their children and grandchildren on the right side of change. 00:11:41 Cathie Wood And even for adults, how to retrain so much is going to change because of the five innovation platforms genomic sequencing. 00:11:49 Cathie Wood Adaptive robotics energy storage, artificial intelligence and blockchain technology. 00:11:54 Cathie Wood So much is changing and those platforms themselves are all growing at exponential rate. 00:12:03 Cathie Wood And they are converging, so it's 1 S curve feeding another S curve and we want people to understand that we want not just investors and registered investment advisors, but also, as I mentioned, the the sell side and the buy side. 00:12:21 Cathie Wood You know they're used to very short term. 00:12:23 Cathie Wood Right? 00:12:24 Cathie Wood And they haven't until recently been as focused on these new technologies. 00:12:29 Cathie Wood They've been much more focused on benchmarks and how to beat benchmarks. 00:12:34 Cathie Wood They haven't been. 00:12:34 Cathie Wood Thinking as much about the future and and the technologies that are going to transform the future. 00:12:40 Cathie Wood So we give our research away because we want to engage with. 00:12:44 Cathie Wood And become a part of the communities that are innovating and I feel like we've done that. 00:12:49 Melissa Francis So if I could just jump in, I mean 'cause this has been a very successful strategy for you, especially during the pandemic and the lockdown economy. 00:12:57 Melissa Francis It's been tougher, obviously more recently, and you know you've seen a lot of correction within the portfolios, and you know you've taken a lot of criticism from the outside. 00:13:08 Melissa Francis I would ask you. 00:13:09 Melissa Francis First of all. 00:13:09 Melissa Francis Is there any part of the criticism that you feel like you're receiving that rings true? 00:13:14 Cathie Wood So let me put in perspective what has happened over the past five years. 00:13:18 Cathie Wood We have a five year investment time horizon, so we'll start with the past. 00:13:21 Cathie Wood Five years and. 00:13:22 Cathie Wood Then we'll look forward at the next five years. 00:13:24 Cathie Wood Past five years. 00:13:25 Cathie Wood As we as we stated in one of our research pieces recently and fund pieces, very few active managers have outperformed the markets during the past five to 10 years. 00:13:41 Cathie Wood I think in the past ten years, which is a recent study that we read. 00:13:47 Cathie Wood 11% of large cap managers have outperformed their benchmarks, and 25% of all active managers have performed outperformed their benchmarks. We have outperformed the NASDAQ, the S&P and the MSCI handsomely. 00:14:05 Cathie Wood Over the past five years, I think our compound annual rate of return is around 22%. 00:14:10 Cathie Wood So that's the past five years. 00:14:12 Cathie Wood Then we go into the pandemic and the crisis period we had for about a six week period. 00:14:19 Cathie Wood A significant risk off. 00:14:23 Cathie Wood Episode and and we underperformed, as we usually do in a risk off period and then from the bottom of the coronavirus to the peak in February of 21, our flagship strategy was up 360%. 00:14:42 Cathie Wood Since then, at our worst point, we were down 60%, so I just wanted to put that in context. 00:14:48 Cathie Wood If we are right now, I'm talking about our innovation platforms. 00:14:52 Cathie Wood Broadly, we believe that disruptive innovation in the global public equity markets is valued. 00:15:02 Cathie Wood Today, at about a $10 trillion market cap and we believe that is going to 210 trillion by 2030, so that's anywhere from a 35 to 40%. 00:15:17 Cathie Wood And compound annual rate of growth for those platforms and we would hope to outperform because we are focused only on the future and and we have centered our research and investing around those platforms. 00:15:30 Cathie Wood When people talk about risk management, they they seem to think that we're a general. 00:15:37 Cathie Wood Just kind of asset manager. 00:15:40 Cathie Wood We are not. 00:15:41 Cathie Wood We are focused exclusively on disruptive innovation and when they say where is the risk management or the risk control, we have many levers of risk control, including our partners who oversee the risk in. 00:15:58 Cathie Wood Their portfolios and I'm talking our minority partners and our distribue 00:16:01 Cathie Wood Partners so we are fielding questions and and are thinking carefully about the risks we're taking in the certainly in the context of the questions we're getting. 00:16:11 Cathie Wood But it's been built into our scoring system. 00:16:15 Cathie Wood Our top and bottom, top down and bottom up modeling there's there are risk assessments. 00:16:21 Cathie Wood Each step along the way, I think. 00:16:25 Cathie Wood Many people confuse generalist portfolio managers who have to shift between this sector and that sector, or between cash and no cash. 00:16:34 Cathie Wood We're not doing that right now, we. 00:16:36 Melissa Francis OK. 00:16:37 And so I. 00:16:37 Melissa Francis Absolutely hear what you're saying and I'm wondering that is that the same as you wouldn't do anything differently in terms of what about? 00:16:45 Melissa Francis Even in the approach with the media and the way that you've engaged people you talked about social media and elsewhere, is there anything that you would do differently, or do you feel like everything is going according to plan? 00:16:55 Cathie Wood So after a one of one of the rougher interview is out there. 00:17:02 Cathie Wood I was trying to figure out why don't they understand how we are controlling risk and and one of our clients actually said well, you sounded like you know you wouldn't do anything differently. 00:17:19 Cathie Wood We actually do when we move into these. 00:17:22 Cathie Wood Risk off period. 00:17:24 Cathie Wood Since we concentrate our portfolios to our highest conviction names and what that means in this last go around for our flagship strategy, we went from 58 names in that strategy to 35. So we basically said from a risk control point of view. 00:17:44 Cathie Wood That OK using our scoring system? 00:17:47 Cathie Wood Where is our conviction the lowest? 00:17:49 Cathie Wood They're all getting hit equally practically in this risk off period. 00:17:54 Cathie Wood So why don't we push towards the higher scoring names and it gives our analysts and and me and our associate portfolio managers the the psychological wherewithal to say, OK, this is. 00:18:10 Cathie Wood A risk off market, all of our stocks are being treated the same. 00:18:14 Cathie Wood Why don't we come out right now with all of our concerns lurking deep down inside and then concentrate. 00:18:23 Cathie Wood So that's we do take risk off the table and if you look at long term stuff. 00:18:27 Cathie Wood These they will show you that the most concentrated strategies are the most successful because typically active managers have a very high degree of confidence in several of their names. 00:18:40 Cathie Wood But there are a lot of names. 00:18:42 Cathie Wood They would be the tail of the portfolio, where they they. 00:18:45 Cathie Wood They just don't have as much confidence, so we use. 00:18:48 Cathie Wood The volatility to curb the risk by further concentrating our portfolios and the only thing else. 00:18:54 Cathie Wood There is many people say wait a minute, that's not risk control concentration is higher risk. 00:19:00 Cathie Wood We disagree. 00:19:01 Melissa Francis Yeah, no, I I'm glad you explained that because that that is really interesting and I'm I'm not sure a lot of people out there understood that. 00:19:07 Melissa Francis That's what you were doing just in terms of some of the personal attacks. I mean, for example when I saw Morningstar's downgrade. 00:19:15 Melissa Francis They were focused so much on succession which. 00:19:19 Melissa Francis Uhm, you know? 00:19:20 Melissa Francis Obviously it's important. 00:19:21 Melissa Francis But there have been a lot of other funds out there, and. 00:19:23 Melissa Francis Fund managers that. 00:19:24 Melissa Francis They haven't had that same criticism and focus. 00:19:26 Melissa Francis Do you think it has anything to do with your gender? 00:19:28 Melissa Francis You think it's sexist at all? 00:19:31 Cathie Wood I really don't, I I do know there are companies like that one that do not understand what we're doing. 00:19:40 Cathie Wood We do not fit into their style boxes and I think style boxes will become a thing of the past as as sectors. 00:19:50 Cathie Wood As technology blurs, the lines between and among sectors. 00:19:54 Cathie Wood And as innovation goes, global and goes across the cap range, you know. 00:19:59 Cathie Wood So I think those style boxes are are going to be will seem quite provincial. 00:20:06 Cathie Wood At some point we are index agnostic. 00:20:10 Cathie Wood That is a big problem for many of these companies. 00:20:12 Cathie Wood Our objective is. 00:20:14 Cathie Wood A minimum compound annual rate of return of 15%. 00:20:18 Cathie Wood At an annual rate over the next five years, we are the closest you will find to a venture capital company in the public equity markets. 00:20:27 Cathie Wood And I think organizations like that one have a very difficult time like that. 00:20:32 Cathie Wood They've never seen an animal like ours where we are thrilled that our active share 00:20:38 Cathie Wood Relative to the broad based indices is in the high 90% range we have. If you look at technology in the S&P 500, we have no overlap. We are doing something. 00:20:49 Cathie Wood We are saying the technologies of the future. 00:20:53 Cathie Wood Are going to be very different from the technologies of the past, and so we offer a good opportunity for diversification for registered investment advisors. 00:21:04 Cathie Wood They own the fangs and Microsoft NVIDIA and now even our beloved Tesla, 'cause it's in indexes but they don't own our stocks 'cause they're not. 00:21:14 Cathie Wood In these broad based indices. 00:21:16 Cathie Wood So I think many much of our success because we have had despite the performance we discussed earlier. 00:21:22 Cathie Wood We've had inflows last year, 17 billion in inflows. 00:21:25 Cathie Wood This year we're still in flowing, even though we've been in this pacing period and no one sure if the next move is up or the next move is down, but we are. 00:21:36 Cathie Wood In in flow and I think that's because advisors know we are a diversifier and we will protect them against the value traps that we believe are populating broad based benchmarks which are becoming part of their core portfolio. 00:21:53 Cathie Wood We are a hedge against the DIS intermediation of the old World order. 00:21:59 Melissa Francis Yeah, it just to clarify for people that are watching so you have your inflows have exceeded your outflows. 00:22:05 Melissa Francis You have more people coming in more money coming in. 00:22:07 Melissa Francis Right now, yeah. 00:22:08 Cathie Wood Yes, right? 00:22:09 Cathie Wood We are in that inflow mode, yes. 00:22:11 Melissa Francis I I'm also fast. I mean, you're so contrarian. And I do think that your fun. If you truly understand what it's about, it it sort of becomes we've talked on this show and magnify a bunch of times about how the old model of you know however you want to slice it. The 4060 is is really broken and that you have to have a whole bunch of. 00:22:27 Melissa Francis Different approaches to your portfolio and having a slice of what you do is something that is so different from what you would get elsewhere and is backed by huge brain power and huge research that it's a way to take. 00:22:40 Melissa Francis You know this this oppositional point of view, almost, but do it in a very smart way along those lines. 00:22:47 Melissa Francis And we talked to Jeff Gundlach a while ago. 00:22:49 Melissa Francis Of course, the bond king he was saying that, you know, he's really obviously a lot of people are worried about inflation right now. 00:22:54 Melissa Francis I I read, I think it was in your Blogger. 00:22:56 Melissa Francis I heard you do an interview. 00:22:56 Melissa Francis You talked a lot about the possibility of deflation. 00:22:59 Melissa Francis A year from now. 00:23:00 Melissa Francis Walk me through that. 00:23:02 Cathie Wood Sure, and before I do that, Melissa, I do you hit on something that I think is critically important? 00:23:08 Cathie Wood This the the analyst team that we have focused on truly disruptive innovation. Innovation is unmatched out there. I am sure of that because it is our sole focus. We have domain experts. We do not have MBA's. It is much easier. 00:23:27 Cathie Wood To treat, to teach a biochemical engineer or a rocket scientist how to read financial statements than it is to teach me. 00:23:38 Cathie Wood Uh, biochemical engineering and rocket science. 00:23:43 Cathie Wood This is an A throwback to the Bernstein days Sandy Bernstein set up his company with that in mind and I think it's absolutely right when it comes to innovation. 00:23:54 Cathie Wood So now I have to. 00:23:57 Cathie Wood Inflation well? 00:24:00 Cathie Wood Disruptive innovation is inherently deflationary in two ways. 00:24:04 Cathie Wood One good, one bad, the good way is just truly disruptive. 00:24:10 Cathie Wood Innovation follows learning curves, which are expressed as cost declines over time, and as costs decline, demand increases. 00:24:21 Cathie Wood For new technologies and and more people around the world have access to them. 00:24:27 Cathie Wood So they can reach mass markets, and that's what causes exponential growth. 00:24:33 Cathie Wood The costs decline. 00:24:35 Cathie Wood They open up. 00:24:35 Cathie Wood A new market costs continue to climb. 00:24:37 Cathie Wood Even so, we're seeing we're seeing massive opportunities from those five platforms. 00:24:44 Cathie Wood The other side of disruptive innovation is creative. 00:24:47 Cathie Wood Destruction, and this is a little bit back to what I said before, but a lot of companies in the broad based indices in particular are very short term oriented in in terms of wanting to cater to their shareholder base. 00:25:05 Cathie Wood And so we have watched them for years, especially since the tech and telecom bust and the 0809 meltdown and the risk aversion that pushed everyone towards these benchmarks. 00:25:16 Cathie Wood We've seen companies cater to that short term. 00:25:21 Cathie Wood Shareholder, by manufacturing earnings buying back shares to increase earnings per share or paying dividends. 00:25:28 Cathie Wood But they've leveraged up to do so, and they haven't invested enough in innovation. 00:25:34 Cathie Wood And so we believe that another source of deflation. 00:25:38 Cathie Wood Secular deflation out. 00:25:39 Cathie Wood There will be bad. 00:25:41 Cathie Wood And that is these companies products going obsolete. 00:25:44 Cathie Wood Wait, they need to service their debt and to do so, they'll have to cut prices. 00:25:48 Cathie Wood We think that's going to happen to the auto market big time. 00:25:52 Cathie Wood The gas powered side of the auto market. 00:25:55 Cathie Wood The big disagreement today is cyclical inflation and we believe it is in the process of peaking. 00:26:04 Cathie Wood And we also believe some of the early signs that we're seeing, whether it's mostly in inventory accumulation, especially in the retail world, excluding autos. 00:26:17 Cathie Wood And then the inventories are piling up. 00:26:20 Cathie Wood And because I think many retailers and maybe wholesalers double and triple ordered when they couldn't get supplies because of supply chain issues that they are going to end up with so much inventory on their balance sheets that they're going to have to cut prices. 00:26:37 Cathie Wood Dramatically, now, of course we have oil prices as well. 00:26:42 Cathie Wood As the outlier here, oil and food with the Russian invasion of of Ukraine, the bread basket of Europe and of course Russia being such a big factor in energy, we think that demand destruction is underway in the energy sector. 00:27:00 Cathie Wood Seeing a lot of substitution. 00:27:01 Cathie Wood I see a lot more bikes in Saint Pete and scooters, and you know. 00:27:06 Cathie Wood And I see people deciding to make fewer trips to the grocery store each week and what have you? 00:27:10 Cathie Wood So we're seeing downright demand destruction and we're seeing. 00:27:16 Cathie Wood Russia hasn't been turned off yet. 00:27:18 Cathie Wood It still may be. 00:27:19 Cathie Wood Europe may may stop, but we're seeing that its oil imports are going. 00:27:24 Cathie Wood Our exports are going elsewhere and we'll have a reshuffling of of where the how the supplies get from one country to another. 00:27:32 Cathie Wood So I actually think I was surprised to see in early March. 00:27:36 Cathie Wood Oil prices peaked out in the one 30s and then they tried again and they peaked out in the one 15117 range. 00:27:43 Cathie Wood So let's see if that could be lower. 00:27:46 Cathie Wood Highs are often the first sign that demand destruction is beginning to have an impact as supplies are starting to. 00:27:54 Cathie Wood Increase including production in the United States. 00:28:00 Melissa Francis Yeah, we just talked to Mark Fisher a couple days ago. 00:28:01 Melissa Francis Who courses master of that space and he said similar things and they actually if you listened to him. 00:28:06 Melissa Francis He had said that Nat gas was going to explode and it had. 00:28:09 Melissa Francis It had a definitely that was a prescient call at the time, so it's interesting to hear you talk. 00:28:14 Melissa Francis That way about energy and also about the supply chain. 00:28:17 Melissa Francis That makes a lot of sense, because this idea that you can't get what you. 00:28:20 Melissa Francis One has been going on for a long time and I know that you also said you have a consumer that doesn't feel particularly good about his or herself right now. 00:28:30 Melissa Francis In addition to that, the fact that wages aren't really keeping up with the prices that you're seeing out there is another reason why we could see these supplies stack up. 00:28:38 Melissa Francis A final word to you on that. 00:28:40 Cathie Wood So I'm asking. 00:28:40 Melissa Francis And and maybe I don't want to forget. 00:28:41 Melissa Francis To ask you. 00:28:42 Melissa Francis Where you see the 10 year bond trading a year from today so. 00:28:45 Melissa Francis Those two things real quick if you don't mind. 00:28:48 Cathie Wood So the consumer sentiment, I don't know why many people or many economists. 00:28:53 Cathie Wood Strategists are not focusing on. 00:28:55 Cathie Wood This consumer University of Michigan Consumer Sentiment survey, which I've watched it for 45 years, is the best out there at measuring consumer sentiment is down to levels that we have not seen since 0809. In 0809, people were losing their homes, losing their jobs, losing their cars. 00:29:15 Cathie Wood And and oil prices were at $147. And and here we are there feeling that badly that tells me this idea of velocity, the velocity of money. 00:29:27 Cathie Wood Consumers not going to be racing out to buy because the consumers becoming risk averse. 00:29:33 Cathie Wood That's a recipe for a continued decline in the velocity of money, which which diffuses the inflationary impact of the reserves out there. 00:29:42 Cathie Wood So that's the first thing I'll say, and that and we I think we could. 00:29:47 Cathie Wood End up in a global recession. I think that there's such a fine line now. I think Europe's in recession, China feels very recessionary to me, which means Asia is going to catch a cold. We're seeing. 00:29:58 Cathie Wood Thing and and these are Canaries in the coal mine. But tree Lanka, you know threatening to default. This is like the beginning of the Asian crisis in 1997 when the Thai baht devalued. 00:30:09 Cathie Wood So you know, I think there are a lot of warning signs out there, and so is the US going to fall into a technical recession or not, I don't know. 00:30:18 Cathie Wood I don't think it matters, I just think I just think there's a lot of weakness out there and then finally on the bond yield. 00:30:25 Cathie Wood I think it's been really interesting as the Fed has been talking up interest rates. 00:30:31 Cathie Wood That the the 10 year yield has has not been able to even crack 3%. So in the 2 1/2 to 3% this is the 10 year Treasury yield and I believe that inflation is going to start unwinding pretty rapidly now because if you look if if for no other reason. 00:30:51 Cathie Wood Then the base effect last April, the CPI was up .9 and the PPI was up one or one point 1. Those are the comparisons. 00:31:00 Cathie Wood Now if we come in below that for April, then both of those year over year comparisons will come down for the first time and I'm seeing a lot more economists saying that they think inflation has peaked and now the only question is how? 00:31:15 Cathie Wood Low it will go. 00:31:17 Cathie Wood And we think the surprise will be on the low side. 00:31:21 Cathie Wood For cyclical reasons, inventories I just described, as well as secular reasons, disruptive innovation, and creative destruction. 00:31:30 Melissa Francis Yeah, well, you know you never fail to disappoint. 00:31:33 Melissa Francis We always go against what is out there and makes so much sense it is such a pleasure to talk to you. 00:31:39 Melissa Francis Thank you so much for doing this today, I think. 00:31:42 Melissa Francis Everybody out there really gained a lot from it. Thank you for joining us For more information on Art, Cathy Wood, or anything you've heard today, please go to 00:31:53 Melissa Francis We'll be right back. Updated on Apr 19, 2022, 11:47 am (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkApr 19th, 2022

Basic Solutions To Our Economic Problems That Establishment Elites Won"t Allow

Basic Solutions To Our Economic Problems That Establishment Elites Won't Allow Authored by Brandon Smith via, I think one of the great misconceptions about economic crisis is that solutions are always dependent on centralized government action. In truth, most financial disasters are actually caused by too much government action and involvement. Central banks like the Federal Reserve are also primary culprits; as I outlined in last week’s article their machinations, which are independent of government oversight, fall into the category of deliberate sabotage. The Fed bankrolls corruption through fiat money creation while government officials and corporations utilize that money to wreak havoc on our living standards. Ending the Fed would solve the fiat money problem, but there’s still a host of agenda driven politicians and bureaucrats to deal with before our nation can right the ship. One clear way to fix our system would be to first force government to interfere less. As a point of reference, consider the common media narratives surrounding the covid pandemic. Along with the White House the media has been the premier driver of irrational fear over the spread of covid, which ended up being a minor threat compared to the hype as the average Infection Fatality Rate was no more that 0.27%. Yet, in response to a virus that was a mortal danger to less than one-thrid of 1% of the population, bureaucrats declared a national emergency requiring insane and unconstitutional lockdowns. The lockdowns damaged the economy in ways people are only now beginning to comprehend, with hundred of thousands of small businesses lost across the country. Not only that, but the establishment responded to the economic implosion they created by printing over $6 trillion in new money through the Fed in 2020 alone. This helicopter money or beta test for UBI (Universal Basic Income) has expedited a stagflationary disaster and helped to push prices on necessities to 40 year highs (the official number). The media claims it is “covid that is causing the crash,” but this is a lie. It was the RESPONSE to covid that is causing the crash. The virus was incidental to the economic sabotage initiated by governments and central banks. As we saw in conservative red states that defied the lockdowns and the vax mandates, economic activity thrived while leftists blue states suffered. And what did these blue states get in return for their economic sacrifices? Nothing. Covid infections continued to rage in blue states and deaths often outpaced red states with similar sized populations. In other words, the lockdowns, the mask mandates and the attempts force vaccinations through medical tyranny saved ZERO lives and possibly made things worse. This is the legacy of government micro-management (And yes, let’s not forget that Trump went along with these lockdowns in the beginning of the pandemic also. Biden is just the dirt-bag that continued the measures despite the massive amount of evidence that they don’t work). While the covid event illustrates my point in a big way, there are a lot of deeply rooted problems that government intervention has caused that add up to one big fiscal calamity. Many of these threats require a basic but sweeping return to fundamentals that government elites will rarely address and will try to stop at all costs. Here are just a few examples… Inflation And Stagflation? Back The Dollar With Hard Commodities The federal reserve and their minions have spent the better part of a century trying to convince the public that a gold standard for our currency is what caused the Great Depression and what could cause future depressions. They claim that limitations on money printing strangle liquidity and disrupt velocity. This is a lie. Former fed chairman Ben Bernanke openly admitted in 2002 in a speech in honor of Milton Friedman that it was the CENTRAL BANK that actually caused the deflationary collapse of the 1930s, not the existence of the gold standard. This rare moment of truth from a fed official was perhaps due to the sheer amount of evidence that Friedman often cited that contradicted the original anti-gold propaganda. Or maybe it happened because the banking elites did not see Friedman as a particular threat, and figured no one among the public would read Bernanke’s speech anyway. In fact, a commodities foundation held the American economy together for centuries until the Fed came along and the government slowly began removing gold from the picture. All subsequent economic crisis events have been exponentially worse ever since. When a commodities standard is employed, stability always follows. Just look at what has happened in Russia recently; their currency was on a downward spiral due to international sanctions, yet, when they reopened markets this past week the Ruble skyrocketed back to normal. Why? Because Putin had the currency coupled to gold. It’s really that simple. The US and parts of Europe are facing their own inflationary disasters and this is largely due to the unchecked avarice of central bank stimulus and government spending. The ONLY way to secure the dollar’s existence as a stable store of wealth would be to back it with hard commodities like precious metals (among others). This might kill the dollar’s world reserve status because fiat printing would be impossible from that point on, but I got a news flash for those that hate the idea of grounding the dollar in commodities: We’re going to lose world reserve status anyway, and it’s going to happen soon. One third of the world’s population including Russia, China and India are already breaking from the dollar in bilateral trade. The US might as well accept this is the reality and prepare to mitigate the coming currency collapse by supporting the dollar with commodities. Oil Shortages And Energy Inflation? Stop Interfering With Oil Exploration In early February of this year the Biden Administration made legal filings which halted new oil and gas leases including exploration due to conflicts over “climate costs.” This interference with America’s oil independence is only one of many instances starting with Biden’s sabotage of the Keystone Pipeline in 2021. Interestingly, with gas prices doubling ever since Biden entered office, the White House now claims that they have nothing to do with energy inflation and are not preventing drilling in the US. During the same period Russia was establishing a decades long oil and gas contract with China and laying the groundwork for a major pipeline to be finished by 2025. And yes, China DOES in fact have the capacity along with India to absorb most of the oil and gas that might be shunned by Europe should they follow through with energy sanctions. Russia was planning ahead while the US was shifting from energy independence and net exporter status to once again becoming dependent on authoritarian regimes in the Arab world. Why? Biden’s excuse is usually climate alarmism. The Earth’s temperature has only risen by ONE DEGREE CELSIUS in the past 100 years according to the NOAA, so the main argument against oil production in the US is based on the fallacy that man-made carbon has any bearing whatsoever on climate changes. But maybe the carbon fraud is just a distraction from something else? To fix any supply and demand issues in the US, we only need to start producing once again at levels which were easily obtainable in 2020. But what if the issue of supply contraction is not the main cause of oil inflation? I would note that the dollar is not only the world reserve currency but also the global petro-currency. Until recently, almost all oil was traded internationally using dollars. The decline or collapse of the dollar’s buying power due to money printing and runaway inflation is more likely the direct cause of rising oil prices, and supply issues are secondary. If the dollar was about to collapse due to inflation, oil would be one of the first early warning indicators. With the establishment blocking new oil production and hindering the most cost effective method for oil transport (pipelines), an engineered decline in supply becomes a very effective smokescreen for the death of the dollar. The crisis caused by the government and the Federal Reserve’s currency destruction could then be blamed on supply chain issues and climate “peril.” This is the reason why the establishment will not allow any future growth in US oil production. They cannot allow the public to realize the precarious position our currency is in. Supply Chain Interdependency Leading To Shortages? Bring Back Manufacturing There are a lot of reasons why manufacturing has left the US, from greedy and corrupt labor unions driving up wages to higher taxes and land costs to extremely cheap shipping from overseas exporters. There is also the theory that US factories were outsourced to places like China in order to deliberately force the public into a global interdependency scheme. In other words were are stuck with the supply chain we have, not because it’s the best system, but because the globalists want it that way. It’s unlikely that the federal government and the elitist establishment would ever allow real manufacturing to come back to the US in a way that would make us more self sufficient. As long as our country relies on outsourced goods and raw materials from other nations we remain beholden to the global chain for our survival. Being completely independent might be impossible, but we could be producing far more domestically than we are today. State governments could create incentives to manufacture within their borders by removing property taxes, reducing state taxes and protecting businesses from certain federal obstructions such as carbon restrictions. As long as those companies do not support anti-freedom initiatives with the money they make, they should be aided so that real jobs and real production make a comeback in the US. I would also note that if states want to survive the coming financial crisis that is about to strike, they are going to have to start ignoring federal restrictions on land use and the production of raw materials (like oil or coal). Some environmental rules are good, but some are pointless and are only designed to control rather than protect. States will have to stand in defiance of these rules if anything is going to change for the better. Debt And Liquidity Crisis? Let States Establish Their Own Banks And Currencies The state of North Dakota has an interesting model for economic independence, which utilizes a state sponsored bank designed specifically to help businesses in ND. I would say it’s bizarre that this idea has not become popular across the nation, but I understand that if it did the federal government and the central bankers would be very unhappy. Here’s the thing, while it is true that the constitution explicitly states that the US Treasury be the only issuer of US currency, this was done at a time when our currency was backed by gold and silver and there was no corrupt middleman in the form of a central bank. In truth, the Treasury is now second fiddle to the Federal Reserve, and the constitutional regulations on money have already been broken. It’s time for a new currency model and new banking model. An official bank in each state could decentralize power away from the Federal Reserve in terms of how debt and interest rates are handled, creating something closer to free market discovery of interest rates rather than a rate dictatorship control by the Fed. By extension, each state could also issue currency scrip legal for use only within the borders of those states. This would create a secondary safety net against inflation in the dollar. In other words, we decentralize the banking system and we offer state alternatives which function not so much as competing currencies but as parallel or complementary currencies backed by and exchangeable in certain commodities. I believe very strongly that this model (along with a couple dozen other measures I don’t have space to cover here) could save our country from decades of economic mismanagement and bring us back from the brink of inflation and debt catastrophe. States could do this without the permission of the federal government or the Federal Reserve, but I have little doubt that the elites would be in an uproar. Make no mistake, states will have to move to decouple from the national financial system and build alternatives as soon as they realize that the dollar is tanking and stagflation is here to stay. And when they do, the establishment will declare such actions on par with “insurrection.” In the meantime, there are numerous preparations each individual can make in their local communities to insulate themselves from economic dangers. There are those that will say that local measures are only a stop gap and more national action needs to be taken. They are partially correct; in the long run there needs to be wider organization towards free markets once again, along with redundancies in state economies. In the short term we must do what we can. Ultimately, the most clear solutions to our fiscal fate are not pursued because the elites do NOT WANT to save the economy, at least not in a way that ends up with them having less power. They want even more power and centralization that extends beyond national boundaries into the realm of global management. Fixing the system can’t happen because they won’t let it happen. This means that the fix that will save us in the long run will be the one that allows all others to progress; and that fix is to remove these people from positions of influence and authority. You can’t really repair the body in the wake of an illness until the offending disease is eliminated. For now, all we can do is keep the country on life support until a cure is applied. *  *  * If you would like to support the work that Alt-Market does while also receiving content on advanced tactics for defeating the globalist agenda, subscribe to our exclusive newsletter The Wild Bunch Dispatch.  Learn more about it HERE. Tyler Durden Sat, 04/16/2022 - 17:30.....»»

Category: worldSource: nytApr 16th, 2022