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Freedom And Sound Money: Two Sides Of A Coin

Freedom And Sound Money: Two Sides Of A Coin Authored by Thorsten Polleit via The Mises Institute, It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically it belongs in the same class with political constitutions and bills of right. So wrote Ludwig von Mises in The Theory of Money and Credit in 1912. And further: The sound-money principle has two aspects. It is affirmative in approving the market's choice of a commonly used medium of exchange. It is negative in obstructing the government's propensity to meddle with the currency system. Against this backdrop, modern day monetary systems appear to have been drifting farther and farther away from the sound money principle in the last decades. In all countries of the so-called free world, money represents nowadays a government controlled irredeemable paper, or "fiat," money standard. The widely held view is that this money system would be compatible with the ideal of a free society and conducive to sustainable output and employment growth. To be sure, there are voices calling for caution. Taking a historical viewpoint, Milton Friedman stated: The world is now engaged in a great experiment to see whether it can fashion a different anchor, one that depends on government restraint rather than on the costs of acquiring a physical commodity. Irving Fisher, evaluating past experience, wrote: "Irredeemable paper money has almost invariably proved a curse to the country employing it." The primary cause for concern rests on a key characteristic of government controlled paper money: the system's unrestrained ability to expand money and credit supply. In contrast, under the (freely chosen) gold standard, money (e.g., gold) supply was expected to increase as well over time, but only in proportion to how the economy expanded—i.e., an increase in money demand, brought about by an increase in economic activity, would bring additional gold supply to the market (by, for instance, increased mining which would become increasingly profitable). As such, the gold standard puts an "automatic break" on money expansion—the latter would be, at least in theory, related to the economy's growth trend. The government controlled fiat money system has no inherent limit to money and credit expansion. In fact, quite the opposite holds true: Central banks, the monopolistic suppliers of governments' money, have actually been deliberately designed to be able to change money and credit supply by actually any amount at any time. To prevent abuse of their unlimited power over the quantity of money supply, most central banks have been granted political independence over the past decades. This has been done in order to keep politicians who, in order to get reelected, from trading off the benefits of a monetary policy induced stimulus to the economy against future costs in the form of inflation. In addition, many central banks have been mandated to seek low and stable inflation—measured by consumer price indices—as their primary objective. These two institutional factors—political independency and the mandate to preserve the purchasing power of money—are now widely seen as proper guarantees for preserving sound money. Be that as it may, Mises's concerns appear as relevant as ever: The dissociation of the currencies from a definitive and unchangeable gold parity has made the value of money a plaything of politics…. We are not very far now from a state of affairs in which "economic policy" is primarily understood to mean the question of influencing the purchasing power of money. Whereas the objective to preserve the value of government controlled paper money appears to be a laudable one, the truth is that it is (virtually) impossible to deliver on such a promise. In fact, there are often overwhelming political-economic incentives for a society to increase its money and credit supply, if possible, in order to influence societal developments according to ideological preset designs rather than relying on free market principles. This very tendency is particularly evidenced by the fact that central banks are regularly called upon to take into account output growth and the economy's job situation when setting interest rates. And these considerations are what seem to cause severe problems in a paper money system if and when there is no clear-cut limit to money and credit expansion. To bring home this point, it is instructive to take a brief look at the relationship between credit and nominal output and "wealth" growth (which is defined here, for simplicity, as gross domestic product plus stock market capitalization). The figure below shows the annual changes of US nominal gross domestic product (GDP) and bank credit in percent from 1974 to the beginning of 2022. As can be seen, both series are positively correlated in the period under review: On average, rising output had been accompanied by rising bank credit and vice versa. It is actually an instructive illustration of the Austrian business cycle theory (ABCT), which holds that the expansion of bank credit is not only closely associated with a boom-and-bust cycle, affecting both real magnitudes and goods prices, but its driving force. Also from 1974 to the beginning of 2022, the following figure shows the US money stock in billions of US dollars and the S&P 500 stock market index. The rising money stock is basically the re of result of the expansion of bank credit—through which new money is created. As can be seen, the development of the money stock trends on the same wavelength as the stock market. Why? On the one hand, the increase in nominal GDP over time is reflected in rising values of corporate valuations. On the other hand, the rising money stock pushes goods prices up, including stock prices. In other words: The stock market performance is—sometimes more so, sometimes less so—attributable to the fiat-money-caused goods price inflation. From the end of 2019 to the first quarter 2022 the US central bank increased the money stock M2 by 43 percent, while the stock market gained 63 percent in the same period. As the increase in the money stock helped inflating nominal GDP, it also translated into (substantially) higher stock prices. In other words: The monetary expansion caused "asset price inflation." Looking at these charts, the message seems to be: The chronic increase in credit and money supply has, on average, been "quite positive" for output and wealth. However, this would be a rather shortsighted interpretation. For a fiat money system, the expansion of credit and money makes a few benefit at the expense of many others. What is more, its "invisible effect" is that it prevents all the economic success and the resulting distributive income and wealth effects that had occurred had there not been an issuance of additional credit and fiat money. As even classical economic theorists warn, a money- and credit-induced stimulus to the economy is (as the ABCT shows) short-lived and will eventually lead to inflation, as outlined by David Hume in 1742: Augmentation (in the quantity of money) has no other effect than to heighten the price of labour and commodities…. in the progress towards these changes, the augmentation may have some influence, by exciting industry, but after the prices are settled … it has no manner of influence. However, the today's intellectual conviction of the economic mainstream, which is dominated by Keynesian economics, is that by lowering interest rates the central bank can stimulate growth and employment. So it does not take wonder that, especially so in periods in which inflation is seen to be "under control," central banks are pressured into an "expansionary" monetary policy to fight recession. In fact, it is widely considered "appropriate" if monetary policy keeps borrowing costs at the lowest level possible. In the work of Mises one finds a well-founded criticism of this broadly held conviction. He writes: Public opinion is prone to see in interest nothing but a merely institutional obstacle to the expansion of production. It does not realize that the discount of future goods as against present goods is a necessary and eternal category of human action and cannot be abolished by bank manipulation. In the eyes of cranks and demagogues, interest is a product of the sinister machinations of rugged exploiters. The age-old disapprobation of interest has been fully revived by modern interventionism. It clings to the dogma that it is one of the foremost duties of good government to lower the rate of interest as far as possible or to abolish it altogether. All present-day governments are fanatically committed to an easy money policy. Mises also outlines what the propensity to lower interest rates and increasing money and credit supply does to the economy. The Austrian school's monetary theory of the trade cycle maintains that it is monetary expansion which is at the heart of the economies' boom and bust cycles. Overly generous supply of money and credit induces what is usually called an "economic upswing." In it's wake, economic growth increases and employment rises. With the liquidity flush, however, come misalignments, a distortion of relative prices, so the theoretical reasoning is. Sooner or later, the artificial money and credit-fueled expansion is unsustainable and turns into a recession. In ignorance and/or in failing to identify the very forces responsible for the economic malaise, namely excessive money and credit creation in the past, falling output and rising unemployment provoke public calls for an even easier monetary policy. Central banks are not in a position to withstand such demands if they do not have any "anchoring"—that is a (fixed) rule which restrains the increase in money and credit supply in day-to-day operations. In the absence of such a limit, central banks, confronted with a severe economic crisis, are most likely to be forced to trade off the growth and employment objective against the preserving the value of money—thereby compromising a crucial pillar of the free society. Seen against this backdrop, today's monetary policy actually resembles a lawless undertaking. The zeitgeist holds that "inflation targeting" (IT)—the so-called state-of-the-art concept, from the point of view of most central banks—will do the trick to prevent monetary policy from causing unintended trouble. In practice, however, IT does not have any external anchor. Under IT, it is the central bank itself that calculates inflation forecasts which, in turn, determine how the bank set interest rates; setting a quantitative limit to money and credit expansion is usually not seen as a policy objective. IT can thus hardly inspire confidence that it will mitigate the threat to the value of paper money stemming from governments (in the form of fraud/misuse) and/or politically independent monetary policy makers (in the form of policy mistakes). The return to "monetary policy without rule" began in the early 1990s, when various central banks abandoned monetary aggregates as a major guide post for setting interest rates. It was argued that "demand for money" had become an unstable indicator in the "short term" and that, as such, money could no longer be used as a yardstick in setting monetary policy, particularly so as policy makers were making interest rate decisions every few weeks. However, that guide post has not been replaced with anything since then. In view of the return of discretion in monetary policy, it might be insightful to quote Hayek's concern; namely, that inflation "is the inevitable result of a policy which regards all the other decisions as data to which the supply of money must be adapted so that the damage done by other measures will be as little noticed as possible." In the long run, such a policy would cause central banks to become "the captives of their own decisions, when others force them to adopt measures that they know to be harmful." Echoing the warning that Ludwig von Mises gave back in The Theory of Money and Credit, Hayek concluded: The inflationary bias of our day is largely the result of the prevalence of the short-term view, which in turns stems from the great difficulty of recognising the more remote consequences of current measures, and from the inevitable preoccupation of practical men, and particularly politicians, with the immediate problems and the achievements of near goals. What can we learn from all this? The inherent risks of today's paper money standard—the very ability of expanding the stock of money and credit at will by actually any amount at any time—are no longer paid proper attention: Putting a limit on the expansion of money and credit does not rank among the essential ingredients for "modern" monetary policy making. The discretionary handling of paper money thus increases the potential for a costly failure substantially. A first step for moving back towards the sound money principle—which is doing justice to the ideal of a free society—would be to make monetary policy limiting—e.g., stopping altogether—money supply growth. Tyler Durden Sun, 05/22/2022 - 09:20.....»»

Category: dealsSource: nyt11 hr. 54 min. ago

Banks Are Restocking Gold At Fastest Pace In Years

Banks Are Restocking Gold At Fastest Pace In Years Via SchiffGold.com, Banks are in the process of restocking gold at a pace not seen in years. This analysis focuses on gold and silver within the Comex/CME futures exchange. See the article What is the Comex? for more detail. The charts and tables below specifically analyze the physical stock/inventory data at the Comex to show the physical movement of metal into and out of Comex vaults. Registered = Warrant assigned and can be used for Comex delivery, Eligible = No warrant attached – owner has not made it available for delivery. CURRENT TRENDS Gold In a recent article, I speculated that the big players might be prepared to let the price of gold run. Part of this will mean increased delivery volume in April after a very strong March. The Comex vaults have been steadily depleted over the last several months, however, 1.6M ounces of gold just showed up since March 1 as shown below. This is the largest inflow since October 2020 and we are only halfway through March! Figure: 1 Recent Monthly Stock Change This may be simply a restock of the metal lost in Jan and Feb. It’s also possible this is being used to support the massive delivery volume being seen in the historically quiet month of March. But a third possibility is that the banks are preparing for massive delivery volume in April. After all, as shown below, this metal has just shown up in the last three days and is primarily in Eligible. Most of it is not yet available for delivery, but it can be moved over instantaneously if the owner so wishes. Figure: 2 Recent Monthly Stock Change Silver Silver continues to show a different trend than gold. It’s as if the big players are fully focused on gold for the moment. Nearly 3.9M ounces left Comex vaults in just the past few days. Figure: 3 Recent Monthly Stock Change Looking at the detailed report shows the mechanics. Metal that was listed as Eligible was being moved to Registered to satisfy the extremely strong delivery demand being seen in March. Unlike gold, this metal has not been restocked and continues to leave Comex vaults. In aggregate, the Eligible category has lost 17.7M ounces over the last month! Figure: 4 Recent Monthly Stock Change The table below summarizes the movement activity over several time periods. Gold Gold has reversed a 50% of the 12-month movement of metal out of the vault in a matter of days Eligible has increased 7.2% in a single week In total, Registered could support 192k contracts standing for delivery. This is 3.5 times larger than the biggest month on record (June 2020 at 55k contracts) The data shows the banks well capitalized to handle higher delivery volume It should be noted that most of this is probably still from the London vaults that came to New York in the depths of the April 2020 liquidity crisis Rhetorical questions: Why are the banks bolstering gold reserves if they appear so well-capitalized? How much metal is actually there ready for delivery? If it’s the full 19.2M then why a sudden flood of new metal? Whether it’s restocking March or preparation for April, there should be enough metal to satisfy demand. Right? Silver Silver has seen stock deplete by 29M ounces over the last year or 7.8%. This has been concentrated entirely in Registered but the last month has seen a major trend change with Eligible seeing the largest outflows The last month outflows from eligible undid 85% of the inflows over the last year Figure: 5 Stock Change Summary The next table shows the activity by bank/Holder. It details the numbers above to see the movement specific to vaults. Gold Almost every vault is now adding to inventory which is a complete reversal from last month JP Morgan and Manfra are leading the way with increases of 7.1% and 15.2% over the last month respectively JP Morgan now has positive flows over the last year. Again, the net gain of JP Morgan inventory over the last year has been added in the last week Why is every vault adding metal all of a sudden? Why is JP Morgan aggressively restocking its inventory? What are the banks preparing for? Silver Over the last month, only Delaware Depository has positive inflows while 6 vaults have seen significant outflows CNT has lost 8.2% of its inventory in a single month! Figure: 6 Stock Change Detail As postulated in the margin analysis, all eyes seem to be on gold. The banks are clearly preparing for a large delivery volume. The current open interest positioning, combined with the lack of increase in margin rates suggests this could be allowed to happen right now. Add the current inventory increase as more evidence. Silver continues to be the forgotten metal. This isn’t entirely surprising though. Gold is the true historical currency of the world. Central banks own hordes of gold (Russia wishes they had more). If the market were to start moving in a big way, it’s going to happen in gold first. The question now becomes: why is this being allowed to happen? None of the powers that be want a surging gold price. It calls into question the entire fiat system. My running theory is that the banks pick their times when to fight it and when to ride it. Right now, the momentum is strong and they appear to be preparing to ride the wave. Prices declined this week, but there is clearly a bullish trend afoot. Be cautious though, there are levers in place (e.g., margin and short selling) that can cause the market to turn on a dime. Expect these levers to be used when they can exact the most impact (e.g., speculation reaches a fever pitch). This was on display on March 9 when margin requirements were raised at the same time gold fell by $80. Perhaps now is not the time to strike, but no question that time will come. The question is, how soon. The data hints at late summer (after the June contract), but an opportunity could present itself much sooner given the market volatility. Gold prices have been under pressure all week. Historical Perspective Zooming out and looking at the inventory for gold and silver since 2016 shows the impact that Covid had on the Comex vaults. Gold had almost nothing in the Registered category before JP Morgan and Brinks added their London inventory with nearly 20M ounces. The gold inventory peeked in February of last year and has been steadily falling ever since aside from brief increases that don’t seem to last. Will the current increase follow the same fate (see spike on far right)? Figure: 7 Historical Eligible and Registered Silver also saw an increase in Registered around March 2020 but has been draining, albeit more slowly than gold. The recent uptick in Registered as a % of the total (far right spike in the black bar) is due to the recent flip of Eligible to Registered noted above. Figure: 8 Historical Eligible and Registered Available supply for potential demand As can be seen in the chart below, the ratio of open interest to total stock has fallen from over 8 to 1.5. In terms of Registered (available for delivery against open interest), the ratio collapsed from nose bleed levels (think Nov 2019 where 100% stood for delivery) down to 3.26 in the latest month. This is due to the recent surge in open interest. On March 7, the ratio hit 3.41. This was the highest since September 2020. The current restocking has helped bring this ratio down along with open interest falling some. Figure: 9 Open Interest/Stock Ratio Coverage in silver is weaker than in gold with 8.4 open interest contracts to each available physical supply of Registered (down from 9.8 on March 8). This is near the highs from June 2020. The current dip can be entirely attributed to open interest falling from 168k on March 8 to 157k today. This drop-in open interest occurred without margin rates going up at all. Figure: 10 Open Interest/Stock Ratio Wrapping Up The Comex gold market has been flashing warning signs since early January. This continues to be the case. The latest influx of metal further supports the notion that banks are preparing for higher delivery volume and potentially higher prices. That being said, with over 12 years of experience watching this market, nothing is ever easy or simple. The bullish setup is there, but something tells me this game has a few more twists ahead. Let’s see how the data unfolds. Tyler Durden Sun, 03/20/2022 - 12:30.....»»

Category: worldSource: nytMar 20th, 2022

2021 Greatest Hits: The Most Popular Articles Of The Past Year And A Look Ahead

2021 Greatest Hits: The Most Popular Articles Of The Past Year And A Look Ahead One year ago, when looking at the 20 most popular stories of 2020, we said that the year would be a very tough act to follow as there "could not have been more regime shifts, volatility moments, and memes than 2020." And yet despite the exceedingly high bar for 2021, the year did not disappoint and proved to be a successful contender, and if judging by the sheer breadth of narratives, stories, surprises, plot twists and unexpected developments, 2021 was even more memorable and event-filled than 2020. Where does one start? While covid was the story of 2020, the pandemic that emerged out of a (Fauci-funded) genetic lab team in Wuhan, China dominated newsflow, politics and capital markets for the second year in a row. And while the biggest plot twist of 2020 was Biden's victory over Trump in the presidential election (it took the pandemic lockdowns and mail-in ballots to hand the outcome to Biden), largely thanks to Covid, Biden failed to hold to his biggest presidential promise of defeating covid, and not only did he admit in late 2021 that there is "no Federal solution" to covid waving a white flag of surrender less than a year into his presidency, but following the recent emergence of the Xi, pardon Omicron variant, the number of covid cases in the US has just shattered all records. The silver lining is not only that deaths and hospitalizations have failed to follow the number of cases, but that the scaremongering narrative itself is starting to melt in response to growing grassroots discontent with vaccine after vaccine and booster after booster, which by now it is clear, do nothing to contain the pandemic. And now that it is clear that omicron is about as mild as a moderate case of the flu, the hope has finally emerged that this latest strain will finally kill off the pandemic as it becomes the dominant, rapidly-spreading variant, leading to worldwide herd immunity thanks to the immune system's natural response. Yes, it may mean billions less in revenue for Pfizer and Moderna, but it will be a colossal victory for the entire world. The second biggest story of 2021 was undoubtedly the scourge of soaring inflation, which contrary to macrotourist predictions that it would prove "transitory", refused to do so and kept rising, and rising, and rising, until it hit levels not seen since the Volcker galloping inflation days of the 1980s. The only difference of course is that back then, the Fed Funds rate hit 20%. Now it is at 0%, and any attempts to hike aggressively will lead to a horrific market crash, something the Fed knows very well. Whether this was due to supply-chain blockages and a lack of goods and services pushing prices higher, or due to massive stimulus pushing demand for goods - and also prices - higher, or simply the result of a record injection of central bank liquidity into the system, is irrelevant but what does matter is that it got so bad that even Biden, facing a mauling for his Democratic party in next year's midterm elections, freaked out about soaring prices and pushed hard to lower the price of gasoline, ordering releases from the US Strategic Petroleum Reserve and vowing to punish energy companies that dare to make a profit, while ordering Powell to contain the surge in prices even if means the market is hit. Unfortunately for Biden, the market will be hit even as inflation still remain red hot for much of the coming year. And speaking of markets, while 2022 may be a year when the piper finally gets paid, 2021 was yet another blockbuster year for risk assets, largely on the back of the continued global response to the 2020 covid pandemic, when as we wrote last year, we saw "the official arrival of global Helicopter Money, tens of trillions in fiscal and monetary stimulus, an overhaul of the global economy punctuated by an unprecedented explosion in world debt, an Orwellian crackdown on civil liberties by governments everywhere, and ultimately set the scene for what even the World Economic Forum called simply "The Great Reset." Yes, the staggering liquidity injections that started in 2020, continued throughout 2021 and the final tally is that after $3 trillion in emergency liquidity injections in the immediate aftermath of the pandemic to stabilize the world, the Fed injected almost $2 trillion in the subsequent period, of which $1.5 trillion in 2021, a year where economists were "puzzled" why inflation was soaring. This, of course, excludes the tens of trillions of monetary stimulus injected by other central banks as well as the boundless fiscal stimulus that was greenlighted with the launch of helicopter money (i.e., MMT) in 2020. It's also why with inflation running red hot and real rates the lowest they have ever been, everyone was forced to rush into the "safety" of stocks (or stonks as they came to be known among GenZ), and why after last year's torrid stock market returns, the S&P rose another 27% in 2021 and up a staggering 114% from the March 2020 lows, in the process trouncing all previous mega-rallies (including those in 1929, 1938, 1974 and 2009)... ... making this the third consecutive year of double-digit returns. This reminds us of something we said last year: "it's almost as if the world's richest asset owners requested the covid pandemic." A year later, we got confirmation for this rhetorical statement, when we calculated that in the 18 months since the covid pandemic, the richest 1% of US society have seen their net worth increase by over $30 trillion. As a result, the US is now officially a banana republic where the middle 60% of US households by income - a measure economists use as a definition of the middle class - saw their combined assets drop from 26.7% to 26.6% of national wealth as of June, the lowest in Federal Reserve data, while for the first time the super rich had a bigger share, at 27%. Yes, the 1% now own more wealth than the entire US middle class, a definition traditionally reserve for kleptocracies and despotic African banana republics. It wasn't just the rich, however: politicians the world over would benefit from the transition from QE to outright helicopter money and MMT which made the over monetization of deficits widely accepted in the blink of an eye. The common theme here is simple: no matter what happens, capital markets can never again be allowed to drop, regardless of the cost or how much more debt has to be incurred. Indeed, as we look back at the news barrage over the past year, and past decade for that matter, the one thing that becomes especially clear amid the constant din of markets, of politics, of social upheaval and geopolitical strife - and now pandemics -  in fact a world that is so flooded with constant conflicting newsflow and changing storylines that many now say it has become virtually impossible to even try to predict the future, is that despite the people's desire for change, for something original and untried, the world's established forces will not allow it and will fight to preserve the broken status quo at any price - even global coordinated shutdowns - which is perhaps why it always boils down to one thing - capital markets, that bedrock of Western capitalism and the "modern way of life", where control, even if it means central planning the likes of which have not been seen since the days of the USSR, and an upward trajectory must be preserved at all costs, as the alternative is a global, socio-economic collapse. And since it is the daily gyrations of stocks that sway popular moods the interplay between capital markets and politics has never been more profound or more consequential. The more powerful message here is the implicit realization and admission by politicians, not just Trump who had a penchant of tweeting about the S&P every time it rose, but also his peers on both sides of the aisle, that the stock market is now seen as the consummate barometer of one's political achievements and approval. Which is also why capital markets are now, more than ever, a political tool whose purpose is no longer to distribute capital efficiently and discount the future, but to manipulate voter sentiments far more efficiently than any fake Russian election interference attempt ever could. Which brings us back to 2021 and the past decade, which was best summarized by a recent Bill Blain article who said that "the last 10-years has been a story of massive central banking distortion to address the 2008 crisis. Now central banks face the consequences and are trapped. The distortion can’t go uncorrected indefinitely." He is right: the distortion will eventually collapse especially if the Fed follows through with its attempt rate hikes some time in mid-2020, but so far the establishment and the "top 1%" have been successful - perhaps the correct word is lucky - in preserving the value of risk assets: on the back of the Fed's firehose of liquidity the S&P500 returned an impressive 27% in 2021, following a 15.5% return in 2020 and 28.50% in 2019. It did so by staging the greatest rally off all time from the March lows, surpassing all of the 4 greatest rallies off the lows of the past century (1929,1938, 1974, and 2009). Yet this continued can-kicking by the establishment - all of which was made possible by the covid pandemic and lockdowns which served as an all too convenient scapegoat for the unprecedented response that served to propel risk assets (and fiat alternatives such as gold and bitcoin) to all time highs - has come with a price... and an increasingly higher price in fact. As even Bank of America CIO Michael Hartnett admits, Fed's response to the the pandemic "worsened inequality" as the value of financial assets - Wall Street -  relative to economy - Main Street - hit all-time high of 6.3x. And while the Fed was the dynamo that has propelled markets higher ever since the Lehman collapse, last year certainly had its share of breakout moments. Here is a sampling. Gamestop and the emergence of meme stonks and the daytrading apes: In January markets were hypnotized by the massive trading volumes, rolling short squeezes and surging share prices of unremarkable established companies such as consoles retailer GameStop and cinema chain AMC and various other micro and midcap names. What began as a discussion on untapped value at GameStop on Reddit months earlier by Keith Gill, better known as Roaring Kitty, morphed into a hedge fund-orchestrated, crowdsourced effort to squeeze out the short position held by a hedge fund, Melvin Capital. The momentum flooded through the retail market, where daytraders shunned stocks and bought massive out of the money calls, sparking rampant "gamma squeezes" in the process forcing some brokers to curb trading. Robinhood, a popular broker for day traders and Citadel's most lucrative "subsidiary", required a cash injection to withstand the demands placed on it by its clearing house. The company IPOed later in the year only to see its shares collapse as it emerged its business model was disappointing hollow absent constant retail euphoria. Ultimately, the market received a crash course in the power of retail investors on a mission. Ultimately, "retail favorite" stocks ended the year on a subdued note as the trading frenzy from earlier in the year petered out, but despite underperforming the S&P500, retail traders still outperformed hedge funds by more than 100%. Failed seven-year Treasury auction:  Whereas auctions of seven-year US government debt generally spark interest only among specialists, on on February 25 2021, one such typically boring event sparked shockwaves across financial markets, as the weakest demand on record hit prices across the whole spectrum of Treasury bonds. The five-, seven- and 10-year notes all fell sharply in price. Researchers at the Federal Reserve called it a “flash event”; we called it a "catastrophic, tailing" auction, the closest thing the US has had to a failed Trasury auction. The flare-up, as the FT put it, reflects one of the most pressing investor concerns of the year: inflation. At the time, fund managers were just starting to realize that consumer price rises were back with a vengeance — a huge threat to the bond market which still remembers the dire days of the Volcker Fed when inflation was about as high as it is today but the 30Y was trading around 15%. The February auaction also illustrated that the world’s most important market was far less liquid and not as structurally robust as investors had hoped. It was an extreme example of a long-running issue: since the financial crisis the traditional providers of liquidity, a group of 24 Wall Street banks, have pulled back because of higher costs associated with post-2008 capital requirements, while leaving liquidity provision to the Fed. Those banks, in their reduced role, as well as the hedge funds and high-frequency traders that have stepped into their place, have tended to withdraw in moments of market volatility. Needless to say, with the Fed now tapering its record QE, we expect many more such "flash" episodes in the bond market in the year ahead. The arch ego of Archegos: In March 2021 several banks received a brutal reminder that some of family offices, which manage some $6 trillion in wealth of successful billionaires and entrepreneurs and which have minimal reporting requirements, take risks that would make the most serrated hedge fund manager wince, when Bill Hwang’s Archegos Capital Management imploded in spectacular style. As we learned in late March when several high-flying stocks suddenly collapsed, Hwang - a former protege of fabled hedge fund group Tiger Management - had built up a vast pile of leverage using opaque Total Return Swaps with a handful of banks to boost bets on a small number of stocks (the same banks were quite happy to help despite Hwang’s having been barred from US markets in 2013 over allegations of an insider-trading scheme, as he paid generously for the privilege of borrowing the banks' balance sheet). When one of Archegos more recent bets, ViacomCBS, suddenly tumbled it set off a liquidation cascade that left banks including Credit Suisse and Nomura with billions of dollars in losses. Conveniently, as the FT noted, the damage was contained to the banks rather than leaking across financial markets, but the episode sparked a rethink among banks over how to treat these clients and how much leverage to extend. The second coming of cryptos: After hitting an all time high in late 2017 and subsequently slumping into a "crypto winter", cryptocurrencies enjoyed a huge rebound in early 2021 which sent their prices soaring amid fears of galloping inflation (as shown below, and contrary to some financial speculation, the crypto space has traditionally been a hedge either to too much liquidity or a hedge to too much inflation). As a result, Bitcoin rose to a series of new record highs that culminated at just below $62,000, nearly three times higher than their previous all time high. But the smooth ride came to a halt in May when China’s crackdown on the cryptocurrency and its production, or “mining”, sparked the first serious crash of 2021. The price of bitcoin then collapsed as much as 30% on May 19, hitting a low of $30,000 amid a liquidation of levered positions in chaotic trading conditions following a warning from Chinese authorities of tighter curbs ahead. A public acceptance by Tesla chief and crypto cheerleader Elon Musk of the industry’s environmental impact added to the declines. However, as with all previous crypto crashes, this one too proved transitory, and prices resumed their upward trajectory in late September when investors started to price in the launch of futures-based bitcoin exchange traded funds in the US. The launch of these contracts subsequently pushed bitcoin to a new all-time high in early November before prices stumbled again in early December, this time due to a rise in institutional ownership when an overall drop in the market dragged down cryptos as well. That demonstrated the growing linkage between Wall Street and cryptocurrencies, due to the growing sway of large investors in digital markets. China's common prosperity crash: China’s education and tech sectors were one of the perennial Wall Street darlings. Companies such as New Oriental, TAL Education as well as Alibaba and Didi had come to be worth billions of dollars after highly publicized US stock market flotations. So when Beijing effectively outlawed swaths of the country’s for-profit education industry in July 2021, followed by draconian anti-trust regulations on the country's fintech names (where Xi Jinping also meant to teach the country's billionaire class a lesson who is truly in charge), the short-term market impact was brutal. Beijing’s initial measures emerged as part of a wider effort to make education more affordable as part of president Xi Jinping’s drive for "common prosperity" but that quickly raised questions over whether growth prospects across corporate China are countered by the capacity of the government to overhaul entire business models overnight. Sure enough, volatility stemming from the education sector was soon overshadowed by another set of government reforms related to common prosperity, a crackdown on leverage across the real estate sector where the biggest casualty was Evergrande, the world’s most indebted developer. The company, whose boss was not long ago China's 2nd richest man, was engulfed by a liquidity crisis in the summer that eventually resulted in a default in early December. Still, as the FT notes, China continues to draw in huge amounts of foreign capital, pushing the Chinese yuan to end 2021 at the strongest level since May 2018, a major hurdle to China's attempts to kickstart its slowing economy, and surely a precursor to even more monetary easing. Natgas hyperinflation: Natural gas supplanted crude oil as the world’s most important commodity in October and December as prices exploded to unprecedented levels and the world scrambled for scarce supplies amid the developed world's catastrophic transition to "green" energy. The crunch was particularly acute in Europe, which has become increasingly reliant on imports. Futures linked to TTF, the region’s wholesale gas price, hit a record €137 per megawatt hour in early October, rising more than 75%. In Asia, spot liquefied natural gas prices briefly passed the equivalent of more than $320 a barrel of oil in October. (At the time, Brent crude was trading at $80). A number of factors contributed, including rising demand as pandemic restrictions eased, supply disruptions in the LNG market and weather-induced shortfalls in renewable energy. In Europe, this was aggravated by plunging export volumes from Gazprom, Russia’s state-backed monopoly pipeline supplier, amid a bitter political fight over the launch of the Nordstream 2 pipeline. And with delays to the Nord Stream 2 gas pipeline from Russia to Germany, analysts say the European gas market - where storage is only 66% full - a cold snap or supply disruption away from another price spike Turkey's (latest) currency crisis:  As the FT's Jonathan Wheatley writes, Recep Tayyip Erdogan was once a source of strength for the Turkish lira, and in his first five years in power from 2003, the currency rallied from TL1.6 per US dollar to near parity at TL1.2. But those days are long gone, as Erdogan's bizarre fascination with unorthodox economics, namely the theory that lower rates lead to lower inflation also known as "Erdoganomics", has sparked a historic collapse in the: having traded at about TL7 to the dollar in February, it has since fallen beyond TL17, making it the worst performing currency of 2021. The lira’s defining moment in 2021 came on November 18 when the central bank, in spite of soaring inflation, cut its policy rate for the third time since September, at Erdogan’s behest (any central banker in Turkey who disagrees with "Erdoganomics" is promptly fired and replaced with an ideological puppet). The lira recovered some of its losses in late December when Erdogan came up with the "brilliant" idea of erecting the infamous "doom loop" which ties Turkey's balance sheet to its currency. It has worked for now (the lira surged from TL18 against the dollar to TL12, but this particular band aid solution will only last so long). The lira’s problems are not only Erdogan’s doing. A strengthening dollar, rising oil prices, the relentless covid pandemic and weak growth in developing economies have been bad for other emerging market currencies, too, but as long as Erdogan is in charge, shorting the lira remains the best trade entering 2022. While these, and many more, stories provided a diversion from the boring existence of centrally-planned markets, we are confident that the trends observed in recent years will continue: coming years will be marked by even bigger government (because only more government can "fix" problems created by government), higher stock prices and dollar debasement (because only more Fed intervention can "fix" the problems created by the Fed), and a policy flip from monetary and QE to fiscal & MMT, all of which will keep inflation at scorching levels, much to the persistent confusion of economists everywhere. Of course, we said much of this last year as well, but while we got most trends right, we were wrong about one thing: we were confident that China's aggressive roll out of the digital yuan would be a bang - or as we put it "it is very likely that while 2020 was an insane year, it may prove to be just an appetizer to the shockwaves that will be unleashed in 2021 when we see the first stage of the most historic overhaul of the fiat payment system in history" - however it turned out to be a whimper. A big reason for that was that the initial reception of the "revolutionary" currency was nothing short of disastrous, with Chinese admitting they were "not at all excited" about the prospect of yet one more surveillance mechanism for Beijing, because that's really what digital currencies are: a way for central banks everywhere to micromanage and scrutinize every single transaction, allowing the powers that be to demonetize any one person - or whole groups - with the flick of a switch. Then again, while digital money may not have made its triumphant arrival in 2021, we are confident that the launch date has merely been pushed back to 2022 when the rollout of the next monetary revolution is expected to begin in earnest. Here we should again note one thing: in a world undergoing historic transformations, any free press must be throttled and controlled, and over the past year we have seen unprecedented efforts by legacy media and its corporate owners, as well as the new "social media" overlords do everything in their power to stifle independent thought. For us it had been especially "personal" on more than one occasions. Last January, Twitter suspended our account because we dared to challenge the conventional narrative about the source of the Wuhan virus. It was only six months later that Twitter apologized, and set us free, admitting it had made a mistake. Yet barely had twitter readmitted us, when something even more unprecedented happened: for the first time ever (to our knowledge) Google - the world's largest online ad provider and monopoly - demonetized our website not because of any complaints about our writing but because of the contents of our comment section. It then held us hostage until we agreed to implement some prerequisite screening and moderation of the comments section. Google's action was followed by the likes of PayPal, Amazon, and many other financial and ad platforms, who rushed to demonetize and suspend us simply because they disagreed with what we had to say. This was a stark lesson in how quickly an ad-funded business can disintegrate in this world which resembles the dystopia of 1984 more and more each day, and we have since taken measures. One year ago, for the first time in our 13 year history, we launched a paid version of our website, which is entirely ad and moderation free, and offers readers a variety of premium content. It wasn't our intention to make this transformation but unfortunately we know which way the wind is blowing and it is only a matter of time before the gatekeepers of online ad spending block us again. As such, if we are to have any hope in continuing it will come directly from you, our readers. We will keep the free website running for as long as possible, but we are certain that it is only a matter of time before the hammer falls as the censorship bandwagon rolls out much more aggressively in the coming year. That said, whether the story of 2022, and the next decade for that matter, is one of helicopter or digital money, of (hyper)inflation or deflation: what is key, and what we learned in the past decade, is that the status quo will throw anything at the problem to kick the can, it will certainly not let any crisis go to waste... even the deadliest pandemic in over a century. And while many already knew that, the events of 2021 made it clear to a fault that not even a modest market correction can be tolerated going forward. After all, if central banks aim to punish all selling, then the logical outcome is to buy everything, and investors, traders and speculators did just that armed with the clearest backstop guarantee from the Fed, which in the deapths of the covid crash crossed the Rubicon when it formally nationalized the bond market as it started buying both investment grade bonds and junk bond ETFs in the open market. As such it is no longer even a debatable issue if the Fed will buy stocks after the next crash - the only question is when. Meanwhile, for all those lamenting the relentless coverage of politics in a financial blog, why finance appears to have taken a secondary role, and why the political "narrative" has taken a dominant role for financial analysts, the past year showed vividly why that is the case: in a world where markets gyrated, and "rotated" from value stocks to growth and vice versa, purely on speculation of how big the next stimulus out of Washington will be, the narrative over Biden's trillions proved to be one of the biggest market moving events for much of the year. And with the Biden stimulus plan off the table for now, the Fed will find it very difficult to tighten financial conditions, especially if it does so just as the economy is slowing. Here we like to remind readers of one of our favorite charts: every financial crisis is the result of Fed tightening. As for predictions about the future, as the past two years so vividly showed, when it comes to actual surprises and all true "black swans", it won't be what anyone had expected. And so while many themes, both in the political and financial realm, did get some accelerated closure courtesy of China's covid pandemic, dramatic changes in 2021 persisted, and will continue to manifest themselves in often violent and unexpected ways - from the ongoing record polarization in the US political arena, to "populist" upheavals around the developed world, to the gradual transition to a global Universal Basic (i.e., socialized) Income regime, to China's ongoing fight with preserving stability in its gargantuan financial system which is now two and a half times the size of the US. As always, we thank all of our readers for making this website - which has never seen one dollar of outside funding (and despite amusing recurring allegations, has certainly never seen a ruble from the KGB either, although now that the entire Russian hysteria episode is over, those allegations have finally quieted down), and has never spent one dollar on marketing - a small (or not so small) part of your daily routine. Which also brings us to another critical topic: that of fake news, and something we - and others who do not comply with the established narrative - have been accused of. While we find the narrative of fake news laughable, after all every single article in this website is backed by facts and links to outside sources, it is clearly a dangerous development, and a very slippery slope that the entire developed world is pushing for what is, when stripped of fancy jargon, internet censorship under the guise of protecting the average person from "dangerous, fake information." It's also why we are preparing for the next onslaught against independent thought and why we had no choice but to roll out a premium version of this website. In addition to the other themes noted above, we expect the crackdown on free speech to accelerate in the coming year when key midterm elections will be held, especially as the following list of Top 20 articles for 2021 reveals, many of the most popular articles in the past year were precisely those which the conventional media would not touch out of fear of repercussions, which in turn allowed the alternative media to continue to flourish in an orchestrated information vacuum and take significant market share from the established outlets by covering topics which the public relations arm of established media outlets refused to do, in the process earning itself the derogatory "fake news" condemnation. We are grateful that our readers - who hit a new record high in 2021 - have realized it is incumbent upon them to decide what is, and isn't "fake news." * * * And so, before we get into the details of what has now become an annual tradition for the last day of the year, those who wish to jog down memory lane, can refresh our most popular articles for every year during our no longer that brief, almost 11-year existence, starting with 2009 and continuing with 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019 and 2020. So without further ado, here are the articles that you, our readers, found to be the most engaging, interesting and popular based on the number of hits, during the past year. In 20th spot with 600,000 reads, was an article that touched on one of the most defining features of the market: the reflation theme the sparked a massive rally at the start of the year courtesy of the surprise outcome in the Georgia Senate race, where Democrats ended up wining both seats up for grabs, effectively giving the Dems a majority in both the House and the Senate, where despite the even, 50-seat split, Kamala Harris would cast the winning tie-breaker vote to pursue a historic fiscal stimulus. And sure enough, as we described in "Bitcoin Surges To Record High, Stocks & Bonds Battered As Dems Look Set To Take Both Georgia Senate Seats", with trillions in "stimmies" flooding both the economy and the market, not only did retail traders enjoy unprecedented returns when trading meme "stonks" and forcing short squeezes that crippled numerous hedge funds, but expectations of sharply higher inflation also helped push bitcoin and the entire crypto sector to new all time highs, which in turn legitimized the product across institutional investors and helped it reach a market cap north of $3 trillion.  In 19th spot, over 613,000 readers were thrilled to read at the start of September that "Biden Unveils Most Severe COVID Actions Yet: Mandates Vax For All Federal Workers, Contractors, & Large Private Companies." Of course, just a few weeks later much of Biden's mandate would be struck down in courts, where it is now headed to a decision by SCOTUS, while the constantly shifting "scientific" goal posts mean that just a few months later the latest set of CDC regulations have seen regulators and officials reverse the constant drone of fearmongering and are now even seeking to cut back on the duration of quarantine and other lockdown measures amid a public mood that is growing increasingly hostile to the government response. One of the defining political events of 2021 was the so-called "Jan 6 Insurrection", which the for America's conservatives was blown wildly out of proportion yet which the leftist media and Democrats in Congress have been periodically trying to push to the front pages in hopes of distracting from the growing list of failures of the Obama admin. Yet as we asked back in January, "Why Was Founder Of Far-Left BLM Group Filming Inside Capitol As Police Shot Protester?" No less than 614,000 readers found this question worthy of a response. Since then many more questions have emerged surrounding this event, many of which focus on what role the FBI had in organizing and encouraging this event, including the use of various informants and instigators. For now, a response will have to wait at least until the mid-term elections of 2022 when Republicans are expected to sweep one if not both chambers. Linked to the above, the 17th most read article of 2021 with 617,000 views, was an article we published on the very same day, which detailed that "Armed Protesters Begin To Arrive At State Capitols Around The Nation." At the end of the day, it was much ado about nothing and all protests concluded peacefully and without incident: perhaps the FBI was simply spread too thin? 2021 was a year defined by various waves of the covid pandemic which hammered poor Americans forced to hunker down at home and missing on pay, and crippled countless small mom and pop businesses. And yet, it was also a bonanza for a handful of pharma companies such as Pfizer and Moderna which made billions from the sale of "vaccines" which we now know do little if anything to halt the spread of the virus, and are instead now being pitched as palliatives, preventing a far worse clinical outcome. The same pharma companies also benefited from an unconditional indemnity, which surely would come in useful when the full side-effects of their mRNA-based therapies became apparent. One such condition to emerge was myocarditis among a subset of the vaxxed. And while the vaccines continue to be broadly rolled out across most developed nations, one place that said enough was Sweden. As over 620,000 readers found out in "Sweden Suspends Moderna Shot Indefinitely After Vaxxed Patients Develop Crippling Heart Condition", not every country was willing to use its citizens as experimental guniea pigs. This was enough to make the article the 16th most read on these pages, but perhaps in light of the (lack of) debate over the pros and cons of the covid vaccines, this should have been the most read article this year? Moving on to the 15th most popular article, 628,000 readers were shocked to learn that "Chase Bank Cancels General Mike Flynn's Credit Cards." The action, which was taken by the largest US bank due to "reputational risk" echoed a broad push by tech giants to deplatform and silence dissenting voices by literally freezing them out of the financial system. In the end, following widespread blowback from millions of Americans, JPMorgan reversed, and reactivated Flynn's cards saying the action was made in error, but unfortunately this is just one example of how those in power can lock out any dissenters with the flick of a switch. And while democrats cheer such deplatforming today, the political winds are fickle, and we doubt they will be as excited once they find themselves on the receiving end of such actions. And speaking of censorship and media blackouts, few terms sparked greater response from those in power than the term Ivermectin. Viewed by millions as a cheap, effective alternative to offerings from the pharmaceutical complex, social networks did everything in their power to silence any mention of a drug which the Journal of Antibiotics said in 2017 was an "enigmatic multifaceted ‘wonder’ drug which continues to surprise and exceed expectations." Nowhere was this more obvious than in the discussion of how widespread use of Ivermectin beat Covid in India, the topic of the 14th most popular article of 2021 "India's Ivermectin Blackout" which was read by over 653,000 readers. Unfortunately, while vaccines continue to fail upward and now some countries are now pushing with a 4th, 5th and even 6th vaccine, Ivermectin remains a dirty word. There was more covid coverage in the 13th most popular article of 2021, "Surprise Surprise - Fauci Lied Again": Rand Paul Reacts To Wuhan Bombshell" which was viewed no less than 725,000 times. Paul's reaction came following a report which revealed that Anthony Fauci's NIAID and its parent, the NIH, funded Gain-of-Function research in Wuhan, China, strongly hinting that the emergence of covid was the result of illicit US funding. Not that long ago, Fauci had called Paul a 'liar' for accusing him of funding the risky research, in which viruses are genetically modified or otherwise altered to make them more transmissible to humans. And while we could say that Paul got the last laugh, Fauci still remains Biden's top covid advisor, which may explain why one year after Biden vowed he would shut down the pandemic, the number of new cases just hit a new all time high. One hope we have for 2022 is that people will finally open their eyes... 2021 was not just about covid - soaring prices and relentless inflation were one of the most poignant topics. It got so bad that Biden's approval rating - and that of Democrats in general - tumbled toward the end of the year, putting their mid-term ambitions in jeopardy, as the public mood soured dramatically in response to the explosion in prices. And while one can debate whether it was due to supply-issues, such as the collapse in trans-pacific supply chains and the chronic lack of labor to grow the US infrastructure, or due to roaring demand sparked by trillions in fiscal stimulus, but when the "Big Short" Michael Burry warned that hyperinflation is coming, the people listened, and with over 731,000 reads, the 12th most popular article of 2021 was "Michael Burry Warns Weimar Hyperinflation Is Coming."  Of course, Burry did not say anything we haven't warned about for the past 12 years, but at least he got the people's attention, and even mainstream names such as Twitter founder Jack Dorsey agreed with him, predicting that bitcoin will be what is left after the dollar has collapsed. While hyperinflation may will be the endgame, the question remains: when. For the 11th most read article of 2021, we go back to a topic touched upon moments ago when we addressed the full-blown media campaign seeking to discredit Ivermectin, in this case via the D-grade liberal tabloid Rolling Stone (whose modern incarnation is sadly a pale shadow of the legend that house Hunter S. Thompson's unforgettable dispatches) which published the very definition of fake news when it called Ivermectin a "horse dewormer" and claimed that, according to a hospital employee, people were overdosing on it. Just a few hours later, the article was retracted as we explained in "Rolling Stone Issues 'Update' After Horse Dewormer Hit-Piece Debunked" and over 812,000 readers found out that pretty much everything had been a fabrication. But of course, by then it was too late, and the reputation of Ivermectin as a potential covid cure had been further tarnished, much to the relief of the pharma giants who had a carte blanche to sell their experimental wares. The 10th most popular article of 2021 brings us to another issue that had split America down the middle, namely the story surrounding Kyle Rittenhouse and the full-blown media campaign that declared the teenager guilty, even when eventually proven innocent. Just days before the dramatic acquittal, we learned that "FBI Sat On Bombshell Footage From Kyle Rittenhouse Shooting", which was read by over 822,000 readers. It was unfortunate to learn that once again the scandal-plagued FBI stood at the center of yet another attempt at mass misinformation, and we can only hope that one day this "deep state" agency will be overhauled from its core, or better yet, shut down completely. As for Kyle, he will have the last laugh: according to unconfirmed rumors, his numerous legal settlements with various media outlets will be in the tens if not hundreds of millions of dollars.  And from the great US social schism, we again go back to Covid for the 9th most popular article of 2021, which described the terrifying details of one of the most draconian responses to covid in the entire world: that of Australia. Over 900,000 readers were stunned to read that the "Australian Army Begins Transferring COVID-Positive Cases, Contacts To Quarantine Camps." Alas, the latest surge in Australian cases to nosebleed, record highs merely confirms that this unprecedented government lockdown - including masks and vaccines - is nothing more than an exercise in how far government can treat its population as a herd of sheep without provoking a violent response.  The 8th most popular article of 2021 looks at the market insanity of early 2021 when, at the end of January, we saw some of the most-shorted, "meme" stocks explode higher as the Reddit daytrading horde fixed their sights on a handful of hedge funds and spent billions in stimmies in an attempt to force unprecedented ramps. That was the case with "GME Soars 75% After-Hours, Erases Losses After Liquidity-Constrained Robinhood Lifts Trading Ban", which profiled the daytrading craze that gave an entire generation the feeling that it too could win in these manipulated capital markets. Then again, judging by the waning retail interest, it is possible that the excitement of the daytrading army is fading as rapidly as it first emerged, and that absent more "stimmies" markets will remain the playground of the rich and central banks. Kyle Rittenhouse may soon be a very rich man after the ordeal he went through, but the media's mission of further polarizing US society succeeded, and millions of Americans will never accept that the teenager was innocent. It's also why with just over 1 million reads, the 7th most read article on Zero Hedge this year was that "Portland Rittenhouse Protest Escalates Into Riot." Luckily, this is not a mid-term election year and there were no moneyed interests seeking to prolong this particular riot, unlike what happened in the summer of 2020... and what we are very much afraid will again happen next year when very critical elections are on deck.  With just over 1.03 million views, the 6th most popular post focused on a viral Twitter thread on Friday from Dr Robert Laone, which laid out a disturbing trend; the most-vaccinated countries in the world are experiencing  a surge in COVID-19 cases, while the least-vaccinated countries were not. As we originally discussed in ""This Is Worrying Me Quite A Bit": mRNA Vaccine Inventor Shares Viral Thread Showing COVID Surge In Most-Vaxxed Countries", this trend has only accelerated in recent weeks with the emergence of the Omicron strain. Unfortunately, instead of engaging in a constructive discussion to see why the science keeps failing again and again, Twitter's response was chilling: with just days left in 2021, it suspended the account of Dr. Malone, one of the inventors of mRNA technology. Which brings to mind something Aaron Rogers said: "If science can't be questioned it's not science anymore it's propaganda & that's the truth." In a year that was marked a flurry of domestic fiascoes by the Biden administration, it is easy to forget that the aged president was also responsible for the biggest US foreign policy disaster since Vietnam, when the botched evacuation of Afghanistan made the US laughing stock of the world after 12 US servicemembers were killed. So it's probably not surprising that over 1.1 million readers were stunned to watch what happened next, which we profiled in the 5th most popular post of 2021, where in response to the Afghan trajedy, "Biden Delivers Surreal Press Conference, Vows To Hunt Down Isis, Blames Trump." One person watching the Biden presser was Xi Jinping, who may have once harbored doubts about reclaiming Taiwan but certainly does not any more. The 4th most popular article of 2021 again has to do with with covid, and specifically the increasingly bizarre clinical response to the disease. As we detailed in "Something Really Strange Is Happening At Hospitals All Over America" while emergency rooms were overflowing, it certainly wasn't from covid cases. Even more curiously, one of the primary ailments leading to an onslaught on ERs across the nation was heart-related issues, whether arrhytmia, cardiac incidents or general heart conditions. We hope that one day there will be a candid discussion on this topic, but until then it remains one of the topics seen as taboo by the mainstream media and the deplatforming overlords, so we'll just leave it at that. We previously discussed the anti-Ivermectin narrative that dominated the mainstream press throughout 2021 and the 3rd most popular article of the year may hold clues as to why: in late September, pharma giant Pfizer and one of the two companies to peddle an mRNA based vaccine, announced that it's launching an accelerated Phase 2/3 trial for a COVID prophylactic pill designed to ward off COVID in those may have come in contact with the disease. And, as we described in "Pfizer Launches Final Study For COVID Drug That's Suspiciously Similar To 'Horse Paste'," 1.75 million readers learned that Pfizer's drug shared at least one mechanism of action as Ivermectin - an anti-parasitic used in humans for decades, which functions as a protease inhibitor against Covid-19, which researchers speculate "could be the biophysical basis behind its antiviral efficiency." Surely, this too was just another huge coincidence. In the second most popular article of 2021, almost 2 million readers discovered (to their "shock") that Fauci and the rest of Biden's COVID advisors were proven wrong about "the science" of COVID vaccines yet again. After telling Americans that vaccines offer better protection than natural infection, a new study out of Israel suggested the opposite is true: natural infection offers a much better shield against the delta variant than vaccines, something we profiled in "This Ends The Debate' - Israeli Study Shows Natural Immunity 13x More Effective Than Vaccines At Stopping Delta." We were right about one thing: anyone who dared to suggest that natural immunity was indeed more effective than vaccines was promptly canceled and censored, and all debate almost instantly ended. Since then we have had tens of millions of "breakout" cases where vaccinated people catch covid again, while any discussion why those with natural immunity do much better remains under lock and key. It may come as a surprise to many that the most read article of 2021 was not about covid, or Biden, or inflation, or China, or even the extremely polarized US congress (and/or society), but was about one of the most long-suffering topics on these pages: precious metals and their prices. Yes, back in February the retail mania briefly targeted silver and as millions of reddit daytraders piled in in hopes of squeezing the precious metal higher, the price of silver surged higher only to tumble just as quickly as it has risen as the seller(s) once again proved more powerful than the buyers. We described this in "Silver Futures Soar 8%, Rise Above $29 As Reddit Hordes Pile In", an article which some 2.4 million gold and silver bugs read with hope, only to see their favorite precious metals slump for much of the rest of the year. And yes, the fact that both gold and silver ended the year sharply lower than where they started even though inflation hit the highest level in 40 years, remains one of the great mysteries of 2021. With all that behind us, and as we wave goodbye to another bizarre, exciting, surreal year, what lies in store for 2022, and the next decade? We don't know: as frequent and not so frequent readers are aware, we do not pretend to be able to predict the future and we don't try despite endless allegations that we constantly predict the collapse of civilization: we leave the predicting to the "smartest people in the room" who year after year have been consistently wrong about everything, and never more so than in 2021 (even the Fed admitted it is clueless when Powell said it was time to retire the term "transitory"), which destroyed the reputation of central banks, of economists, of conventional media and the professional "polling" and "strategist" class forever, not to mention all those "scientists" who made a mockery of the "expertise class" with their bungled response to the covid pandemic. We merely observe, find what is unexpected, entertaining, amusing, surprising or grotesque in an increasingly bizarre, sad, and increasingly crazy world, and then just write about it. We do know, however, that after a record $30 trillion in stimulus was conjured out of thin air by the world's central banks and politicians in the past two years, the attempt to reverse this monetary and fiscal firehose in a world addicted to trillions in newly created liquidity now that central banks are freaking out after finally getting ot the inflation they were hoping to create for so long, will end in tears. We are confident, however, that in the end it will be the very final backstoppers of the status quo regime, the central banking emperors of the New Normal, who will eventually be revealed as fully naked. When that happens and what happens after is anyone's guess. But, as we have promised - and delivered - every year for the past 13, we will be there to document every aspect of it. Finally, and as always, we wish all our readers the best of luck in 2022, with much success in trading and every other avenue of life. We bid farewell to 2021 with our traditional and unwavering year-end promise: Zero Hedge will be there each and every day - usually with a cynical smile - helping readers expose, unravel and comprehend the fallacy, fiction, fraud and farce that defines every aspect of our increasingly broken system. Tyler Durden Sun, 01/02/2022 - 03:44.....»»

Category: personnelSource: nytJan 2nd, 2022

Fireworks To Go On?

S&P 500 sharply extended gains, and credit markets indicate some continuation even if by pure inertia. A trend in place, stays in place until reversed – and yesterday‘s upswing was sufficiently supported by the credit markets. The late day retreat in HYG is an obvious warning of a pause possibly coming next, but not of […] S&P 500 sharply extended gains, and credit markets indicate some continuation even if by pure inertia. A trend in place, stays in place until reversed – and yesterday‘s upswing was sufficiently supported by the credit markets. The late day retreat in HYG is an obvious warning of a pause possibly coming next, but not of a reversal – the improvements in market breadth speak for themselves. So, I‘m looking for a lean day today, and I‘m keenly watching bonds and cyclicals such as financials for further short-term direction clues. 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 .af-body.af-standards 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); Q3 2021 hedge fund letters, conferences and more While yesterday‘s upswing was driven by tech, the daily rise in yields and inflation expectations (however modest) was balanced out by still more yield curve compression. The risk-on turn in credit markets isn‘t over, and the key question is whether HYG can extend gains or at least go only sideways for a while. Today‘s key premarket news propelling risk assets up, was about Pfizer extolling its three-dose alleged efficiency against Omicron – even though the news was sold into shortly thereafter, it has the power to buy more time and provide fuel for stocks and commodities. The copper weakness remains the only watchout in the short term, and silver sluggishness reflects lack of imminent inflation fears. As if the current prices accurately reflected above ground stockpiles and yearly mining output minus consumption. It‘s the same story in the red metal, by the way. Patience in the precious metals – it‘s about Fed either relenting, or placing inordinate amount of stress on the real economy, which would take time. Spring 2022 most probably would bring greater PMs gains than 2021 with its fits and starts – aka when inflation starts to bite the mainstream narratives and stocks, some more. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook S&P 500 gapped higher, and is once again approaching ATHs. Hold your horses though for it would take some time to get there. I would prefer to see broader participation within value, which isn‘t totally there at the moment. It‘s improving, but still. Credit Markets HYG upswing was considerably sold into, and that spells some consolidation ahead. The degree to which it spills over into stocks, remains to be seen. Gold, Silver and Miners Precious metals are still looking stable, and ever so slowly improving after the Fed hawkish turn hit. The central bank and real yields projections hold the key, but the countdown to higher prices is firmly on. Crude Oil Crude oil upswing indeed continued, and black gold looks set to consolidate gains unless value stocks spring some more to life later today. Anyway, the medium-term chart remains bullish. Copper Copper is another reason why I‘m not overly bullish for today – the red metal‘s base building looks to need a bit more time to play out. Bitcoin and Ethereum Bitcoin and Ethereum are still base building, and looking vulnerable. While a downswing isn‘t guaranteed, it can come and turn out to be sharp. Summary S&P 500 is likely to consolidate recent strong gain, not accelerating the surge today. The bulls within risk-on assets look to be slowly gaining the upper hand, and the opening part of today‘s analysis describes it‘s not a one-way street to fresh highs as the Fed has turned from a tailwind to a headwind. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals. Thank you, Monica Kingsley Stock Trading Signals Gold Trading Signals Oil Trading Signals Copper Trading Signals Bitcoin Trading Signals www.monicakingsley.co mk@monicakingsley.co All essays, research and information represent analyses and opinions of Monica Kingsley that are based on available and latest data. Despite careful research and best efforts, it may prove wrong and be subject to change with or without notice. Monica Kingsley does not guarantee the accuracy or thoroughness of the data or information reported. Her content serves educational purposes and should not be relied upon as advice or construed as providing recommendations of any kind. Futures, stocks and options are financial instruments not suitable for every investor. Please be advised that you invest at your own risk. Monica Kingsley is not a Registered Securities Advisor. By reading her writings, you agree that she will not be held responsible or liable for any decisions you make. Investing, trading and speculating in financial markets may involve high risk of loss. Monica Kingsley may have a short or long position in any securities, including those mentioned in her writings, and may make additional purchases and/or sales of those securities without notice. 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Category: blogSource: valuewalkDec 8th, 2021

Futures Jump In Volatile Session Dragged By Latest Twists In Omicron Saga

Futures Jump In Volatile Session Dragged By Latest Twists In Omicron Saga Much of the overnight session was a snooze fest with stocks drifting first higher then lower after surging on Tuesday, as the narrative meandered from "omicron fears ease" optimism to "vaccines won't work" pessimism, before futures took a sudden leg lower, dropping into the red just after 530am ET, following news that UK's Boris Johnson would introduce new restrictions in England to curb Omicron spread, sparking fears that Omicron is more dangerous that expected (and than futures reflected). However, this episode of pessimism proved short-lived because just an hour later, the WSJ confirmed that Omicron is really just a pitch for covid booster shots when it reported that even though the covid vaccine loses significant effectiveness against Omicron in an early study, this is miraculously reversed with a booster shot as three doses of the vaccine were able to neutralize the variant in an initial laboratory study, and the companies said two doses may still protect against severe disease. Futures quickly shot up on the news, spiking above the gamma "all clear" level of 4,700 in a move best summarized with the following chart. And so, after going nowhere, S&P futures climbed for a third day, last seen 12 points, or 0.3% higher, just around 4,700 after rising the most since March on Tuesday. Europe’s Stoxx 600 Index rose following the biggest jump in more than a year. In addition to the omicron soap opera, which as we noted yesterday turns out was just one staged covid booster shot advertisement (because Pfizer and Moderna can always do with a bigger yacth), sentiment was also lifted by Chinese authorities' reversal to "easing mode" and aggressive efforts to limit the fallout from property market woes which lifted risk assets in Asia even as key debt deadlines at China Evergrande Group and Kaisa Group Holdings Ltd. passed without any sign of payment. "Clearly in the very short term uncertainty has risen over the Omicron virus... but overall at this stage we do not believe it will derail the macro picture in the medium-term," said Jeremy Gatto, multi-asset portfolio manager at Unigestion. Treasury yields were little changed after rising across the curve Tuesday. The VIX spiked first on the FT news, then dropped back into the red, while the dollar was flat and crude rose after turning red. Besides macro, micro was also in play and here are some other notable premarket movers Apple (AAPL US) ticks 1% higher in premarket trading following a Nikkei report that the tech giant told suppliers to speed up iPhone output for Nov.-Jan, citing people it didn’t identify. Amazon.com (AMZN US) shares in focus after an Amazon Web Services outage is wreaking havoc on the e-commerce giant’s delivery operation Stitch Fix (SFIX US) tumbles 25% in U.S. premarket trading after a 2Q forecast miss that analysts called “surprising,” while customer additions also disappointed Pfizer (PFE US) shares drop 2% in U.S. premarket trading after an early study showed that the company’s vaccine provides less immunity to the omicron variant Dare Bioscience (DARE US) soars 41% in premarket trading after Xaciato gets FDA approval for treating bacterial vaginosis EPAM Systems (EPAM US) soars 8% in premarket after S&P Dow Jones Indices said co. will replace Kansas City Southern in the S&P 500 effective prior to the opening of trading on Dec. 14 Goodyear Tire & Rubber (GT US) upgraded to buy from hold and target boosted to Street-high $32 from $29 at Deutsche Bank with the company seen as a major beneficiary from the shift to electric vehicles. Shares up 4.3% in premarket trading NXP Semiconductor (NXPI US) shares slide 2.2% in U.S. premarket trading after the chipmaker got a new sell rating at UBS Dave & Buster’s (PLAY US) gained 3.5% postmarket after the dining and entertainment company reported EPS that beat the average analyst estimate and authorized a $100 million share buyback program "Every day that passes without a wave of severe cases driven by Omicron is offering more hope that this won't be the curveball to throw the recovery off course," wrote Deutsche Bank strategist Jim Reid in a note to clients. In Europe, the Stoxx Europe 600 Index initially drifted both higher and lower then bounced 0.3% on the favorable Pfizer and BioNTech news one day after posting its bigger surge in a year. European benchmark index earlier rose as much as 2%, dropped 2.1%. Health care sub-index leads gains, rising 1.2%, followed by travel stocks. The Stoxx 600 closed 2.5% higher on Tuesday, biggest gain since November 2020 Earlier in the session, Asia stocks also rose for a second day as concerns about the omicron variant and China’s economic slowdown eased. The MSCI AsiaPacific Index climbed as much as 0.9% after capping its biggest one-day gain in more than three months on Tuesday. Technology and health-care shares provided the biggest boosts. Benchmarks in New Zealand and India -- where the central bank held rates at a record low -- were among the day’s best performers. “The biggest point appealing to investors is that the Omicron variant doesn’t seem to be too fatal,” which is encouraging to those who had been going short to close out their positions, said Tomoichiro Kubota, a senior market analyst at Matsui Securities in Tokyo. “Worry that the Chinese economy will lose its growth momentum has subsided quite a bit.” Thus far, Omicron cases haven’t overwhelmed hospitals while vaccine developments indicate some promise in dealing with the variant. While vaccines like the one made by Pfizer and BioNTech SE may be less powerful against the new strain, protection can be fortified with boosters. The two-day rally in the Asian stock benchmark marks a sharp turnaround following weeks of declines since mid-November. Stocks in China also climbed for a second day. The nation’s central bank said Monday it will cut the amount of cash most banks must keep in reserve from Dec. 15, providing a liquidity boost and helping restore investor confidence In FX, news on the Omicron variant rippled through G-10 currencies after a report the Pfizer vaccine could neutralize the Omicron variant boosted risk appetite. The pound underperformed other Group-of-10 peers, extending declines after reports that the U.K. government is poised to introduce new Covid-19 restrictions.  A gauge of the dollar’s strength fluctuated as Treasuries pare gains and stocks rally after a report that said Pfizer and BioNTech claim three vaccine doses neutralize the omicron variant. EUR/USD rose 0.1% to 1.1277; USD/NOK falls as much as 0.8% to 8.9459, lowest since Nov. 25 Sterling fell against the euro and the dollar, as traders pare bets on the path of Bank of England rate hikes following reports that the U.K. could introduce fresh Covid-19 restrictions such as working from home and vaccine passports for large venues. Money markets pare rate hike bets, with just six basis points of interest rate hikes priced in for the BOE meeting next week. GBP/USD falls as much as 0.6% to 1.3163, testing the key level of 1.3165, the 38.2% Fibonacci retracement of gains since March 2020. EUR/GBP gains as much as 0.7% to 0.85695, the highest since Nov. 11. “The market will probably see this as more U.K. specific and therefore an issue for the pound at least in the short term,” said Stuart Bennett, FX strategist at Santander. In rates, Treasuries were mixed with markets reacting in a risk-on manner to the Dow Jones report that Pfizer and BioNTech claim three vaccine doses neutralize the omicron variant. Yields remain richer by less than 1bp across long-end of the curve while front-end trades cheaper on the day, flattening curve spreads. Session’s focal points include $36b 10-year note reopening at 1pm ET, following Tuesday’s strong 3-year note auction. Treasury 10-year yields around 1.475%, near flat on the day; gilts outperform slightly after Financial Times report that further Covid restrictions will be announced imminently to curb the variant’s spread. U.S. 2-year yields were cheaper by 1bp on the day, rose to new 2021 high following Pfizer vaccine report; 2s10s spread erased a flattening move In commodities, crude futures turned red, WTI falling 0.8%, popping back below $72. Spot gold holds Asia’s modest gains, adding $8 to trade near $1,792/oz. Looking at the day ahead, and Olaf Scholz is expected to become German Chancellor in a Bundestag vote today. From central banks, the Bank of Canada will be deciding on rates, and we’ll also hear from ECB President Lagarde, Vice President de Guindos and the ECB’s Schnabel. Finally, data releases include the JOLTS job openings from the US for October. Market Snapshot S&P 500 futures up 0.2% to 4,693.75 STOXX Europe 600 little changed at 480.55 MXAP up 0.7% to 194.84 MXAPJ up 0.6% to 632.78 Nikkei up 1.4% to 28,860.62 Topix up 0.6% to 2,002.24 Hang Seng Index little changed at 23,996.87 Shanghai Composite up 1.2% to 3,637.57 Sensex up 1.8% to 58,654.25 Australia S&P/ASX 200 up 1.3% to 7,405.45 Kospi up 0.3% to 3,001.80 Brent Futures down 0.5% to $75.04/bbl Gold spot up 0.3% to $1,790.33 U.S. Dollar Index down 0.17% to 96.20 German 10Y yield little changed at -0.38% Euro up 0.2% to $1.1286 Brent Futures down 0.5% to $75.04/bbl Top Overnight News from Bloomberg The omicron variant of Covid-19 must inflict significant damage on the euro-area economy for European Central Bank Governing Council member Martins Kazaks to back additional stimulus “The current phase of higher inflation could last longer than expected only some months ago,” ECB vice president Luis de Guindos says at event The earliest studies on omicron are in and the glimpse they’re providing is cautiously optimistic: while vaccines like the one made by Pfizer Inc. and BioNTech SE may be less powerful against the new variant, protection can be fortified with boosters U.K. Prime Minister Boris Johnson is set to announce new Covid-19 restrictions in England, known as “Plan B,” to stop the spread of the Omicron variant, the Financial Times reported, citing three senior Whitehall officials familiar with the matter. French economic activity will continue to rise in December, despite another wave of the Covid-19 pandemic and fresh uncertainty over the omicron variant, according the Bank of France The Kingdom of Denmark will sell a sovereign green bond for the first time next month to help the Nordic nation meet one of the world’s most ambitious climate targets Tom Hayes, the former UBS Group AG and Citigroup Inc. trader who became the face of the sprawling Libor scandal, has lost his bid to appeal his U.K. criminal conviction Poland is poised for a hefty increase in interest rates after a spike in inflation to a two- decade high convinced central bankers that spiraling price growth isn’t transitory. Of 32 economists surveyed by Bloomberg, 20 expect a 50 basis-point hike to 1.75% today and 10 see the rate rising to 2%. The other two expect a 25 basis-point increase Australia is weighing plans for a central bank-issued digital currency alongside the regulation of the crypto market as it seeks to overhaul how the nation’s consumers and businesses pay for goods and services Bank of Japan Deputy Governor Masayoshi Amamiya dropped a strong hint that big firms are in less need of funding support, a comment that will likely fuel speculation the BOJ will scale back its pandemic buying of corporate bonds and commercial paper A detailed summary of global markets courtesy of Newsquawk Asian equity markets traded positively as the region took impetus from the global risk momentum following the tech-led rally in the US, where Apple shares rose to a record high and amid increased optimism that Omicron could be less dangerous than prior variants. This was after early hospitalisation data from South Africa showed the new variant could result in less severe COVID and NIH's Fauci also suggested that Omicron was 'almost certainly' not more severe than Delta, although there were some slight headwinds in late Wall Street trade after a small study pointed to reduced vaccine efficacy against the new variant. The ASX 200 (+1.3%) was underpinned in which tech led the broad gains across sectors as it found inspiration from the outperformance of big tech stateside, and with energy bolstered by the recent rebound in underlying oil prices. The Nikkei 225 (+1.4%) conformed to the upbeat mood although further advances were capped after USD/JPY eased off the prior day’s highs and following a wider-than-expected contraction to the economy with the final annualised Q3 GDP at -3.6% vs exp. -3.1%. The Hang Seng (+0.1%) and Shanghai Comp. (+1.2%) were less decisive and initially lagged behind their peers as sentiment was mired by default concerns due to the failure by Evergrande to pay bondholders in the lapsed 30-day grace period on two USD-denominated bond payments and with Kaisa Group in a trading halt after missing the deadline for USD 400mln in offshore debt which didn’t bode well for its affiliates. Furthermore, China Aoyuan Property Group received over USD 650mln in repayment demands and warned it may not be able to meet debt obligations, while a subdued Hong Kong debut for Weibo shares which declined around 6% from the offer price added to the glum mood for Hong Kong’s blue-chip tech stocks, as did reports that China is to tighten rules for tech companies seeking foreign funding. Finally, 10yr JGBs languished after spillover selling from T-notes and due to the heightened global risk appetite, but with downside stemmed by support at the key psychological 152.00 level and amid the presence of the BoJ in the market today for over JPY 1.0tln of JGBs. Top Asian News China Clean Car Sales Spike as Consumers Embrace Electric Gold Edges Higher as Traders Weigh Vaccine Efficacy, Geopolitics Paint Maker Avia Avian Falls in Debut After $763 Million IPO Tokyo Prepares to Introduce Same-Sex Partnerships Next Year Equities in Europe shifted to a lower configuration after a mixed open (Euro Stoxx 50 -0.7%; Stoxx 600 -0.1%) as sentiment was dented by rumours of tightening COVID measures in the UK. Markets have been awaiting the next catalyst to latch onto for direction amidst a lack of fresh fundamentals. US equity futures have also been dented but to a lesser extent, with the YM (-0.1%) and ES (Unch) straddling behind the NQ (+0.2%) and RTY (+0.2%). Sources in recent trade suggested an 85% chance of the UK implementing COVID Plan B, according to Times' Dunn; reports indicate such restrictions could be implemented on Thursday, with the potential for an announcement today. In terms of the timings, the UK cabinet is penciled in for 15:45GMT and presser for 17:30GMT on Plan B, according to BBC's Goodall. Note, this will not be a formal lockdown but more so work-from-home guidance, vaccine passports for nightlife and numerical restrictions on indoor/outdoor gatherings. APAC closed in the green across the board following the tech-led rally in the US. The upside overnight was attributed to a continuation of market optimism after early hospitalisation data from South Africa showed the new variant could result in less severe COVID, albeit after a small study pointed to reduced vaccine efficacy against the new variant. Participants will be closely watching any updates from the vaccine-makers, with the BioNTech CEO stating the drugmaker has data coming Wednesday or Thursday related to the new COVID-19 variant, thus markets will be eyeing a potential update this week ahead of the Pfizer investor call next Friday. Back to European, the UK’s FTSE 100 (Unch) and the Swiss SMI (+0.8%) are largely buoyed by their defensive stocks, with sectors seeing a defensive formation, albeit to a slightly lesser extent vs the open. Healthcare retains its top spot closely followed by Food & Beverages, although Personal & Household Goods and Telecoms have moved down the ranks. On the flip side, Retail, Banks and Travel & Leisure trade at the bottom of the bunch, whilst Tech nursed some earlier losses after opening as the lagging sector. In terms of individual movers, Nestle (+1.8%) is bolstered after announcing a CHF 20bln share repurchase programme alongside a stake reduction in L'Oreal (+1.0%) to 20.1% from 23.3% - worth some EUR 9bln. L’Oreal has shrugged off the stake sale and conforms to the firm sectoral performance across the Personal & Household Goods. Meanwhile, chip names are under pressure after Nikkei sources reported that Apple (+0.8% pre-market) was forced to scale back the total output target for 2021, with iPhone and iPad assembly halted for several days due to supply chain constraints and restrictions on the use of power in China, multiple sources told Nikkei. STMicroelectronics (-1.7%) and Infineon (-5.0%) are among the losers, with the latter also weighed on by a broker downgrade at JPM. Top European News ECB’s Kazaks Sets High Bar for Omicron-Driven Extra Stimulus Biden Is Left Guessing Over Putin’s Ultimate Aim in Ukraine Byju’s Buys Austria’s GeoGebra to Bolster Online Math Courses Scholz Elected by Parliament to Take Charge as German Chancellor In FX, the Dollar index continues to hold above 96.000, but bounces have become less pronounced and the range so far today is distinctly narrower (96.285-130) in fitting with the generally restrained trade in pairings within the basket and beyond, bar a few exceptions. Price action suggests a relatively muted midweek session unless a major game-changer arrives and Wednesday’s agenda does not bode that well in terms of catalysts aside from JOLTS and the BoC policy meeting before the second leg of this week’s refunding in the form of Usd 36 bn 10 year notes. AUD/EUR - Notwithstanding the largely contained currency moves noted above, the Aussie is maintaining bullish momentum on specific factors including strength in iron ore prices and encouraging Chinese data plus PBoC easing that should have a positive knock-on effect for one of its main trading partners even though diplomatic relations between the two nations are increasingly strained. Aud/Usd has also cleared a couple of technical hurdles on the way up to circa 0.7143 and Aud/Nzd is firmer on the 1.0500 handle ahead of the RBA’s latest chart pack release and a speech by Governor Lowe. Elsewhere, the Euro has regained composure after its sub-1.1250 tumble on Tuesday vs the Buck and dip through 0.8500 against the Pound, but still faces psychological resistance at 1.1300 and the 21 DMA that comes in at 1.1317 today, while Eur/Gbp needs to breach the 100 DMA (0.8513) convincingly or close above to confirm a change in direction for the cross from a chart perspective. CHF/CAD/JPY/GBP/NZD - All sitting tight in relation to their US counterpart, with the Franc paring some declines between 0.9255-30 parameters and the Loonie straddling 1.2650 in the run up to the aforementioned BoC that is widely seen as a non-event given no new MPR or press conference, not to mention the actual changes in QE and rate guidance last time. Nevertheless, implied volatility is quite high via a 63 pip breakeven for Usd/Cad. Meanwhile, Sterling lost grip of the 1.3200 handle amidst swirling speculation about the UK reverting to plan B and more Tory MPs calling for PM Johnson to resign, the Yen is rotating around 113.50 eyeing broad risk sentiment and US Treasury yields in context of spreads to JGBs, and the Kiwi is lagging after touching 0.6800 awaiting independent impetus from NZ manufacturing sales for Q3. SCANDI/EM - The Nok extended its advantage/outperformance against the Sek as Brent rebounded towards Usd 76/brl in early trade and Riksbank’s Jansson retained reservations about flagging a repo rate hike at the end of the forecast horizon, while the Mxn and Rub also initially derived some support from oil with the latter also taking on board latest hawkish talk from the CBR. However, the Cny and Cnh are outpacing their rivals again with some assistance from a firmer PBoC midpoint fix to hit multi-year peaks vs the Usd and probe 6.3500 ahead of option expiry interest at 6.3000 and a Fib retracement at 6.2946, in stark contrast to the Try that is unwinding recent recovery gains with no help from the latest blast from Turkish President Erdogan - see 10.00GMT post in the Headline Feed for more. Conversely, the Czk has taken heed of CNB’s Holub underscoring tightening signals and expectations for the next rate convene and the Pln and Brl are anticipating hikes from the NBP and BCB. In commodities, crude futures have been hit on the prospect of imminent COVID-related measures in the UK, albeit the measures do not involve lockdowns. Brent and WTI front month futures slipped from European highs to breach APAC lows. The former dipped below USD 74.50/bbl from a USD 76.00/bbl European peak while its WTI counterpart tested USD 71.00/bbl from USD 72.50/bbl at best. Overnight the benchmarks traded on either side the USD 75/bbl mark and just under USD 72/bbl after the weekly Private Inventories printed a larger-than-expected draw (-3.6mln vs exp. -3.1mln), albeit the internals were less bullish. Yesterday also saw the release of the EIA STEO, cut its 2021 world oil demand growth forecast by an insignificant 10k BPD but raised the 2022 metric by 200k BPD – with the IEA and OPEC monthly reports poised to be released next week. On the vaccine front, a small preliminary study of 12 people showed a 40x reduction in neutralization capacity of the Pfizer vaccine against Omicron, but early hospitalisation data from South Africa showed the new variant could result in less severe COVID. BioNTech CEO said they have data coming in on Wednesday or Thursday related to the new Omicron variant. The geopolitical space is also worth keeping on the radar, with US President Biden yesterday warning Russian President Putin that gas exports via Nord Stream 2 will be targeted and more troops will be deployed if he orders an invasion of Ukraine. Further, reports suggested, an Indian army helicopter crashed in Tamil Nadu, with Chief of Defence staff reportedly on board, according to Sputnik. Note, Tamil Nadu is located towards the south of the country and away from conflict zones. Elsewhere spot gold was supported by the overnight pullback in the Dollar, but the recent risk aversion took the yellow metal above the 100 DMA around USD 1,790/oz, with nearby upside levels including the 200 DMA (1,792/oz) and the 50 DMA (1,794/oz). Copper prices meanwhile consolidated within a tight range, with LME copper holding onto a USD 9,500/t handle (just about). Dalian iron ore extended on gains in a continuation of the upside seen in recent trade. US Event Calendar 7am: Dec. MBA Mortgage Applications, prior -7.2% 10am: Oct. JOLTs Job Openings, est. 10.5m, prior 10.4m DB's Jim Reid concludes the overnight wrap A reminder that we are currently conducting our special 2022 survey. We ask about rates, equities, bond yields and the path of covid in 2022, amongst other things, and also return to a festive question we asked in 2019, namely your favourite ever Christmas songs. The link is here and it’ll be open until tomorrow. All help filling in very much appreciated. My optimism for life has been shattered this morning. Not from the markets or the virus but just as I woke this morning England cricketers finally surrendered and collapsed in a heap on the first day of the Ashes - one the oldest international rivalries in sport. It was all I could do not to turn round and go back to bed. However out of duty I’m soldering on. After the twins nativity play went without incident yesterday, this morning it’s Maisie’s turn. Given she’s in a wheelchair at the moment she can’t get on stage so they’ve given her a solo singing spot at the start. I’m going so I can bring a bucket for all my wife’s tears as she sings!! If I shed a tear I’ll pretend it’s because of the cricket. The global market rebound continued to gather strength yesterday as investors became increasingly optimistic that the Omicron variant wouldn’t prove as bad as initially feared. To be honest, it was more the absence of bad news rather than any concrete good news helping to drive sentiment. Late in the US session we did see some headlines suggesting that the Pfizer vaccine may provide some defence against Omicron but also that the new variant does evade some of the immunity produced by this vaccine. This report of the small study (12 people!!) from South Africa lacked substance but you could take positives and negatives from it. More information is clearly needed. For the markets though, every day that passes without a wave of severe cases driven by Omicron is offering more hope that this won’t be the curveball to throw the recovery off course. Indeed, to get a sense of the scale of the market rebound, both the S&P 500 and the STOXX 600 in Europe have now clocked in their strongest 2-day performances of 2021 so far, with the indices up by +3.27% and +3.76% respectively since the start of the week. Meanwhile, the VIX fell below 25 for the first time in a week. On the day, the S&P 500 (+2.07%) put in its strongest daily performance since March, whilst the STOXX 600 (+2.45%) saw its strongest daily performance since the news that the Pfizer vaccine was successful in trials back in November 2020. Once again the gains were incredibly broad-based, albeit with cyclical sectors leading the way. The Nasdaq (+3.03%) outperformed the S&P 500 for the first time in a week as tech shares led the rally. Small cap stocks also had a strong day, with the Russell 2000 up +2.28%, on the back of Omicron optimism. This recovery in risk assets was also seen in the bounceback in oil prices, with Brent crude (+3.23%) and WTI (+3.68%) now both up by more than $5.5/bbl since the start of the week, which puts them well on the way to ending a run of 6 consecutive weekly declines. For further evidence of this increased optimism, we can also look at the way that investors have been dialling back up their estimates of future rate hikes from the Fed, with yesterday seeing another push in this direction. Before the Omicron news hit, Fed fund futures were fully pricing in an initial hike by the June meeting, but by the close on the Monday after Thanksgiving they’d moved down those odds to just 61% in June, with an initial hike not fully priced until September. Fast forward just over a week however, and we’re now not only back to pricing in a June hike, but the odds of a May hike are standing at +78.8%, which is actually higher than the +66.1% chance priced before the Omicron news hit. A reminder that we’re just a week away now from the Fed’s next decision, where it’s hotly anticipated they could accelerate the pace at which they’ll taper their asset purchases. With investors bringing forward their bets on monetary tightening, front-end US Treasury yields were hitting post-pandemic highs yesterday, with the 2yr Treasury yield up +5.8bps to 0.69%, a level we haven’t seen since March 2020. Longer-dated yield increases weren’t as large, with the 10yr yield up +3.9bps to 1.47%, and the 5s30s curve flattened another -1.8bps to 54.4bps, just above the post-pandemic low of 53.7bps. Over in Europe there was similarly a rise in most countries’ bond yields, with those on 10yr bunds (+1.4bps), OATs (+1.0bps) and BTPs (+4.4bps) all moving higher, though incidentally, the 5s30s curve in Germany was also down -2.2bps to its own post-pandemic low of 50.0bps. One pretty big news story that markets have been relatively unperturbed by so far is the rising tensions between the US and Russia over Ukraine. Yesterday saw a video call between US President Biden and Russian President Putin. The US readout from the call did not offer much in the way of concrete details, but if you’re looking for any optimistic news, it said that both sides tasked their teams with following up. Setting the background for the call, there were reports immediately beforehand that the US was considering evacuating their citizens and posturing to stop Nord Stream 2 if Russia invaded Ukraine. The Ruble appreciated +0.42% against the dollar, and is now only slightly weaker versus the dollar on the week. Overnight in Asia stocks are trading mostly higher led by the Nikkei (+1.49%), CSI (+1.11%), Shanghai Composite (+0.86%) and the KOSPI (+0.78%) as markets respond positively to the Pfizer study mentioned at the top. The Hang Seng (-0.12%) is lagging though. In Japan, the final Q3 GDP contracted -3.6% quarter on quarter annualised against consensus expectations of -3.1% on lower consumer spending than initially estimated. In India, the RBI left the key policy rate unchanged for the ninth consecutive meeting today while underscoring increasing headwinds from the Omicron variant. Futures markets indicate a positive start in the US and Europe with S&P 500 (+0.41%) and DAX (+0.12%) futures trading in the green. Back on the pandemic, despite the relative benign news on Omicron, rising global case counts mean that the direction of travel is still towards tougher restrictions across a range of countries. In fact here in the UK, we saw the 7-day average of reported cases move above 48,000 for the first time since January. In terms of fresh restrictions, yesterday saw Canada announce that they’d be extending their vaccine mandate, which will now require employees in all federally regulated workplaces to be vaccinated, including road transportation, telecommunications and banking. In Sweden, the government is preparing a bill that would see Covid passes introduced for gyms and restaurants, while Poland put further measures in place, including remote schooling from December 20 until January 9, while vaccines would become mandatory for health workers, teachers and uniformed services from March 1. One move to ease restrictions came in Austria, where it was confirmed shops would be reopening on Monday, albeit only for those vaccinated, while restaurants and hotels would reopen the following week. If you see our daily charts you’ll see that cases in Austria have dropped sharply since the peaks a couple of weeks ago, albeit still high internationally. In DC, Congressional leaders apparently agreed to a deal that would ultimately lead to the debt ceiling being increased, after some procedural chicanery. Senate Majority Leader McConnell voiced support for the measure, which is a good sign for its ultimate prospects of passing, but it still needs at least 10 Republican votes in the Senate to pass. McConnell indicated the votes would be there when the Senate ultimately takes it up, which is reportedly set to happen this week. The House passed the measure last night. Yields on Treasury bills maturing in December fell following the headlines. Looking ahead, today will mark the end of an era in Germany, as Olaf Scholz is set to become Chancellor in a Bundestag vote later on, marking an end to Chancellor Merkel’s 16-year tenure. That vote will simply be a formality given the three parties of the incoming coalition (the centre-left SPD, the Greens and the liberal FDP) have a comfortable majority between them, and the new cabinet will feature 7 SPD ministers, 5 Green ministers, and 4 from the FDP. Among the positions will include Green co-leader Robert Habeck as Vice Chancellor, Green co-leader Annalena Baerbock as foreign minister, and FDP leader Christian Lindner as finance minister. Running through yesterday’s data, the US trade deficit narrowed to $67.1bn in October (vs. $66.8bn expected), marking its smallest level since April. Meanwhile in the Euro Area, the latest Q3 growth estimate was left unchanged at +2.2%, but both Q1 and Q2’s growth was revised up a tenth. Over in Germany, industrial production grew by a stronger-than-expected +2.8% in October (vs. +1.0% expected), with the previous month’s contraction also revised to show a smaller -0.5% decline. In addition, the expectations component of the December ZEW survey fell by less than expected to 29.9 (vs. 25.4 expected), but the current situation measure fell to a 6-month low of -7.4 (vs. 5.7 expected). To the day ahead now, and Olaf Scholz is expected to become German Chancellor in a Bundestag vote today. From central banks, the Bank of Canada will be deciding on rates, and we’ll also hear from ECB President Lagarde, Vice President de Guindos and the ECB’s Schnabel. Finally, data releases include the JOLTS job openings from the US for October. Tyler Durden Wed, 12/08/2021 - 07:58.....»»

Category: blogSource: zerohedgeDec 8th, 2021

Like Clockwork

S&P 500 took a little breather, and sideways trading with a bullish slant goes on unchecked. Credit markets have partially turned, and I‘m looking for some risk appetite returning to HYG and VTV. Any modest improvement in market breadth would thus underpin stocks, and not even my narrow overnight downswing target of yesterday may be […] S&P 500 took a little breather, and sideways trading with a bullish slant goes on unchecked. Credit markets have partially turned, and I‘m looking for some risk appetite returning to HYG and VTV. Any modest improvement in market breadth would thus underpin stocks, and not even my narrow overnight downswing target of yesterday may be triggered. The banking sector is internally strong and resilient, which makes the bulls the more favored party than if judged by looking at the index price action only. Consumer discretionaries outperformance of staples confirms that too. 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 .af-body.af-standards 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); Q3 2021 hedge fund letters, conferences and more When it comes to gold and silver: (…) Faced with the dog and pony debt ceiling show, precious metals dips are being bought – and relatively swiftly. What I‘m still looking for to kick in to a greater degree than resilience to selling attempts, is the commodities upswing that would help base metals and energy higher. These bull runs are far from over – it ain‘t frothy at the moment as the comparison of several oil stocks reveals. Precious metals dip has been swiftly reversed, and it‘s just oil and copper that can cause short-term wrinkles. Both downswings look as seriously overdone, and more of a reaction to resilient dollar than anything else. In this light, gold and silver surge is presaging renewed commodities run, which is waiting for the greenback to roll over (first). And that looks tied to fresh debt issuance and debt ceiling resolution – Dec is almost knocking on the door while inflation expectations are about to remain very elevated. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook S&P 500 bulls continue holding the upper hand, and yesterday‘s rising volume isn‘t a problem in the least. Dips remain to be bought, and it‘s all a question of entry point and holding period. Credit Markets Credit markets stabilization is approaching, and yields don‘t look to be holding S&P 500, Russell 2000 or emerging markets down for too long. Especially the EEM performance highlights upcoming dollar woes. Gold, Silver and Miners Gold and silver decline was promptly reversed, and the lower volume isn‘t an immediate problem – it merely warns of a little more, mostly sideways consolidation before another push higher. PMs bull run is on! Crude Oil Crude oil bulls could very well be capitulating here – yesterday‘s downswing was exaggerated any way examined. Better days in oil are closer than generally appreciated. Copper The copper setback got likewise extended, and the underperformance of both CRB Index and other base metals is a warning sign. One that I‘m not taking as seriously – the red metal is likely to reverse higher, and start performing along the lines of other commodities. Bitcoin and Ethereum Bitcoin and Ethereum bears may be slowing down here, but I wouldn‘t be surprised if the selling wasn‘t yet over. We‘re pausing at the moment, and in no way topping out. Summary S&P 500 bulls keep banishing the shallow correction risks, leveling the very short-term playing field. The credit markets non-confirmation is probably in its latter stages, and stock market internals favor the slow grind higher to continue. Precious metals remain my top pick over the coming weeks, and these would be followed by commodities once the dollar truly stalls. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals. Thank you, Monica Kingsley Stock Trading Signals Gold Trading Signals Oil Trading Signals Copper Trading Signals Bitcoin Trading Signals www.monicakingsley.co mk@monicakingsley.co All essays, research and information represent analyses and opinions of Monica Kingsley that are based on available and latest data. Despite careful research and best efforts, it may prove wrong and be subject to change with or without notice. Monica Kingsley does not guarantee the accuracy or thoroughness of the data or information reported. Her content serves educational purposes and should not be relied upon as advice or construed as providing recommendations of any kind. Futures, stocks and options are financial instruments not suitable for every investor. Please be advised that you invest at your own risk. Monica Kingsley is not a Registered Securities Advisor. By reading her writings, you agree that she will not be held responsible or liable for any decisions you make. Investing, trading and speculating in financial markets may involve high risk of loss. Monica Kingsley may have a short or long position in any securities, including those mentioned in her writings, and may make additional purchases and/or sales of those securities without notice. Updated on Nov 18, 2021, 10:11 am (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; 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: valuewalkNov 18th, 2021

Futures Flat Ahead Of Historic Taper Announcement, China Warns Of "Downward Pressure" On Economy

Futures Flat Ahead Of Historic Taper Announcement, China Warns Of "Downward Pressure" On Economy US stock futures were flat ahead of today's Fed meeting, where the central bank is widely expected to announce the reduction of asset purchases with a majority of analysts expecting the Fed reducing its monthly purchases of Treasuries by $10 billion and mortgage- backed securities by $5 billion. Nasdaq 100 futures climbed 0.1% while S&P 500 and Dow Jones futures were little changed. Oil fell as the U.S. ramped up pressure on OPEC+ to boost supplies (which will bear zero results). The two-year Treasury yield was steady, while the 30-year rate shed two basis points. European stocks struggled for direction and the dollar fell less than 0.1%.   Despite turmoil in the bond market which sent the MOVE (or bond VIX) index to post-covid highs... ... stocks remain complacent and are likely not under stress “because we all think we know what will come out from today’s meeting: a gradual start of the tapering of the bond purchases program,” said Ipek Ozkardeskaya, senior analyst at Swissquote. A "taper announcement will likely be seamless, what may be less seamless is the rate discussion," she wrote in a note.  In recent weeks, policy makers have come under pressure to reassess their assessment of inflation being transitory, with bond and currency markets pricing in faster-than-expected rate hikes. “The big question will be whether they will signal anything about when the rate hikes will start,” Jeanette Garretty, chief economist at Robertson Stephens Wealth Management, said on Bloomberg Television. “I think they are going to try and avoid that.” Wall Street has also largely shrugged off concerns around rising price pressures and mixed economic growth, boosted by a stellar third-quarter earnings season and an upbeat commentary about growth going forward. In fact, there is absolutely nothing that can dent the ongoing market meltup which according to Morgan Stanley will continue until just around Thanksgiving. "Anything suggesting that the Fed is confident to keep withdrawing monetary policy support following a start today may allow equity investors to buy more," said Charalambos Pissouros, head of research at JFD group. "After all, they may have already digested the idea that interest rates will start rising at some point soon." Meanwhile, Chinese equities drifted lower after what Bloomberg called was a "dour warning" from Premier Li who cautioned about “downward pressure” for the economy. Hang Seng falls as much as 1.2% after tech shares resume slide. Here are some of the most notable premarket moves: Lyft rose after its third-quarter results showed a continued improvement in key metrics for the ride-sharing company. Zillow dropped as the decision to shut its home-flipping business raised questions about its ability to deliver growth. Shale oil producer Devon Energy rose 4.8% in premarket trading on topping earnings estimates as oil prices hit multi-year highs. Mondelez International added 1.9% after the Oreo maker raised its annual sales forecast, helped by price increases and strong demand from emerging markets. T-Mobile gained 3.4% after the U.S. wireless carrier beat third-quarter estimates for adding monthly bill paying phone subscribers. Activision Blizzard tumbled 12.0% after the videogame publisher delayed the launch of two much-awaited titles, as its co-leader Jen Oneal decided to step down from her role On the economic data front, October readings on ADP private payrolls, IHS Markit composite PMI and ISM non-manufacturing activity is due later in the day. Meanwhile, European stocks were flat as losses in energy stocks offset gains in basic resources shares.  Italy's FTSE MIB outperforms, rising as much as 0.3% while Spain's IBEX underperforms. Oil & gas, retail and utilities are the weakest Stoxx 600 sectors; miners and autos outperform. Asia’s equity benchmark was little changed as traders await the outcome of the U.S. Federal Reserve’s policy meeting, with an announcement expected on tapering amid concerns about elevated inflation. The MSCI Asia Pacific Index traded in a narrow range, with Alibaba Group, AIA Group and Samsung Electronics the biggest drags and Tencent among the winners. South Korea’s Kospi tumbled 1.3% on mounting selling by foreign funds. Hong Kong’s benchmark Hang Seng Index declined for a seventh day, extending its longest losing streak since July. The earnings season has failed to boost Asian shares, with the regional benchmark down more than 10% from a February peak as supply-chain and inflation worries persist. Traders will focus on the Fed’s policy move on Wednesday for cues at a time volatility in the bond market has heightened. “U.S. monetary policy has a very direct impact on the Asian market, especially with their plethora of dirty U.S. dollar pegs,” Jeffrey Halley, senior market analyst at Oanda, wrote in a note. Philippine stocks were among the top gainers, advancing for a second day after local Covid-19 cases fell to fewest since March. Stocks in Australia also rose after the country’s central bank scrapped a bond-yield target on Tuesday and said there’s still some time to go for rate hikes. Iron ore’s rebound on Wednesday also bolstered the mining sector. Japan’s equity market was closed for a holiday. Chinese stocks dripped after Premier Li Keqiang said China’s economy faces new downward pressures and has to cut taxes and fees to address the problems faced by small and medium-sized companies. Li did not specify the extent of the new “downward pressure” or its cause, but the phrase is generally used by Chinese officials to refer to a slowing economy. He has used the phrase before, including several times in 2019. The economy needs “cross-cyclical adjustments” to continue in a proper range, Li said during a visit to China’s top market regulator, state broadcaster CCTV reported. That phrase is associated with a more conservative fiscal and monetary approach that focuses more on the long-term outlook instead of immediate economic performance. “There are no obvious growth drivers now, so the government is looking for one,” said Bruce Pang, head of macro and strategy research at China Renaissance Securities Hong Kong Ltd. “Small businesses’ investment can provide a source of healthier, longer-term growth, compared with government or property investment.” In rates, 10-year Treasury note futures are at the top of Tuesday’s range, gaining over Asia session while eurodollar futures are up 1-2 ticks in red and green packs as shares declined in China and Hong Kong ahead of today’s FOMC decision and after Premier Li’s warning of downward pressures to the economy. Treasury 10-year yields richer by 1.8bp on the day, flattening 2s10s spread with front-end yields unchanged -- bunds and gilts trade slightly cheaper vs. Treasuries. Cash Treasuries resumed trading in London after being closed in Tokyo for a Japanese holiday --curve has flattened with long-end yields richer by as much as 2bp. Focus on U.S. session includes ADP employment and durable goods data, refunding announcement before 2pm ET Fed rate decision. In Europe, Bunds bull flattened, helped in part by dovish comments from ECB’s Lagarde and Muller while peripheral spreads tightened with 10y Bund/BTP narrowing 3bps near 120bps. In FX, the Bloomberg Dollar Spot Index inched lower as the dollar fell versus most of its Group-of-10 peers and Treasury yields fell by up to 3 basis points, led by the long end of the curve. The euro gradually climbed toward the $1.16 handle while European government bonds yields fell and curves flattened. New Zealand’s dollar was among the top G-10 performers, and rose from a two- week low after the unemployment rate dropped more than economists predicted; the Kiwi and Aussie were also boosted by leveraged short covering. The pound inched up from a three-week low against the dollar before a speech by Bank of England Governor Andrew Bailey. Hedging the pound on an overnight basis is the costliest since March as traders focus on the upcoming meetings by the Federal Reserve and the BOE. In commodities, crude futures extend Asia’s softness; WTI drops over 2%, stalling near $82, Brent drops a similar magnitude to trade near $83. Spot gold drifts around Asia’s worst levels near $1,783/oz. Most base metals are up over 1% with LME aluminum and tin outperforming Looking at the day ahead the highlight will be the aforementioned Fed's policy decision along with Chair Powell’s subsequent press conference. Other central bank speakers include ECB President Lagarde, alongside the ECB’s Elderson, Centeno, de Cos and Villeroy. Data releases include the final October services and composite PMIs from the UK and the US, and other US data includes the ISM services index for October, the ADP’s report of private payrolls for October and factory orders for September. Finally, earnings today include Qualcomm, Booking Holdings, Fox Corp and Marriott International. Market Snapshot S&P 500 futures little changed at 4,622.00 STOXX Europe 600 little changed at 479.79 MXAP little changed at 197.87 MXAPJ little changed at 645.10 Nikkei down 0.4% to 29,520.90 Topix down 0.6% to 2,031.67 Hang Seng Index down 0.3% to 25,024.75 Shanghai Composite down 0.2% to 3,498.54 Sensex little changed at 59,993.78 Australia S&P/ASX 200 up 0.9% to 7,392.73 Kospi down 1.3% to 2,975.71 German 10Y yield little changed at -0.18% Euro little changed at $1.1587 Brent Futures down 1.8% to $83.23/bbl Gold spot down 0.3% to $1,782.83 U.S. Dollar Index little changed at 94.05 Top Overnight News from Bloomberg The Federal Reserve is widely expected to announce the reduction of asset purchases at the conclusion of its policy meeting Wednesday, which Chair Jerome Powell will likely say is not a step toward raising interest rates any time soon Traders have had a mixed view for most of this year about when emerging-Asia central banks will begin to normalize policy. Suddenly though, they are rushing to price in rate-hike bets across the region. The hawkish shift is most evident in South Korea and India, where markets are now anticipating at least a quarter-point increase in the next three months, while they are also building in Malaysia and Thailand over a two-year horizon China’s economy faces new downward pressures and has to cut taxes and fees to address the problems faced by small and medium-sized companies, according to the country’s Premier Li Keqiang More provinces in China are fighting Covid-19 than at any time since the deadly pathogen first emerged in Wuhan in 2019 The likelihood that elevated inflation will become entrenched is increasing, according to European Central Bank Governing Council member Bostjan Vasle A more detailed look at global markets courtesy of Newsquawk Asian equity markets traded mixed despite another encouraging handover from Wall Street where all major indices notched fresh record closing highs for the third consecutive day, and the DJIA breached the 36k level amid a slew of earnings and absence of any significant catalysts to derail the recent uptrend. Gains in APAC were also capped by holiday-thinned conditions with Japan away for Culture Day and as the FOMC announcement draws closer (full Newsquawk preview available in the Research Suite). The ASX 200 (+0.9%) outperformed amid a resurgence in the top-weighted financials sector as AMP shares were boosted after it announced to divest a 19.1% stake in Resolution Life Australasia for AUD 524mln and with CBA also higher as Australia’s largest bank is to offer customers the ability to conduct crypto transactions via its app. Conversely, the KOSPI (-1.3%) lagged after its automakers posted weak October sales stateside and following comments from South Korean PM Lee that they cannot afford additional cash handouts right now, while there was also attention on Kakao Pay which more than doubled from the IPO price on its debut. The Hang Seng (-0.3%) and Shanghai Comp. (-0.2%) were lacklustre and failed to benefit from the improvement in Chinese Caixin Services and Composite PMI data, amid ongoing concerns related to the energy crunch and with tech subdued after Yahoo pulled out of China due to a challenging business and legal environment. Furthermore, reports also noted that the Chinese version of Fortnite will close in mid-November, while a slightly firmer PBoC liquidity operation failed to spur Chinese markets as its efforts still resulted in a substantial net drain. Aussie yields continued to soften after the RBA affirmed its dovish tone at yesterday’s meeting and with the central bank also present in the market today for AUD 800mln in semi-government bonds which is in line with its regular weekly purchases, while a softer b/c at the 10yr Australian bond auction failed to unnerve domestic bonds and T-notes futures were steady overnight amid the looming FOMC. Top Asian News State Bank of India Profit Tops Estimates on Lower Provisions Chinese Copper Smelters Boost Exports to Ease Historic Squeeze China’s PBOC Says Digital Yuan Users Have Surged to 140 Million Malaysia Holds Rates on Recovery, ‘Benign’ Inflation Outlook European majors have adopted a similarly mixed performance (Euro Stoxx 50 -0.1%; Stoxx 600 Unch) as seen during the APAC session, as markets and participants count down to the FOMC policy decision, with the BoE and NFPs also on the docket for the rest of the week. US equity futures are also mixed but have been drifting mildly higher in European trade thus far, vs a flat overnight session. Back to Europe, there isn’t anything major to report in terms of under/outperformers among European majors, although Spain’s IBEX (-0.7%) lags in the periphery amidst losses in sector heavyweights. Sectors in Europe are mixed with no overarching theme. Basic Resources top the charts in a slight reversal of yesterday’s underperformance and amid a bounce in base metal prices. Travel & Leisure is propped up by Deutsche Lufthansa (+5.0%) post-earnings. Oil & Gas names are pressured by the decline across the crude complex in the run-up to tomorrow’s OPEC+ confab, whilst Banks are lacklustre as yields lose ground. In terms of individual movers, Vestas Wind System (-9.0%) is at the bottom of the Stoxx 600 after cutting guidance. BMW (+0.4%) is choppy after-earnings which saw EBIT top forecasts and targets confirmed, although the group noted that the rise in raw material prices have also had an impact on earnings, but they do not expect short-term magnesium shortage to affect production. Finally, Pandora (+0.8%) reported improvements on their metrics but warned that APAC performance, including China, remains weak and heavily impacted by COVID-19, with China expected to remain a drag on performance for the remainder of the year. Top European News BMW Muscles Through Chip Shortage With Profit Jump Nexans Drops as Morgan Stanley Says 3Q Results Were Weak Russia’s Biggest Alcohol Retailer Seeks $1.3 Billion in IPO LSE Boss Expects London Will Keep EU Clearing Role Post-Brexit In FX, far from all change, but the Kiwi has reclaimed 0.7100+ status against the Greenback and a firmer grasp of the handle in wake of significantly stronger than expected NZ labour market metrics via Q3’s HLFS update overnight, including jobs growth coming in five times higher than forecast and the unemployment rate falling sharply irrespective of a rise in participation. Nzd/Usd is hovering around 0.7135 and the Aud/Nzd cross is under 1.0450 even though the Aussie has regained some composure after its post-RBA relapse to retest 0.7450, albeit with assistance from the Buck’s broad pull-back rather than mixed PMIs and much weaker than anticipated building approvals. Indeed, the Franc has also rebounded from circa 0.9150 with no independent incentive and cognisant that the SNB will be monitoring moves as Eur/Chf meanders within its 1.0604-1.0548 w-t-d range. DXY/JPY/EUR/GBP/CAD - The Dollar index has drifted back down from a fractional new high compared to Tuesday’s best between 94.144-93.970 parameters vs a 94.136-93.818 range yesterday, and for little apparent reason aside from pre-FOMC tinkering and fine-tuning of positions it seems. Nevertheless, DXY components are mostly taking advantage of the situation, albeit in typically tight ranges seen on a Fed day, with the Yen holding above 114.00 on Japanese Culture Day, the Euro just under 1.1600 and amidst more decent option expiry interest (1.1 bn from 1.1585 to the round number), Sterling still trying to retain 1.3600+ status and also close to a fairly big option expiry (821 mn at the 1.3615 strike) and the Loonie striving to contain declines beneath 1.2400 against the backdrop of retreating oil prices. Note, some upside in the Pound via upgrades to UK services and composite PMIs, but limited and Eur/Gbp remains over 0.8500 in advance of the showdown between Britain and France on fishing tomorrow when the BoE also delivers its eagerly anticipated November policy verdict. SCANDI/EM - Not much adverse reaction to a slowdown in Sweden’s services PMI for the Sek, while the Nok is taking the latest downturn in Brent crude largely in stride on the eve of the Norges Bank meeting that is widely seen cementing rate hike guidance for next month. However, scant respite or solace for the Try from sub-consensus Turkish CPI as the near 20% y/y print means more divergence relative to the CBRT’s 1 week repo, and PPI accelerated again to heighten the build up of pipeline price pressures. Conversely, the Cnh and Cny are nudging back above 6.4000 after an encouraging Chinese Caixin services PMI and the Zar is on a firm footing awaiting results of SA local elections. RBNZ said the financial system is well placed to support economic recovery despite uncertainty and risks, while the more recent Delta outbreak is creating stress for some industries and regions, particularly in Auckland. RBNZ also noted that with the risk of global inflation heightened, already stretched asset prices are facing headwinds from rising global interest rates and that supply chain bottlenecks and inflation are adding to stresses in some sectors. Furthermore, they intend to increase the minimum CFR requirement to its previous level of 75% on 1st January 2022, subject to no significant worsening in economic condition, while capital requirements for banks are to progressively increase from 1st July 2022 and it is encouraging to see them increasing ahead of these requirements. (Newswires) In commodities, WTI and Brent front month futures are softer and in proximity to USD 82/bbl and USD 83/bbl respectively with losses today also potentially a function of the downbeat China COVID updates seen overnight. As a reminder, China's most recent COVID-19 outbreak is reportedly the most widespread since Wuhan with infection in 19 of 31 provinces, according to a major newswires article. It was also reported that around half the flights to and from Beijing city’s two airports were cancelled Tuesday, according to aviation industry data site VariFlight. Further, yesterday’s Private Inventory data was also bearish, printing a larger-than-expected build of 3.6mln bbl vs exp. +2.2mln, ahead of today’s DoEs which will take place 1hr earlier for those in Europe. Looking ahead to tomorrow’s OPEC+, markets expect a continuation of the current plan to ease output curbs by 400k BPD/m. Outside calls have been getting louder for the producers to open the taps more than planned amid inflationary feed-through to consumers and company margins, although ministers, including de-factor heads Saudi and Russia, have been putting weight behind current plans, with no pushback seen from members within OPEC+ thus far. Further, the COVID situation in China is deteriorating, hence ministers will likely express a cautious approach. Elsewhere, spot gold and silver are flat within overnight ranges, as is usually the case before FOMC. Base metals are staging a recovery with LME copper back above USD 9,500/t, whilst Chinese thermal coal futures rose some 10% following 10 days of declines US Event Calendar 8:15am: Oct. ADP Employment Change, est. 400,000, prior 568,000 9:45am: Oct. Markit US Services PMI, est. 58.2, prior 58.2 Oct. Markit US Composite PMI, prior 57.3 10am: Sept. Durable Goods Orders, est. -0.4%, prior -0.4% Sept. -Less Transportation, est. 0.4%, prior 0.4% Sept. Cap Goods Orders Nondef Ex Air, prior 0.8% Sept. Cap Goods Ship Nondef Ex Air, prior 1.4% 10am: Sept. Factory Orders, est. 0.1%, prior 1.2% Sept. Factory Orders Ex Trans, est. 0%, prior 0.5% 10am: Oct. ISM Services Index, est. 62.0, prior 61.9 2pm: FOMC Rate Decision DB's Jim Reid concludes the overnight wrap So after much anticipation we’ve finally arrived at the Fed’s decision day, where it’s widely anticipated (including by DB’s US economists) that they’ll announce a tapering in their asset purchases. Such a move has been increasingly anticipated over recent months, not least with the repeated upgrades to inflation forecasts over the course of 2021, and the FOMC themselves flagged this at their September meeting, where their statement said that “if progress continues broadly as expected … a moderation in the pace of asset purchases may soon be warranted.” In terms of what our economists are expecting, their view is that the Fed will announce monthly reductions of $10bn and $5bn in the pace of Treasury and MBS purchases respectively, with the first cut to purchases coming in mid-November. They see this bringing the latest round of QE to an end in June 2022, though this would also offer some flexibility to respond to any changes in the economic environment over the coming eight months should they arise. On the question of rate hikes, they think lift-off won’t take place until December 2022, but don’t see Chair Powell actively pushing back on current market pricing (a full hike nearly priced in by mid-year 22) given the elevated uncertainty about the outlook, particularly on inflation. You can see more details in their preview here. Of course since the Fed’s last meeting, many inflationary pressures have only grown, particularly given the fresh surge in energy prices that’s taken WTI oil up to $83/bbl, having been at just $72/bbl at the time of their September meeting. In turn, this has taken market expectations of future inflation up as well, with the 10yr breakeven now standing at 2.52%, up from 2.28% following Powell’s September press conference. And market pricing has also shifted significantly since the last meeting, with investors having gone from expecting less than one full hike by the December 2022 meeting to more than two. Ahead of all that, global risk assets continued to perform strongly and a number of major indices climbed to fresh all-time highs yesterday. The S&P 500 (+0.37%), the NASDAQ (+0.34%), the Dow Jones (+0.39%) and Europe’s STOXX 600 (+0.14%) all hit new records, whilst France’s CAC 40 (+049%) exceeded its previous closing peak made all the way back in 2000. Positive earnings news helped bolster those indices, with 27 of 29 S&P 500 reporters beating earnings estimates during trading, and 16 of 20 after-hours reporters beating earnings estimates. This included Pfizer during the day, which raised its full-year forecasts on the back of strong vaccine demand and noted it had the capacity to produce as much as 4 billion shots next year. However, the big winner yesterday (the biggest in the small-cap Russell 2000 yesterday) was Avis Budget Group (+108.31%) even if its performance actually marked a fall from its intraday high when the share price had more than tripled. Those moves occurred after Avis posted strong earnings driven by better-than-expected demand. Their CEO said they’d add more electric cars, whilst the stock also got attention on the WallStreetBets forum on Reddit, which readers may recall was behind some big moves at the start of the year in various "meme stocks” like GameStop. The banner day added $8.5bn to its market cap, which helped it leap frog fellow meme stock AMC to become the second biggest company in the Russell 2000 from third slot yesterday. In other such popular retail stocks, Tesla retreated -3.03% after Elon Musk cast some doubt the previous evening over the recently announced deal to sell 100,000 cars to rental car company Hertz. That said, the automaker has still added over $300 billion in market cap over the last month. Sovereign bonds were another asset class that put in a decent performance ahead of the Fed, with yields falling throughout the curve across a range of countries following the relatively dovish tone vs heightened expectations from the RBA yesterday morning. By the close, those on 10yr Treasuries were down -1.4bps to 1.54%, whilst their counterparts in Europe saw even steeper declines, including those on 10yr bunds (-6.3bps), OATs (-8.5bps) and BTPs (-14.1bps). BTPs were the biggest story and the move seemed to coincide with a reappraisal of ECB hike expectations, as pricing through December 2022 declined -6.5 bps, down from c.20 bps of expected tightening priced as of Monday. So a big decline. In Asia, the Shanghai Composite (-0.57%), the Hang Seng (-0.93%) and the KOSPI (-1.23%) are all trading lower. Japan’s markets are closed due to the Culture Day, meaning also that cash treasuries are not trading in the region. In data releases, the Caixin Services PMI for China rose to 53.8 versus 53.1 expected. However, Premier Li’s remarks about new “downward pressure” on China’s economy and latest COVID outbreak, which is now the most widespread since the first emergence of the virus, are weighing down on the sentiment. Meanwhile, China and Hong Kong are discussing reopening of the shared border. The S&P 500 futures (-0.01%) is pretty flat this morning. Aussie yields are again lower especially at the front end with the infamous April 24 bond around -7bps as we type. As we go to print the Associated Press have called the Virginia as a victory for the GOP Youngkin with New Jersey equivalent also looking likely to go to the GOP. So a big blow to the Democrats. Of those, Virginia was being more closely watched. As recently as the Obama years it was a fiercely contested battleground, but it’s trended Democratic over the last few cycles, with Biden’s 10 point margin of victory last year well exceeding his 4.4 point margin nationally. So this will not be good news for the Dems ahead of next year’s mid-terms. It will also increase the odds of legislative and fiscal gridlock after that - although the latter has been increasingly expected. Staying with US Politics, President Biden indicated in a news conference that he was getting closer to announcing whether or not he would re-nominate Fed Chair Powell for another term as head of the central bank, or if he would appoint a new Chair. He said an announcement will come “fairly quickly”. In terms of the latest on the pandemic, the US CDC’s advisory committee on immunization practices met and backed the Pfizer vaccine for 5-11 year olds, joining the FDA who gave the vaccine the green light for the same age group. There wasn’t much in the way of data releases yesterday, though we did get the final manufacturing PMIs from Europe, where the Euro Area PMI for October was revised down two-tenths from the flash estimate to 58.3. Germany also saw a downward revision to 57.8 (vs. flash 58.2), but Italy outperformed expectations with a 61.1 reading (vs. 59.6 expected). To the day ahead now, and the highlight will be the aforementioned policy decision from the Fed, along with Chair Powell’s subsequent press conference. Other central bank speakers include ECB President Lagarde, alongside the ECB’s Elderson, Centeno, de Cos and Villeroy. Data releases include the final October services and composite PMIs from the UK and the US, and other US data includes the ISM services index for October, the ADP’s report of private payrolls for October and factory orders for September. Finally, earnings today include Qualcomm, Booking Holdings, Fox Corp and Marriott International. Tyler Durden Wed, 11/03/2021 - 08:13.....»»

Category: blogSource: zerohedgeNov 3rd, 2021

Waypoints On The Road To Currency Destruction (And How To Avoid It)

Waypoints On The Road To Currency Destruction (And How To Avoid It) Authored by Alasdair Macleod via GoldMoney.com, The few economists who recognise classical human subjectivity see the dangers of a looming currency collapse. It can easily be avoided by halting currency expansion and cutting government spending so that their budgets balance. No democratic government nor any of its agencies have the required mandate or conviction to act, so fiat currencies face ruin. These are some waypoints to look for on the road to their destruction: Monetary policy will be challenged by rising prices and stalling economies. Central banks will almost certainly err towards accelerating inflationism in a bid to support economic growth. The inevitability of rising bond yields and falling equity markets that follows can only be alleviated by increasing QE, not tapering it. Look for official support for financial markets by increased QE. Central banks will then have to choose between crashing their economies and protecting their currencies or letting their currencies slide. The currency is likely to be deemed less important, until it is too late. Realising that it is currency going down rather than prices rising, the public reject the currency entirely and it rapidly becomes valueless. Once the process starts there is no hope for the currency. But before we consider these events, we must address the broader point about what the alternative safety to a fiat collapse is to be: cryptocurrencies led by bitcoin, or metallic money to which people have always returned when state fiat money has failed in the past. Introduction When expected events begin to unfold, they can be marked by waypoints. These include predictable government responses, and the confused statements of analysts who are unfamiliar with the circumstances. We see this today in the early stages of an inflation that threatens to become a terminal cancer for fiat currencies. Harder to judge is the human element, the pace at which realisation dawns and the public’s consequential response to the discovery that their currency is being debauched and their wealth being transferred stealthily to the state. But history can provide some guidance. If we consider the evidence from Austria before the First World War, we see that the economic prophets who truly understood economics became thoroughly despondent long before the First World War and the currency collapse of the early 1920s. Carl Menger, the father of subjectivity in marginal price theory became depressed by what he foresaw. As von Mises in his Memoirs wrote of Menger’s discouragement and premature silence, “His keen intellect had recognized in which direction Austria, Europe, and the world were pointed; he saw this greatest and highest of all civilizations rushing toward the abyss”. Mises then recorded a conversation his great-uncle had had with Menger’s brother, which referred to comments made by Menger at about the turn of the century, when he reportedly said, “The policies being pursued by the European powers will lead to a terrible war ending with gruesome revolutions, the extinction of European culture and destruction of prosperity for people of all nations. In anticipation of these inevitable events, all that can be recommended are investments in gold hoards and the securities of the two Scandinavian countries” [presumably being on the periphery of European events]. The few economists who have studied American and European monetary and economic policies dispassionately and how they have evolved since the Nixon shock will resonate with Menger’s concerns. Mises also noted that this “pessimism consumed all sharp-sighted Austrians”. Menger’s pupil and friend, Crown Prince Rudolf, successor to the Austro-Hungarian throne took his own life and that of his lover in 1889 because of his despair over the future of his empire and that of European civilisation, and not because of his love affair. As with all historical comparisons, today’s decline in American hegemony is only a most generalised repetition of the process by which an empire dies. But from this distance of over a century from events in Vienna it is easy to forget how important the Hapsburgs were and that before Napoleon the Austro-Hungarian empire had been the largest and most important of the European empires. But putting aside the obvious differences between then and now, today we see little or no evidence of cutting-edge economists sharing the despair of the early Austrians. There is a good reason why this despair is absent today. Instead of economists independent from the state, universities, and professorial sponsorship, the entire economic profession is paid for by governments and their departments to promote statist intervention in the economic affairs of humanity. Feeding off statistics, mathematics is every policy-makers and investor’s religion. But economics is not a natural science governed by mathematics, like physics or chemistry, but a social science governed by markets; markets being forums where humans interact to satisfy their needs and wants, to exchange their production for consumption, and to manage their savings and capital. As Hayek said of his friend Keynes, Keynes was a mathematician and not an economist. Today we can confidently state that students are taught mathematics and not economics. Economists are no longer economists, but statisticians and mathematicians devoid of the a priori reasoning that was central to the science before Keynes. With the entire profession taught to believe in statist intervention, perhaps we should not be surprised that economists are not ringing the alarm bells warning of the consequences of decades of state manipulation of markets and of the catastrophe that evolves from denying there is any difference between money and currency, that is gold or silver, and infinitely expandable promissory notes and credit. Even many modern “Austrians” seem oblivious to the danger of a fiat money collapse, let alone the dire economic consequences. Among them there is even an antipathy against metallic money, which suggests they have not fully absorbed the theories of money and credit so lucidly explained by their earlier mentors. Hopefully, the decline of America and its dollar hegemony we will not result in military conflict, let alone one on the scale of the 1914-18 European catastrophe. But that might be a vain hope. In today’s America we see a hegemon struggling to get to terms with its decline and the reality that the rise of Asia cannot be stopped. But what concerns us here is the more obvious and immediate problem of its currency, dollars backed by nothing more than the faith and credit of the declining US Government. It is not too late to avoid a complete collapse of the dollar-led global currency regime, but there is no sign that the measures to avoid it will be taken. And with the exclusive dominance of mathematical economists: neo-Keynesians, monetarists, and modern monetary theorists alike, there is hardly anyone, like Menger, Mises, and the other Austrian economists who, before the First World War foresaw the economic and monetary consequences of unfettered statism and inflationary financing. Bitcoin — the canary in the currency mine We find ourselves not being warned of potential inflationary dangers by the state-educated pseudo-economists but by a motley crowd of geeks and speculators instead, who have grasped the relative price effect from different rates of currency issuance. Bitcoin’s quantity is capped while those of fiat currencies are not. All you need to exploit this simple fact is believe and convince yourself and others that bitcoin is the replacement currency of tomorrow for the comparison between bitcoin and state fiat to appear valid. This was certainly the story being promoted by crypto enthusiasts from shortly after bitcoin’s first trade until the end of last year. But they have become increasingly convinced that the future for bitcoin is not so much as a currency (after all, while its price in dollars is rising it is in no one’s interest to use it as a medium for exchanging goods), but simply that, like a stock index on steroids, it is the inflation hedge par excellence. And for fear of missing out, even investing institutions run by custodians of other peoples’ money are now piling in. But an index based on equities has the fundamental prop under it of being comprised of stocks the objective of which is to earn money for shareholders by selling goods and services for profit. With bitcoin there are no underlying earnings and nothing which is inflation-linked. In that sense it is a chimera. An argument has therefore developed, with investors and speculators buying bitcoin only because the relative rate of issue relative to fiat currencies is capped, which is expected to drive the price still higher as governments continue to print their currencies. The underlying rationale, that bitcoin is a replacement currency for state fiat currencies has been disproved and I have little more to add in this respect. It cannot be used for economic calculation, because for a borrower there is uncertainty of repayment value. Nor does bitcoin as a rival to state currencies hold water because no central bank will permit it to act as such. This is one reason why they are heading private cryptocurrencies off at the pass by developing their own, state-issued, and state-controlled digital currencies which can be used for economic calculation. Not only has the argument for ever rising bitcoin prices become its sole support, but the underlying rationale, that cryptocurrencies such as bitcoin qualify as a medium for transactions and will be permitted to replace state-issued fiat currencies cannot apply. By identifying relative rates of currency issue as a valuation factor the tech-savvy millennial generation has understood a partial truism. The other part of which they appear not to be fully aware is that the effect of monetary inflation is to undermine a currency’s purchasing power. It is a separate argument from one based solely on relative rates of currency issue. However, having half the story understood at least is an advance from not comprehending any of it, and when further rises in prices for goods become widely expected, as they appear to be beginning to today, crypto fans are likely to learn the consequences of monetary inflation earlier than their non-tech predecessors, and perhaps even before state-educated economists as well. For now, investors are being enticed by nothing other than the promise of riches to buy bitcoin as an inflation hedge, being disappointed by gold’s non-performance. In a recent quote in the UK’s Daily Telegraph a Morgan Stanley analyst stated just that: “We believe the perception of bitcoin as a better inflation hedge than gold is the main reason for the current upswing… triggering a shift away from gold [funds] into bitcoin funds since September”. But without the prop of being a credible form of replacement money the only reason to buy bitcoin is that circular argument: it should be bought because it is being bought. Furthermore, buying bitcoin funds dissipates potential bitcoin demand, because for a bitcoin fund to qualify as a regulated investment, obtaining regulatory permission is easiest when a fund deals mostly or wholly in contracts on a regulated futures exchange instead of the underlying unregulated bitcoin. In other words, much of the demand for bitcoin is being side-lined into paper versions rather than for bitcoin itself. Bubbles based on pure speculation always fail. That is not to say that speculative flows won’t drive bitcoin’s price higher still; as a possibility it seems highly likely. But that is for speculators, not those who seek protection from evolving economic and monetary events. Attention should be paid to Menger’s reported words 120 years ago, quoted above, that “In anticipation of these inevitable events, all that can be recommended are investments in gold hoards and the securities of the two Scandinavian countries” — except the securities of the two Scandinavian countries offer no escape today. That being the case, the price of gold measured in bitcoin would appear to present a remarkable opportunity for lucky holders of bitcoin and similar private-sector cryptocurrencies. This is shown in Figure 1 below. Since April 2015, the ratio of gold to bitcoin prices has fallen from over 5 to 0.03, a decline of over 99%. We have established why bitcoin has advanced: it is now due solely to the madness of an investing crowd, given that it is apparent that it will have no monetary role in the future. Market participants have either forgotten about or turned their backs against the metallic monies of millennia which have always returned as circulating media when state-issued fiat currencies fail. Why gold is under-owned and unappreciated Bitcoin is just part of this story: the other is the central banks’ resistance to rivalry to their fiat currencies from sound money. When US citizens were banned from owning gold coin, gold bullion, and gold certificates by executive order in 1933, the US Government’s desire to escape the discipline of gold as money became public. The resetting of international currency arrangements at Bretton Woods replaced gold with the dollar as the reserve currency with convertibility into gold limited to central banks and certain post-war supranational organisations. Even that failed, leading to the Bretton Woods agreement being suspended by President Nixon in 1971. Led by the US Fed, ever since the Nixon shock central banks have run a propaganda campaign to convince their private sectors that gold’s historic role as the money “of last resort” had been made redundant through the magic of monetary progress. That propaganda campaign is now fifty years old and encompasses the entire working lives of employees in all financial sectors. The dollar myth as the ultimate form of money is now fully institutionalised. In parallel with statist propaganda there has been a fundamental reform of the financial system to permit the development of various forms of derivatives. While derivatives previously existed in limited quantities, their massive expansion since the mid-eighties big-bang and the repeal of the Glass-Steagall Act created the means to absorb speculative demand for all commodities, including metallic money. According to the Bank for International Settlements, outstanding notional amounts of gold OTC derivatives at the end of last year stood at $834bn, to which must be added derivatives on regulated markets totalling a further $100bn. Together they are the equivalent together of over 15,000 tonnes of gold. There is little doubt that, like bank credit, the financial system’s ability to create paper gold out of thin air has had a profound effect on the price. Backing this inflation of derivative paper has been the expansion of bank and shadow bank credit. That is now coming to an end, with the implementation of the latest phase of Basel 3 banking regulations. Basel 3 and the net stable funding ratio If you Google it, you find that Basel 3 is an internationally agreed set of measures developed by the Basel Committee on Banking Supervision in response to the financial crisis of 2007-09. It was a crisis centred on derivatives, which highlighted the inadequacies of minimum capital requirements, banking supervision and market discipline, the three pillars of banking regulation. Basel 3 is gradually being introduced, but the regulations which concern gold and silver derivatives are what specifically concern us. Curbing balance sheet risk from inappropriate funding of precious metal derivative positions has already been introduced in Europe, Switzerland, and the US with the introduction of the net stable funding ratio. The last major financial jurisdiction to be affected is the UK, which introduces appropriate regulations from the first trading day of 1922 — in only nine weeks’ time. Put briefly, a bank will no longer be able to run unrestricted derivative assets and liabilities without them being tied together. In other words, if a bank has a derivative as an asset on its balance sheet, it must relate specifically to and match a liability for netting purposes and be otherwise unencumbered if a balance sheet funding penalty is to be avoided. If a bank owns unencumbered physical gold as an asset, it can match that against a customer’s unallocated account without a funding penalty, if it has successfully sought and obtained regulatory permission to do so. Two consequences follow. The first is that a bullion bank can only run an uneven book if it is prepared to accept a funding penalty through the application of the net stable funding ratio.[iii]Therefore, liquidity will almost certainly be withdrawn from futures and forwards markets, at least because banks want to appear fully compliant with the regulations. And the second is that most of the BIS gold derivative number of $834bn referred to above reflects bullion banks liabilities to their gold deposit accounts. By the year-end bullion banks will want to remove them, and the only way this can be achieved is by paying off customer gold accounts in fiat currency. There could be thousands of tonnes equivalent of paper gold to reconcile in this way, leaving gold account depositors to either abandon their gold exposure entirely or to buy physical replacements in the market. And while the gaff is being blown on gold forwards and futures, reconciling central bank swaps and leases could also emerge as a problem. In short, the factors that have suppressed the gold price since the early 1970s are not only coming to an end but are being reversed. The liquidation of paper gold threatens a gold liquidity crisis, which in the past would have been resolved by making bullion available through central bank gold swaps. But with central banks already owed bullion by the commercial banks and increasingly concerned about monetary inflation, this facility may be restricted. For the leading central banks, the introduction of Basel 3’s net stable funding ratio therefore comes at a difficult time. They are already fighting to convince their markets that inflation is only a transient price effect and are beginning to reluctantly admit it is more intractable than they thought. The last thing they need is for the gold price to be forced higher by their own regulations, adding to fears of yet higher inflation to come. But for individuals seeking to escape a fiat money catastrophe it appears that the ratio of gold to bitcoin is at an extreme of overvaluation for bitcoin and an extreme undervaluation for gold. The next waypoints in understanding inflation Because bitcoin has introduced the concept of relative rates of issue for currencies, the masses of the millennial generations will be alerted to the debasement of fiat currencies sooner than they would otherwise have been. We are less interested in how this is reflected in cryptocurrency prices than how this knowledge changes relations between consumers and state currencies. Statist economists and monetary policy makers at the major central banks insist that higher prices for consumer goods are being driven by a combination of increased spending, which was stored up during covid lockdowns, and logistics disruption. To this can be added labour problems, with acute shortages in certain industry sectors and absenteeism due to continuing covid infections. Furthermore, energy and other input costs for businesses have been rising rapidly. Monetary policy makers are aware that a wider consumer panic over rising prices must be avoided. They understand that continuing reports of product shortages will risk encouraging consumer stockpiling, driving consumer prices even higher. They will fear that interest rates would have to be increased significantly to bring price inflation back under control. But growth in the major economies appears to be stalling, which in the Keynesian playbook calls for lower interest rates and monetary stimulation instead. This leads us to... Waypoint 1. Commentary in the main-stream media has yet to address this dilemma. It is to be expected at any time. Following our first waypoint, we can assume that interest rates will be forced to rise by markets beginning to discount further losses of currency purchasing power for which interest compensation is demanded. That will inevitably terminate the bull market in equities because it undermines bond prices, pushing up yields and disrupting relative valuations. Figure 2 shows that this process has probably started, though markets are not yet discounting a rise in bond yields beyond a minor amount. The technical message from this chart confirms that the 10-year UST yield is set to go significantly higher, affecting government borrowing adversely through rising interest costs. And when the bear market in these bonds becomes more obvious to investors and foreign holders of them alike, funding the government deficit will become much more difficult. The scale of the rise in fixed interest yields is likely to take market participants and policy planners alike by surprise. The only way in which monetary policy planners can attempt to control rising bond yields and to stop equities sliding into a bear market is to increase the pace of currency creation, particularly through enhanced QE. But for now, the Fed’s stated intention is to taper QE, not increase it. This leads us to... Waypoint 2. No anticipation of this dilemma in the media or independent commentary has yet been detected. Look out for it. In the run up to the northern hemisphere winter and the Christmas shopping season, energy prices and fuel costs are set to rise further. There is no sign of product shortages being resolved. The danger is that with continuing product shortages, consumers will push their purchases of goods not immediately needed even further into the future in case they become unavailable. This will drive consumer prices even higher, creating expectations of yet higher interest rates in financial markets. The Fed will have a straightforward choice: resist market pressures for higher interest rates to save financial markets, stave off insolvencies by over-leveraged borrowers and minimise government funding costs; or protect the dollar by raising the funds rate sufficiently to take all expectation of higher rates out of the market and ignore the financial carnage. This will be next... Waypoint 3. No anticipation of this dilemma in the media or independent commentary has yet been detected. There is a specific danger developing from consumer demand leading to a general stockpiling goods. When the process goes beyond a certain point the consequences of consumers disposing of their currency and credit in favour of goods become apparent. Currency no longer works as the objective value in a transaction, this role being switched to goods, because people begin to buy goods just to get rid of currency. When that process starts in earnest, the fate of the currency is sealed. A hundred years ago this was called the crack-up boom, the final abandonment of currency. Waypoint 4. No anticipation of the final nails in the fiat currency coffin is currently anticipated. When it is, the fate of the currency will have already been sealed. Summary and conclusions Those of us not under the direct management of the US monetary policies will not escape the consequences. All western central banks accept the dollar as their reserve currency and not metallic money, so events affecting the dollar affect all the other fiat currencies. Furthermore, the other major central banks led by the Bank of Japan, European Central Bank, and the Bank of England are pursuing similarly inflationary monetary policies. Central bank groupthink is concreted into global monetary policies. Without a change in their mandate the end of modern currencies is only a matter of time — and a shortening one at that. The dying days of fiat are foreshadowed by the speculative fervour in bitcoin and other leading cryptocurrencies. A new millennial tech-savvy class of investors has got at least half the message, that fiat currency quantities are being inflated. That a significant element of the population has grasped this much about currencies early challenges the long-held wisdom that not one in a million understands money, which allows governments to oversee a limitless expansion of currency and credit for significant periods of time. Therefore, the danger to state inflationism is that significant numbers will act sooner to avoid currency depreciation by dumping it in favour of goods. It is a process that once started is impossible to stop. While the establishment appears vaguely aware of this danger, it lacks the theoretical knowledge to deal with it. Ninety years of denying classical economics in favour of Keynesianism and other statist monetary theories are too embedded in the official mind. And in the absence of understanding the destructive forces of inflationism, prescient individuals seeking protection for their families, close friends and themselves have no option but to reduce their dependency on fiat currencies and all ephemeral financial assets tied to them. These include savings deposits and “stores of wealth”, particularly fixed-interest bonds and equities. The fashionable alternative is distributed ledger cryptocurrencies which are beyond the interference of the state, exemplified by the rise and rise of bitcoin. But this article points out that this has now become dominated by speculation, so much so that in their ignorance of catallactics investors are discarding metallic money in favour of bitcoin. This is a mistake. There are sound reasons why metallic money, gold and silver, have always been money used as a medium of exchange. And as Figure 1 in this article illustrates, relative to bitcoin gold is now less than 1% of its value in 2016. Bitcoin is the bubble; gold has become the anti-bubble. The systematic suppression of gold in favour of the dollar as the world’s reserve currency is now coming to an end. The fact that westerners hardly own any bullion as part of their savings is a mistake they will rue, if, as seems inevitable, current monetary and economic policies persist. Tyler Durden Fri, 10/29/2021 - 22:00.....»»

Category: blogSource: zerohedgeOct 29th, 2021

Futures Surge On Debt Ceiling Reprieve, Slide In Energy Prices

Futures Surge On Debt Ceiling Reprieve, Slide In Energy Prices The nausea-inducing rollercoaster in the stock market continued on Thursday, when US index futures continued their violent Wednesday reversal - the biggest since March - and surged with Nasdaq futures up more than 1%, hitting a session high, as Chinese technology stocks rebounded from a record low, investors embraced progress on the debt-ceiling impasse in Washington, a dip in oil prices eased worries of higher inflation and concerns eased about the European energy crisis fueled a risk-on mood. At 7:30am ET, S&P futures were up 44 points or 1.00% and Dow futures were up 267 points or 0.78%. Oil tumbled as much as $2, dragging breakevens and nominal yields lower, while the dollar dipped and bitcoin traded around $54,000. Wednesday's reversal started after Mitch McConnell on Wednesday floated a plan to support an extension of the federal debt ceiling into December, potentially heading off a historic default, a proposal which Democrats have reportedly agreed to after Senate Majority Leader Chuck Schumer suggested an agreement would be in place by this morning. While the deal is good news for markets worried about an imminent default, it only kicks the can to December when the drama and brinksmanship may run again. Markets have been rocked in the past month by worries about the global energy crisis, elevated inflation, reduced stimulus and slower growth. Meanwhile, the prospect of a deal to boost the U.S. debt limit into December is easing concern over political bickering, while Friday’s payrolls report may shed light on the the Federal Reserve’s timeline to cut bond purchases. “We have several things that we are watching right now -- certainly the debt ceiling is one of them and that’s been contributing to the recent volatility,” Tracie McMillion, head of global asset allocation strategy at Wells Fargo Investment Institute, said on Bloomberg Television. “But we look for these 5% corrections to add money to the equity markets.” Tech and FAAMG stocks including Apple (AAPL US +1%), Nvidia (NVDA +2%), Microsoft (MSFT US +0.9%), Tesla (TSLA US 0.8%) led the charge in premarket trading amid a dip in 10-year Treasury yields on Thursday, helped by a slide in energy prices on the back of Putin's Wednesday announcement that Russia could ramp up nat gas deliveries to Europe, something it still has clearly not done. Perhaps sensing that not all is at Putin said, after plunging on Wednesday UK nat gas futures (NBP) from 407p/therm to a low of 209, prices have ominously started to rise again. As oil fell, energy stocks including Chevron, Exxon Mobil and APA led declines with falls between 0.6% and 2.1%. Here are some of the other big movers today: Twitter (TWTR US) shares rise 2% in U.S. premarket trading after it agreed to sell MoPub to AppLovin for $1.05 billion in cash Levi Strauss (LEVI US) rises 4% in U.S. premarket trading after it boosted its adjusted earnings per share forecast for the full year; the guidance beat the average analyst estimate NRX Pharmaceuticals (NRXP US) drops in U.S. premarket trading after Relief Therapeutics sued the company, alleging breach of a collaboration pact Osmotica Pharmaceuticals (OSMT US) declined 28% in premarket trading after launching an offering of shares Rocket Lab USA (RKLB US) shares rose in Wednesday postmarket trading after the company announced it has been selected to launch NASA’s Advanced Composite Solar Sail System, or ACS3, on the Electron launch vehicle U.S. Silica Holdings (SLCA US) rose 7% Wednesday postmarket after it started a review of strategic alternatives for its Industrial & Specialty Products segment, including a potential sale or separation Global Blood Therapeutics (GBT US) climbed 2.6% in Wednesday after hours trading while Sage Therapeutics (SAGE US) dropped 3.9% after Jefferies analyst Akash Tewari kicked off his biotech sector coverage On the geopolitical front, a senior U.S. official said President Joe Biden’s plans to meet virtually with his Chinese counterpart before the end of the year. Tensions are escalating between the two countries, with U.S. Secretary of State Antony Blinken criticizing China’s recent military maneuvers around Taiwan. European equities rebounded, with the Stoxx 600 index surging as much as 1.3% boosted by news that the European Central Bank was said to be studying a new bond-buying program as emergency programs are phased out. Also boosting sentiment on Thursday, ECB Governing Council member Yannis Stournaras said that investors shouldn’t expect premature interest-rate increases from the central bank. Here are some of the biggest European movers today: Iberdrola shares rise as much as 6.8% after an upgrade at BofA, and as Spanish utilities climbed following a report that the Ministry for Ecological Transition may suspend or modify the mechanism that reduces the income received by hydroelectric, nuclear and some renewables in relation to gas prices. Hermes shares climb as much as 3.8%, the most since February, after HSBC says “there isn’t much to worry about” from a possible slowdown in mainland China or questions over trend sustainability in the U.S. Edenred shares gain as much as 5.2%, their best day since Nov. 9, after HSBC upgrades the voucher company to buy from hold, saying that Edenred, along with Experian, offers faster recurring revenue growth than the rest of the business services sector. Valeo shares gain as much as 4.9% and is Thursday’s best performer in the Stoxx 600 Automobiles & Parts index; Citi raised to neutral from sell as broker updated its model ahead of 3Q results. Sika shares rise as much as 4.2% after company confirms 2021 guidance, which Baader said was helpful amid market concerns of sequentially declining margins due to rising raw material prices. Centrica shares rise as much as 3.6% as Morgan Stanley upgrades Centrica to overweight from equalweight, saying the utility provider will add market share as smaller U.K. companies fail due to the spike in wholesale energy prices. Earlier in the session, Asian stocks rallied, boosted by a rebound in Hong Kong-listed technology shares and optimism over the progress made toward a U.S. debt-ceiling accord. The MSCI Asia Pacific Index climbed as much as 1.3%, on track for its biggest jump since Aug. 24. Alibaba, Tencent and Meituan were among the biggest contributors to the benchmark’s advance. Equity gauges in Hong Kong and Taiwan led a broad regional gain, while Japan’s Nikkei 225 also rebounded from its longest losing run since 2009. Thursday’s rally in Asia came after U.S. stocks closed higher overnight on a possible deal to boost the debt ceiling into December. Focus now shifts to the reopening of mainland China markets on Friday following the Golden Week holiday, and also the U.S. nonfarm payrolls report due that day. READ: China Tech Gauge Posts Best Day Since August After Touching Lows “Risk off sentiment has persisted due to a number of negative factors, but worry over some of these issues has been alleviated for the near term,” said Shogo Maekawa, a strategist at JPMorgan Asset Management in Tokyo. “One is that concern over stagflation has abated, with oil prices pulling back.” Sentiment toward risks assets was also supported as a senior U.S. official said President Joe Biden plans to meet virtually with Chinese President Xi Jinping before the end of the year. Of note, holders of Evergrande-guaranteed Jumbo Fortune bonds have yet to receive payment; the holders next step would be to request payment from Evergrande. The maturity of the bond in question was Sunday October 3rd, with a Monday October 4th effective due data, though the bond does have a five-day grace period only in the event that payment failure is due to an administrative/technical error. Australia's S&P/ASX 200 index rose 0.7% to close at 7,256.70. All subgauges finished the day higher, with the exception of energy stocks as Asian peers tumbled with a retreat in crude oil prices.  Collins Foods was among the top performers after the company signed an agreement to become KFC’s corporate franchisee in the Netherlands. Whitehaven tumbled, dropping the most for a session since June 17.  In New Zealand, the S&P/NZX 50 index fell 0.5% to 13,104.61. Oil extended its decline from a seven-year high as U.S. stockpiles grew more than expected, and European natural gas prices tumbled on signals from Russia it may increase supplies to the continent. The yield on the U.S. 10-year Treasury was 1.526%, little changed on the day after erasing a 2.4bp increase; bunds outperformed by ~1.5bp, gilts by less than 1bp; long-end outperformance flattened 2s10s, 5s30s by ~0.5bp each. Treasuries pared losses during European morning as fuel prices ebbed and stocks gained. Bunds and gilts outperform while Treasuries curve flattens with long-end yields slightly richer on the day. WTI oil futures are lower after Russia’s offer to ease Europe’s energy crunch. Negotiations on a short-term increase to U.S. debt-ceiling continue.    In FX, the Bloomberg Dollar Spot Index was little changed and the greenback was weaker against most Group-of-10 peers, though moves were confined to relatively tight ranges. The U.S. jobs report Friday is the key risk for markets this week as a strong print could boost the dollar. Options traders see a strong chance that the euro manages to stay above a key technical support, at least on a closing basis. Risk sensitive currencies such as the Australian and New Zealand dollars as well as Sweden’s krona led G-10 gains, while Norway’s currency was the worst performer as European natural gas and power prices tumbled early Thursday after signals from Russia it may increase supplies to the continent. The pound gained against a broadly weaker dollar as concerns over the U.K. petrol crisis eased and focus turned to Bank of England policy. A warning shot buried deep in the BoE’s policy documents two weeks ago indicating that interest rates could rise as early as this year suddenly is becoming a more distinct possibility. Australia’s 10-year bonds rose for the first time in two weeks as sentiment was bolstered by a short-term deal involving the U.S. debt ceiling. The yen steadied amid a recovery in risk sentiment as stocks edged higher. Bond futures rose as a debt auction encouraged players to cautiously buy the dip. Looking ahead, investors will be looked forward to the release of weekly jobless claims data, likely showing 348,000 Americans filed claims for state unemployment benefits last week compared with 362,000 in the prior week. The ADP National Employment Report on Wednesday showed private payrolls increased by 568,000 jobs last month. Economists polled by Reuters had forecast a rise of 428,000 jobs. This comes ahead of the more comprehensive non-farm payrolls data due on Friday. It is expected to cement the case for the Fed’s slowing of asset purchases. We'll also get the latest August consumer credit print. From central banks, we’ll be getting the minutes from the ECB’s September meeting, and also hear from a range of speakers including the ECB’s President Lagarde, Lane, Elderson, Holzmann, Schnabel, Knot and Villeroy, along with the Fed’s Mester, BoC Governor Macklem and PBoC Governor Yi Gang. Market Snapshot S&P 500 futures up 1% to 4,395.5 STOXX Europe 600 up 1.03% to 455.96 MXAP up 1.2% to 193.71 MXAPJ up 1.8% to 633.78 Nikkei up 0.5% to 27,678.21 Topix down 0.1% to 1,939.62 Hang Seng Index up 3.1% to 24,701.73 Shanghai Composite up 0.9% to 3,568.17 Sensex up 1.2% to 59,872.01 Australia S&P/ASX 200 up 0.7% to 7,256.66 Kospi up 1.8% to 2,959.46 Brent Futures down 1.8% to $79.64/bbl Gold spot up 0.0% to $1,762.96 U.S. Dollar Index little changed at 94.19 German 10Y yield fell 0.6 bps to -0.188% Euro little changed at $1.1563 Top Overnight News from Bloomberg Democrats signaled they would take up Senate Republican leader Mitch McConnell’s offer to raise the U.S. debt ceiling into December, alleviating the immediate risk of a default but raising the prospect of another bruising political fight near the end of the year The European Central Bank is studying a new bond-buying program to prevent any market turmoil when emergency purchases get phased out next year, according to officials familiar with the matter Market expectations for interest-rate hikes “are not in accordance with our new forward guidance,” ECB Governing Council member Yannis Stournaras said in an interview with Bloomberg Television Creditors have yet to receive repayment of a dollar bond they say is guaranteed by China Evergrande Group and one of its units, in what could be the firm’s first major miss on maturing notes since regulators urged the developer to avoid a near-term default Boris Johnson’s plan to overhaul the U.K. economy is a 10-year project he wants to see out as prime minister, according to a senior official. The time frame, which has not been disclosed publicly, illustrates the scale of Johnson’s gamble that British voters will accept a long period of what he regards as shock therapy to redefine Britain The U.K.’s surge in inflation has boosted the cost of investment-grade borrowing in sterling to the most since June 2020. The average yield on the corporate notes climbed just past 2%, according to a Bloomberg index A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded positively as the region took impetus from the mostly positive close in the US where the major indices spent the prior session clawing back opening losses, with sentiment supported amid a potential Biden-Xi virtual meeting this year, and hopes of a compromise on the debt ceiling after Senate Republican Leader McConnell offered a short-term debt limit extension to December. The ASX 200 (+0.7%) was led higher by strength in the tech sector and with risk appetite also helped by the announcement to begin easing restrictions in New South Wales from next Monday. The Nikkei 225 (+0.5%) attempted to reclaim the 28k level with advances spearheaded by tech and amid reports Tokyo is to lower its virus warning from the current top level. The Hang Seng (+3.1%) was the biggest gainer owing to strength in tech and property stocks, with Evergrande shareholder Chinese Estates surging in Hong Kong after a proposal from Solar Bright to take it private. Reports also noted that the US and China reportedly reached an agreement in principle for a Biden-Xi virtual meeting before year-end and with yesterday’s talks in Zurich between senior officials said to be more meaningful and constructive than other recent exchanges. Finally, 10yr JGBs retraced some of the prior day’s after-hours rebound with haven demand hampered by the upside in stocks and after the recent choppy mood in T-notes, while the latest enhanced liquidity auction for longer-dated JGBs resulted in a weaker bid-to-cover. Top Asian News Vietnam Faces Worker Exodus From Factory Hub for Gap, Nike, Puma Japan’s New Finance Minister Stresses FX Stability Is Vital Korea Lures Haven Seekers With Bonds Sold at Lowest Spread Africa’s Free-Trade Area to Get $7 Billion in Support From AfDB Bourses in Europe hold onto the gains seen at the cash open (Euro Stoxx 50 +1.5%; Stoxx 600 +1.1%) following on from an upbeat APAC handover, albeit the upside momentum took a pause shortly after the cash open. US equity futures are also firmer across the board but to a slightly lesser extent, with the tech-laden NQ (+1.0%) getting a boost from a pullback in yields and outperforming its ES (+0.7%), RTY (+0.6%) and YM (+0.6%). The constructive tone comes amid some positive vibes out of the States, and on a geopolitical note, with US Senate Minority Leader McConnell offered a short-term debt ceiling extension to December whilst US and China reached an agreement in principle for a Biden-Xi virtual meeting before the end of the year. Euro-bourses portray broad-based gains whilst the UK's FTSE 100 (+1.0%) narrowly lags the Euro Stoxx benchmarks, weighed on by its heavyweight energy and healthcare sectors, which currently reside at the foot of the bunch. Further, BoE's Chief Economist Pill also hit the wires today and suggested that the balance of risks is currently shifting towards great concerns about the inflation outlook, as the current strength of inflation looks set to prove more long-lasting than originally anticipated. Broader sectors initially opened with an anti-defensive bias (ex-energy), although the configuration since then has turned into more of a mixed picture, although Basic Resource and Autos still reside towards the top. Individual movers are somewhat scarce in what is seemingly a macro-driven day thus far. Miners top the charts on the last day of the Chinese Golden Week Holiday, with base metal prices also on the front foot in anticipation of demand from the nation – with Antofagasta (+5.1%), Anglo American (+4.2%) among the top gainers, whist Teamviewer (-8.2%) is again at the foot of the Stoxx 600 in a continuation of the losses seen after its guidance cut yesterday. Ubisoft (-5.1%) are also softer, potentially on a bad reception for its latest Ghost Recon game announcement. Top European News ECB’s Stournaras Reckons Investor Rate-Hike Bets Are Unwarranted Shell Flags Financial Impact of Gas Market Swings, Hurricane Johnson’s Plans for Economy Signal Ambitions for Decade in Power U.K. Grid Bids to Calm Market Saying Winter Gas Supply Is Enough In FX, the latest upturn in broad risk sentiment as the pendulum continues to swing one way then the other on alternate days, has given the Aussie a fillip along with news that COVID-19 restrictions in NSW remain on track for being eased by October 11, according to the state’s new Premier. Aud/Usd is eyeing 0.7300 in response to the above and a softer Greenback, while the Aud/Nzd cross is securing a firmer footing above 1.0500 in wake of a slender rise in AIG’s services index and ahead of the latest RBA FSR. Conversely, the Pound is relatively contained vs the Buck having probed 1.3600 when the DXY backed off further from Wednesday’s w-t-d peak to a 94.102 low and has retreated through 0.8500 against the Euro amidst unsubstantiated reports about less hawkish leaning remarks from a member of the BoE’s MPC. In short, the word is that Broadbent has downplayed the prospects of any fireworks in November via a rate hike, but on the flip-side new chief economist Pill delivered a hawkish assessment of the inflation situation in the UK when responding to a TSC questionnaire (see 10.18BST post on the Headline Feed for bullets and a link to his answers in full). Back to the Dollar index, challenger lay-offs are due and will provide another NFP guide before claims and commentary from Fed’s Mester, while from a technical perspective there is near term support just below 94.000 and resistance a fraction shy of 94.500, at 93.983 (yesterday’s low) and the aforementioned midweek session best (94.448 vs the 94.283 intraday high, so far). NZD - Notwithstanding the negative cross flows noted above, the Kiwi is also taking advantage of more constructive external and general factors to secure a firmer grip of the 0.6900 handle vs its US counterpart, but remains rather deflated post-RBNZ on cautious guidance in terms of further tightening. EUR/CHF/CAD/JPY - All narrowly mixed against their US peer and mostly well within recent ranges as the Euro reclaims 1.1500+ status in the run up to ECB minutes, the Franc consolidates off sub-0.9300 lows following dips in Swiss jobless rates, the Loonie weighs up WTI crude’s further loss of momentum against the Greenback’s retreat between 1.2600-1.2563 parameters awaiting Canada’s Ivey PMIs and a speech from BoC Governor Macklem, and the Yen retains an underlying recovery bid within 111.53-23 confines before a raft of Japanese data. Note, little reaction to comments from Japanese Finance Minister, when asked about recent Jpy weakening, as he simply said that currency stability is important, so is closely watching FX developments, but did not comment on current levels. In commodities, WTI and Brent front month futures are on the backfoot, in part amid the post-Putin losses across the Nat Gas space, with the UK ICE future dropping some 20% in early trade. This has also provided further headwinds to the crude complex, which itself tackles its own bearish omens. WTI underperforms Brent amid reports that the US was mulling a Strategic Petroleum Reserve (SPR) release and did not rule out an export ban. Desks have offered their thoughts on the development. Goldman Sachs says a US SPR release would likely be of up to 60mln barrels, only representing a USD 3/bbl downside to the year-end USD 90/bbl Brent forecast and stated that relief would only be transitory given structural deficits the market will face from 2023 onwards. GS notes that any larger price impact that further hampers US shale activity would lead to elevated US nat gas prices in 2022, and an export ban would lead to significant disruption within the US oil market, likely bullish retail fuel price impact. RBC, meanwhile, believes that these comments were to incentivise OPEC+ to further open the taps after the producers opted to maintain a plan to hike output 400k BPD/m. On that note, sources noted that the OPEC+ decision against a larger supply hike at Monday's meeting was partly driven by concern that demand and prices could weaken – this would be in-fitting with sources back in July, which suggested that demand could weaken early 2022. The downside for crude prices was exacerbated as Brent Dec fell under USD 80/bbl to a low of near 79.00/bbl (vs 81.14/bbl), whilst WTI Nov briefly lost USD 75/bbl (vs high 77.23/bbl). Prices have trimmed some losses since. Metals in comparison have been less interesting; spot gold is flat and only modestly widened its overnight range to the current 1,756-66 range, whilst spot silver remains north of USD 22.50/bbl. Elsewhere, the risk tone has aided copper prices, with LME copper still north of USD 9,000/t, whilst some also cite supply concerns as a key mining road in Peru (second-largest copper producer) was blocked, with the indigenous community planning to continue the blockade indefinitely, according to a local leader. It is also worth noting that Chinese markets will return tomorrow from their Golden Week holiday. US Event Calendar 7:30am: Sept. Challenger Job Cuts YoY, prior -86.4% 8:30am: Oct. Initial Jobless Claims, est. 348,000, prior 362,000; Continuing Claims, est. 2.76m, prior 2.8m 9:45am: Oct. Langer Consumer Comfort, prior 54.7 11:45am: Fed’s Mester Takes Part in Panel on Inflation Dynamics 3pm: Aug. Consumer Credit, est. $17.5b, prior $17b DB's Jim Reid concludes the overnight wrap On the survey, given how fascinating markets are at the moment I think the results of this month’s edition will be especially interesting. However the irony is that when things are busy less people tend to fill it in as they are more pressed for time. So if you can try to spare 3-4 minutes your help would be much appreciated. Many thanks. It was a wild session for markets yesterday, with multiple asset classes swinging between gains and losses as investors sought to grapple with the extent of inflationary pressures and potential shock to growth. However US equities closed out in positive territory and at the highs as the news on the debt ceiling became more positive after Europe went home. Before this equities had lost ground throughout the London afternoon, with the S&P 500 down nearly -1.3% at one point with Europe’s STOXX 600 closing -1.03% lower. Cyclical sectors led the European underperformance, although it was a fairly broad-based decline. However after Europe went home – or closed their laptops in many cases – the positive debt ceiling developments saw risk sentiment improve throughout the rest of New York session. The S&P rallied to finish +0.41% and is now slightly up on the week, as defensive sectors such as utilities (+1.53%) and consumer staples (+1.00%) led the index while US cyclicals fell back like their European counterparts. Small cap stocks didn’t enjoy as much of a boost as the Russell 2000 ended the day -0.60% lower, while the megacap tech NYFANG+ index gained +0.82%. Risk sentiment improved following reports that Senate Minority Leader Mitch McConnell was willing to negotiate with Democrats to resolve the debt ceiling impasse and allow Democrats to raise the ceiling until December. This means President Biden and Congressional Democrats would be able to finish their fiscal spending package – now estimated at around $1.9-2.2 trillion – and include a further debt ceiling raise into one large reconciliation package near year-end. Senate Majority Leader Schumer has not publicly addressed the deal yet, but Democrats have signaled that they’ll accept the deal, although they’ve also indicated they’d still like to pass the longer-term debt ceiling bill under regular order in a bipartisan manner when the time came near year-end. Interestingly, if we did see the ceiling extended until December, this would put another deadline that month, since the government funding extension only went through to December 3, so we could have yet another round of multiple congressional negotiations in just a few weeks’ time. The news of a Republican offer coincided with President Biden’s virtual meeting with industry leaders, where the President implored them to join him in pressuring legislators to raise the debt limit. Treasury Secretary Yellen also attended the meeting, and re-emphasised her estimate for the so-called “drop dead date” to be October 18. Potentially at risk Treasury bills maturing shortly thereafter rallied a few basis points, signaling investors took yesterday afternoon’s debt ceiling developments as positive and credible. This was a far cry from where markets opened the London session as turmoil again gripped the gas market. UK and European natural gas futures both surged around +40% to reach an intraday high shortly after the open. However, energy markets went into reverse following comments from Russian President Putin that the country was set to supply more gas to Europe and help stabilise energy markets, with European futures erasing those earlier gains to actually end the day down -6.75%, with their UK counterpart similarly reversing course to close -6.96% too. The U.K. future traded in a stunning 255 to 408 price range on the day. We shouldn’t get ahead of ourselves here though, since even with the latest reversal, prices are still up by more than five-fold since the start of the year, and this astonishing increase over recent weeks has attracted attention from policymakers across the world as governments look to step in and protect consumers and industry. In the EU, the Energy Commissioner, Kadri Simson, said that the price shock was “hurting our citizens, in particular the most vulnerable households, weakening competitiveness and adding to inflationary pressure. … There is no question that we need to take policy measures”. However, the potential response appeared to differ across the continent. French President Macron said that more energy capacity was required, of which renewables and nuclear would be key elements, while Italian PM Draghi said that joint EU gas purchases had wide support. However, Hungarian PM Orban took the opportunity to blame the European Commission, saying that the Green Deal’s regulations were “indirect taxation”, which shows how these price spikes could create greater resistance to green measures moving forward. Elsewhere, blame was also cast on carbon speculators, with Spanish environment minister Rodriguez saying that “We don’t want to be hostages of external financial investors”, and outside the EU, Serbian President Vucic said that his country could ban power exports if there were further issues, which just shows how energy has the potential to become a big geopolitical issue this winter. Those declines in natural gas prices were echoed across the energy complex, with both Brent Crude (-1.79%) and WTI (-1.90%) oil prices subsiding from their multi-year highs the previous day, just as coal also fell -10.20%. In turn, that served to alleviate some of the concerns about building price pressures and helped measures of longer-term inflation expectations decline across the board. Indeed by the close, the 10yr breakeven in the US had come down -1.4bps, and the equivalent measures in Germany (-4.6bps), Italy (-6.1bps) and the UK (-4.2bps) had likewise seen declines of their own. In spite of those moves for inflation expectations, this proved little consolation for European sovereign bonds as higher real rates put them under continued pressure, even if yields had pared back some of their gains from the morning. Yields on 10yr bunds (+0.6bps), OATs (+0.9bps) and BTPs (+3.2bps) were all at their highest levels in 3 months, whilst those on Polish 10yr debt were up +13.7bps after the central bank there unexpectedly became the latest to raise rates, with the 40bps hike to 0.5% marking the first increase since 2012. However, for the US it was a different story, with yields on 10yr Treasuries down -0.5bps to 1.521%, having peaked at 1.57% earlier in the London morning. There was a late story in Europe that could bear watching in the coming weeks as Bloomberg reported that the ECB is studying a new bond-buying tool that could help ease market volatility if a “taper tantrum”-esque move were to happen when the PEPP purchases end in March. The plan would reportedly target purchases selectively if there were to be a larger selloff in more heavily indebted economies, which differs from the existing programs that buys debt in relation to the size of each member’s economy. Asian stocks overnight have performed strongly, with the Hang Seng (+2.28%), Nikkei (+1.68%) and KOSPI (+1.61%) all advancing after the positive news on the debt-ceiling, as well on news that US President Biden was set to meeting with Chinese President Xi by the end of the year. All the indices were lifted by the IT and consumer discretionary sectors, and the Hang Seng Tech index has rebounded by +3.29% this morning. Separately, Evergrande-related news has been subsiding in recent days, but China Estates, a company controlled by a backer of Evergrande, rose 30% after the company disclosed an offer to take it private for $245mn. Otherwise, US futures are pointing to a positive start later, with those on the S&P 500 (+0.50%) and DAX (+1.19%) both advancing. Turning to Germany, exploratory talks will be commencing today between the centre-left SPD, the Greens and the Liberal FDP, who together would make up a so-called “traffic-light” coalition. That marks a boost for the SPD, who beat the CDU/CSU bloc into first place in the September 26 election, although CDU leader Armin Laschet said that his party were “still ready to hold talks”. However, the CDU/CSU have faced internal tensions after they slumped to their worst-ever election result, whilst a Forsa poll out on Tuesday said that 53% of voters wanted a traffic-light coalition, versus just 22% who favoured the Jamaica option led by the CDU/CSU. So momentum seems clearly behind the traffic light option for now. Looking at yesterday’s data, in the US the ADP’s report at private payrolls came in at an unexpectedly strong +568k (vs. +430k expected), which is the highest in their series for 3 months and comes ahead of tomorrow’s US jobs report. However in Germany, factory orders in August fell by -7.7% (vs. -2.2% expected) amidst various supply issues. To the day ahead now, and data releases include German industrial production and Italian retail sales for August, whilst in the US we’ve got the weekly initial jobless claims and August’s consumer credit.From central banks, we’ll be getting the minutes from the ECB’s September meeting, and also hear from a range of speakers including the ECB’s President Lagarde, Lane, Elderson, Holzmann, Schnabel, Knot and Villeroy, along with the Fed’s Mester, BoC Governor Macklem and PBoC Governor Yi Gang. Tyler Durden Thu, 10/07/2021 - 07:57.....»»

Category: blogSource: zerohedgeOct 7th, 2021

Between A Rock And A Hard Place

S&P 500 stopped consolidating in the 4,340s shortly after the open, and went largely one way since – except for the run up to the closing bell, which I used to grab short profits off the table. The overnight pump is at work today – not vigorously, but still. Given the credit market posture (yields […] S&P 500 stopped consolidating in the 4,340s shortly after the open, and went largely one way since – except for the run up to the closing bell, which I used to grab short profits off the table. The overnight pump is at work today – not vigorously, but still. Given the credit market posture (yields not rising much on the day), a brief retracement in tech can be expected – especially since yesterday‘s outage news were what powered it in the first place. 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 .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q2 2021 hedge fund letters, conferences and more VIX has gone nowhere yesterday, and looks unwilling to spend much time below 21 really. We‘re at crossroads where the supports I mentioned on Thursday, are giving way one after another. 4,260s are next in line, followed by 4200s – it would take time to get there, and Friday‘s non-farm payrolls could be the catalyst. Unless they come in outrageously weak, the Fed is likely to announce taper in Nov – monetary policy deceleration into a weakening economy while inflation expectations are rising, supply chains increasingly strained to the point that the International Chamber of Shipping has issued a red alert warning of a global transport systems collapse – make you go hmm. Something tells me the Fed won‘t be as successful jawboning inflation as in June – its favorite metric, the PCE deflator, isn‘t yielding, and the realization that inflation is here to stay, is creeping in. I don't know how so much of the financial universe could have been duped by the transitory narrative... for so long. The energy squeeze is on – I cashed in sizable oil profits yesterday (check at my site the portfolio performance at fresh highs!) – the dollar is stalling, cryptos are rising and adding to open profits too, while precious metals are waking up. I‘m looking for silver to lead and be more resilient – the gold to silver ratio falling first below 73 would be a welcome confirmation of the budding broad recognition of inflation across the markets. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook S&P 500 volume doesn‘t show the buyers are serious here. This downswing isn‘t over. Credit Markets HYG was really weak yesterday, but the quality debt instruments positioning hints at a reprieve, at a risk-off led S&P 500 pause next. Gold, Silver and Miners Gold and silver upswing was finally joined by the miners – the sentiment is warming up to further gains. Crude Oil The crude oil elevator hasn‘t stopped yet, but I wouldn‘t be surprised by a consolidation of gained ground next. Copper Copper upswing was a bit too readily sold into, and the volume wasn‘t stellar. This long sideways trend isn‘t over yet. Bitcoin and Ethereum Bitcoin and Ethereum are approaching the early Sep highs – and look likely to overcome them. Summary Stock market bears still have the upper hand, and credit markets are signalling caution. None of the intraday reversals to the upside have stuck, and we haven‘t reached a local bottom yet. Coupled with the stagflationary undertones, the cyclically sensitive commodities have a harder time than oil. The dollar is likely to come under increasing pressure, which would underpin precious metals and commodities alike. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals. Thank you, Monica Kingsley Stock Trading Signals Gold Trading Signals Oil Trading Signals Copper Trading Signals Bitcoin Trading Signals www.monicakingsley.co mk@monicakingsley.co All essays, research and information represent analyses and opinions of Monica Kingsley that are based on available and latest data. Despite careful research and best efforts, it may prove wrong and be subject to change with or without notice. Monica Kingsley does not guarantee the accuracy or thoroughness of the data or information reported. Her content serves educational purposes and should not be relied upon as advice or construed as providing recommendations of any kind. Futures, stocks and options are financial instruments not suitable for every investor. Please be advised that you invest at your own risk. Monica Kingsley is not a Registered Securities Advisor. By reading her writings, you agree that she will not be held responsible or liable for any decisions you make. Investing, trading and speculating in financial markets may involve high risk of loss. Monica Kingsley may have a short or long position in any securities, including those mentioned in her writings, and may make additional purchases and/or sales of those securities without notice. Updated on Oct 5, 2021, 10:44 am (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; 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: valuewalkOct 5th, 2021

Wishing Away Inflation

S&P 500 bears did indeed move, and the dip wasn‘t much bought. VIX with its prominent upper knot may not have said the last word yet, but a brief consolidation of the key volatility metrics is favored next. Even the overnight rebound (dead cat bounce, better said), is losing traction, prompting me to issue a […] S&P 500 bears did indeed move, and the dip wasn‘t much bought. VIX with its prominent upper knot may not have said the last word yet, but a brief consolidation of the key volatility metrics is favored next. Even the overnight rebound (dead cat bounce, better said), is losing traction, prompting me to issue a stock market update to subscribers hours ago – fresh short profits can keep growing: .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 .af-body.af-standards 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 Ray Dalio Series in PDF Get the entire 10-part series on Ray Dalio in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q2 2021 hedge fund letters, conferences and more (…) Following yesterday’s slide, the S&P 500 upswing appears running into headwinds as credit markets keep putting pressure on the Fed. Rising dollar is thus far having little effect on commodities, and precious metals have retraced a sizable part of the intraday downswing. Tech remains more vulnerable than value, and this correction appears as not (at all) yet over. While the dollar upswing hasn‘t been strongest over the prior week, higher yields are causing it to rise somewhat still. The commodity complex is remarkably resilient – the open long positions are likely to keep doing well – and I don‘t mean only energies. Copper is holding up in the mid 4.20s while precious metals are giving the bears a break – a tentative one, but nonetheless encouraging – as I have written yesterday: (…) the metals would stop reacting to the bad news while ignoring negative real rates (yes, transitory inflation is another myth the market place believes in) at some point. All roads lead to gold – inflationary and deflationary ones alike. What can the Fed do? Underestimate inflation, be behind the curve, carefully play expectations while real world inflation coupled with shattered supply chains wreck the stock market bull over the quarters ahead? Or throughtfully slam on the brakes (which is what the markets think it‘s doing now), which would force a long overdue S&P 500 correction that could reach even 10-15% from the ATHs? Remember that the debt ceiling hasn‘t been resolved yet, so an interesting entry to the month of October awaits. Bonds are signalling that the Fed‘s image of inflation fighter (right or wrong, have your pick) is losing the benefit of the doubt it was given with the Jun FOMC – bond yields have abruptly ended their descent and subsequent trading range. This spells not only inflation (the risk of Fed‘s policy mistake – warnings it would take longer with us than originally anticipated coupled with the professed faith it would just naturally subside all by itself), but smacks of stagflation. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook Rising volume and some lower knot hint at the possibility of overnight rebound, but the real question is whether that would stick. So far, it doesn‘t seem so. Credit Markets Credit markets haven‘t moderated their pace of decline, but TLT attempted to find bottom intraday, which would coincide with tech temporarily pausing as well. The dust hasn‘t yet settled. Gold, Silver and Miners Gold is having harder and harder time declining, and the miners pause makes yesterday‘s modest downswing suspect. When silver joins in showing some relative strength, we would know the focus is shifting to inflation again, in precious metals as much as in Treasuries – this hasn‘t happened thus far. Crude Oil Crude oil finally paused, and its candlestick favors consolidation – oil stocks have remained well performing, pointing out still more upside in the current black gold upleg. Copper Copper hesitation goes on, with the red metal once again trading at odds with the CRB Index, which makes further downside rather limited. Bitcoin and Ethereum Bitcoin and Ethereum bears haven‘t confirmed the initiative with a break below $40K in BTC (sorry for yesterday‘s typo stating $44K – corrected on my site). It‘s too early to declare the end of the trading range – similarly to gold, cryptos have a hard time falling, and that means something. Summary Stocks aren‘t out of the woods yet, and monetary policy has turned into a headwind. Damned if you do, damned if you don‘t – the Fed is having a hard time walking the fine taper line. Rising Treasury yields are a warning sign – commodities are likely to remain the most resilient, and precious metals would join just like cryptos. The question marks over the debt ceiling, the timing and actual pace of taper, keep persisting. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals. Thank you, Monica Kingsley Stock Trading Signals Gold Trading Signals Oil Trading Signals Copper Trading Signals Bitcoin Trading Signals www.monicakingsley.co mk@monicakingsley.co All essays, research and information represent analyses and opinions of Monica Kingsley that are based on available and latest data. Despite careful research and best efforts, it may prove wrong and be subject to change with or without notice. Monica Kingsley does not guarantee the accuracy or thoroughness of the data or information reported. Her content serves educational purposes and should not be relied upon as advice or construed as providing recommendations of any kind. Futures, stocks and options are financial instruments not suitable for every investor. Please be advised that you invest at your own risk. Monica Kingsley is not a Registered Securities Advisor. By reading her writings, you agree that she will not be held responsible or liable for any decisions you make. Investing, trading and speculating in financial markets may involve high risk of loss. Monica Kingsley may have a short or long position in any securities, including those mentioned in her writings, and may make additional purchases and/or sales of those securities without notice. Updated on Sep 29, 2021, 10:21 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; 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: valuewalkSep 29th, 2021

Why Is Gold Not Rising?

Why Is Gold Not Rising? Authored by Matthew Piepenburg via GoldSwitzerland.com, Many are asking why gold is not rising, as just about every other commodity makes new highs in the backdrop of inflationary tailwinds. That’s a very fair question. Some are even saying gold is dead, a silly and “barbarous” old relic of ancient times, ancient math and ancient common sense. Needless to say, we beg to differ, not because we are Swiss-based gold bugs, but simply…well… let’s explain. Current Price vs. Current and Future Roles For those who see history and math as guides rather than “barbarous” and outdated disciplines, their convictions regarding gold’s role, and even price trajectory, do not wane or rise simply due to the paper price of gold. To some extent, and despite Basel 3, gold remains openly manipulated by a handful of central and bullion banks who are terrified of gold’s shine for no other reason than it embarrasses currencies (and mad monetary experiments) falling deeper into discredit. But we track the movement of physical gold every day, and can say with blunt clarity that the paper trade in gold has zero to do with the those otherwise “barbarous” forces of the actual supply and demand of this precious metal. Zero. In short, the paper price of gold has become a fiction accepted as reality, which is not surprising in a financial landscape (i.e., historically over-valued stocks, negative yielding bonds and central bankers allergic to transparency) which defies every measure of honest price discovery or basic capitalism. As for the never-ending gold vs. BTC debate, it would be wrong to say Bitcoin hasn’t taken (or continue to take) some market share away from gold, but at less than $1 trillion, BTC is not going to destroy gold’s $10T market share. In short, the current gold price is a less important topic than its current and future role as historical insurance against mathematically-failing financial and economic systems around the globe. That said, we are not apologists for the falling gold prices, nor do we doubt that by the end of this decade, gold will price well above $4000 per ounce and greatly reward informed investors playing the long game rather than putting green. More on that later. Gold’s Three Roles For now, let’s consider gold’s historical role as a hedge against: 1) recession risk; 2) market volatility risk; and 3) inflation/currency risk. 1. Recession Hedging As for recessions, gold is like an emotional and mathematical barometer testing the temperature of over-heated monetary expansion. As such, it moves higher even before policy makers add more inevitable “stimulus” (i.e., mouse-click fiat currencies) into the system. By the time policy makers officially announce a recession, it’s far too late for most investors to react. Fortunately, gold acts more quickly, anticipating monetary expansion even before the money printers start churning. Long before the “COVID recession” of 2020, for example, the writing was already on the wall that markets and central bankers were getting desperate. By late 2019, debt levels were off the charts, liquidity was drying up, the repo markets were drinking hundreds of billions of Fed dollars per month and an un-official QE to the tune of $60 billion per month was in full-swing. Then came COVID in March. Markets and GDP were tanking and gold was already on course to see (in dollar terms) a 25% rise in 2020, after a 19% rise in 2019. In short, as a recession hedge, gold was ahead of the central bankers in protecting investors. By the way, the Fed’s record for calling recessions and warning investors is 0 for 10… 2. Hedging Market Volatility We all remember March of 2020, when markets puked and gold fell along with it, primarily sold-off as a liquidity source for players facing margin costs which they were forced to pay off with gold holdings. As in 2008 and 2009, gold initially followed the stock ship below the waterline—though not nearly as far as BTC… But as mentioned above, gold reacted quickly, anticipating the money printing (and hence dollar debasement) to come, rising steadily for the rest of that fiscal year. Of course, stocks rose as well, thanks to the unbelievable and historically unprecedented money creation witnessed in 2020—more QE in less than a year than all of the combined QE1-QE4 and “Operation Twist” which we saw from 2009-2015. But thankfully, gold doesn’t just follow stock markets, it hedges them, as the past shows and the future will once again confirm. Such monetary stimulus creates what von Mises would call a “crack-up boom,” and near-term such liquidity is just wonderful for stocks and bonds. As we’ve written elsewhere, COVID—and the policy measures which followed– literally saved the securities bubble and made this “boom” even bigger. But the “boom”-to-volatility to sequence to come from such risk assets reaching price levels which have absolutely nothing to do with valuation will be infinitely more painful (“crack-up”) down the road for those assets than for gold the moment when, not if, this horrific financial system implodes under its own and historically un-matched weight. In short, gold will zig when the markets zag. The anti-gold crowd, of course, will smirk and hug their bonds, reminding us all that gold is a yield-less relic while forgetting to confess that the “no yield” of gold is ironically preferrable to over $19 trillion worth of negative yielding sovereign bonds… 3. Hedging Inflation & Currency Risk Which brings us to the big question of the day, why is gold not rising when it should be ripping as a hedge against what is clearly an inflationary new normal? Fair question. We are asking this ourselves, as real rates (the ideal setting for gold) fall deeper into negative depths with each new day… …as inflation, as well as inflation expectations, are on the objective rise: Last year, for example, gold saw this inflation coming and thus its rising, double-digit price moves reflected the same. But this year, with real rates still diving and inflation rising, gold is showing single single-digit losses rather than gains. What gives? The Market Still Believes the “Transitory” Meme Our ultimate opinion boils down to this: We think the market still believes the central bank myth (i.e., propaganda) that the current inflation is indeed, only “transitory.” We’ve written ad nauseum as to why inflation is anything but “transitory,” yet we can nevertheless respect the deflationists’ argument. The Deflationists The deflation camp, for example, rightly argues that recessionary forces, if left alone, are inherently deflationist, and the signs of economic (rather than market) declines are everywhere. But the key mistake which such deflation (or dis-inflation) narratives make is that these natural forces have not, nor will be, “left alone.” In other words, deflationists are somehow ignoring the monetary and fiscal elephant in the room. That is, more, not less, unnatural monetary and fiscal liquidity is entering the system at historically unprecedented levels, levels that are more than enough to quash such otherwise natural deflationary forces. Stated even more plainly, moderation at the fiscal and monetary level died long ago. Simple Realism—Inflation as Necessity Rather than Debate Central banks are desperate to reach higher inflation to inflate their way out of debt without admitting the same. This is nothing new for fork-tongued policy makers who once “targeted” 2% inflation as a ceiling, but are now effectively “allowing” 2% inflation as the new floor. Just as Nixon said the closing of the gold window was “transitory” in 1971, or as Bernanke promised that QE would be transitory in 2009, the current lie from on high about “transitory inflation” is no less a lie in 2021 as those other lies were in 1971 or 2009. Again, we all just kina know this, right? Furthermore, we just need to be realists rather than dreamers to see the inflation reality now and ahead. Central bankers, for example, may be dishonest, but they aren’t entirely stupid, just desperate and realistic. In the U.S., for example, a staggering as well as openly embarrassing $28.5 trillion public (i.e., national) debt level quickly limits one’s options at the White House or the Eccles Building. Not Many Options Other than Inflation In this realistic light, let’s consider their options. Policy makers have four tools to address such debt, namely: raise taxes, cut spending, declare bankruptcy, or devalue their currencies through inflation. The first two are already in play in the U.S., namely political efforts to raise taxes and ‘talk’ of cutting spending, both politically difficult options. Taking bankruptcy off the table, leaves devaluing the U.S. Dollar as the favored option, which is achieved by deliberately taking real interest rates to extreme negative levels. Allowing inflation to run while keeping rates low reduces the number of dollars needed to repay the debt. This hurts regular folks, but as we’ve said so many times, the Fed is not interested in regular folks. In other words, by decreasing the value of the U.S. Dollar, the U.S. is effectively paying off its current debt with devalued money. There are no permission slips needed from Congress, nor taxpayers. Given such realism, let us be repeatedly blunt and clear: Unlike gold not rising, inflation is not, nor will it be, “transitory.” Instead, deliberate inflation is an inherently and deliberately necessary tool used by the same anti-heroes who put us in this debt hole. More Fed-Speak, Less Honesty This means the Fed will come up with whatever excuses, words, phrases and lies to justify being more dovish despite publicly flirting with hawkish talk about a Fed taper. Already, Powell is taking the Fed way beyond its mandate and talking about social and environmental activism, as these are nice phrases to justify, you guessed it: More money creation and more (not “transitory”) inflation. As for me, hearing Powell talk about “labor market inequality” after the Fed has spent years making the top 1% richer at the expense of an increasingly poorer bottom-90% is so rich in hypocrisy that it makes the eyes water. In this opaque light, the notion of “Fed independence” is a complete and utter fiction. Instead, the Fed is slowly crossing the line into becoming the direct financier to the entire nation—and the only way it can do this is via monetary expansion and deliberate (as well as much higher) inflation, which is a tax on the poor and bullet to the heart of the U.S. Dollar. Period. Full stop. It’s All About Debt Again, this all comes realistically back to debt. When there’s too much unpayable debt (be it at the zombified corporate level or the embarrassed national level), rising rates becomes fatal. The Fed has learned since 2018 that even a slight rise in rates kills the debt-saturated markets whose capital gains taxes are about all that Uncle Sam can declare as income in a nation whose GDP was sold to China years ago. And yet… and yet… the markets somehow wish to believe the fantasy (and Fed-speak) that inflation is only “transitory.” What’s Ahead? We strongly think differently. As blunt realists, we see the Fed perhaps raising rates nominally, but when adjusted by openly deliberate (yet openly denied) inflation, real rates will fall deeper as inflation rises higher. This is because the simple reality (and choice) of nations with their backs against a debt wall is always the pursuit of inflation by design, not deflation. As I recently wrote, nothing is real anymore, and all taboos are broken. The Fed, through QE and/or the Repurchase Program, will print more money as fiscal policy rises alongside—a veritable double-whammy for more “liquidity” to come. This, of course, is crazy and ends badly. The Fed, along with the White House, have tried since Greenspan to outlaw natural market forces and needed austerity in order to bloat markets, keep their jobs or win re-election. Since we can never grow or default (?) our way out of the greatest debt hole in our history, the realistic playbook ahead is negative real rates—i.e., inflation rising higher and faster than repressed Treasury yields. Once this becomes obvious rather than “debated,” gold will rise along side the money supply to levels well above it’s current, yet admittedly, low price. Slowly, but surely, the $19 trillion in negative-yielding sovereign bonds will see outflows from that discredited asset and hence inflows into the “barbarous” asset: Gold. For now, we are patient realists rather than apologists, as the market seemingly continues to price gold for only “transitory” inflation. But once inflationary reality rises above the current “transitory” fantasy, gold will not only surge in price, but serve its far more important role of hedging against undeniable inflation and the equally undeniable (i.e., destructive) impact such inflation will have on global currencies in general and the U.S. Dollar in particular. Gold: Biding Its Time Despite such signposts from math, history and Real Politik, gold is currently under attack for not “doing enough,” despite two years of double-digit rises. Gold investors, however, are not greedy, they are patient, and they hold this physical rather than paper asset for the long game, as previously described. And as for that long game, the inflation ahead, as well destruction of the currency in your pocket today and tomorrow, means today’s gold price is not nearly as relevant an issue as gold’s role in protecting far-sighted investors from what’s ahead. In the end, gold’s primary role is acting as insurance for a global financial and currency system already burning to the ground. But for those naturally asking about price, forecasting and models, as any who worked in a bank know, such models are as complex as they are useless. We keep things simpler and humbler. By just tracking monetary growth rates with certain regressions, a realistic price target for gold based upon inevitable monetary expansion suggests gold at well past $4000 by the end of this decade. That may or may not seem sexy enough for those chasing returns today, but when those returns convert into losses too hard to imagine as markets reach new highs, we must genuinely remind you that even with Fed “support,” all bubbles do the same thing: “Pop.” We are not here to tell you when, as no one can. We are simply suggesting you prepare, rather than react. Tyler Durden Sat, 09/25/2021 - 10:30.....»»

Category: blogSource: zerohedgeSep 25th, 2021

Deflationary Winds Howling

Without looking back, S&P 500 rallied in what feels as a short squeeze in ongoing risk-off environment. Daily rise in yields was not only unable to propel the dollar, but resulted in a much higher upswing in tech than value stocks – and that‘s a little fishy, especially when the long upper knot in VTV […] Without looking back, S&P 500 rallied in what feels as a short squeeze in ongoing risk-off environment. Daily rise in yields was not only unable to propel the dollar, but resulted in a much higher upswing in tech than value stocks – and that‘s a little fishy, especially when the long upper knot in VTV is considered. 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 .af-body.af-standards 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 Our Icahn eBook! Get our entire 10-part series on Carl Icahn and other famous investors in PDF for free! Save it to your desktop, read it on your tablet or print it! Sign up below. NO SPAM EVER (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q2 2021 hedge fund letters, conferences and more The post-Fed relief simply took the bears for a little ride, and the Evergrande yuan bond repayment calmed the nerves. As if though the real estate sector was universally healthy – I think copper prices and the BHP stock price tell a different story. Things will still get interested in spite of PBOC moving in. The current macroeconomic environment will be very hard (economically and politically) to tighten into – have you noticed that the Turkish central bank unexpectedly cut rates? As I have written yesterday: (…) If June FOMC showed us anything, it was the power of (cheap) talk. We‘ve gone a long way since inflation‘s (getting out of hand) existence was acknowledged – yesterday, we were treated to very aggressive $10-15bn a month taper plans, cushioned with the „may be appropriate“ and Nov time designations. Coupled with the few and far away rate hikes on the dot plot, something fishy appears going on. While the real economy recovery progress has been acknowledged (how does that tie in with GDP downgrades and other macroeconomic realities I raised in yesterday‘s extensive analysis?), I think that the bar is being set a bit too high. Almost as if to give a (valid) reason for why not to taper right next. And the theater of taper on-off could go on, otherwise called jawboning, as markets reaction to this fragile phase of the economic recovery (marked by increasing deflationary undercurrents as shown by declining Treasury yields and contagion risks – make no mistake, Evergrande is the tip of the iceberg, real estate has been heating up over the last 1+ year around the world, and in the U.S. we have BlackRock mopping up residential real estate supply, underpinning high real estate prices especially when measured against income). Don‘t forget the weak non-farm payrolls either when it comes to the list of excuses to choose from. At the same time, we have not been entertained by the debt ceiling drama nearly enough yet. Right, the Fed is projecting the aura of independence, which made a Sep decision all the more unlikely. And who says we‘re short of drama these days? Given the S&P 500 sectoral performance and not exactly stellar market breadth, this is the time to be cautious, if you‘re a bull. Precious metals haven‘t yet caught the safe haven bid, but aren‘t decisively declining either. Dialing back the risk in stocks makes select commodities more vulnerable – copper more so than oil or natural gas, and cryptos are a chapter in its own right. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook The bulls closed yesterday on a strong note, but the upswing was arguably a bit too steep on a very short-term basis. Credit Markets High yield corporate bonds giving up their intraday gains coupled with rising yields in quality debt instruments, that‘s not entirely a picture of strength in the credit markets. Gold, Silver and Miners Gold declined on the no Fed taper celebrations, and the sectoral weakness is concentrated in the miners. When it comes to silver, the white metal would be influenced by the copper woes – look for good news on the red metal front before expecting the same for silver, that‘s the short-term assessment. Crude Oil Oil stocks performance lends credibility to the oil upswing, and black gold‘s chart is still bullish – energies are likely to do well even if any CRB hiccups occur. Copper Copper hesitation is back, and both the bulls and bears are waiting as shown by the low volume. The bears have the advantage here. Bitcoin and Ethereum Bitcoin and Ethereum are suffering on renewed China headlines about cracking on crypto trading. The bears haven‘t gained full traction, though. Summary Yesterday‘s risk-on turn is likely to get questioned, with one day delay – revealing that it‘s not about the Fed setting a tad unrealistic taper pace and conditions. With no fresh stimulus coming, financial assets are facing a fiscal cliff in their own right, that‘s the big picture conclusion, which should temper the bullish appetite across many an asset class. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals. Thank you, Monica Kingsley Stock Trading Signals Gold Trading Signals Oil Trading Signals Copper Trading Signals Bitcoin Trading Signals www.monicakingsley.co mk@monicakingsley.co All essays, research and information represent analyses and opinions of Monica Kingsley that are based on available and latest data. Despite careful research and best efforts, it may prove wrong and be subject to change with or without notice. Monica Kingsley does not guarantee the accuracy or thoroughness of the data or information reported. Her content serves educational purposes and should not be relied upon as advice or construed as providing recommendations of any kind. Futures, stocks and options are financial instruments not suitable for every investor. Please be advised that you invest at your own risk. Monica Kingsley is not a Registered Securities Advisor. By reading her writings, you agree that she will not be held responsible or liable for any decisions you make. Investing, trading and speculating in financial markets may involve high risk of loss. Monica Kingsley may have a short or long position in any securities, including those mentioned in her writings, and may make additional purchases and/or sales of those securities without notice. Updated on Sep 24, 2021, 10:45 am (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; 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: valuewalkSep 24th, 2021

So Much For Hawkish Fed

So long – better said (as if it did apply in the first place). If June FOMC showed us anything, it was the power of (cheap) talk. We‘ve gone a long way since inflation‘s (getting out of hand) existence was acknowledged – yesterday, we were treated to very aggressive $10-15bn a month taper plans, cushioned […] So long – better said (as if it did apply in the first place). If June FOMC showed us anything, it was the power of (cheap) talk. We‘ve gone a long way since inflation‘s (getting out of hand) existence was acknowledged – yesterday, we were treated to very aggressive $10-15bn a month taper plans, cushioned with the „may be appropriate“ and Nov time designations. Coupled with the few and far away rate hikes on the dot plot, something fishy appears going on. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q2 2021 hedge fund letters, conferences and more While the real economy recovery progress has been acknowledged (how does that tie in with GDP downgrades and other macroeconomic realities I raised in yesterday‘s extensive analysis?), I think that the bar is being set a bit too high. Almost as if to give a (valid) reason for why not to taper right next. And the theater of taper on-off could go on, otherwise called jawboning, as markets reaction to this fragile phase of the economic recovery (marked by increasing deflationary undercurrents as shown by declining Treasury yields and contagion risks – make no mistake, Evergrande is the tip of the iceberg, real estate has been heating up over the last 1+ year around the world, and in the U.S. we have BlackRock mopping up residential real estate supply, underpinning high real estate prices especially when measured against income). Don‘t forget the weak non-farm payrolls either when it comes to the list of excuses to choose from. At the same time, we have not been entertained by the debt ceiling drama nearly enough yet. Right, the Fed is projecting the aura of independence, which made a Sep decision all the more unlikely. And who says we‘re short of drama these days? So, S&P 500 looks seeing through the Fed fog, but don‘t forget about the historical tendency to fade the first day (FOMC day) move during the next 1-2 days. So, I‘m looking for a certain paring off of yesterday‘s upswing in both paper and real assets. And that includes backing and filling in both commodities, precious metals and cryptos. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook The bulls are on the move, running into headwinds though – more intraday hesitation (inan overall up day with a notable upper knot) is expected. Credit Markets High yield corporate bonds again merely kept opening gains – there is still hesitation, but the bullish spirits are ever so slowly returning. Gold, Silver and Miners Gold was still stunned by the taper plans presented, and miners are bidding their time. We haven‘t turned the corner yet. Crude Oil Oil stocks confirmed the oil upswing, and black gold‘s chart still maintains bullish posture. Copper Copper didn‘t really hesitate – the red metal produced another wild upswing, but the volume and base is lacking, and might take a moment to establish itself. Bitcoin and Ethereum Bitcoin and Ethereum rebounded, but the volume could have been larger – what was amiss there, could be compensated by prices hanging above at least the midpoint of yesterday‘s white candle. Summary The balance of power is shifting to the bulls, who are about to face a retracement attempt of yesterday‘s upswing, however. The degree of its mildness would hint at what to expect next – crucially, the dollar is getting the Fed (not a hawk) message, which would serve to cushion any hiccups taking markets lower over the nearest days. Thank you for having read today‘s free analysis, which is available in full here at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals. Thank you, Monica Kingsley Stock Trading Signals Gold Trading Signals Oil Trading Signals Copper Trading Signals Bitcoin Trading Signals www.monicakingsley.co mk@monicakingsley.co All essays, research and information represent analyses and opinions of Monica Kingsley that are based on available and latest data. Despite careful research and best efforts, it may prove wrong and be subject to change with or without notice. Monica Kingsley does not guarantee the accuracy or thoroughness of the data or information reported. Her content serves educational purposes and should not be relied upon as advice or construed as providing recommendations of any kind. Futures, stocks and options are financial instruments not suitable for every investor. Please be advised that you invest at your own risk. Monica Kingsley is not a Registered Securities Advisor. By reading her writings, you agree that she will not be held responsible or liable for any decisions you make. Investing, trading and speculating in financial markets may involve high risk of loss. Monica Kingsley may have a short or long position in any securities, including those mentioned in her writings, and may make additional purchases and/or sales of those securities without notice. Updated on Sep 23, 2021, 10:35 am (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; 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: valuewalkSep 23rd, 2021

The "Flash-Crash On Steroids" Scenario

The "Flash-Crash On Steroids" Scenario Authored by Bruce Wilds via Advancing Time blog, An interesting way to exercise the brain is to imagine what some of us might consider the unimaginable. That is what I ask you to do now. Many investors continue to believe that even if the stock market drops they will be smart enough to get out after taking only a minor hit. Others simply think no way exists for these markets to fall sighting a lack of investment alternatives and what they see as the Fed put having their back. After the financial crisis in 2008 when the market took nasty and violent swings many investors came away with the feeling they learned a few things that will enable them to leap to safety before it is too late. That brings us to today. Almost everyone agrees that after years of moving ever upward this bull market is long in the tooth. Today with  the economy rapidly slowing and debt across the world having exploded it seems any opportunity to panic the bears should not go unexploited. It is against this backdrop that one allows optimist fellas to think, this time is different. The thing many investors are not taking into consideration is that if the market falls like a flash crash on steroids they could be trapped. We have been assured that can't happen because circuit breakers have been put in place to arrest panic-style moves, however, imagine a market that falls, trade is halted, and the market simply does not reopen for days or even weeks. As remote as this might seem remember Japan's stock market has failed to reach the high it made decades ago. Today the Nikkei 225 trades around 25,750 even with the BoJ buying huge amounts of ETFs. See the 1980 to 2015 chart below. Japan's Nikkei 225 has yet to reach the high it made decades ago Also, please take a moment to consider the possibility and the far-reaching ramifications of stocks falling from grace. Not only would active stock market investors get hammered but pensions, 401 plans, and a slew of other investment programs would be affected. While you are imagining this scenario realize that America's stock market is the gold standard and consider how less stable global markets would react in countries like China and Brazil. For a long time, I have been trying to develop a scenario for a market "super crash" and a reasonable map that would arrive at such a situation. To say I'm negative about this economy is a gross understatement. I saw the last housing bubble coming and predicted the crash. I continue to contend that we have never recovered from the Great Recession or corrected the many problems that haunt our financial systems such as derivatives and collateralized debt obligations. By printing money, imploding interest rates, and exploding the Federal Government's deficit we have only delayed the "big one." These two quotes on macroeconomic stabilization and crisis speak volumes. First, from Macresilience; "As Minsky has documented, the history of macroeconomic interventions post-WW2 has been the history of prevention of even the smallest snapbacks that are inherent to the process of creative destruction. The result is our current financial system which is as taut as it can be, in a state of fragility where any snap-back will be catastrophic." And next from Nassim Taleb (author of The Black Swan); "Complex systems that have artificially suppressed volatility tend to become extremely fragile, while at the same time exhibiting no visible risks. In fact, they tend to be too calm and exhibit minimal variability as silent risks accumulate beneath the surface. Although the stated intention of political leaders and economic policymakers is to stabilize the system by inhibiting fluctuations, the result tends to be the opposite." These quotes suggest an analogy with ideas about forest management when natural fires are suppressed. If random fires do not periodically clear away forest underbrush, we see a build-up of flammable material sufficient to power a massive conflagration. I certainly think an equivalent truth applies to financial markets. The longer it has been since a painful collapse, the greater the willingness to pile on leverage and complexity, such that the next crisis becomes unmanageable. The "Too Big To Fail" and other policies implemented since 2008 have distorted markets across the globe and laid the groundwork for "The Big One", or what we will someday look back on as the mother of all sell-offs. Over the years not only have we witnessed many cases of government overreach and many rule changes to protect the system at the expense of the people. What happened in Cyprus years ago should serve as a warning to anyone who thinks money in the bank is safe. A bad haircut, in this case, means you have been robbed. That may be the case if the government reaches in over a long weekend and steals money from your bank account. This is a horrible precedent to set, and the worst part may be how many people accept it saying it is OK as long as it is only on the larger accounts and only impacts the savings of someone else! It is very important to remember these low-interest rates come at a price, a dark side exists to current economic policy. In the long run, the benefits they bring may be outweighed by the distortions they cause. By not taking steps to correct many of the ills lurking in our financial system we have made things worse. Absent are actual structural changes necessary for our economy to become sustainable. Instead, we have put band-aid upon band-aid, upon band-aid while what was necessary was the amputation of a diseased limb. After all the threats that this market has avoided, and sidestepped, some investors have come to think of it as invincible. This market has overcome a struggling euro, the financial cliff, the end of Greece as we knew it, a trade war, and a global pandemic. Back in August of 2016, in a similar article, I warned about being complacent in dangerous times. My studies in "microeconomics," and observations in the current real estate market, both as an owner and hands-on landlord allow me to predict, that we ain't seen nothing yet! While Knowing such a flash crash is highly unlikely it is important we consider it could happen. Remember, none of the oil traders foresaw the oil contango  that occurred in 2020 and shook the oil industry to its core. Tyler Durden Fri, 05/20/2022 - 08:23.....»»

Category: smallbizSource: nytMay 20th, 2022

Here Is Why I’m Still Bullish On Gold Miners

The medium-term outlook for the precious metals remains bearish, but does this mean we can’t profit on shorter-term moves? Quite the opposite! Precious metals declined yesterday, and so did the general stock market. Is the rally already over? When I wrote about this rally on May 12, which took place at the same time when […] The medium-term outlook for the precious metals remains bearish, but does this mean we can’t profit on shorter-term moves? Quite the opposite! Precious metals declined yesterday, and so did the general stock market. Is the rally already over? When I wrote about this rally on May 12, which took place at the same time when I took profits from the short positions and entered the long ones, I mentioned that I planned to hold these long positions for a week or two. Since that was exactly a week ago, the question is: is the top already in? .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 .af-body.af-standards 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 Ray Dalio Series in PDF Get the entire 10-part series on Ray Dalio 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 In short, it probably isn’t. As always, it’s useful to check what happened in the past in similar situations to verify whether what we see is normal or some kind of an outlier that cannot be explained by something that has already happened. Let’s start with a quote from yesterday’s analysis: Of course, there will be some back-and-forth movement on an intraday basis, but it doesn’t change anything. Junior miners are likely to rally this week nonetheless. And perhaps not longer than that, as the next triangle-vertex-based reversal is just around the corner – on Friday/Monday. The previous few days were the “forth” and yesterday was the “back” movement – so far, my comments remain up-to-date. However, comparing the market action with what I wrote previously isn’t what I meant by analogies to past situations. I meant this: The areas marked with green rectangles are the starting moments of the previous short-term rallies. Some were bigger than others, and yet they all had one thing in common. They all included a corrective downswing after the initial post-bottom rally. Consequently, what we saw yesterday couldn’t be more normal during a short-term rally. This means that yesterday’s decline is not bearish at all and the profits from our long positions are likely to increase in the following days. Besides, the general stock market declined by over 4%, while the GDXJ (normally moving more than stocks) ETF – a proxy for junior mining stocks – declined by only about 2%. If the general stock market continues to decline, junior miners could get a bearish push even if gold prices don’t decline. However, let’s keep in mind the fact that miners tend to bottom before stocks do – in fact, we saw that in early 2020. This means that even if the S&P 500 moves to new yearly lows shortly and then bounces back up, the downside for miners could be limited, and the stocks’ rebound could trigger a profound immediate-term rally. If stocks decline, then they have quite strong support at about 3815 – at their 38.2% Fibonacci retracement level. Let’s keep in mind that junior miners have triangle-vertex-based reversal over the weekend, so they might form some kind of reversal on Friday or Monday. Ideally, miners would be after a quick rally that is accompanied by huge volume on Friday. This would serve as a perfect confirmation that the top is in or at hand. However, we can’t tell the market what it should do – we can only respond to what it does and position ourselves accordingly. Consequently, if stocks take miners lower, it could be the case that Friday or Monday will be the time when they bottom. This seems less likely to me than the previous (short-term bullish) scenario, but I’m prepared for it as well. In this case, we’ll simply… wait. Unless we see some major bearish indications, we will wait for the rally to end, perhaps sometime next week. Again, a nearby top appears more likely than another bottom, in particular in light of what I wrote about the common post-bottom patterns in the GDXJ. Naturally, as always, I’ll keep my subscribers informed. Having said that, let’s take a look at the markets from a fundamental point of view. The Chorus Continues While investors still struggle with the notion that the Fed can’t bail them out amid soaring inflation, the S&P 500 and the NASDAQ Composite suffered another reality check on May 18. Moreover, with Fed officials continuing to spread their hawkish gospel, I warned on Apr. 6 that demand destruction does not support higher asset prices. I wrote: Please remember that the Fed needs to slow the U.S. economy to calm inflation, and rising asset prices are mutually exclusive to this goal. Therefore, officials should keep hammering the financial markets until investors finally get the message. Moreover, with the Fed in inflation-fighting mode and reformed doves warning that the U.S. economy “could teeter” as the drama unfolds, the reality is that there is no easy solution to the Fed’s problem. To calm inflation, it has to kill demand. And as that occurs, investors should suffer a severe crisis of confidence. To that point, while the S&P 500 and the NASDAQ Composite plunged on May 18, Fed officials didn't soften their tones. For example, Philadelphia Fed President Patrick Harker said: "Going forward, if there are no significant changes in the data in the coming weeks, I expect two additional 50 basis point rate hikes in June and July. After that, I anticipate a sequence of increases in the funds rate at a measured pace until we are confident that inflation is moving toward the Committee’s inflation target." For context, "measured" rate hikes imply quarter-point increments thereafter. Please see below: Source: Reuters Likewise, Chicago Fed President Charles Evans delivered a similar message on May 17. He said that by December, "we will have completed any 50 [basis point rate hikes] and have put in place at least a few 25 [basis point rate hikes]." Moreover, "given the current strength in aggregate demand, strong demand for workers, and the supply-side improvements that I expect to be coming,” he added that “I believe a modestly restrictive stance will still be consistent with a growing economy." Therefore, while their recent rhetoric had Fed officials “expeditiously” marching toward neutral, now the prospect of a “restrictive stance” has entered the equation. For context, a neutral rate neither stimulates nor suffocates the U.S. economy. However, when the federal funds rate rises above neutral (restrictive), the goal is to materially slow economic activity and consumer spending. As such, the medium-term liquidity drain is profoundly bearish for the S&P 500 and the PMs. Please see below: Source: Reuters Making three of a kind, Minneapolis Fed President Neel Kashkari (a reformed dove) said on May 17 that “My colleagues and I are going to do what we need to do to bring the economy back into balance…” “What a lot of economists are scratching their heads and wondering about is: if we really have to bring demand down to get inflation in check, is that going to put the economy into recession? And we don’t know.” For context, Fed officials initially thought inflation was “transitory,” so don’t hold your breath waiting for that “soft landing.” However, while Kashkari is ~16 months too late to the inflation party, he acknowledged the reality on May 17: Source: Bloomberg As a result, while the S&P 500 and the NASDAQ Composite sell-off in their search for medium-term support, Fed officials haven’t flinched in their hawkish crusade. As such, I’ve long warned that Americans’ living standards take precedence over market multiples. To that point, the U.K. headline Consumer Price Index (CPI) hit 9% year-over-year (YoY) on May 18. For the sake of objectivity, the results underperformed economists’ consensus estimates (the middle column below). Source: Investing.com However, while investors may take solace in the miss, they should focus on the fact that the U.K. output Producer Price Index (PPI) materially outperformed expectations and often leads the headline CPI. As a result, the inflation story is much more troublesome than it seems on the surface. Please see below: Source: Investing.com In addition, British Finance Minister Rishi Sunak warned of a cost of living crisis on May 18, saying that “as the situation evolves our response will evolve” and “we stand ready to do more.” Please see below: Source: Reuters Even more revealing, I’ve noted on numerous occasions that Canada is the best comparison to the U.S. due to its geographical proximity and its reliance on the U.S. to purchase Canadian exports. Therefore, with Canadian inflation outperforming across the board on May 18, the data paints an ominous portrait of the challenges confronting North American central banks. Please see below: Source: Investing.com To that point, the official report stated: “Canadians paid 9.7% more in April for food purchased from stores compared with April 2021. This increase, which exceeded 5% for the fifth month in a row, was the largest increase since September 1981. For comparison, from 2010 to 2020, there were five months when prices for food purchased from stores increased at a rate of 5% or higher…. “Basics, such as fresh fruit (+10.0%), fresh vegetables (+8.2%) and meat (+10.1%), were all more expensive in April compared with a year earlier. Prices for starchy foods such as bread (+12.2%), pasta (+19.6%), rice (+7.4%) and cereal products (+13.9%) also increased. Additionally, a cup of coffee (+13.7%) cost more in April 2022 than in April 2021.” Moreover, “in April, shelter costs rose 7.4% year over year, the fastest pace since June 1983, following a 6.8% increase in March.”  Therefore, the data is nearly synonymous with the U.S., and I’ve been warning for months that rent inflation would prove much stickier than investors expected. Please see below: Source: Statistics Canada Finally, the investors awaiting a dovish pivot from the Fed assume that growth will overpower inflation. In a nutshell: the U.S. economy will sink into a deep recession in the next couple of months (some believe that we are already in one), and the Fed will resume QE. Moreover, they assume that the inflationary backdrop has left consumers destitute and that we’re a quarter away from famine. However, I couldn’t disagree more. With Home Depot – which primarily sells discretionary items – noting that consumers are showing no signs of slowing down, I warned on May 18 that investors don’t realize that the Fed’s war with inflation would be one of attrition. Please see below: Source: Home Depot/The Motley Fool For context, the National Retail Federation (NRF) listed Home Depot as the fourth-largest retailer in the U.S. in its 2021 report. As a result, the company's performance is a reliable indicator of U.S. consumer spending. Source: NRF To that point, The Confidence Board released its U.S. CEO Confidence survey on May 18. The report revealed: CEO confidence “declined for the fourth consecutive quarter in Q2 2022. The measure now stands at 42, down from 57 in Q1. The measure has fallen into negative territory and is at levels not seen since the onset of the pandemic. (A reading below 50 points reflects more negative than positive responses.)” Please see below: However, the devil is in the details and the details are what matter to the Fed. For example: “More than half (54%) of CEOs said they were effectively managing rising input costs by passing along costs to customers, while 13% said they had no major issues with input costs.” Source: The Confidence Board Second: “More than two-thirds of CEOs said they are increasing wages across the board in response to labor market conditions and managing rising labor costs through different means.” Source: The Confidence Board More importantly, though: Source: The Confidence Board Therefore, while consolidated CEO confidence has crashed to “levels not seen since the onset of the pandemic,” nearly two-thirds of CEOs plan to increase their workforce and more than nine out of 10 plan to increase wages. As a result, would major U.S. corporations be adding employees and paying them more if demand has fallen off a cliff? Of course not. Moreover, when considering the 15-point drop in consolidated CEO confidence, the three-point decline in employment expectations is largely immaterial. The bottom line? While investors keep using the post-GFC script as their roadmap for when the Fed turns dovish, they don’t realize that 1970s/1980s-like inflation is a completely different animal. Thus, what I wrote on May 18 should prove prescient in the coming months: While Powell keeps warning investors of what’s to come, a decade of dovish pivots has a generation of investors believing that the central bank is all talk and no action. However, with inflation at levels unseen in 40+ years, Powell is not out of ammunition, and the Fed followers should suffer profound disappointment as the drama unfolds. In conclusion, the PMs declined on May 18, as risk-off sentiment returned to the financial markets. However, since fits and starts are always expected along the way, the GDXJ ETF should have more upside in the coming days, and profits from our long position should increase. The medium-term outlook for the mining stocks remains bearish, though. 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 May 19, 2022, 11:28 am (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; 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: valuewalkMay 19th, 2022

Market Rout Extends With Futures Tumbling To Verge Of Bear Market

Market Rout Extends With Futures Tumbling To Verge Of Bear Market US stock futures slumped again, extending yesterday’s brutal selloff that erased $1.5 trillion in market value on concerns about everything from slowing growth, to Chinese lockdowns, to soaring inflation and tightening monetary policy. Contracts on the S&P 500 were down 1.2% 7:30 a.m. in New York, having earlier dropped to 3,856, one point away sliding 20% from January's all time highs, and triggering a bear market. The underlying index tumbled 4% on Wednesday, the most since June 2020, as consumer shares cratered after Target slashed its profit forecast due to a surge in costs. Nasdaq 100 futures were down 1.2%. 10Y TSY Yields slumped about 7bps, dropping to 2.833, while the dollar also dropped after yesterday's surge; bitcoin was flat around $29K. The retail rout continued on Thursday: shares of US retailers again tumbled in premarket trading amid growing worries over the impact of rising inflation and the ability of companies to pass on higher costs to consumers; with Bath & Body Works becoming the latest retailer to cut its guidance. Major technology and internet stocks were also down, pointing to further losses in major technology and internet stocks a day after the tech-heavy Nasdaq slumped to its lowest since November 2020. Apple (AAPL US) -1.2%, Microsoft (MSFT US) -1.2%, Meta Platforms (FB US) -1.1%, Netflix (NFLX US) -0.9% and Nvidia (NVDA US) -2.2% in premarket trading. US rail stocks may be in focus as Citi cuts ratings on Norfolk Southern (NSC US), Union Pacific (UNP US) and US Xpress Enterprises (USX US) to neutral from buy, while lowering 2023 estimates “across the board.”Here are some other notable movers: Cisco Systems (CSCO US) plunged 13% in premarket trading after the network-gear maker spooked investors with a warning that Chinese lockdowns and other supply disruptions would wipe out sales growth in the current quarter. Shares of networking equipment makers drop after Cisco cuts outlook, with Broadcom (AVGO US) -3.6% and Juniper Networks (JNPR US) -5.9% in premarket trading. Synopsys (SNPS US) rises 3.8% in premarket trading after the supplier of software used to design semiconductors boosted its profit and revenue guidance for the full year. Target (TGT US) shares fall 2.2% in premarket trading, Walmart (WMT US) -0.3%; Kohl’s (KSS US) is in focus after two senior executives depart Under Armour (UAA US) shares dropped as much as 6% in US premarket trading, with analysts saying that the departure of the sportswear maker’s CEO Patrik Frisk is a surprise and adds uncertainty. Bath & Body Works’s (BBWI US) outlook cut was a little greater than expected, though analysts noted that it was due to higher costs and investment. The company’s shares fell almost 4% in premarket trading. United Wholesale Mortgage (UWMC US) will struggle to main its 1Q earnings level in coming quarters, Piper Sandler says in a note downgrading the stock to underweight from neutral. Shares drop as much as 7% in US premarket trading. The S&P 500 is on track for its longest weekly losing streak since 2001 as traders flee risk assets over fears that the Federal Reserve will push the economy into a recession as it tries to curb inflation. The benchmark is close to falling into a bear market, after dropping 18% from a record high in January. "The US selloff was rather orderly and the market isn’t oversold, yet. That tells us that we are likely not at the bottom yet,” said Joachim Klement, head of strategy, accounting and sustainability at Liberum Capital. “Consumer sentiment remains depressed and we are seeing consumers retrenching on some discretionary spending.”  Speaking on Tuesday in his most hawkish remarks to date, Fed Chair Jerome Powell said the US central bank will keep raising interest rates until there is “clear and convincing” evidence that inflation is in retreat. JPMorgan's Marko Kolanovic, meanwhile, said - what else - that things can get better for US stocks. “There will be no recession this year, some summer increase in consumer activity on the back of reopening, China increasing monetary and fiscal measures,” he said.  Bolstering his opinion is a conviction that US inflation has probably peaked, or is about to do so, paving the way for a pullback in price pressures that will eventually allow the Federal Reserve to moderate the pace of monetary tightening.  "Since we are pricing in a growth scare but not yet a recession, we could see further downside in the coming weeks, but we are starting to price in a very negative picture already, suggesting we should, at some point, be closer to the bottom,” said Esty Dwek, chief investment officer at Flowbank SA. US stock investors are pricing in stronger odds of a recession than are evident from positive macroeconomic indicators, according to Goldman Sachs strategists. "A recession is not inevitable,” Goldman strategists led by David J. Kostin wrote in a note. “Rotations within the US equity market indicate that investors are pricing elevated odds of a downturn compared with the strength of recent economic data.” Bets that robust earnings can help investors weather this year’s turbulence were thrown in doubt after US consumer titans signaled growing impact of high inflation on margins and consumer spending. Meanwhile, Federal Reserve officials reaffirmed that tighter monetary policy lies ahead, and investors fretted over stagflation risks. “We are pricing in a growth scare,” Lori Calvasina, the head of US equity strategy at RBC Capital Markets, told Bloomberg TV. “There is a lot of uncertainty in this market right now about whether or not that recession is going to come through or if it’s going to be another near-death experience.” There was some more good news on the China covid lockdown front: Shanghai Vice Mayor said Shanghai port throughput recovered to around 90% of the levels a year ago and that Shanghai will expand work resumption in areas with no COVID risk in early June. Furthermore, Shanghai is to gradually restore inter-district public transport from May 22nd and will require residents to show negative PCR tests taken within 48 hours before using public transport, while an economy official said Shanghai will reduce rents for small and medium-sized enterprises by more than CNY 10bln and the city extended CNY 72.3bln of loans to over 10,000 firms since March, according to Reuters. In Europe, the Stoxx 600 retreated 1.8%, after sliding more than 2% earlier, with all industry sectors in the red and personal care and financial services leading the decline as Wednesday’s retailer trouble in the U.S. spills over into Europe. FTSE 100 lags regional peers, dropping 2%. Here are some of the biggest European movers today: HomeServe shares jump as much as 12% after Brookfield agrees to buy the home emergency and repair services company for GBP4.1b. Societe Generale shares rise as much as 1.5%, as it was raised to outperform from market perform at KBW, with the broker saying the sale of Russian activities removes a key overhang for the bank and should result in a re-rating. Generali shares rose as much as 1.4% after 1Q profit beats analyst estimates as EU136m impairments on Russian investments were more than offset by higher operating income. PGNiG shares rise as much as 6.2% after reporting 1Q results that, according to analysts, support Polish gas company’s outlook. Nestle shares drop as much as 5.3% after Bernstein downgraded the stock to market perform from outperform, saying the shares will “struggle” if market sentiment improves and investors exit havens. Royal Mail shares fall as much as 14% after the postal group’s FY results slightly missed estimates and analysts said its outlook is “disappointing.” National Grid shares fall as much as 2.5%, erasing gains from yesterday’s record high, after the utility company reported full-year results. Earlier in the session, shares of Asian retailers follow their US counterparts lower after Target became the second big retailer in two days to trim its profit forecast. Australia: JB Hi-Fi retreats 6.6%, Wesfarmers -7.8%, Harvey Norman -5.5%, Woolworths -5.6% South Korea: E-Mart - 3.4%; apparel makers Hansae -9.4%, F&F -4.2%, Youngone -8.2% Japan: Fast Retailing - 3.1%, MatsukiyoCocokara -1.4%, Ryohin Keikaku -1.7%, Nitori -3% Singapore: Grocery chain operator Sheng Siong slips as much as 1.3% Hong Kong: Sun Art Retail down as much as 4.1% In China, Tencent Holdings Ltd. plunged 6.6% after warning it will take time for Beijing to act on promises to prop up the Chinese tech sector. Cisco Systems Inc. slid in extended US trading on a disappointing revenue outlook. Japan's Nikkei 225 suffered firm losses amid reports the ruling coalition is considering increasing the corporate tax rate and after several data releases in which Machinery Orders topped estimates but Exports missed as China-bound exports declined by the fastest pace since March 2020. Indian stocks declined to a ten-month low, tracking a sell-off across Asia, on concerns the US Fed’s hawkish stance on inflation may cool economic activity and hurt consumer demand.  The S&P BSE Sensex plunged 2.6% to 52,792.23, its lowest level since July 30, in Mumbai, while the NSE Nifty 50 Index slipped 2.7% to 15,809.40  Software exporter Infosys Ltd. fell 5.4% to a 11-month low and was the biggest drag on the Sensex, which had 27 of 30 member stocks trading lower. All 19 sector indexes compiled by BSE Ltd. declined, led by S&P BSE Information Technology index, that dropped the most in over two years.   “Deteriorating macro sentiment such as soaring inflation, recession fears, and the prospect of the Federal Reserve getting even more hawkish will continue to keep benchmarks on the edge,” Prashanth Tapse, an analyst at Mehta Equities Ltd., wrote in a note.  In earnings, of the 36 Nifty 50 firms that have announced results so far, 21 have either met or exceeded analyst estimates, while 15 have missed forecasts. In Australia, the S&P/ASX 200 index fell 1.7% to close at 7,064.50, tumbling with global shares as concerns over inflation, interest-rate hikes and Ukraine piled up. All sectors dropped, except for health. Consumer shares were among the worst performers, following their US peers lower after Target became the second big retailer in two days to trim its profit forecast. Aristocrat rose after it released its 1H results and unveiled buyback plans. In New Zealand, the S&P/NZX 50 index fell 0.5% to 11,206.93 And in emerging markets, Sri Lanka fell into default for the first time in its history as the government struggles to halt an economic meltdown that prompted mass protests and a political crisis. An index of developing-nation stocks slumped more than 2%. In FX, the Bloomberg dollar spot index declines, with all G-10 majors rising against the greenback. CHF is the strongest G-10 performer with USD/CHF snapping lower on to a 0.97 handle and EUR/CHF slumping below 1.03. The Swiss franc diverged from Japanese yen and dollar after hawkish comments from SNB’s Thomas Jordan Wednesday, which assured traders CHF rates could follow EUR higher. Options trades may also be behind the latest move in the spot market. In rates, Treasury yields dropped about seven basis points as investors sought insurance against further declines in risk assets. Treasury yields richer by up to 6bp across belly of the curve, richening the 2s5s30s fly by 2.2bp on the day; 10-year yields around 2.83% with German 10-year outperforming by 2.5bps. Treasuries extended Wednesday’s rally as stocks resume slide with S&P 500 futures dropping under 3,900 to lowest level in a year; on the curve, the belly led the advance while bunds outperform in a more aggressive bull-flattening move as European stocks tumble. US session highlights include 10-year TIPS reopening at 1pm ET. Flurry of block trades during London session follows a spate of trades Wednesday; five blocks worth a combined cash-equivalent $1.2m/DV01 between 3:38am and 5:35am similarly entailed price action consistent with sales. Most European bonds also gained, with the yield on German 10-year securities falling more than basis points.  German yield curve bull-flattens: 30-year yield drops ~9bps before stalling near 1.05% which has acted as support for much of May so far. The Dollar issuance slate empty so far; eight borrowers priced $8.5b Wednesday, and new issue activity is expected to be muted during remainder of the week. Three-month dollar Libor +2.69bp to 1.50486%. Economic data slate includes May Philadelphia Fed business outlook and initial jobless claims (8:30am), April existing homes sales and leading index (10am). In commodities, crude oil extended declines, while most industrial metals were in the red as global growth fears damped the demand outlook. WTI reverses Asia’s gains, dropping back below $110 but holding above Wednesday’s lows. Spot gold is comparatively quiet, holding above $1,810/oz. Most base metals trade in the green; LME tin rises 2.1%, outperforming peers while copper held near a seven-month low and zinc extended losses. Bitcoin is modestly softer in a relatively contained range that lies just shy of the USD 30k mark. Crypto exchange FTX to start rollout of new stock-trading service on Thursday, WSJ reports; will not accept payment for order flow on stock trades. Looking to the day ahead now, and data releases from the US include the weekly initial jobless claims, along with April’s existing home sales and the Philadelphia Fed’s business outlook survey for May. Central bank speakers include ECB Vice President de Guindos, the ECB’s Holzmann and the Fed’s Kashkari. Finally, the ECB will be publishing the minutes from their April meeting. Market Snapshot S&P 500 futures down 1.1% to 3,879.25 STOXX Europe 600 down 1.7% to 426.41 MXAP down 1.8% to 161.60 MXAPJ down 2.2% to 527.30 Nikkei down 1.9% to 26,402.84 Topix down 1.3% to 1,860.08 Hang Seng Index down 2.5% to 20,120.68 Shanghai Composite up 0.4% to 3,096.97 Sensex down 2.4% to 52,926.71 Australia S&P/ASX 200 down 1.6% to 7,064.46 Kospi down 1.3% to 2,592.34 Gold spot down 0.1% to $1,814.49 U.S. Dollar Index down 0.28% to 103.52 German 10Y yield little changed at 0.96% Euro up 0.3% to $1.0496 Brent Futures down 0.1% to $109.00/bbl Top Overnight News from Bloomberg President Joe Biden is set to meet on Thursday with Finland’s President Sauli Niinisto and Swedish Prime Minister Magdalena Andersson at the White House to discuss the Nordic nations’ NATO bids. China’s top diplomat again warned the US over its increased support for Taiwan, showing the island democracy remains a major sticking point between the world’s biggest economies as Beijing sent more military aircraft toward the island Sri Lanka fell into default for the first time in its history as the government struggles to halt an economic meltdown that prompted mass protests and a political crisis The yuan’s outlook is finally looking more balanced after a 6.5% dive versus its major trading partner currencies since March. A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were pressured on spillover selling after the worst day on Wall St in almost two years. ASX 200 was led lower by consumer staples following the retailer woes stateside and mixed Australian jobs data. Nikkei 225 suffered firm losses amid reports the ruling coalition is considering increasing the corporate tax rate and after several data releases in which Machinery Orders topped estimates but Exports missed as China-bound exports declined by the fastest pace since March 2020. Hang Seng and Shanghai Comp initially weakened with the Hong Kong benchmark dragged lower by heavy losses in tech after Tencent’s profit declined by more than 50% and with the mainland pressured as Beijing conducts a fresh round of mass COVID testing, although the mainland bourse recovered most of its losses after Shanghai announced a further gradual easing of restrictions. Xiaomi (1810 HK) Q1 adj. net profit CNY 2.859bln (vs 6.069bln Y/Y), Q1 revenue CNY 73.4bln (vs. 76.9bln Y/Y); global smartphone shipments -10.5% Y/Y at 38.5mln units. Top Asian News Shanghai Vice Mayor said Shanghai port throughput recovered to around 90% of the levels a year ago and that Shanghai will expand work resumption in areas with no COVID risk in early June. Furthermore, Shanghai is to gradually restore inter-district public transport from May 22nd and will require residents to show negative PCR tests taken within 48 hours before using public transport, while an economy official said Shanghai will reduce rents for small and medium-sized enterprises by more than CNY 10bln and the city extended CNY 72.3bln of loans to over 10,000 firms since March, according to Reuters. Japanese MOF official said China's COVID curbs are among the factors that caused a decline in China-bound exports from Japan which fell by the fastest pace since March 2020, while Japan's April imports reached the largest amount on record, according to Reuters. Japan's ruling coalition is reportedly considering increasing the corporate tax rate, according to Jiji. New Zealand sees 2021/22 OBEGAL at NZD -18.98bln (prev. forecast -20.44bln), 2021/22 net debt at 36.9% of GDP (prev. forecast 37.6%) and Cash Balance at NZD -31.78bln (prev. forecast -34.10bln), while Finance Minister Robertson said the economy is expected to be robust in the near term and they see a return to OBEGAL surplus in 2024/25, according to Reuters. European bourses are pressured across the board in a broader risk-off moves after yesterday's Wall St. sell off, as European players look past the brief respite seen overnight on Shanghai's reopening; Euro Stoxx 50 -2.3%. Stateside, the magnitude of the downside is somewhat more contained given newsflow has been limited since Wednesday's downside commenced, ES -1.2%. Top European News EU is reportedly considering a targeted trade war on troublesome Brexiteer MPs and Tory ministers to force UK PM Johnson to do a U-turn on the Northern Ireland protocol, according to The Telegraph. Top UK Economist Defends BOE’s Handling of Inflation Crisis EasyJet Bookings Pick Up Ahead of Uncertain Summer Season Apax-Owned Rodenstock Acquires Spanish Rival Indo European Gas Slips With LNG Imports Helping Boost Stockpiles In FX Franc resurgence and re-emergence as a safe haven currency continues; USD/CHF touches 0.9750 vs 1.0060+ peak on Monday, EUR/CHF sub-1.0250 vs circa 1.0500 at one stage only yesterday. Dollar loses momentum as US Treasury yields retreat further and curve re-flattens amidst ongoing risk rout, DXY ducks under 103.500 after peaking just shy of 104.000 on Wednesday. Kiwi and Aussie find positives via fiscal and fundamental factors to evade aversion; NZD/USD back above 0.6300 after NZ budget and AUD/USD hovering around 0.7000 post- Aussie jobs data. Yen retains underlying bid irrespective of mixed Japanese data, USD/JPY below 128.00 again. Euro firmer beyond EUR/CHF cross ahead of ECB minutes and Sterling off UK inflation data lows awaiting retail sales on Friday, EUR/USD retains sight of 1.0500 and Cable near 1.2400. Rand meandering ahead of SARB in anticipation of 50 bp rate hike, USD/ZAR around 16.0000, irrespective of Gold taking firmer hold of USD 1800/oz handle. Fixed Income Debt resumes safe-haven rally as market mood continues to sour. Bunds top 154.00, Gilts get close to 120.00 and 10 year T-note even nearer the same psychological level. BTPs lag amidst the ongoing aversion to risk, while OATs and Bonos reflect on somewhat mixed auction results. Commodities WTI and Brent are pressured in-fitting with broader sentiment as initial resilience on demand-side positives re. China/COVID were overpowered by the risk move. However, the benchmarks are around USD 1.00/bbl off lows of USD 104.36/bbl and USD 106.76/bbl respectively, following reports that China is discussing the purchase of Russian crude. China is said to be in talks with Russia to purchase oil for strategic reserves, according to Bloomberg sources; detailed on terms and volume reportedly not decided yet Qatar Energy was reportedly selling July Al-Shaheen crude at premiums of USD 5.80-6.40/bbl above Dubai quotes which is the highest in 2 months, according to Reuters sources. Spot gold is bid as it draws haven allure, with the yellow metal marginally surpassing USD 1830/oz. US Event Calendar 08:30: May Initial Jobless Claims, est. 200,000, prior 203,000; Continuing Claims, est. 1.32m, prior 1.34m 08:30: May Philadelphia Fed Business Outl, est. 15.0, prior 17.6 10:00: April Existing Home Sales MoM, est. -2.2%, prior -2.7%; Home Resales with Condos, est. 5.64m, prior 5.77m 10:00: April Leading Index, est. 0%, prior 0.3% DB's Jim Reid concludes the overnight wrap Today is my last day at work this week before I head up to Cambridge tomorrow for my Masters’ graduation. Before you send in a flood of congratulations though, I didn’t actually do any work for this qualification, with not even a single hour of revision. Now at this point you’re probably thinking I’m either a genius or guilty of some serious academic malpractice. I’m hoping the former. But the truth is that I’m benefiting from a quirky tradition that somehow means Cambridge, Oxford and Dublin will upgrade your Bachelors into a Masters after a few years. With the wedding two months away, it appears as though I’m losing all my bachelor status at once. Markets seem ready for a holiday too after the last 24 hours, with the selloff resuming at pace after the brief respite on Tuesday. In fact it was nothing short of a rout with the S&P 500 ending the day down -4.04%, marking its worst daily performance since June 2020, and leaving the index at a fresh one-year low. There wasn’t a single catalyst behind the slump, but weak housing data out of the US along with Target’s move to cut its profit outlook helped feed investor concern that the consumer might not be in as strong a position as previously thought. And that’s on top of all the other worries of late that the global economy is heading in a stagflationary direction amidst various supply-chain issues, alongside the prospect that tighter central bank policy is going to further dent growth and risks tipping various economies into recession. In terms of the specific moves, the S&P 500 gradually tumbled as the day went on, with its -4.04% decline more than reversing its +2.02% bounceback on Tuesday. The decline was an incredibly broad-based one, with just 8 constituents in the index ending the day higher, which is the lowest number since November. That earnings report we mentioned at the top meant that Target (-24.93%) saw the worst performance in the entire S&P 500, after saying they now expected their full-year operating income margin rate to be around 6%. That follows a disappointing report from Walmart the previous day, and meant that consumer staples (-6.38%) and consumer discretionary (-6.60%) were the worst-performing sectors in the S&P yesterday. The latest declines also mean that the S&P is back on track for a 7th consecutive weekly decline, having shed -2.49% since the start of the week, and S&P 500 futures are only up by +0.18% this morning. If the S&P 500 does see a 7th week in negative territory, then that would be the longest run of weekly declines for the index since 2001. Other indices lost ground too given the risk-off move, with the Dow Jones (-3.57%), the NASDAQ (-4.73%), and the small-cap Russell 2000 (-3.56%) all experiencing sizeable declines of their own. European indices had a better performance after closing before the worst of the US declines, and the STOXX 600 was “only” down -1.14% to just remain in positive territory for the week. With recessionary concerns back in focus, sovereign bonds rallied on both sides of the Atlantic as investors sought out safe havens. Yields on 10yr US Treasuries fell by -10.2bps to 2.88%, with the decline mostly led by a -9.6bps move lower in real yields, and nominal yields are only back up +2.5bps this morning. The yield curve also continued to flatten and the 2s10s slope (-6.9ps) fell to its lowest in over two weeks, at 21.0bps, although it’s been over 6 weeks now since the curve last traded in inversion territory. We did get some Fedspeak but to be honest there weren’t any major headlines relative to what we already knew, with Chicago Fed President Evans saying it was “quite likely” the Fed would be at a neutral setting by year-end, whilst Philadelphia Fed President Harker was making the case for more gradual rate hikes after the next few 50bp hikes are delivered. More important for the outlook was the release of various housing data yesterday, where housing starts fell to an annualised rate of 1.724m in April (vs. 1.756m expected), and that was from a downwardly revised 1.728m in March. That comes against the backdrop of rising mortgage rates, and the MBA reported that mortgage purchase applications fell -11.9% in the week ending May 13, leaving them at their lowest levels since May 2020 when the numbers were still recovering from the pandemic slump. Over in Europe, sovereign bond curves also became flatter as investors became increasingly aggressive on the near-term ECB rate path. Indeed the amount of ECB rate hikes priced in by the December meeting hit a fresh high of 108bps, or equivalent to at least four rate hikes of 25bps by year-end. That came amidst further ECB speakers over the last 24 hours, including Finnish central bank governor Rehn, who had already endorsed a July hike and said yesterday that the initial hike was “likely to take place in the summer”. Furthermore, he said that it seemed “necessary that in our policy rates we move relatively quickly out of negative territory”. We also heard from Estonian central bank governor Muller, who also endorsed a July hike and said he “wouldn’t be surprised” if the deposit rate were in positive territory by year-end. However, Spanish central bank governor De Cos said that rate hikes should be gradual as he called for APP purchases to end at the start of Q3, with rate hikes to follow shortly afterwards. Those growing expectations of tighter policy saw shorter-dated yields move higher in Europe once again, with 2yr German yields hitting their highest level since 2011 despite only a marginal +0.1bps move to 0.36%. However, the broader risk-off tone meant it was a different story for their longer-dated counterparts, and yields on 10yr bunds (-1.6bps) and OATs (-2.2bps) both moved lower on the day. Peripheral spreads widened as well, whilst iTraxx Crossover neared its recent highs with a +26.2bps move to 468bps. In terms of the fight against inflation, there was a potential boost on the trade side yesterday as US Treasury Secretary Yellen confirmed ahead of a meeting of G7 finance ministers and central bank governments that the she favoured removing some tariffs on goods that are not considered strategic. Separately the risk-off move also saw oil prices move lower for a 2nd day running yesterday, with Brent crude down -2.52%, although it’s since taken back a decent chunk of that loss this morning with a +1.51% move higher to $110.76/bbl. Over in Asia, equity markets have tracked those steep overnight losses on Wall Street to move sharply lower this morning. Among the key indices, the Hang Seng (-2.25%) is the largest underperformer amidst a broad weakness in tech stocks as the Hang Seng Tech index fell by an even larger -3.40%. Mainland Chinese stocks have performed relatively better however, even if the Shanghai Composite (-0.08%) and CSI (-0.25%) have both moved slightly lower, while the Nikkei (-1.91%) and the Kospi (-1.29%) have seen more substantial losses. Finally there was some important employment data out of Australia this morning ahead of their election on Saturday, with the unemployment rate falling to its lowest since 1974, at 3.9%. The employment gain was a bit softer than expected with just a +4.0k gain (vs. +30.0k expected), but that included a +92.4k gain in full-time employment, offset by a -88.4k decline in part-time employment. Elsewhere on the data side, there were fresh signs of inflationary pressure in the UK after CPI inflation rose to a 40-year high of +9.0% in April. But in spite of the 40-year high, that was actually slightly beneath the +9.1% reading expected by the consensus, which marked the first time in over 6 months that the reading hasn’t been higher than expected. Gilts outperformed following the release as it was also beneath the BoE’s staff projection of +9.1%, and 10yr gilt yields closed down -1.6bps on the day, whilst sterling underperformed the other major currencies leave it -1.28% weaker against the US Dollar. To the day ahead now, and data releases from the US include the weekly initial jobless claims, along with April’s existing home sales and the Philadelphia Fed’s business outlook survey for May. Central bank speakers include ECB Vice President de Guindos, the ECB’s Holzmann and the Fed’s Kashkari. Finally, the ECB will be publishing the minutes from their April meeting. Tyler Durden Thu, 05/19/2022 - 08:02.....»»

Category: personnelSource: nytMay 19th, 2022

Ben Bernanke On Inflation, ESG And President Biden

Following are excerpts from the unofficial transcript of a CNBC exclusive interview with former Fed Chair Ben Bernanke on CNBC’s “Squawk Box” (M-F, 6AM-9AM ET) today, Monday, May 16th. Following are links to video on CNBC.com: The Fed’s Delayed Inflation Response Was A Mistake, Says Former Chair Ben Bernanke Former Fed Chair Ben Bernanke On […] Following are excerpts from the unofficial transcript of a CNBC exclusive interview with former Fed Chair Ben Bernanke on CNBC’s “Squawk Box” (M-F, 6AM-9AM ET) today, Monday, May 16th. Following are links to video on CNBC.com: The Fed’s Delayed Inflation Response Was A Mistake, Says Former Chair Ben Bernanke Former Fed Chair Ben Bernanke On Inflation, ESG And President Biden PART I ANDREW ROSS SORKIN: Welcome back to “Squawk Box.” Former Fed Chair Ben Bernanke is out with a new book this week. It’s titled, “21st Century Monetary Policy: Federal Reserve from the Great Inflation to COVID-19.” In an exclusive TV interview, I spoke with Ben Bernanke at his home in Washington, DC. I started out by asking him about the comparison of the great inflation of the 1970s to where we are today and how he thinks about it if we’re, if he were in this seat now. BEN BERNANKE: Well there are some big differences between the 70s and today and one of course being that the inflation in the 70s lasted for more than a decade. It was much higher than we have now so it was a, it was a worse episode. But I think the most important things, first of all, that the Federal Reserve has to take the lead. Arthur Burns, who was chair of the Fed in the 70s felt that other parts of the government, you know, should take the lead on inflation. Secondly, that you have to worry a lot about credibility and inflation expectations. The Fed’s credibility was completely shattered in the 70s. Nobody believed that the Fed was going to take action against inflation. And so, when Paul Volcker did, I mean he had a lot of credibility, but it wasn’t enough and that was part of the reason why the recession which followed his tightening was so much greater. And I think the third lesson from the 70s is that political interference with Fed policy can be very dangerous. In the 70s, Arthur burns again acted more or less as a member of the Nixon administration and Nixon wanted to be reelected in 1972 and so Arthur Burns said, well, we won’t tighten monetary policy then and that led to greater inflation. We have I think today both a more independent central bank and also I’m actually pleasantly surprised if you look at Congress and the President and so on, you’re not seeing a lot of people saying the Fed should not be doing anything about this inflation. There’s a lot of support for the fact that the Fed is tightening now even though obviously we see the effects in markets, you know, we’ll see the effects in house prices, etc. So those are some ways in which the current situation I think is better because we learned a lot from the 70s. SORKIN: And does that mean that we’ve acknowledged that actually you said the Fed should lead this. Is it because there is no other tool? BERNANKE: Well, in theory, the fiscal authorities could play a role. That is, this is what modern monetary theory says, you know, that by raising taxes and cutting spending and reducing aggregate demand and so on, the fiscal authorities could play the same kind of role as the Fed which basically reduce demand and get inflation down. Unfortunately, the Fed is just a lot more nimble and a lot better informed about markets and so on and it can respond quickly and it can provide guidance about its long run policy goals, etc. You know, for there are many advantages to fiscal policy, but nimbleness is not one of them. It takes a long time to come to agreement. only under very extreme circumstances does Congress really react in a powerful way so from a political economy point of view, I think the Fed really is the only game in town. SORKIN: I asked Ben Bernanke whether he thinks that with transparency and the forward guidance that effectively comes with that, if it locks in the Fed, for example, the most recent case of the 50 basis point raise, rate hike. BERNANKE: There’s no strategy that doesn’t have occasional downsides. I think the clearest case in most recent period is that the Fed said they weren’t gonna begin to raise rates until certain criteria were met, first of all, secondly, until they had QE had gotten to a certain point and they were going to taper first, etc, etc. So the forward guidance, I think, overall, on the margin slowed the response of the fed to the inflation problem last year to some extent. SORKIN: So does that mean it was a mistake? BERNANKE: Well, they were they had different. So this is a complicated question. The question is, why did they delay that? I think that why did they delay their response. I think, in retrospect, yes, it was a mistake, and I think they agree it was a mistake. There were a number of reasons for it. One of the reasons was that they wanted not to shock the market. They wanted to avoid, Jay Powell was on my board during the taper tantrum in 2013 which was a very unpleasant experience, he wanted to avoid that kind of thing by giving people as much warning as possible. And so that gradualism was one of several reasons why the Fed didn’t respond more quickly to the inflationary pressure in the middle of 2021. There were other reasons as well. SORKIN: What do you think? BERNANKE: Well, one of them was that in early 2021 after the American Rescue Plan was passed and this was something like $2.8 trillion dollars of new federal spending between the American Rescue Plan and the December program, you know, the Fed could have responded to that point but they looked around and said, well, look, there’s still a lot of slack because the unemployment rate was still close to 6%. The number of people working was still well below where it was before the pandemic. And so they they said that, well, there’s still a lot of slack in the economy, we should we should let this fiscal program do its job and bring the economy back to full employment. What we’ve learned since then is that because of the pandemic with a lot of people staying home, that the unemployment rate, for example, the number of jobs may not be a really good indicator of whether the labor market is hot or not. And so, they’re looking now at things like the number of job vacancies which show that employers are having a terrible time finding enough workers and that the labor market is is distorted. The other issue that they were looking at was the supply chain issue. You know, the pandemic has snarled supply chains around the world that has helped drive up prices. The Fed believed in the middle of 2021 that these factors would likely solve themselves over time that in other words that supply shocks were quote “transitory” and so that they didn’t need to respond to the early stages of inflation because it was going to go away by itself. That proved wrong. So they were they were a couple of, of issues I think that are related primarily to the pandemic itself and the way that it scrambled the usual indicators that made it harder for the Fed to read the economy. SORKIN: We did get into a question about how he read the economy at that time. BERNANKE: I wasn’t particularly on board with the view that the number of jobs was the right indicator of how tight labor market was because I knew first of all that immigration was low. I knew a lot of people were staying home not because they couldn’t find a job but because with the pandemic and Delta variants and so on raging, they weren’t looking for a job. But I I did believe that some of the inflation was coming from factors created by the pandemic including the supply chain problems through reduction in labor supply. The fact that people were shifting their demand away from services like restaurants towards durable goods like cars, and that was putting up the prices tremendously in those durable goods. So, we’ve seen big increases in car prices, for example. So I thought, I don’t know I didn’t have a specific timeframe in mind, but I thought that over this year that those things would begin to reverse. I still think they will reverse eventually but clearly they’ve been more persistent, more problematic than we, than we, I had thought. SORKIN: And over the years former Fed Chair Ben Bernanke has written a lot about inequality. I asked him about the debate over a wealth tax. BERNANKE: I’m not against taxing billionaires, but I think a better way to do it would be to raise capital gains taxes. You could, you could tax realized capital gains. I think an important thing what would be helpful would be to eliminate the provision that when you pass appreciated securities on to your heirs, the appreciation is not taxed at any time. So there are there ways to increase the tax burden on both the income and the wealth of rich people, which I think are much more, just more practical than than a straight wealth tax. And I know defenders of the wealth tax would disagree and there’s a great debate about that, but I don’t disagree with the objective but I think that you just need to find a method that will not be impossible to enforce. PART II SORKIN: Welcome back to “Squawk Box.” Former Fed Chair Ben Bernanke is out with a new book this week. It’s titled, “21st Century Monetary Policy: The Federal Reserve from the Great Inflation to COVID-19.” In an exclusive TV interview, I spoke with Ben Bernanke at his home in Washington, DC and I asked him about what he thinks of the idea that it is hard for the Fed to say it out loud that it’s just trying to reduce demand and trying to make things right. BERNANKE: Well, I think Powell can say that now because he has argued that we are beyond full employment. We’re not at full employment. We are at a point where work, where employers can’t find workers, where there’s two jobs available for every unemployed person. And so his argument is that we could cool things down a bit, raise the unemployment rate a little bit, reduce that ratio of vacancies to unemployed persons maybe to one to one let’s say without creating a lot of real hardship for workers in America so that you need for long run stability, you need to cool the economy down. SORKIN: We also talked about whether the former Fed chair thinks the Fed is going to become if it hasn’t already become politicized politicized. BERNANKE: I think at the moment that the Fed is pretty independent, and certainly nonpartisan. SORKIN: But you do write about efforts that previous administrations have made to politicize— BERNANKE: Yeah. SORKIN: The Fed and the pressures that have been felt. BERNANKE: Absolutely. And I and I think the changes really began to some extent with the first Bush but mostly with Clinton. And since Clinton until Trump, presidents have been pretty, pretty good about letting the Fed do what it thought was necessary. SORKIN: President Biden has said that inflation is his top domestic priority and has talked about higher taxes on the wealthy as a measure of something that he could do. Here’s what Bernanke thinks about President Biden or any elected official what they can do about inflation to this point. BERNANKE: It’s fairly limited. I mean, I think it’s appropriate that the Fed is taking the lead and I think the most important thing that President can do is support the Fed chair and let the Fed chair do what needs to be done even if it’s a little bit painful. There’s things in this particular case that there’s things that probably could help on the margin. I mean the thing that the White House has done to improve supply chains, for example, work to improve public health so we don’t have another pandemic and the effects of that, you know, things that make critical goods like health and education cheaper, more efficient, it’s not gonna do much for inflation, but it would be good for people who are, you know, feeling like their money is not going far enough. SORKIN: And given the price of oil today, here’s what he had to say about the ESG movement, a debate that we’ve had on this program a lot and some of the new ways that businesses have approached these types of investments. BERNANKE: The fact that people are willing to do ESG investments does suggest that they’re interested in, in helping on that side, but I think real real progress is going to take not just private actions, while we should all do what we can to reduce our carbon footprints and so on, but real progress is going to take a collective effort that would involve, you know, other tools. SORKIN: Do you think there’s real economic theory behind ESG? BERNANKE: There’s always demand for divesting, you know, unpopular stocks, let’s say in university endowments and so on and it’s fine to show your concern about about the way some country is behaving or the way some company is behaving and so on. But when you divest, you’re basically just selling the stock to somebody else who doesn’t have quite the same concerns and the effects on the issuer of the stock tend to be fairly modest. So, I’m not saying it has no effect at all, but it’s it’s a more limited approach than either community level or personal level efforts to reduce say carbon, or even better social wide effort to take strong actions to meet carbon goals. PART III SORKIN: We also talked out with Bernanke about the chances of a recession. Here’s what he had to say. BERNANKE: The more the Fed has to tighten in order to get inflation down, the bigger the chance of a recession and the more severe it will be. How much the Fed has to tighten depends in turn on what happens to these factors they can’t control like the supply chains and the commodity prices. So that prediction requires you to make a prediction not only about the Fed’s behavior but about a lot of other things the Ukraine war, etc. So it’s a very hard thing, very uncertain thing to say. I guess that I still tend to believe that some of these forces pushing up inflation like the supply chains, like the preference for durable goods or services and some of the commodity price increases gas prices and so on, that they will at least stabilize and begin to moderate sometime during this year which would mean that inflation will come down to some extent, not saying by itself, but without the Fed’s direct intervention. If that happens, the Fed would have to raise rates perhaps moderately above neutral. When they do that, they’ll slow demand. But as Jay Powell has pointed out, the economy is pretty strong. We’re not going into recession as often is the case with a troubled economy. In fact, the underlying economy as we recover from the pandemic is quite strong. We have a very strong labor market, for example, we have a strong financial system, we have strong balance sheets. So if if the inflation slows as I expect it ultimately will, although I’ve been disappointed about how slow that process is, than the Fed should not have to raise rates, you know, too far and what we would get that would be a slowing of the economy, maybe even a stall, but not a severe recession. The severe recession would only come if these other factors simply do not cooperate and in particular, the thing the thing people should watch most closely is inflation expectations. If inflation expectations as measured by breakevens in the Inflation-Protected and Securities market, as measured by surveys and so on, begin to move up in a significant way that people have lost confidence in the credibility of the Fed, the Fed will have to react much more strongly and the effects in the economy will be much more deleterious. And SORKIN: And how concerned are you about that? BERNANKE: For the moment, knock on wood. This is a big difference between today the 1970s. In the 1970s, inflation expectations were all over the place and nobody had any confidence in the Fed, that it would bring inflation back down. Today, most indicators suggests that people are still pretty confident that the Fed or maybe some combination of the Fed and the end of the pandemic will lead to more normal inflation in the future. SORKIN: And we couldn’t have a conversation without talking about Bitcoin. Take a look at this Bitcoin right now down a little under 30,000 and in Bernanke’s new book, he writes about the potential of the digital dollar. So of course, I asked him to share his point of view on cryptocurrency these days. This is what he had to say. BERNANKE: So Bitcoin and other currencies, cryptocurrencies whose whose value changes minute to minute, they’ve been successful as a speculative asset and people you’re seeing the downside of that right now. But they were intended to be a substitute for fiat money. And I think in that respect, they have not succeeded because if, if bitcoin were a substitute for fiat money, you could use Bitcoin to go buy your groceries. Nobody buys groceries with Bitcoin because it’s too expensive and too inconvenient to do that. We’re over the price of groceries, the price of celery varies radically day to day in terms of Bitcoin and so there’s no stability either in the value of Bitcoin. The main use of Bitcoin is mostly for underground economy activities and things that often things that are illegal or illicit. So I don’t think that Bitcoin is going to take over as an alternative form of money. It’ll be around as long as people are believers and they want to speculate in this but again, I don’t think it’s going to— SORKIN: And you don’t, you don’t buy into the idea of it as being a store of value or some kind of version of digital gold. BERNANKE: Well, as I said, it’s a speculative asset, but it’s, it’s one that whose underlying use value, gold has underlying use value. You can use it to fill cavities. The underlying use value of a Bitcoin is to do ransomware or something like that. So, one of the other risks that Bitcoin has is that it could at some point be subject to a lot more regulation and the anonymity is also at risk I think at some point. So, you know, investors in Bitcoin should be, should be aware of that. Updated on May 16, 2022, 11:11 am (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; 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: valuewalkMay 16th, 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 JD.com (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

Goldman Trader: The State Of The Market Is To Bleed To Lower Lows Interrupted, On Occasion, By Vicious Short Squeezes

Goldman Trader: The State Of The Market Is To Bleed To Lower Lows Interrupted, On Occasion, By Vicious Short Squeezes At the end of March, Goldman's head of hedge funds sales Tony Pasquariello unexpectedly took a bearish contrarian position to the conventionally bullish house view, warning that "This Rally Is Nothing But A Huge Bear Market Squeeze; Stocks Will Be Lower "Over The Next Few Weeks." A few days later, in early April, when many of his Goldman peers were predicting an imminent bounce in stocks, the bank's head of Hedge fund sales warned that "The Recession Signal was Once Again Hiding In Plain Sight," something which the bank's CEO was aware of, considering Goldman's massive, $18 billion in very quiet stock sales over the past two years (a classical distribution pattern).   Fast forward to mid-April, when Pasquariello again was the lone Goldman voice warning that "The Best Days Are Behind Us, And We've Never Seen A Setup Quite Like This Before." Needless to say, he was right again. So in a world where so many professional strategists have no idea what to do or say, and in most cases are just parroting trite legacy recos like BTFD (see any weekly note from Marko Kolanovic), what does Pasquariello think will happen next? Unfortunately for the bulls, nothing good: "the more time we spend near the lower goal post, the more I question whether the state of the market is a genuine range trade ... or a steady bleed to lower lows that’s interrupted, on occasion, by vicious short squeezes." Below we excerpt the key highlights from his latest report (full report available to professional subscribers in the usual place). markets / macro :: a high velocity trading range The high velocity trading environment carries on. You know this by now, but to set the scene: the stock market fell apart during April. Furthermore, with the exception of the energy space, there was a nowhere-to-hide element to the selloff. Well, for the moment, the negative momentum has been arrested -- thanks to an on-the-screws, if non-intimidating, Fed meeting. In the doing, S&P has returned to the bottom end of trading range that has largely defined the past three months. In full disclosure, the more time we spend near the lower goal post, the more I question whether the state of the market is a genuine range trade ... or a steady bleed to lower lows that’s interrupted, on occasion, by vicious short squeezes. Looking forward: for the bulls, the thesis to falsify is this: inflation will force the Fed to tighten aggressively into a slowdown. For the bears, the thesis to falsify is this: the strength of the labor market will be sufficient to stave off recession. In the end, you take what the market gives you, and for now I continue come out in the same place: buy dips below 4200, sell rips over 4500 (and, if I’m going to be wrong, it’s more likely to the downside than to the upside). To conclude, I’ll tag in long-time colleague Dominic Wilson, who captures the macro narrative of the moment, and makes a key point on where to best place the bet: As long as inflation is well above target and the labor market still extremely tight, the logic of tighter financial conditions and slower growth is hard to avoid. The more resilience that activity and equity markets show, the higher rates will likely need to go. For that reason, a period of easing financial conditions again sowed the seeds of its own demise. Continued Fed hawkishness -- both an increasing embrace of 50bp moves and renewed focus on QT -- have helped to push real and nominal yields to new highs ... until the inflation/labor market dynamics change on a more sustained basis, the pressure for tighter financial conditions is unlikely to abate for long. while equity and credit weakness are driving this tightening dynamic, we think a sustained higher rate structure is still its clearest implication as long as recession risks stay at bay. * * * What follows from here is one table and a batch of charts: 1. a level set on the inflation outlook from US economics ... part of me thinks this looks like stickier-for-longer, the other part of me thinks the Fed would declare some form of victory in the mid-2’s: 2. Speaking of inflation, with credit to Ronnie Walker in GIR, a simple plot of the Employment Cost Index. I’m inclined to think this scream higher is a big deal -- as Joe Briggs pointed out to me, Chair Powell said the Q3’21 release was the data point that made him rethink the speed of taper -- and, given the ongoing and immense gap between labor supply and demand, I have a hard time thinking these pressures magically disappear: 3. An inconvenient truth ... of 12 possible options, yes, May through October is the worst six-month period of the year for S&P (credit to Ryan Hammond in GIR): 4. If you bought S&P 12 months ago, as of yesterday, you were underwater ... and, retail outflows continue beyond the standard tax seasonal. As we move forward, I’d keep a close eye on that light blue line: 5. There’s little doubt that cost pressures are building, everywhere. that said, this level sets the magnitude of excess cash held by both households and businesses (the dark blue and light blue lines are what stick out to me here): 6. With thanks to a client who knows a thing or two about investing in commodities, take a step back and consider the big picture: commodities (BCOM spot index) vs equities (S&P). One argument: commodities have moved a lot over the past two years -- for long-term investors, however, they are still quire cheap when compared to financial assets: 7. A chart of MSCI World, ex-US, which is below 2007 prices: 8. I remember back in 2018 when industry folks got excited about clipping nominal coupons in US 2-year notes for the PA. In the context of challenging the TINA argument for stocks, perhaps a viable alternative has been put on the table ... But, that would require an acceptance of 8% inflation today vs 2% inflation back then: 9. To conclude, what level of implied volatility set the stage for the best equity returns? Answer: S&P performs well following periods when VIX was somewhat low (e.g. in the teens) ... it performs best when vol has been very high (e.g. north of 25) ... it’s above-average vol (e.g. in the low 20’s) that generates the worst performance. given that VIX data only goes back to 1993, as a longer-term check we tested S&P returns vs 1-month realized vol going back 80 years -- that data shows a similar pattern. I give full credit to Rocky Fishman in GIR for all of this work: 1-month returns: worst performance around VIX 20-25, highest with VIX>27.5. S&P 500 total return 1-month total returns, based on VIX ranges, 1993-present 3-month returns: lowest at VIX=20, consistently rising above that point. S&P 500 total return 3-month total returns, based on VIX ranges, 1993-present 6-month returns: worst performance with VIX 20-30, highest with VIX very high. S&P 500 total return 6-month total returns, based on VIX ranges, 1993-present 12-month returns have been lowest with VIX in mid-20’s, highest with VIX above 30. S&P 500 total return 12-month total returns, based on VIX ranges, 1993-present. More in the full note available to pro subscribers. Tyler Durden Sun, 05/08/2022 - 13:25.....»»

Category: blogSource: zerohedgeMay 8th, 2022