Gold Is Shining Again (After the Fed Killed King Dollar…Again)

One Ring To Rule Us All: A Global Digital Fiat Currency Via SchiffGold.com, We’ve written extensively about the “war on cash.” In a nutshell, governments would love to do away with cash in order to better track and control their citizens. There have been numerous moves closer to a cashless society in recent years, from capping ATM withdrawals to doing away with large-denomination bills. Last year, China launched a digital yuan pilot program and the US has floated moving toward a digital dollar. We got a first-hand look at what happens when governments restrict access to cash when India plunged into a cash crisis after the country’s government enacted a policy of demonetization in November 2016. It’s bad enough that various countries are exploring ways to move toward cashlessness, but there’s an even worse scenario - a global digital currency. Economist Thorsten Polleit compares it to the “master ring” in J.R.R. Tolkien’s classic Lord of the Rings. The following article was originally published by the Mises Wire. 1. Human history can be viewed from many angles. One of them is to see it as a struggle for power and domination, as a struggle for freedom and against oppression, as a struggle of good against evil. That is how Karl Marx (1818–83) saw it, and Ludwig von Mises (1881–1973) judged similarly. Mises wrote: The history of the West, from the age of the Greek Polis down to the present-day resistance to socialism, is essentially the history of the fight for liberty against the encroachments of the officeholders. But unlike Marx, Mises recognized that human history does not follow predetermined laws of societal development but ultimately depends on ideas that drive human action. From Mises’s point of view, human history can be understood as a battle of good ideas against bad ideas. Ideas are good if the actions they recommend bring results that are beneficial for everyone and lead the actors to their desired goals; At the same time, good ideas are ethically justifiable, they apply to everyone, anytime and anywhere, and ensure that people who act upon them can survive. On the other hand, bad ideas lead to actions that do not benefit everyone, that do not cause all actors to achieve their goals and/or are unethical. Good ideas are, for example, people accepting “mine and yours”; or entering into exchange relationships with one another voluntarily. Bad ideas are coercion, deception, embezzlement, theft. Evil ideas are very bad ideas, ideas through which whoever puts them into practice is consciously harming others. Evil ideas are, for example, physical attacks, murder, tyranny. 2. With Lord of the Rings, J. J. R. Tolkien (1892–1973) wrote a literary monument about the epic battle between good and evil. His fantasy novel, published in 1954, was a worldwide success, not least because of the movie trilogy, released from 2001 to 2003. What is Lord of the Rings about? In the First Age, the deeply evil Sauron—the demon, the hideous horror, the necromancer—had rings of power made by the elven forges. Three Rings for the Elven-kings under the sky, Seven for the Dwarf-lords in their halls of stone, Nine for Mortal Men doomed to die, One for the Dark Lord on his dark throne In the Land of Mordor where the Shadows lie. One Ring to rule them all, One Ring to find them, One Ring to bring them all, and in the darkness bind them. In the Land of Mordor where the Shadows lie. But Sauron secretly forges an additional ring into which he pours all his darkness and cruelty, and this one ring, the master ring, rules all the other rings. When Sauron puts the master ring on his finger, he can read and control the minds of everyone wearing one of the other rings. The elves see through the dark plan and hide their three rings. The seven rings of the dwarves also fail to subjugate their bearers. But the nine rings of men proved to be effective: Sauron enslaved nine human kings, who were to serve him. Then, however, in the Third Age, in the battle before Mount Doom, Isildur, the eldest son of King Elendils, severed Sauron’s ring finger with a sword blow. Sauron is defeated and loses his physical form, but he survives. Now Isildur has the ring of power, and it takes possession of him. He does not destroy the master ring when he has the opportunity, and it costs him his life. When Isildur is killed, the ring sinks to the bottom of a river and remains there for twenty-five hundred years. Then the ring is found by Smeagol, who is captivated by its power. The ring remains with its finder for nearly five hundred years, hidden from the world. Over time, Sauron’s power grows again, and he wants the Ring of Power back. Then the ring is found, and for sixty years, it remains in the hands of the hobbit Bilbo Baggins, a friendly, well-meaning being who does not allow himself to be seduced by the power of the One Ring. Years later, the wizard Gandalf the Gray learns that Sauron’s rise has begun, and that the Ring of Power is held by Bilbo Baggins. Gandalf knows that there is only one way to defeat the ring and its evil: it must be destroyed where it was created, in Mordor. Bilbo Baggins’s nephew, Frodo Baggins, agrees to take the task upon himself. He and his companions—a total of four hobbits, two humans, a dwarf, and an elf—embark on the dangerous journey. They endure hardship, adversity, and battles against the dark forces, and in the end, they succeed at what seemed impossible: the destruction of the ring of power in the fires of Mount Doom. Good triumphs over evil. 3. The ring in Tolkien’s Lord of the Rings is not just a piece of forged gold. It embodies Sauron’s evil, corrupting everyone who lays hands or eyes on it, poisons their soul, and makes them willing helpers of evil. No one can wield the cruel power of the One Ring and use it for good; no human, no dwarf, no elf. Can an equivalent for Tolkien’s literary portrait of the evil ring be found in the here and now? Yes, I believe so, and in the following, I would like to offer you what I hope is a startling, but in any case, entertaining, interpretation. Tolkien’s Rings of Power embody evil ideas. The nineteen rings represent the idea that the ring bearers should have power over others and rule over them. And the One Ring, to which all other rings are subject, embodies an even darker idea, namely that the bearer of this master ring has power over all other ring bearers and those ruled by them; that he is the sole and absolute ruler of all. The nineteen rings symbolize the idea of establishing and maintaining a state (as we know it today), namely a state understood as a territorial, coercive monopoly with the ultimate power of decision-making over all conflicts. However, the One Ring of power stands for the particularly evil idea of creating a state of states, a world government, a world state; and the creation of a single world fiat currency controlled by the states would pave the way toward this outcome. 4. To explain this, let us begin with the state as we know it today. The state is the idea of the rule of one over the other. This is how the German economist, sociologist, and doctor Franz Oppenheimer (1864–1946) sees it: The state … is a social institution, forced by a victorious group of men on a defeated group, with the sole purpose of regulating the dominion of the victorious group over the vanquished and securing itself against revolt from within and attacks from abroad…. This dominion had no other purpose than the economic exploitation of the vanquished by the victors. Joseph Stalin (1878–1953) defined the state quite similarly: The state is a machine in the hands of the ruling class to suppress the resistance of its class opponents. The modern state in the Western world no longer uses coercion and violence as obviously as many of its predecessors. But it, too, is, of course, built on coercion and violence, asserts itself through them, and most importantly, it divides society into a class of the rulers and a class of the ruled. How does the state manage to create and maintain such a two-class society of rulers and ruled? In Tolkien’s Lord of the Rings, nine men, all of them kings, wished to wield power, and so they became bearers of the rings, and because of that, they were inescapably bound to Sauron’s One Ring of power. This is quite similar to the idea of the state. To seize, maintain, and expand power, the state seduces its followers to do what is necessary, to resort to all sorts of techniques: propaganda, carrot and stick, fear, and even terror. The state lets the people know that it is good, indispensable, inevitable. Without it, the state whispers, a civilized coexistence of people would not be possible. Most people succumb to this kind of propaganda, and the state gets carte blanche to effectively infiltrate all economic and societal matters—kindergarten, school, university, transport, media, health, pensions, law, security, money and credit, the environment—and thereby gains power. The state rewards its followers with jobs, rewarding business contracts, and transfer payments. Those who resist will end up in prison or lose their livelihood or even their lives. The state spreads fear and terror to make people compliant—as people who are afraid are easy to control, especially if they have been led to believe that the state will protect them against any evil. Lately, the topics of climate change and coronavirus have been used for fear-mongering, primarily by the state, which is skillfully using them to increase its omnipotence: it destroys the economy and jobs, makes many people financially dependent on it, clamps down on civil and entrepreneurial freedoms. However, it is of the utmost importance for the state to win the battle of ideas and be the authority to say what are good ideas and what are bad ideas. Because it is ideas that determine people’s actions. The task of winning over the general public for the state traditionally falls to the so-called intellectuals—the people whose opinions are widely heard, such as teachers, doctors, university professors, researchers, actors, comedians, musicians, writers, journalists, and others. The state provides a critical number of them with income, influence, prestige, and status in a variety of ways—which most of them would not have been able to achieve without the state. In gratitude for this, the intellectuals spread the message that the state is good, indispensable, inevitable. Among the intellectuals, there tend to be quite a few who willingly submit to the rings of power, helping—consciously or unconsciously—to bring their fellow men and women under the spell of the rings or simply to walk over, subjugate, dominate them. Anyone who thinks that the state (as we know it today) is acceptable, a justifiable solution, as long as it does not exceed certain power limits, is seriously mistaken. Just as the One Ring of power tries to find its way back to its lord and master, an initially limited state inevitably strives towards its logical endpoint: absolute power. The state (as we know it today) is pushing for expansion both internally and externally. This is a well-known fact derived from the logic of human action. George Orwell put it succinctly: “The object of power is power.”  Or, as Hans-Hermann Hoppe nails it, “[E]very minimal government has the inherent tendency to become a maximal government.” Inwardly, the state is expanding through all sorts of interventions in economic and social life, through regulations, ordinances, laws, and taxes. Outwardly, the economically and militarily strongest state will seek to expand its sphere of influence. In the most primitive form, this happens through aggressive campaigns of conquest and war, in a more sophisticated form, by pursuing political ideological supremacy. In recent decades the latter has taken the form of democratic socialism. To put it casually, democratic socialism means allowing and doing what the majority wants. Under democratic socialism, private property is formally upheld, but it is declared that no one is the rightful owner of 100 percent of the income from their property. People no longer strive for freedom from being ruled but rather to participate in the rule. The result is not people pushing back the state, but rather coming to terms and cooperating with it. The practical consequence of democratic socialism is interventionism: the state intervenes in the economy and society on a case-by-case basis to gradually make socialist ideals a reality. All societies of the Western world have embraced democratic socialism, some with more authority than others, and all of them use interventionism. Seen in this light, all Western states are now acting in concert. What they also have in common is their disdain for competition, because competition sets undesirable limits to the state’s expansive nature. Therefore, larger states often form a cartel. Smaller, less powerful states are compelled to join—and if they refuse, they will suffer political and economic disadvantages. But the cartel of states is only an intermediate step. The logical endpoint that democratic socialism is striving for is the creation of a central authority, something like a world government, a world state. 5. In Tolkien’s Lord of the Rings, the One Ring, the ring of power, embodies this very dark idea: to rule them all, to create a world state. To get closer to this goal, democracy (as we understand it today) is proving to be an ideal trailblazer, and that’s most likely the reason why it is praised to the skies by socialists. Sooner or later, a democracy will mutate into an oligarchy, as the German-Italian sociologist Robert Michels pointed out in 1911. According to Michels, parties emerge in democracies. These parties are organizations that need strict leadership, which is handed to the most power-hungry, ruthless people. They will represent the party elite. The party elite can break away from the will of the party members and pursue their own goals and agendas. For example, they can form coalitions or cartels with elites of other parties. As a result, there will be an oligarchization of democracy, in which the elected party elites or the cartel of the party elites will be the kings of the castle. It is not the voters who will call the tune but oligarchic elites that will rule over the voters. The oligarchization of democracy will not only afflict individual states but will also affect the international relations of democracies. Oligarchical elites from different countries will join together and strengthen each other, primarily by creating supranational institutions. Democratic socialism evolves into “political globalism”: the idea that people should not be allowed to shape their own destiny in a system of free markets but that it should be assigned and directed by a global central authority. The One Ring of power drives those who have already been seduced by the common rings to long for absolute power, to elevate themselves above the rest of humanity. Who comes to mind? Well, various politicians, high-level bureaucrats, court intellectuals, representatives of big banking, big business, Big Pharma and Big Tech and, of course, big media—together they are often called the “Davos elite” or the “establishment.” Whether it is about combating financial and economic crises, climate change, or viral diseases—the one ring of power ensures that supranational, state-orchestrated solutions are propagated; that centralization is placed above decentralization; that the state, not the free market, is empowered. Calls for the “new world order,” the “Great Transformation,” the “Great Reset” are the results of this poisonous mindset inspired by the one ring of power. National borders are called into question, property is relativized or declared dispensable, and even a merging of people’s physical, digital, and biological identities—transhumanism—is declared the goal of the self-empowered globalist establishment. But how can political globalism be promoted at a time when there are (still) social democratic nation-states that insist on their independence? And where people are separated by different languages, values, and religions? How do the political globalists get closer to their badly desired end of world domination, their world state? 6. Sauron is the undisputed tyrant and dictator in his realm of darkness. He operates something like a command economy, forcing his subjects to clear forests, build military equipment, and breed Orcs. There are neither markets nor money in Sauron’s sinister kingdom. Sauron takes whatever he wants; he has overcome exchange and money, so to speak. Today’s state is not quite that powerful, and it finds itself in economies characterized by property, division of labor, and monetary exchange. The state wants to control money—because this is one of the most effective ways to gain ultimate power. To this end, the modern state has already acquired the monopoly of money production; and it has replaced gold with its own fiat money. Over time, fiat money destroys the free market system and thus the free society. Ludwig von Mises saw this as early 1912. He wrote: It would be a mistake to assume that the modern organization of exchange is bound to continue to exist. It carries within itself the germ of its own destruction; the development of the fiduciary medium must necessarily lead to its breakdown. (6) Indeed, fiat money not only causes inflation, economic crises, and an unsocial redistribution of income and wealth. Above all, it is a growth elixir for the state, making it ever larger and more powerful at the expense of the freedom of its citizens and entrepreneurs. Against this backdrop, it should be quite understandable why the political globalists see creating a single world currency as an important step toward seizing absolute power. In Europe, what the political globalists want “on a large scale” has already been achieved “on a small scale”: merging many national currencies into one. In 1999, eleven European nation-states gave up their currencies and merged them into a single currency, the euro, which is produced by a supranational authority, the European Central Bank. The creation of the euro provides the blueprint by which the world’s major currencies can be converted into a single world currency. This is what the 1999 Canadian Nobel laureate in economics, Robert Mundell, recommends: Fixing the exchange rates between the US dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound against each other and also fixing them against a new unit of account, the INTOR. And hocus pocus: here is the world fiat currency, controlled by a cartel of central banks or a world central bank. 7. Admittedly, creating a single world fiat currency seems to have little chance of being realized at first glance. But maybe at second glance. First of all, there is a good economic reason for having a single world currency: if all people do business with the same money, the productive power of money is optimized. From an economic standpoint, the optimal number of monies in the world is one. What is more, nation-states have the monopoly of money within their respective territory, and since they all adhere to democratic socialism, they also have an interest in ensuring that there is no currency competition—not even between different state fiat currencies. This makes them susceptible to the idea of reducing the pluralism of currencies. Furthermore, one should not misinterpret the so-called rivalry between the big states such as the US and China and between China and Europe, which is being discussed in the mainstream media on a regular basis. No doubt that there is a rivalry between the national rulers: they do not want to give up the power they have gained in their respective countries; they want to become even more powerful. But the rivalry between the oligarchic democracies of the West has already weakened significantly, and there are great incentives for the oligarchic party elites to work together across borders. In fact, it is the oligarchization of democracy in the Western world that allowed for the rapprochement with a socialist-communist regime: the state increasingly taking control of the economic and societal system. This development could be called “the Chinacization of the West.” The way the Western world has dealt with the coronavirus—the suspension, perhaps the termination of constitutional rights and freedoms—undoubtedly shows where the journey is headed: to the authoritarian state that is beyond the control of the people—as is the case in Communist China. The proper slogan for this might be “One System, Many Countries.” Is it too farfetched to assume that the Western world will make common cause with Communist China not only on health issues but also on the world currency issue? The democratic socialists in the West and the Chinese Communist Party have a great deal of common ground and common interest, I would think. It is certainly no coincidence that China has pushed hard for the Chinese renminbi to be included in the International Monetary Fund’s special drawing rights, and that the IMF already agreed in November 2015. 8. The issue of digital central bank money, something the world’s major central banks are working on, could be a catalyst in the creation of a single world currency. The issue of digital central bank money not only heralds the end of cash—the anonymous payment option for citizens and entrepreneurs. Once people start using digital central bank money, it will be easy for the central bank and the state to spy on people’s transactions. The state will not only know who pays what, when, where, and what for. It will also be in a position to determine who gets access to the deposits: who gets them and who doesn’t. China is blazing the trail with its “social credit system”: behavior conforming to the Communist regime is rewarded, behavior that does not is punished. Against this backdrop, digital central bank money would be particularly effective at stifling unwanted political opposition. Digital central bank money will not only replace cash, but it will also increasingly compete with money from commercial banks. Why should you keep your money with banks that are exposed to the risk of default when you can keep it safe with the central bank that never goes bankrupt? Once commercial bank deposits can be exchanged one to one for digital central bank money—and this is to be expected—the credit and monetary system is de facto fully nationalized. Because under these conditions, the central bank transfers its unlimited solvency to the commercial banking sector. This completely deprives the financial markets of their function of determining the cost of capital—and the state-planned economy becomes a reality. In fact, this is the type of command and control economy that emerged in National Socialist Germany in the 1930s. The state formally retained ownership of the means of production. But with commands, prohibitions, laws, taxes, and control, the state determines who is allowed to produce what, when, and under what conditions, and who is allowed to consume what, when, and how much. In such a command and control economy, it is quite conceivable that the form of money production will change—away from money creation through lending toward the issue of helicopter money. The central bank determines who gets how much new money and when. The amount of money in people’s bank accounts no longer reflects their economic success. From now on, it is the result of arbitrary political decisions by the central banks, i.e., the rulers. The prospect of being supplied with new money by the state and its central bank—that is, receiving an unconditional basic income—will presumably drive hosts of people into the arms of the state and bring any resistance to its machinations to a shrieking halt. 9. Will the people, the general public, really subscribe to all of this? Well, government-sponsored economists, in particular, will do their very best to inform us about the benefits of having a globally coordinated monetary policy; that stabilizing the exchange rates between national currencies is beneficial; that if a supranational controlled currency—with the name INTOR or GLOBAL—is created, we will achieve the best of all worlds. And as the issuance of digital central bank money has shut down the last remnants of a free capital market, the merging of different national currencies into one will be relatively easy. The single world currency creature that the political globalists want to create will be a fiat money, certainly not a commodity money. Such a single world fiat currency will not only suffer from all the economic and ethical defects which weigh on national fiat currencies. It will also exacerbate and exponentiate the damages a national fiat currency causes. The door to a high inflation policy would be pushed wide open—as nobody could escape the inflationary single world fiat currency. The states are the main beneficiaries: they can get money from the world central bank at any time, provided they adhere to the rules set out by the world central bank and the special interest groups that govern it. This creates the incentive for national states to relinquish sovereignty rights and to submit to supranational rules—for example, in taxation and financial market regulation. It is therefore the incentive resulting from a single world currency that paves the way toward a world government and a world state. In this context, please note what happened in the euro area: the starting point was not the creation of the EU superstate, which was to be followed by the introduction of the euro. It was exactly the opposite: the euro was introduced to overcome national sovereignty and ultimately establish the United Nations of Europe. One has good reason to fear that the idea of issuing a world fiat currency—which the master ring relentlessly pushes for—would bring totalitarianism—that would most likely dwarf the regimes established by Joseph Stalin, Adolf Hitler, Mao Zedong, Pol Pot, and other criminals. 10. In Tolkien’s Lord of the Rings, evil is eventually defeated. The story has a happy ending. Will it be that easy in our world? The ideas of having a state (as we know it today), of tolerating it, of cooperating with it, of giving the state total control over our money, of accepting fiat money, are deeply rooted in people’s minds as good ideas. Where are the forces supposed to come from that will enlighten people about the evil that the state (as we know it today) brings to humanity? Particularly when in kindergartens, schools, and universities—which are all in the hands of the state—the teachings of collectivism-socialism-Marxism are systematically drummed into people’s (especially impressionable children’s) heads, when the teachings of freedom, free market and free society, and capitalism are hardly or not at all imparted to the younger generation? Who will explain to people the uncomfortable truth that even a minimal state will become a maximal state? That states’ monopolies over money will lead to a single world currency and thus world tyranny? It does not take much to become bleak when it comes to the future of the free economic and social order. However, it would be rather shortsighted to get pessimistic. Those who believe in Jesus Christ can trust that God will not fail them. If we cannot think of a solution to the problems at hand, the believers can trust God. Because “[e]ven in the darkest night, there is a bright light shining somewhere.” Or: please remember the Enlightenment movement in the eighteenth century. At that time, the Prussian philosopher Immanuel Kant explained the “unheard of” to the people, namely that there is such a thing as “autonomy of reason.” It means that you and I have the indisputable right to lead our lives independently; that we should handle it according to self-imposed rules, rules that we determine ourselves based on good reason. People back then understood Kant’s message. Why should such an intellectual revolution—triggered by the writings and words of a free thinker—not be able to repeat itself in the future? Or: the fact that people have not yet learned from bad experience does not mean that they won’t eventually learn from it. When it comes to thinking about changes for the better, it is important to note that it is not the mass of people that matters, but the individual. Applied to the conditions in today’s world, among those thinkers who can defeat evil and help the good make a breakthrough are Ludwig von Mises, Murray Rothbard, and Hans-Hermann Hoppe—and all those following their teachings and fearlessly disseminating them—as scholars or as fans. They are—in terms of Tolkien’s Lord of the Rings—the companions. They give us the intellectual firepower and the courage to fight and defeat evil. I don’t know if Ludwig von Mises knew Tolkien’s Lord of the Rings. But he was certainly well aware of the struggle between good and evil that continues throughout human history. In fact, the knowledge of this struggle shaped Mises’s maxim of life, which he took from the verse of the Roman poet Virgil (70 to 19 BC): “Tu ne cede malis, sed contra audentior ito,” which means “Do not give in to evil but proceed ever more boldly against it.” I want to close my interpretation with a quote from Samwise Gamgee, the loyal friend and companion of Frodo Baggins. In a really hopeless situation, Sam says to Frodo: “There is something good in this world, Mr. Frodo. And it’s worth fighting for.” So if we want to fight for the good in this world, we know what we have to do: we have to fight for property and freedom and against the darkness that the state (as we know it today) wishes to bring upon us, especially with its fiat money. In fact, we must fight steadfastly for a society of property and freedom! Tyler Durden Sat, 10/09/2021 - 22:00.....»»

"The Fed Is Broke" - Gundlach Likes Gold, Fears "Expanding Wars" Most In the past week, DoubleLine CEO and founder Jeffrey Gundlach has had a lot to say as the US banking system collapse and bailout enjoins Europe's banking crisis leaving central banks' inflation-fighting plans in question. The ECB was clear - hiking 50bps and FTW! - but what will The Fed do? The market has dovishly adjusted to the banking crisis overhang... (pricing in a peak in rate in May with just one 25bps hike and then cuts for the rest of the year) ...and the new 'bond king' suggests that Powell hikes continue to keep up its inflation-fighting efforts, due to credibility concerns. “This is really throwing a wrench in [Fed Chair] Jay Powell’s game plan,” Gundlach said. “I wouldn’t do it myself. But what do you do in the context of all this messaging that has happened over the past six months, and then something happens that you think you’ve solved.” Ironically adding that, The Fed is doing this with one hand at the same time as enabling inflationary policy with the BTFP on the other: “I think that the inflationary policy is back in play with the Federal Reserve … putting money into the system through this lending program.” Gundlach said.   But, in a Twitter Spaces audio chat Thursday with Jennifer Ablan, editor-in-chief of Pensions & Investments, Gundlach warns of an imminent recession - within the next four months - as the yield-curve suddenly steepens... "In all the past recessions going back for decades, the yield curve starts de-inverting a few months before the recession," adding that "I think it's within four months at the most. Almost every indicator is flipped into high probability. The only one that hasn't is the unemployment rate." But,, the DoubleLine founder pointed out that at 3.6%, the unemployment rate just crossed back above its 12-month moving average... Which, historically has been "a reliable indicator you're on the doorstep" of recession. Gundlach called Silicon Valley Bank's failure "a rate policy collision with stupid accounting rules" for banks, but warned of The Fed's reaction was inflationary and antithetical to their inflation-fighting stance. "By bailing out depositors at SVB, that's essentially a quantitative easing" by the Fed, he said. "Making those depositors whole is about the same as a month or two of reversing quantitative tightening." The stock market is currently in a bear market, he said, and he would sell into any rallies. Gundlach predicts the S&P 500 index will trade down to 3,200 and reminded investors that "the goal for 2023 is survival, and losing as little money as possible." What worries the bond king the most may surprise some - spreading geopolitical conflicts: "I think expanding wars worries me the most." But he was clear on the biggest financial risk: "The Fed is broke. The Fed's balance sheet is negative $1.1 trillion. There's nothing they can do to fight any problems except for printing money. They have nothing left. The Fed used to send money to Treasury. Now Treasury sends money to the Fed. We're at this point in time where we don't have any road left to kick the can on our mismanagement of finances and monetary policy." His suggestion - buy gold. If government spending continues, he predicts "the dollar will collapse under the weight of the deficit." "I think gold is a good long-term hold, gold and other real assets with true value, such as land, gold and collectibles." Tyler Durden Fri, 03/17/2023 - 15:45.....»»

Trump's pursuit of loyalty hangs over the GOP primary as Ron DeSantis weighs his future. Another Floridian can relate to Trump's plight. SOPA Images, Scott Eisen, CNBC / Getty image; Arif Qazi / Insider Trump calls DeSantis "disloyal" as he seems to be mounting a challenge for the 2024 nomination. The dynamics are similar to 2016, when Sen. Marco Rubio and Jeb Bush were in the arena together. Insider dove into the similarities and differences between the duos.  Donald Trump needs loyalty.His Oval Office command to FBI Director James Comey became one of the defining moments of his presidency. Rejected by the American people in 2020, Trump lashed out at lawyers, Cabinet secretaries, and ultimately his vice president who had stuck with him through his chaotic term but wouldn't support his unconstitutional effort to cling to power.It is then fitting that the characteristic the former president says he prizes the most is already defining the 2024 Republican presidential nomination fight. One former Cabinet secretary, former UN Ambassador Nikki Haley, is opposing the former president. Another, former Secretary of State Mike Pompeo, is openly flirting with a run. So is former Vice President Mike Pence, who, in Trump's eyes, may have committed the most disloyal act imaginable.None of them has the story of Florida Gov. Ron DeSantis. Few Republicans tied their primary fortunes to Trump in the way the now two-term governor did. Trump is already fuming about the perceived betrayal, even though DeSantis has yet to formalize his intentions for 2024. Trump's team is even branding DeSantis as "the apprentice," a nod to the reality TV show where Trump once aimed to crown his next business consigliere.Trump's campaign paid minimal amounts for a series of ads bashing DeSantis, including this one that nods at Trump's "Apprentice" past.Team Trump Facebook/InsiderWhile Trump has been more open than most about how he sees the rivalry, he isn't the first politician living in Florida to go through this.Eight years ago, former Florida Gov. Jeb Bush found himself in a similar place. Like Trump, Bush has experienced what it's like to watch a younger man overshadow him, a man he worked hard to support. For Bush, that man was US Sen. Marco Rubio. Bush and Rubio were allies in Florida government, and Rubio was widely viewed as a Bush protége. Then, when both were in the ring for the 2016 Republican presidential nomination and Rubio outshined Bush, a complicated dynamic unfolded."It's not at all unusual for former allies to run against each other in presidential primaries — it happens virtually every cycle," Alex Conant, a founding partner at Firehouse strategies who was communications director for Rubio's 2016 presidential campaign, said. "There's no reason to think ambitious young politicians will 'wait their turn.'" To be sure, Rubio and Bush had a far warmer relationship than Trump and DeSantis. Also, Conant said Bush and Rubio attracted different primary voters, while operatives view Trump and DeSantis as being in the same "lane." But today, just like in 2016, both Florida men appear to have a path to the nomination. And despite differences, the underlying cliché is still stands: The student is becoming the master."It does feel like some archetypal plot lines are happening," Miami Beach Mayor Dan Gelber, who was the top Democrat in the Florida Senate when Bush was governor, told Insider. "It's almost Oedipal," he added, referring to the Greek tragedy in which a king unwittingly kills his father and marries his mother.  Then-Florida State Rep. Marco Rubio holds a sword presented to him by then-Gov. Jeb Bush in September 2005 in ceremonies marking Rubio's designation as the next speaker of the Florida House.Phil Coale/File/APA tale of two alliancesTwo decades ago, Bush was the leader of the Republican movement in Florida, spearheading school vouchers and fiscal conservatism. Rubio was a "lieutenant in Jeb's Army," skilled at articulating his positions, Gelber said.When Rubio became Florida's House speaker in 2005, Bush handed him a gold and silver sword and extolled him as a "great conservative warrior." Rubio, then 34, made history as the first Cuban American to lead Florida's lower chamber, and Bush said he was ready for the next generation of leaders. "To me it was beyond literal," Peter Schorsch, a former GOP political operative who's now the publisher of FloridaPolitics.com, told Insider. "It was King Arthur giving over a weapon to Lancelot. That was just the defining picture of that relationship."Bush encouraged Rubio to run for the US Senate and attended his victory party. When Mitt Romney was the 2012 GOP presidential nominee, Bush urged him to pick Rubio as his running mate. He told PBS he had a "close relationship" with Rubio and admired him. Despite this, Gelber told Insider he didn't think that either men believed Bush had been responsible for Rubio's ascent. "Jeb created a movement in Florida that Marco clearly was important in, and rose to prominence in, but you could say that about every Republican from 20 years ago who rose to prominence in Florida," he said. In contrast, the DeSantis-Trump alliance was more about political convenience, David Kochel, owner of Redwave Communications who was senior strategist on Bush's presidential campaign, said. "Jeb was much more of a mentor to Marco than Trump ever was to DeSantis," he said. "But that said, DeSantis definitely took advantage of Trump's standing within the primary electorate to help him." When Trump was in the White House and DeSantis was a congressman, he frequently defended the president on Fox News over the Russia investigation. When DeSantis decided to run for governor, he wanted Trump's support. In his book "The Courage to Be Free," DeSantis discloses little about the endorsement conversation with Trump. He credits the president for raising his name recognition, but then writes that a debate performance got him the GOP nomination against his better-known challenger. He also suggests Trump's name was a liability in the general election. Trump, for his part, describes DeSantis as having "begged" for his support, telling radio host Hugh Hewitt in February that the young, little-known congressman had tears in his eyes — a questionable account given that DeSantis is known for stoicism.Still, polling at the time showed that Trump's backing gave DeSantis a significant boost, and the president would go on to host numerous rallies for him. DeSantis ran a Trump-centric campaign that included a viral ad where he was teaching his children about Trumpism. "I can't think of a candidate in this country who has leaned in more to the presidential endorsement than Ron DeSantis," White House counselor Kellyanne Conway said on Fox and Friends in August 2018.When DeSantis became governor, he attended several events with Trump. Today, many political insiders still view DeSantis as Trumpian or working off the former president's playbook, pointing to examples such as his political stunt of flying migrants to Marthat's Vineyard."Trump was a cult of personality, and Jeb was a cult of policy," Gelber said. Rubio shrugged when Insider asked his thoughts about the changing-of-the-guard themes bubbling up now, in regards to Trump and DeSantis, and how that compared to 2016. "I haven't even analyzed it," he told Insider.Bush, through a representative, declined Insider's request for an interview, and the DeSantis team didn't respond to a request for comment. "President Trump's endorsement is the single, most power tool in political history and his America First movement has led to overwhelming victories across the country," Steven Cheung, Trump's campaign spokesman, told Insider "He received over 5.6 million votes in Florida alone in 2020, more than any other candidate or politician in the state's history. There is nobody who can even come close to generating the excitement and enthusiasm as President Trump has and will do in 2024."Florida Sen. Marco Rubio (left) embraces former Florida Gov. Jeb Bush during a Republican presidential primary debate in Iowa in January 2016.Chris Carlson/APFallout from presidential runs As member of the first family of Republican politics, Bush was an early big-dollar donor favorite in 2016. The political world readied for a showdown between two establishment candidates: Bush and former Secretary of State Hillary Clinton.In the end, Trump branding Bush as "low energy" wasn't the only thing standing between Bush and the nomination. The other was Rubio, who proved to be the better campaigner. It would be a bitter fight. Bush's team homed in on Rubio's missed votes. During a CNN town hall, Bush portrayed Rubio's youth as a vulnerability and called him a follower of his in Tallahassee.  Rubio hit back hard during a debate: "Someone has convinced you that attacking me is going to help you."Neither Rubio nor Bush would win the 2016 primary. The strategic misstep was that all the GOP candidates were attacking each other instead of Trump, Kochel said. "Somebody had to go take out Trump and nobody made the decision to do that because the consensus view — including in pundit class and media — was that Trump was going to blow himself up at some point," Kochel said. Assuming DeSantis formally gets into the race, the Trump-DeSantis rivalry is considered to be one of the most closely watched storylines for 2024. The breakage started between the two men after Trump left the White House. DeSantis gained the spotlight on his own, initially through bucking federal health advice on COVID-19 mitigation policies. By late 2021, articles citing anonymous sources began leaking that Trump was annoyed with DeSantis.The governor didn't seek Trump's endorsement for his reelection bid, and Trump nicknamed him "Ron DeSanctimonious." The back and forth has been heated since."No one has mastered the Trump relationship better than Ron DeSantis," said Schorsch, who supported DeSantis' Democratic challenger in the 2022 reelection race. "DeSantis is like the one person who has gotten more out of Trump than Trump has gotten out of them."Sam Nunberg, a former Trump 2016 campaign advisor who had a public falling out with Trump, laughed at the position the former president now finds himself in."Think about another time in Donald Trump's career when somebody in business that he really helped then outshined him, or in entertainment that he promoted or he brought up — then that person competed against him in the same arena and beat him," Nunberg told Insider. "Trump has always been the king of his own domain and the stage that he's put himself in."Read the original article on Business Insider.....»»

Letter To A Mainstream Straddler: Live Not By Half-Lies Authored by Margaret Anna Alice via Off-Guardian.org, I get it. You don’t want to be called a “conspiracy theorist.” You don’t want to be tarred an “anti-vaxxer.” A “science-denier.” A “far right-wing extremist.” You’ve got your reputation to protect. Your credibility. Your grant funding. So you water down the truth. You tiptoe around it. You don’t go there. And the philanthropaths, the tyrants, the Big Liars, the demociders, and their enablers continue to profit. Continue to conspire. Continue to torture. Continue to slaughter. They tell you right to your face what they’re doing. But if you turn around and quote them, you’re the crazy one. If you ask why a child, teen, athlete, or other healthy adult suddenly had a heart attack, got turbo cancer, or died, you’re the “truly disgusting” one. If you provide scientific evidence that a warp-sped experimental injection being peddled by a trillion-dollar industry in collusion with governments, federal agencies, the media, and Big Tech is dangerous, you—not the corporations raking in billions—are the grifter. If you ask what’s causing the sudden deaths and injuries that began surging in 2021 in hopes of preventing future such tragedies, you’re “morally reprehensible” (and yet “mocking anti-vaxxers’ COVID deaths … may be necessary”). If you point out that we should maybe think twice about pushing a product estimated to have killed thirteen million human beings and counting, you are the “major killing force globally” and guilty of “undermin[ing] public confidence” in said product. If you call genocide genocide, you are the enemy, the misinformation spreader, the anti–semite. If you dare point out Never Again is already happening, you get inquisitioned—even though Holocaust survivors and their relatives agree. If you call out governments for practicing totalitarianism and enacting policies that cause lethal collateral damage, you’re the granny-killer. If you challenge people to face the livid, electrifying grief of those who have lost loved ones to financially incentivized hospicide, you are making them uncomfortable. You know you’re living in a world of lies when the mob is more enraged at the whistleblowers revealing the deceptions, corruption, and murder than they are at the lying liars, corrupt corrupters, and murdering murderers themselves—indeed, they trip over themselves racing to defend their narcissistic abusers. As Edward Snowden says: When exposing a crime is treated as committing a crime, you are being ruled by criminals!” But guess what? Once they start calling you all those hideous names, you realize they’re nothing more than magician’s smoke. You gradually start to give fewer and fewer f*cks. You know you’ve hit zero when you feel the exhilarating liberation that comes from shouting the unfettered truth. That’s the words-can-never-hurt-you stage. You become untouchable. You start collecting libels like Purple Hearts. The more scars you can count, the more evidence of your efficacy, your threat to the hegemony. That’s when you can truly LIVE. And by truth, not by lies. If enough of us stand up and do that, we can hold the perpetrators accountable. We can present the unadulterated evidence of their crimes. And we can find justice … or die trying—like the members of the White Rose, whose piercing words still ring out nearly a century later: “We will not keep silent. We are your guilty conscience.” I’m going to tell you a secret. Stick it out long enough, and that tarnished reputation turns into burnished gold. Because when you are slandered by the propagandists, that means you are the good guy, even though the menticided public believes the opposite. In Upside-Down World, persisting in seeing things right-side up—despite the incessant, relentless, never-ending gaslighting—means you have valiantly guarded your most precious possessions: your integrity and your sanity. As e.e. cummings writes: To be nobody but yourself in a world which is doing its best day and night to make you like everybody else means to fight the hardest battle which any human being can fight and never stop fighting.” Most gratifying of all, you will find fellow members of your karass, and together you will set about fulfilling your wampeter. Once you are living in alignment with your values, you will feel the deepest joy fathomable. And when the COVID criminals have been found guilty, when the spells dissolve, the people will gradually awaken from their coma and recognize you for the hero you are. Or not. Most will be too ashamed to admit they’ve been conned. To realize they shielded fascist tyrants and attacked those trying to rescue them. Few find that courageous humility within themselves to acknowledge their complicity in totalitarianism. And so they will swathe themselves in soothing denial and lash out at anyone who tries to puncture it. But you will keep trying, anyway. Because that’s what truth-tellers do. That’s what people who care about saving lives do. That’s what people of integrity do, whether or not anyone ever recognizes it. You know in your heart what is true, and you speak it. And no one one can ever shut you up again. Even if they kill you. Your bravery will outlive you. Your words will remain like candles, lighting the path for future truth-droppers. And you will be at peace, in life and beyond. Tyler Durden Wed, 03/01/2023 - 23:40.....»»

Is The Deep State Getting Desperate? Authored by James Howard Kunstler via DailyReckoning.com, After Commander-in-Chief (ahem) “Joe Biden” demonstrated our ability to shoot down a Chinese spy balloon leisurely wandering the jet stream clear across North America, he loosed the Air Force on every other menacing aerial object hovering in our sovereign skies and… Ira Tonitrus… mission accomplished! “American officials do not know what the objects were, much less their purpose or who sent them,” The New York Times reported, poaching a line from every horror movie of the 1950s. When do the giant ants show up on Fremont Street in Las Vegas? It took the President another week to admit sheepishly that the three other targets were “most likely balloons tied to private companies, recreation or research institutions,” not alien invaders from another galaxy, as regime spokespersons hinted and the news media played-up for days. Note to America’s hot air ballooning community for the upcoming spring launch season: be very afraid! “Misinformation” Is a Synonym for “the Truth” What’s going on here? It seems that all the usual tropes the Deep State employs to intimidate its opponents — Putin sympathizer, white supremacy, right-wing extremism, racism, misogyny, transphobia, blah blah — have lost their power to scare the non-insane. Fewer Americans are believing the official BS about keeping America “safe” from “misinformation.” It’s perfectly obvious now that “misinformation” is a synonym for “the truth.” So, what have they got left? A UFO invasion? Is that what it’s come to? I guess so. If Russia was impressed by the successful balloon op, it didn’t offer any comment. Russia was busy neutralizing America’s pet proxy palooka, sad-sack Ukraine. These poor folks were sent into the ring to soften-up Russia for a revolution aimed at overthrowing the wicked Vlad Putin — at least according to our real Secretary of State (and Ukraine war show-runner), Victoria Nuland, in remarks this week to the Carnegie Endowment, a DC think tank. WTF? Speaking of tanks, our NATO allies are getting cold feet about sending those Leopard-2 war wagons into the Ukraine cauldron. Something about it had a discouraging act-of-war odor, as, by the way, did blowing up the Nord Stream gas pipelines, alleged by veteran reporter Seymour Hersh — though that caper was actually against NATO member and supposed US ally, Germany. WTF?, as the kids like to say. Are the doings in Western Civ getting a little too complex for comfort? Anyway, it turns out that the thirty-one Abrams tanks America promised to Ukraine have yet to be bolted together at the tank factory. It’s a special order, you see, because we don’t want to send the latest models built with super-high-tech armor that the Russians might capture and learn from… so Mr. Zelensky will just have to cool his jets waiting on delivery, say, around Christmas time… if he’s not singing Izprezhdi Vika somewhere on Miami Beach by then. Putting a Bomb on Russia’s Doorstep The biggest problem Russia has in resolving this conflict on its border, is doing it in a way that does not drive “JB” and his posse of war-mongers so raving crazy that they resort to a nukes-flying, world-ending, Thelma-and-Louise type denouement. In effect, America put a bomb on Russia’s front porch and now Russia has to carefully defuse the darn thing. The prank itself was just the last in a long line of foolish American military escapades that have ended in humiliation for us, most recently the Afghan fiasco. At best, this one in Ukraine — which we really started in 2014 — is on-track to sink NATO, plunge Europe into cold and darkness, and put the USA out of business as the world’s premier superpower. Attempted Suicide or Murder? In the meantime, America is rapidly disintegrating on the home front. Is it attempted suicide or murder? It’s a little hard to tell. Things are blowing up from sea to shining sea — food processing facilities, giant chicken barns, regional electric grids, oil refineries. The latest, of course, is a chemical spill from the Norfolk-Southern train wreck in East Palestine, Ohio, set ablaze by a conclave of government officials purportedly to keep the toxic liquids from seeping into the Ohio River watershed and beyond. Of course, in the dithering prior to lighting it up, enough vinyl chloride leached into streams feeding the big river to kill countless fish. And then torching the remaining chemical pools sent up a mushroom cloud of dioxin and other poisons that killed wildlife, pets, and chickens in the vicinity before the evil miasma wafted eastward on the wind to the densely-populated Atlantic coast. One has to wonder whether an army of saboteurs is on the loose across the land. Considering the border with Mexico is wide open, why wouldn’t America’s adversaries send whole wrecking crews over here to mess with our infrastructure? Hmmm… There’s no question that people from all over the planet have been sneaking across the Rio Grande. Surely some of them are on a mission. America is filled with “soft” targets, things unguarded and indefensible — not least, tens of thousands of miles of railroad track. Of all the reasons to be unnerved by “Joe Biden’s” open border policy, this one is the least discussed, even in the alt-media. But it seems like a no-brainer for nefarious interests who might want to bamboozle and disable us. I’m not claiming that’s what happened in Ohio. But it might give some bad ombres ideas. Think of what Vlad Putin could do in retaliation for US involvement in the Nord Stream 2 bombing. We Couldn’t Have Picked a Worse Place Than Ukraine The sad truth of this moment in history is that the USA has too much going sideways with our own business at home now to be dabbling in any foreign misadventures — and we couldn’t have picked a worse place than Ukraine to do it. The sheer logistics are implausible. The geography is lethally unfavorable. The place has been inarguably within Russia’s sphere of influence for centuries and Russia has every intention of pacifying the joint at all costs. Peace talks are apparently out of the question for our leaders. Something’s got to give, and that something is probably Western Civ’s financial system. It’s primed to blow anyway, and when it does, we’ll have other things to think about. Forces are aligning now to shake this creaking system down to its foundation. The moment of criticality will most likely come when the financial markets crater and the US dollar gets broken by international ridicule to a near-worthless token of decrepitude. The public can apparently take an awful lot of gaslighting, double-dealing, and derogation. But that all changes when you can’t buy food anymore. Tyler Durden Sat, 02/25/2023 - 13:01.....»»

Futures Rebound As Yields, Dollar Drop, Fed Minutes Loom After suffering their biggest one-day drop of 2023, US futures rebounded in muted trading on Wednesday, boosted by a drop in rates (the 10Y just hit a session low of 3.92% after rising as high as 3.97%) and weakness in the dollar, even as investors awaited further clues on the direction of monetary policy from the Federal Reserve’s minutes due out at 2pm today. S&P 500 and Nasdaq futures rose 0.3% and 0.4%, respectively, at 7:45am ET; sentiment was boosted by a CNBC appearance of the Fed's "trial balloon" speaker, St Louis Fed president James Bullard, who was hawkish - saying he favors hiking rates to 5.375% as fast as possible, but not as hawkish as some had feared, leading to a sharp bounce in futures just after 7am. Yields dropped, as did the dollar, while oil, gold and crypto erased earlier losses. In premarket trading, CoStar Group led declines in US premarket trading after its annual guidance disappointed analysts and News Corp. said it’s no longer involved in discussions to sell its Move subsidiary to the real estate information and services company. Coinbase Global Inc. declined after the cryptocurrency exchange posted a $557 million loss. Here are some other notable premarket movers: Palo Alto shares rose nearly 10% after the cybersecurity company’s results beat across the board. Several analysts raised their price targets for the stock, saying the firm is managing macro pressures effectively and executing well on its strategy Keep an eye on Constellation Energy as it was cut to neutral from outperform at Credit Suisse as the broker says the green energy group’s shares now look expensive and lack near-term catalysts Watch Nordson after it was raised to overweight from sector weight at KeyBanc, with the broker saying a good entry point for the adhesives and sealants company has materialized following a post-earnings decline in its shares Morgan Stanley is constructive on US software stocks, given that the moderation in forward IT spending growth is likely to prove less severe than feared. Valuations are still near multi-year trough levels and longer-term demand trends are intact Keysight shares fell 7.1% in after-hours trading on Tuesday as the company’s results showed order weakness, and guidance will create cause for concern in the near term, analysts said, though they remain positive on the longer-term outlook for the electronic measurement services firm Meanwhile disappointing earnings projections are seen everywhere. Walmart Inc. reported a weak profit outlook that fell short of analyst estimates, signaling another rocky year for the world’s largest retailer. Home Depot Inc. also released a profit-decline forecast. Only 68% of S&P 500 companies reporting results this season have beaten estimates, compared with about 80% seen during recent quarters. Following strong business activity data on Tuesday, a classic example of "good news is bad news for markets", stocks tumbled as evidence mounted that the Fed may have to hike even more (ignoring for a second the fact that the data is manipulated "strong" for purely political reasons and will soon slump) and prompted fears the powerful stock rally since the start of the year may be coming to an end, as hot economic indicators pressure central banks to keep monetary policy tight. And while until recently investors looked as though they may be pricing in a soft landing for the economy, that may be ending said Stephanie Niven, portfolio manager at Ninety One UK Limited, and hoping strong economic conditions may cushion higher rates. “We will continue to see investors adjust their expectations,” said Niven. “We see a harsher economic cycle into the second half of this year, and we really think a harder landing is the likely outcome here.” In a relatively quiet calendar, today's main event will be the Minutes from the Fed's Jan. 31-Feb. 1 meeting, which while naturally backward looking, may shed light on the path forward. For context, officials at the meeting voted unanimously to raise rates by just 25 basis points, moderating from a half-point hike in December after four 75-bp increases. The policy statement said the “extent of future increases” will depend on a number of factors including cumulative tightening of monetary policy, wording Fed watchers viewed as a signal the central bank may stick with smaller moves. Watch the minutes for insight into whether a larger hike is still on the table, which in turn may mean the Fed’s terminal rate is higher than some expect. “Investors are waking up to a stark realization that the Fed’s work is not done, and that interest rates may have to be hiked even higher to cool hot inflation,” Susannah Streeter, the head of money and markets at Hargreaves Lansdown Plc, wrote in a note. “Waves of exuberance, which have propelled equities higher since the start of the year, have turned into tides of disappointment and apprehension about the difficulties that still may lie ahead for the mighty US economy.” A rocky geopolitical outlook has not helped. President Vladimir Putin said Russia will suspend its observation of the New START nuclear weapons treaty with the US, a decision Secretary of State Antony Blinken called “irresponsible.” President Joe Biden hit back at Putin, saying he would never win his war in Ukraine. In delayed response to yesterday's US slump, European stocks fall for a second day after disappointing corporate earnings gave investors another reason to be cautious besides the prospect of tighter monetary policy. The Stoxx 600 is down 0.9%, headed for a second-day loss, though it came off the day’s lows. Lloyds Banking Group Plc dropped, weighing on the FTSE 100 Index, after results and guidance for 2023 came in below analyst estimates, despite announcing a £2 billion ($2.4 billion) share buyback. Miner Rio Tinto Plc fell after reporting lower than expected profit and slashing its dividend due to weak demand for metals in China. Here are some of the biggest movers on Wednesday: Lloyds Banking Group shares fall as much as 3% after the lender reported fourth-quarter results and guidance that were mixed with the bank affected by competition in the mortgage market Rio Tinto shares slip as much as 3.2% after the mining conglomerate slashes dividends and reports lower-than-expected profits, hurt by weaker demand and higher costs Grifols shares fell as much as 8.2%, the most intraday in four months, after the Spanish blood plasma company said executive chairman Steven F. Mayer resigned after four months in the job Covivio shares fall as much as 5.4%, the most since December, with analysts saying the French real estate firm’s guidance is soft and that its dividend is lower than expected Korian shares fell as much as 20%, set to close at their lowest level since 2006, after the French care home operator reported 2022 full year results that came short of analysts’ expectations Siegfried shares fall as much as 11%, the most since 2015, after the Swiss pharma company delivered an outlook analysts considered cautious given its strong performance in 2022 Danone shares rise as much as 2.8% in early Paris trading, before paring gains, after reporting full-year recurring operating income that beat estimates Wolters Kluwer shares rise as much as 3.9%, the biggest intraday climb since October, after the information services company forecast organic sales growth this year will be in-line UCB gains as much as 4.9% after the Belgian pharmaceuticals firm reported better-than- expected earnings BE Semiconductor gains as much as 9.9% after reporting fourth-quarter orders that blew past analyst estimates Stellantis shares rise as much as 3.4% to the highest since March 2022 after the carmaker’s full-year results beat expectations and it announced a buyback of as much as €1.5 billion Earlier in the session, Asian stocks declined for a second day after the aforementioned jump in US Treasury yields undermined confidence in the equity market’s advance this year, with shares in Hong Kong falling to the brink of a correction. The MSCI Asia Pacific Index fell as much as 1.4% to its lowest level since Jan. 9, with TSMC and Tencent among the heaviest drags on the gauge. Shares in Australia, Japan and mainland China slipped, while losses in Hong Kong’s Hang Seng Index reached almost 10% since a Jan. 27 peak. Technology stocks dropped after Treasury yields touched new highs for the year amid growing concern the Federal Reserve will continue to raise interest rates. Investors are pricing in the federal funds rate climbing to around 5.3% in June. That compares with a perceived peak of 4.9% just three weeks ago. “We see more signs of a growth slowdown” into year end, Alexander Wolf, Asia head of investment strategy at JPMorgan Private Bank, told Bloomberg Television. Fixed income “still remains our highest conviction call, given what we’ve seen with the move up in yields, you can achieve equity-like returns.”  Read: Investors Stung by Treasuries Rout Brace for Next Fed Blow   A key MSCI gauge of Indian stocks was also on course to enter a technical correction as the selloff in Adani Group shares deepened. Indexes in Vietnam and South Korea were among the biggest decliners in the region as investors awaited the release of Fed minutes from its latest policy meeting.  Japanese equities fell, following US peers lower on concerns of further Fed hikes and after weak corporate forecasts from US retailers Walmart and Home Depot. The Topix Index fell 1.1% to 1,975.25 as of market close Tokyo time, while the Nikkei declined 1.3% to 27,104.32. Sony Group Corp. contributed the most to the Topix Index decline, decreasing 2%. Out of 2,162 stocks in the index, 431 rose and 1,636 fell, while 95 were unchanged. “Expectations for an early halt to US interest rate hikes and cuts have faded, with the landing point for a rate hike higher than what the market expected,” said Kiyoshi Ishigane chief fund manager at Mitsubishi UFJ Kokusai Asset Management.    India’s benchmark stocks gauge posted its biggest single-day slump this year as a selloff across global equity markets extended amid worries over interest rates staying higher-for-longer. Sentiment in India continued to be weighed down by the ongoing decline in Adani shares. The rout triggered by US short-seller Hindenburg Research’s report has now stretched to $144 billion, with the group’s flagship firm Adani Enterprises plunging 11% today. All 10 group stocks declined during the session.  The S&P BSE Sensex fell 1.5% to 59,744.98 in Mumbai, the most since Dec. 23 and is close to erasing its gains for February. The NSE Nifty 50 Index declined by a similar measure. “There is an increasing fear that the Fed may remain hawkish for a longer duration than expected, which may even force RBI to keep interest rates high,” Siddhartha Khemka, head of retail research at Motilal Oswal Financial, said in a note. All 20 sector sub-gauges compiled by BSE Ltd. declined, led by utilities, while 29 out of Sensex’s 30 companies closed lower In FX, the dollar slid against its Group-of-10 currencies, where Sweden’s krona was the best performer followed by the yen while the Australian dollar and British pound are the weakest among. The euro fell a third day, to touch a low of $1.0630. Bund yields were a tad higher, led by longer maturities A German expectations gauge by the Ifo institute rose to 88.5 in February from 86.4 the previous month. That was better than the 88.3 median estimate in a Bloomberg poll of economists The Swedish krona outperformed other G-10 peers against the dollar and neared 11 per euro in the wake of comments from the new Riksbank Governor Erik Thedeen, who described underlying inflation figures in January as worrying. He also said that Sweden is currently not experiencing a housing market crash The pound fell, erasing some of its Tuesday gains, as investors mulled the UK economic outlook following data that showed the nation is weathering the sharpest cost-of-living crisis in generations better than feared. The gilt yield curve bear-flattened, with yields rising 3-6bps The yen advanced as much as 0.3% to 135.06 per dollar as the nation’s benchmark bond yield climbed back above the BOJ ceiling for a second day amid a global bond selloff. BOJ Governor nominee Kazuo Ueda is due to face confirmation hearings in the parliament this week. BOJ Board Member Naoki Tamura says that any decision on conducting a policy assessment will be made by looking at wage growth, prices and the economy. A divergence in the spot and options markets for the dollar-yen pair suggests traders are looking once again to position for possible hawkish signals from BOJ officials The New Zealand dollar was little changed after earlier rising as much as 0.4% to 0.6246 even as the RBNZ hiked rates by 50 basis points as expected and forecasting that it would take longer than previously expected to reach its 5.5% peak rate The Australian dollar was the worst G-10 performer following a smaller-than-expected wages increase in the fourth quarter. Wage price index rose 0.8% q/q (estimate +1.0%) in 4Q In rates, Treasuries held on to modest gains as US trading day begins, after erasing declines that pushed yields to new YTD highs, with the exception of the new 2-year note. Shorter-term Treasuries rose more than longer-dated ones in a choppy session. The two-year rate slid 5 basis points from the highest level since early November. Its 10-year counterpart was 3 basis points lower. The 10-year reached 3.966% before dropping as low as 3.92%. Gilts have led European bonds lower as markets continue to price in higher terminal rates for the Bank of England and European Central Bank. UK two-year yields are up 8bps while the German equivalent adds 2bps. In the US, the Treasury auction cycle continues with 5-year note sale at 1pm New York time, and FOMC releases minutes of Jan. 31-Feb. 1 meeting at 2pm. WI 5-year yield 4.13%; current issue traded as high as 4.185%, still more than 30bp below last year’s multiyear high, as traders are assigning higher odds to more Fed rate increases to follow the 25bp move on Feb. 1. Since then, St. Louis Fed President Bullard — appearing on CNBC — has said he advocated for a 50bp hike and might support one in March, heightening interest in whether the minutes will reveal broader appetite for reacceleration. Oil extended its longest run of losses this year, with West Texas Intermediate contracts falling for a sixth day. The prospect of more aggressive interest-rate hikes from the Fed to quell inflation have kept a lid on prices, despite increasing evidence of a robust recovery in China following the end of Covid Zero. Crude futures decline with WTI down 0.6% to trade around $75.89, off session lows. Spot gold rose to $1,840. Looking to the day ahead. In terms of data releases, we have the German February ifo survey which came in stronger than expected, and the France February business and manufacturing confidence indicators; in the US. the latest MBA mortgage applications dropped -13.3%, following last week's -7.7% slide. For central banks, first and foremost we have the release of the Fed’s FOMC minutes, and we will also hear from the Fed’s Williams. Finally, we will have earnings releases from NVIDIA, TJX, Pioneer and eBay. Market Snapshot S&P 500 futures little changed at 4,004.75 STOXX Europe 600 down 0.9% to 459.50 MXAP down 1.3% to 160.19 MXAPJ down 1.3% to 521.69 Nikkei down 1.3% to 27,104.32 Topix down 1.1% to 1,975.25 Hang Seng Index down 0.5% to 20,423.84 Shanghai Composite down 0.5% to 3,291.15 Sensex down 1.5% to 59,790.65 Australia S&P/ASX 200 down 0.3% to 7,314.50 Kospi down 1.7% to 2,417.68 German 10Y yield little changed at 2.56% Euro little changed at $1.0643 Brent Futures down 1.1% to $82.13/bbl Gold spot down 0.1% to $1,834.10 U.S. Dollar Index little changed at 104.26 Top Overnight News Japan's 10-year government bond yield on Wednesday breached the top end of the Bank of Japan's policy band for a second straight session, prompting the central bank to step into the market with emergency bond buying and offering of loans. RTRS Two of Japan’s biggest automakers (Toyota & Honda) agreed to the biggest wage hikes in decades in an early sign of momentum in annual pay negotiations as the central bank looks for evidence of a wage-price cycle that could lead to policy change. BBG Chinese authorities have urged state-owned firms to phase out using the four biggest international accounting firms, signaling continued concerns about data security even after Beijing reached a landmark deal to allow US audit inspections on hundreds of Chinese firms listed in New York. BBG Missing Chinese investment banker Bao Fan was preparing to move some of his fortune from China and Hong Kong to Singapore in the months leading up to his disappearance, according to four people with knowledge of his plans. FT Investors increase bets on ECB lifting rates to all-time high. Buoyant service sector and wages fuel expectations of further rises in eurozone borrowing costs. FT The Fed minutes may show how many officials pushed for a larger hike and whether they saw the need to take rates higher than anticipated. Markets expect tightening to be extended after stronger economic data and some hawkish messaging, with rates peaking at 5.36% this year. The RBNZ slowed its pace with a 50-bp increase to 4.75% after mulling another move of 75 bps. The projection for peak rates was left unchanged at 5.5%, over a slightly longer timeframe. BBG Authorities accused crypto trader Avi Eisenberg of manipulating token prices on an exchange. Mr. Eisenberg countered, saying he did only what was permitted by the exchange's software code. At the core of this case is the idea held by some crypto enthusiasts that "code is king." WSJ In the hunt for Lael Brainard’s successor, the White House is “focusing in” on Harvard University professor Karen Dynan, Northwestern University finance professor Janice Eberly and Morgan Stanley Chief Global Economist Seth Carpenter. BBG JPMorgan cut staff access to ChatGPT, a person familiar said, confirming an earlier Telegraph report. The move wasn't triggered by any specific incident. BBG Consistent with the increase in leverage, demonstrated hedge fund equity market exposures have begun to rise from the extremely low levels registered late last year. Hedge funds exhibited exceptionally low betas to the equity market in 2022, reaching levels only matched during the last 20 years in 2009. Betas have rebounded in the last few weeks, driven in part by increased net length, but remain well below historical averages. GIR A more detailed look at global markets courtesy of Newsquawk Asia-Pacific stocks were subdued after the declines on Wall St where the major indices were pressured on return from holiday as strong PMI data from Europe and the US spurred hawkish central bank repricing. ASX 200 briefly dipped below 7,300 amid a slew of earnings releases although clawed back most of its losses after weak data releases including a surprise contraction in Construction Work and softer-than-expected Wage Price Index, which removes some of the hawkish impulses for the RBA. Nikkei 225 underperformed and approached closer to testing the 27,000 level to the downside. Hang Seng and Shanghai Comp. conformed to the subdued mood in which weakness in tech briefly pulled the Hong Kong benchmark into correction territory although losses were then pared after the budget announcement which included a giveaway of HKD 5,000 in consumption vouchers and a cut to salary taxes, while there was also strength in HSBC and Hang Seng Bank post-earnings. Top Asian News Hong Kong Finance Secretary Chan delivered the Budget and confirmed the government will provide HKD 5k in consumption vouchers to residents aged 18 years old and above, while they will reduce salaries tax with a ceiling of HKD 6,000 which will benefit 1.9mln taxpayers and lower government revenue by HKD 8.5bln. Chan also noted that the city is at the beginning of a recovery and that GDP contracted by 3.5% in 2022, although the government expects Hong Kong GDP growth of 3.5%-5.5% in 2023. China's top diplomat Wang Yi met with Russia's security chief and said the two sides discussed their willingness to oppose all forms of unilateral bullying and discussed ways to improve global governance. Furthermore, the two sides believe peace and stability in the Asia-Pac region should be resolutely upheld and they oppose the introduction of a cold war mentality, according to Reuters. RBNZ hiked the OCR by 50bps to 4.75%, as expected, while it maintained its view for rates to peak at 5.50% and considered hikes of 50bps and 75bps at the meeting. RBNZ stated that although there are early signs of price pressure easing, core consumer inflation remains too high and the Committee agreed it must continue to raise the OCR to return inflation to the target and to fulfil its remit. European bourses are softer across the board, Euro Stoxx 50 -0.8%, as hawkish price action remains in full swing. Sectors are lower across the board ex-Media following individual earning updates, while Basic Resources lag as underlying commodities are dented. Stateside, futures are flat/negative with the ES holding around the 4k mark having briefly and incrementally dipped below the figure in European trade. Top European News ECB's Villeroy reiterates that there is excessive volatility of the market view on the terminal rate. Already in restrictive territory with a 2.5% rate, ECB is not obliged to hike at every meeting to September, via Les Echos. Remarks which echo his commentary from last Friday. UK PM Sunak reportedly secured the backing of two key Brexiteers for the Northern Ireland trade deal with Heaton-Harris and Braverman getting behind the outline agreement, according to FT. DUP's Donaldson reportedly told an ERG meeting on Tuesday that UK PM Sunak was just halfway to meeting the DUP's seven tests re. N. Ireland Protocol, having made progress towards three or four of them, via Politico citing sources; added that progress towards the remaining DUP tests is critical, telling PM Sunak to abandon the "arbitrary deadline" of April 10th. FX The DXY remains underpinned on haven dynamics and as yields continue to climb across the board, index continues to climb above a 104.00 base with the current high at 104.33 As such, peers are generally softer across the board with the AUD lagging post-data and as the NZD clings onto gains following the hawkish RBNZ announcement; AUD around 0.6810 and NZD near 0.6210 vs USD. EUR was generally unreactive to the morning's Ifo data while dovish commentary from Villeroy prompted some pressure, but this was brief and limited given his remarks are a repeat of Friday's, EUR/USD at the lower-end of 1.0630-1.0663 parameters. JPY and CHF are rangy and narrowly mixed against the USD, after the JPY regrouped on some convergence in JGB-UST yields irrespective of BoJ buying while CHF shrugged off an upbeat domestic investor survey. GBP is giving back some of Tuesday's marked upside, with caution around N. Ireland Protocol progress perhaps weighing though the focus is firmly on BoE-related dynamics; Cable around 20 pips shy of 1.21 though off worst. EUR/SEK continues to test 11.00 with Riksbank's Thedeen assisting while the ZAR is a touch softer heading into the budget announcement from 12:00BST/07:00ET onwards. PBoC set USD/CNY mid-point at 6.8759 vs exp. 6.8776 (prev. 6.8557) Yonhap reports that as USD/KRW soared "the foreign exchange authorities called an emergency market situation inspection meeting this afternoon.". Riksbank's Thedeen says inflation is far too high; January's inflation data was a negative surprise, it is worrying. Fixed Income EGBs have experienced a modest bounce in the wake of well-received EZ & UK supply, with Bunds now back to 104.00 from the new 133.63 YTD low and Gilts firmly above 101.00 in a similar fashion. Prior to this, the complex had been under marked pressure in a continuation of recent hawkish price action with the German 10yr yield as high as 2.57%; though, pre-supply this eased following a rerun of recent dovish remarks from Villeroy. Stateside, USTs have been moving in-tandem with EGBs with specific catalysts thin ahead of FOMC minutes and a 5yr sale, as such USTs are flat within 110.30+ to 111.08 parameters. Commodities Crude benchmarks remain underpressure with specific developments limited and focus on the broader risk tone; WTI & Brent Apr at the lower end of USD 74.96-76.55/bbl and USD 81.70-83.25/bbl intraday parameters respectively. Nat Gas futures are mixed, though remain pressured vs recent levels as desks continue to cite relatively mild weather in the US and Europe. Kazakhstan may send the first batch of oil to Germany in the coming days which could possibly occur today, according to RIA citing the Energy Minister. Morgan Stanley sees Brent trading in a USD 90-100bbl range in H2 vs. its prev. view of USD 100-110bbl; raises estimate for oil demand growth to 1.9mln BPD from 1.4mln BPD. Nigeria raises March Bonny Crude OSP to +0.95/bbl vs dated Brent; Qua Iboe raise to +1.27/bbl vs dated Brent. Spot gold is little changed as any haven allure is offset by the USD's strength, while base metals are lower given the tone and with focus on commentary from Rio Tinto overnight. Ukraine could export a total of 8mln tonnes of agricultural good a month for Odesa and Mykolaiv ports; will talk to UN to extend the grain deal for another year, according to Ukrainian Deputy Minister. Geopolitics Russia reportedly conducted an ICBM test when US President Biden was recently in Ukraine although the test was said to have failed, while an official stated that Russia notified the US in advance of the launch through deconfliction lines, according to CNN. Russian PM Medvedev says Russia is ready to defend itself with any weapon, including nuclear. Russian Foreign Minister Lavrov says relations between Moscow and Beijing are developing despite the tense international situation; China's Top Diplomat says we continue to maintain close communication with Russia, via Sky News Arabia. Subsequently, Russian Kremlin says President Putin is to meet with China's Top Diplomat Wang Yi on Wednesday (as touted). US President Biden’s administration is expected to impose fresh sanctions on about 200 Russian individuals and entities this week, according to WSJ citing sources. North Korea could fire ICBMs at a normal angle and conduct its seventh nuclear test this year, according to South Korean lawmakers citing intelligence officials. US Event Calendar 07:00: Feb. MBA Mortgage Applications, prior -7.7% 14:00: Feb. FOMC Meeting Minutes 17:30: Fed’s Williams Discusses Inflation DB's Jim Reid concludes the overnight wrap I’m still in a bit of a state of shock this morning after the Liverpool / Real Madrid game last night. From wild jubilation to the end of the world within an hour. A Bit like financial markets in the last three weeks. Back before the game when there was still hope in my heart, I released my latest monthly chart book, "Waiting for the lag" that debates the themes around the near-term improvement in the global outlook versus that of the lag of monetary policy. At this stage of a normal hiking cycle, we show that markets and economies are usually fairly benign so don't confuse recent strength in data as a soft landing. It's not until year 2 onwards of the hiking cycle that pain normally starts to be felt. So the real test will be when the lag of monetary policy fully kicks in as it should do over the next few quarters. By March, the ECB will have likely hiked +350bps in 8 months and the Fed +475bps in 12 months. More hikes are likely to come too. Indeed our European economists yesterday lifted our ECB terminal rate call from 3.25% to 3.75% (more below). Until all these hikes on both sides of the Atlantic fully pass through the economy it is impossible to sound the all clear. We've always thought the first few months of the year would be positive with the problems building by year-end, but the extent of the rally in January made us shift back to neutral in credit quicker than we thought we would. Indeed, we think US credit has now passed the tights of the year. See the chart book here for much more. The skinny in markets today is that the week has sprung into action over the last 24 hours after the US holiday on Monday, as a run of better than expected flash global PMIs led to a sizeable global bond sell off (10yr USTs +13.8bps), with the S&P 500 (-2.00%) wiping out its February gains. More on markets later but while we wait for the full lag of policy, the flash PMIs continued to improve yesterday from what were quite stressed levels. Indeed the US composite PMI rose back into expansionary territory at 50.2 (vs 47.5 expected). Much of the strength originated from a strong performance in services, which surprised to the upside at 50.5 (vs 47.3 expected). There was less evidence of a similarly strong improvement in manufacturing as it modestly surprised to the upside at 47.8 (vs 47.2 expected). As we dug into the weeds of the data release, it is clear that whilst input costs rose at a softer pace in February, there was a sharper rise in private sector output charges at both manufacturing and service sector firms. This comes as the pace of increase in selling prices was the quickest it has been since October, as firms reportedly passed through these increases as costs to their customers. This increased the chatter on inflation being sticky. The immaculate disinflation story has had some big blows in the last 2-3 weeks. Markets subsequently moved to price in bets that the Fed will need to keep rates higher for longer, as expectations for the terminal rate for July’s meeting increased by 6.2bps to 5.367%. However, the increase was most evident for December’s meeting, with rate expectations for year-end increasing by 12.5bps to 5.19% since Friday’s close. With uncertainty over terminal back on the agenda, the S&P 500 fell back -2.00% in its largest down move since the day after the December FOMC meeting and erasing its February gains. It was a broad based decline for US equities with every industry group lower on the day as over 93% of index members declined. The NASDAQ retreated further, down -2.50% at the close – also its biggest downside move since December 15. In US fixed income markets, the 10yr US Treasury yield spiked up by +13.8bps to reach its highest level since the second week of November at 3.945%. The 2yr Treasury also saw large moves, as yields rose +10.6bps to 4.723%, the highest level since July 2007. All eyes will be on the release of the Fed’s minutes today, as markets look for guidance on policy going forward. However it's likely to feel a bit dated as a lot has happened in the subsequent three weeks. Over to the other side of the Atlantic, the European PMI releases fitted in with the global pattern of improving services, but limited improvement from manufacturing. The EA services PMI came in above expectations at 53 (vs 51 expected). On the other hand, we had a downward surprise with the manufacturing release which fell to 48.5 (vs 49.3 expected). Resultingly, the composite PMI rose to 52.3 (vs 50.7 expected) and into expansionary territory. Against this backdrop, markets have moved to price in +126bps of rate hikes until hitting terminal at the October meeting (3.658%), up +6.4bps yesterday. As stated near the top, our European economists yesterday lifted their ECB terminal rate call from 3.25% to 3.75%. They had previously expected a 50bp hike in March and a final 25bp in May. Now the baseline is for 50bp hikes at both the March and May meetings followed by a final hike of 25bp in June. See their note here for why a robust European economy and labour market along with hawkish ECB commentary have caused them to upgrade their call. They also explain why the heightened uncertainties make risks fairly balanced for a terminal landing zone between 3.50-4.00%. Narrowing in, the German composite PMI also beat consensus, rising into mildly expansionary territory to 51.1 (vs 50.3 expected). This strong performance largely came from services, which rose to 51.3 (vs 51 expected), whilst manufacturing surprised to the downside at 46.5 (vs 48.1 expected). These releases affirm our expectation that Germany will have a shallow technical recession over the winter half year. For a bit more colour, look at the new Germany: Economic Chartbook from our Frankfurt team for all things Germany related. The beat in German composite PMI also reflects a rosier outlook for the German economy following a warm winter (here), and a significant drop in wholesale gas prices and favourable gas storage levels. Indeed, our German economists confirm the view that they’ll be no gas supply crunch for the country for this winter nor for winter 23/24. See their latest and final European Gas monitor here. Final due to the fact that the supply issue has now been covered. Yesterday, European natural gas futures sat below €50 at €48.54/contract, down -2.67%. France’s PMI’s largely mirrored the broader Euro Area release, with the manufacturing surprising to the downside at 47.9 (vs 51 expected), and services to the upside at 52.8 (vs 49.8 expected). The overall composite PMI rose into expansionary territory to 51.6 (vs. 49.8 expected). Off the back of these upward surprises and expectations of larger rate hikes by the ECB, the 10yr bund yield rose +6.5bps to 2.529%, reaching their highest level since the end of 2022. The policy sensitive 2yr bund also rose by +5.1bps yesterday. The STOXX 600 modestly fell back -0.19%. This morning in Asia equity markets are tracking the US falls with the KOSPI (-1.46%) emerging as the biggest underperformer followed by the Nikkei (-1.30%), the CSI (-0.56%) and the Shanghai Composite (-0.25%). Meanwhile, the Hang Seng (+0.03%) is just above flat after opening lower. In overnight trading, US stock futures tied to the S&P 500 (+0.19%) and NASDAQ 100 (+0.28%) are inching higher. Early morning data showed that Japan’s producer prices index (PPI) rose +1.6% y/y in January, inline with market expectations and slightly higher than December’s increase of +1.5%. Elsewhere, Australia’s wage price index (WPI) for the final three months of 2022 rose +3.3% (+3.5% expected) from an upwardly revised +3.2% in the September quarter, thus slightly easing the RBA’s rate hike concerns. In terms of monetary policy action, the Reserve Bank of New Zealand (RBNZ) hiked interest rates by +50bps (as expected) to a more than 14-year high of 4.75% while highlighting that rates could still rise as inflation remains too high. Following the decision, the New Zealand dollar rose as high as $0.6246, reflecting the hawkishness of the statement before settling to trade at $0.6224 (+0.03%) as we go to press. Back to yesterday, and the same PMI story reverberated in the UK as the composite PMI came firmly in above expectations at 53 (vs 49 expected). There was a big jump in services, which rose to 53.3 (vs 49.2 expected). Manufacturing saw a stronger beat than over in the Continent, with UK manufacturing PMI surprising to the upside at 49.2 (vs 47.5 expected). With concerns over inflations still at large, 2yr and 10yr Gilts rose +16.3bps and +14.3bps respectively. Aside from the rush of the global flash PMIs, we had further developments in the geopolitical space yesterday, as Bloomberg reported that President Putin announced Russia was suspending (but not exiting) its participation in the New Start Treaty, a significant shift in its policy. The Treaty limited each signatory to no more than 1,550 deployed nuclear warheads and 700 deployed long-range missiles and bombers and had been renewed for five years in 2021, as reported by Reuters. We also saw Russia’s Secretary of the Security Council Patrushev meet with China’s Director of Central Commission for Foreign Affairs Wang Yi in Moscow. Yi had previously met on less than amicable terms with US Secretary of the State Blinken last weekend. President Biden reiterated NATO’s resolve at a speech in Warsaw yesterday, saying “there should be no doubt: Our support for Ukraine will not waver, NATO will not be divided, and we will not tire.” This comes alongside the $480mn arms announcement made by the Biden administration in recent days. Looking to other data releases, yesterday also saw the release of Germany’s February’s ZEW investor expectations index, which rose to 28.1 (vs 23 expected). We also had Canadian February CPI data, which decelerated to 5.9% year-on-year (vs 6.1% expected) – a rare recent positive inflation surprise. To the day ahead. In terms of data releases, we have the German February ifo survey, and the France February business and manufacturing confidence indicators. For central banks, first and foremost we have the release of the Fed’s FOMC minutes, and we will also hear from the Fed’s Williams. Finally, we will have earnings releases from NVIDIA, TJX, Pioneer and eBay. Tyler Durden Wed, 02/22/2023 - 08:07.....»»

Futures Rise Ahead Of Key Powell Speech US equity futures rose, led by Nasdaq 100 contracts, setting up the tech-heavy index for a rebound as investors brace for Powell 2nd press conference in less than a week, in which he is widely expected to be more hawkish than he was during last week's FOMC. S&P 500 futures climbed 0.1% as of 7:45 a.m. ET while Nasdaq 100 contracts added 0.3%. The Bloomberg Dollar Spot Index retreated from the day’s highs, boosting most Group-of-1o currencies. Treasury yields pulled back after two days of outsized gains. Oil climbed with gold, while Bitcoin advanced for a second day. Among notable moves in premarket trading, Activision gained after the video game publisher’s results beat expectations thanks to the performance of its big game titles. Bed Bath & Beyond sank 33% and was set for its biggest one-day drop in nearly six months (which in turn followed a record surge the day prior) after the troubled home-furnishings retailer said it’s planning to issue convertible preferred securities and warrants that would raise more than $1 billion. Bank stocks were lower in premarket trading Tuesday, putting them on track to fall for a third straight session. Nu Holdings Ltd/Cayman Islands and Block Inc. are among the most active financials stocks in early premarket trading, gaining 1% and 0.3% respectively. Here are some of the biggest US movers today: Activision Blizzard shares rise 2.6% to $73.47, still well below Microsoft’s offer to buy the company at $95 per share, after the video game publisher’s results beat expectations thanks to the performance of its big game titles. Oak Street Health shares surge 36% after a Wall Street Journal report that the company is close to an agreement to be acquired by CVS Health for about $10.5 billion, including debt. Peer Cano Health (CANO US) gains 11%. Baidu ADRs soared 15% in US premarket trading on growing hopes over the Chinese search giant’s ChatGPT-like service, which the company said is on track to roll out in March. Artificial intelligence- related stocks gained amid Baidu’s progress: SoundHound AI +15%, BigBear.ai +3.3%, C3.ai +4% Pinterest shares slip 3.2% after the social network reported fourth-quarter revenue that was weaker than expected. While analysts were positive about the platform’s improving engagement trends, they noted that the ad market remains tough. ZoomInfo Technologies fell 10% after the sales and marketing software company gave guidance for 2023 EPS and revenue that missed estimates. Analysts noted that cost cuts and layoffs among software firms have hurt ZoomInfo’s ability to up-sell on deals, while the macroeconomic environment is also a challenge. Bed Bath & Beyond shares slump 31% after the troubled home-furnishings retailer said that it’s planning to issue convertible preferred securities and warrants that would raise more than $1 billion. Chegg tumbles 24% after the US online education provider issued weaker-than-expected 2023 guidance. Expectations for a second year of shrinking sales prompted a downgrade at KeyBanc, while other brokers slash their price targets, adding the company could face future challenges from emerging AI technologies. Adecoagro the US-listed agricultural firm with operations in South America, drops 5.9% after Morgan Stanley downgrades it to underweight from equal- weight, saying soy and corn yields will be impacted by severe drought in Argentina. The sharp rally in US stocks had cooled in the past two days amid mounting fears that resilient economic growth would keep the Fed hawkish for longer. Fallout from the flight over the US of an alleged Chinese spy balloon has also kept risk demand subdued. Fed Chair Jerome Powell is set to speak later today and investors are keen for clues on whether the central bank could further slow the pace of rate hikes over the next few months. “There is little to cheer as the Fed hawks are returning to the playground, mixed with escalating geopolitical tensions with China,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. Investor confidence about the outlook for technology stocks also appears to be fizzling out. Just as the Nasdaq 100 is getting close to entering a bull market, bearish bets on the index are piling up, signaling that the outperformance isn’t expected to last, according to Citi's Chris Montagu. Heading into today's 12pm speech by Powell, Investors are assessing whether the Fed Chair will dampen market optimism for interest-rate cuts later in 2023, following January’s strong payrolls report and comments from other Fed officials about the possibility of a higher peak than policy makers had previously expected. Treasuries steadied after a two-day rout sparked by traders ramping up bets on future Fed tightening. “I expect that Powell will drive home that point that they’ve done a lot and there’ll be a tightening that is going to impact the economy later on this year,” Jack McIntyre, a portfolio manager at Brandywine Global Investment Management LLC, said on Bloomberg Television. As discussed last night, market positioning is vulnerable for another delta squeeze should Powell prove to be more dovish than expected. Meanwhile, Bloomberg notes that the fourth-quarter reporting season has done little to support optimism about corporate fundamentals. Earnings in sectors from energy to consumer discretionary have been coming in below pre-season estimates and companies are dialing back outlooks based on expectations growth will slow. Still, in a seemingly contrarian move, analysts have boosted stock-price targets, signaling how equity prices are being driven more by the Fed’s outlook than profits. Geopolitical concerns are also back on the radar. As the US attempts to recover the sunken remains of a huge Chinese balloon it blasted out of the sky with a missile, Beijing acknowledged ownership of a second balloon spotted drifting over several Latin American countries. In Europe, the Stoxx 600 advances 0.3% as investors focus on positive corporate earnings rather than the prospect of additional monetary tightening. Energy and banks are among the best performing sectors, boosted by BP Plc and BNP Paribas SA after their respective updates exceeded expectations. Turkish assets extended declines as the country continued to grapple with earthquakes that killed at least 4,000 people in Turkey and Syria. Here are some of the biggest European movers: BP shares gain as much as 4.3% after the oil major raised its dividend and extended share buybacks after reporting record full-year profits BNP Paribas rises as much as 2.1% after the euro zone’s largest bank announced a 5-billion-euro buyback and upgraded its 2025 financial targets Demant climbs as much as 12%, the most since February 2021, after the Danish hearing-aid maker presented a stronger-than-expected outlook for 2023 Paradox Interactive jumps as much as 13% with analysts saying the Swedish video-game developer’s results look strong on the bottom line Lotus Bakeries advances as much as 7.3%, the most since August 2021, as analysts said the biscuit maker’s results topped expectations on all metrics TeamViewer jumps as much as 18% after the German software maker projected 2023 revenue ahead of analyst expectations and announced a buyback program of as much as €150m Carlsberg falls as much as 3.7%, the most since October, as analysts said guidance from the Danish brewer was disappointing Siemens Energy drops as much as 4.8% after its results confirmed pre-released figures that had disappointed investors Synlab slides as much as 25%, the most since the German laboratory and diagnostics firm’s May 2021 IPO, after it cut its 2022 margin guidance AMS-Osram tumbles as much as 20% after the company issued a first-quarter outlook that missed estimates, suspended cash dividends and guided 2024 targets to the lower end of prior ranges Morgan Advanced falls as much as 8.2% after providing a trading update in which the specialty chemicals company said a recent cyber attack will reduce FY23 Ebita by 10%-15% Nordic Semiconductor drops as much as 19%, the biggest intraday slide since 2018, after the chipmaker said it no longer expects to meet its 2023 revenue target In FX, the Bloomberg Dollar Spot Index eased as the greenback was little changed or weaker against its Group-of-10 peers. The Australian dollar led gains after the RBA raised the Cash Rate by 25bps to 3.35%, as expected, while it stated that the Board expects further increases in interest rates and is resolute in its determination to return inflation to the target. RBA said inflation is expected to decline this year due to both global factors and slower growth in domestic demand, as well as noted that the path to achieving a soft landing remains a narrow one. Furthermore, it stated there is uncertainty around the timing and extent of the expected slowdown in household spending and that another source of uncertainty is how the global economy responds to the large and rapid increase in interest rates around the world, while these uncertainties mean that there are a range of potential scenarios for the Australian economy. Elsewhere, the Norwegian krone was the worst performer. The euro fell as much as 0.3% to touch $1.0697, before paring losses. The currency is set for its fourth day of declines, the longest losing streak since November. Bunds and Italian bonds were little changed ahead of scheduled policymaker speeches. Germany’s industrial production fell 3.1% m/m (estimate -0.8%) in December versus revised +0.4% in November The pound slid to a day-low of $1.1987 before paring. Gilts were steady after Monday’s sharp drop The Australian dollar rebounded from a one-month low to rally by as much as 1% while sovereign yields jumped after the Reserve Bank raised its key rate by 25bps to 3.35% and signaled that more tightening is needed to crush stubbornly-high inflation The yen also bounced from a one-month low after Japanese workers’ nominal wages in December rose at the fastest pace since 1997, an acceleration in gains that may fuel speculation the central bank will consider shifting policy after Governor Haruhiko Kuroda steps down in April In rates, treasuries clawed back some of Monday’s heavy declines with two-year yields eased as much as 5bps ahead of comments from Powell. At 730am ET, Treasuries were mixed with the curve steeper as front-end unwinds portion of Monday’s selloff. Long-end is steady, leaving 2s10s, 5s30s spreads both steeper by 3bp-4bp on the day. Bunds lag over early London session amid debt sales. Focal points of US session include 3-year note auction at 1pm New York time, an hour after Fed Chair Powell is slated to make unscripted comments at an event. US yields little changed across long-end of the curve while front-end trades richer by ~3bp on the day; US 10-year yields around 3.64%, richer by ~1bp vs Monday’s close with bunds and gilts lagging by 4bp and 6bp in the sector. Treasury auction cycle begins with $40b 3-year note sale; $35b 10-year and $21b 30-year new issue auctions are ahead Wednesday and Thursday. WI 3-year yield at 4.09% is around 11bp cheaper than January’s, which stopped 2.3bp through the WI level. In commodities, crude benchmarks rose for a second session, after Saudi Arabia signaled it was optimistic about oil demand by unexpectedly raising prices for customers in its main market of Asia, while also lifting those for Europe and the US. WTI added 2.4% to trade near $75.90. Pumping has begun on the Kirkuk-Ceyhan oil pipeline from Iraq; exports from Ceyhan expected to being on Tuesday, according to an energy official. TotalEnergies SE is being forced to cut production of fuels like gasoline and diesel at its French oil refineries for 48 hours, according to the CGT union. US official later confirmed the US is considering raising the tariff on Russian aluminium to 200% but stated no decision was made and no announcement is expected this week, according to Reuters. Spot gold is modestly firmer and at the top-end of the session's ranges, rising roughly 0.4% to trade near $1,874 while base metals are mixed overall with LME Copper moving back towards the USD 9k/t mark. Looking at today's events, at 8:30 a.m. ET we’ll get US trade balance data. Fed Chair Jerome Powell will speak at 12 p.m., followed by comments from Fed Vice Chair for Supervision Michael Barr due at 2 p.m. At 1 p.m., the US will sell $40 billion in three-year notes. Earnings today include KKR, DuPont, Prudential, Chipotle and Carlyle. To the day ahead now, and we’ll hear from an array of central bank speakers, including Fed Chair Powell at 12pm, followed by comments from Fed Vice Chair for Supervision Michael Barr due at 2 p.m. Other central bank speakers include the ECB’s Schnabel and Villeroy, BoE Deputy Governor Ramsden, Deputy Governor Cunliffe and Chief Economist Pill, and Bank of Canada Governor Macklem. Data releases include the US trade balance at 8:30am ET. At 1 p.m., the US will sell $40 billion in three-year notes. Earnings today include KKR, DuPont, Prudential, Chipotle and Carlyle. Finally, tonight will see US President Biden deliver the State of the Union address. Market Snapshot S&P 500 futures up 0.2% to 4,131.00 MXAP up 0.4% to 166.13 MXAPJ up 0.2% to 542.05 Nikkei little changed at 27,685.47 Topix up 0.2% to 1,983.40 Hang Seng Index up 0.4% to 21,298.70 Shanghai Composite up 0.3% to 3,248.09 Sensex down 0.3% to 60,335.03 Australia S&P/ASX 200 down 0.5% to 7,504.14 Kospi up 0.6% to 2,451.71 STOXX Europe 600 up 0.3% to 458.44 German 10Y yield little changed at 2.30% Euro little changed at $1.0718 Brent Futures up 1.6% to $82.26/bbl Gold spot up 0.4% to $1,875.19 U.S. Dollar Index little changed at 103.55 Top Overnight News from Bloomberg Japan’s Finance Ministry hasn’t approached BOJ Deputy Governor Masayoshi Amamiya about becoming the next governor, says Finance Minister Shunichi Suzuki French labor unions are holding a third day of mass strikes and protests against raising the retirement age, keeping up pressure on the government as parliament debates the proposed reform London house prices flatlined in December, recording their worst performance in more than three years, one of the UK’s biggest mortgage lenders said Rescue teams from overseas began deploying in Turkey on Tuesday after a pair of powerful earthquakes a day earlier killed at least 4,000 people in the country and neighboring Syria, leaving millions to suffer without power or heat throughout a snowy night A $5 trillion investor coalition wants to change how markets assess government bonds to help unlock climate finance to emerging markets by proposing a framework it says focuses on fairness between richer and poorer countries A More detailed look at global markets courtesy of Newsquawk APAC stocks eventually traded mixed after the weak lead from global counterparts as markets continued to ramp up hawkish Fed pricing, while the region also digested the RBA rate decision. ASX 200 was initially kept afloat amid strength in the energy sector after a rebound in oil prices although the index was later pressured after the RBA lifted the Cash Rate by 25bps to a fresh decade-high and signalled further rate increases ahead. Nikkei 225 was indecisive after mixed data in which household spending disappointed but wages topped forecasts, while the earnings deluge also continued. Hang Seng and Shanghai Comp. were varied with Hong Kong led by a rebound in the tech, healthcare and property sectors following yesterday’s underperformance although the mood in the mainland was less decisive owing to the recent spy balloon frictions and with a lack of fresh drivers aside from Wuhan relaxing property buying restrictions. Top Asian News US President Biden said the US made it clear to China what it would do regarding the balloon and it was always his view that the balloon should be shot down, while he added the balloon incident doesn’t weaken US-China relations, according to Reuters. RBA raised the Cash Rate by 25bps to 3.35%, as expected, while it stated that the Board expects further increases in interest rates and is resolute in its determination to return inflation to the target. RBA said inflation is expected to decline this year due to both global factors and slower growth in domestic demand, as well as noted that the path to achieving a soft landing remains a narrow one. Furthermore, it stated there is uncertainty around the timing and extent of the expected slowdown in household spending and that another source of uncertainty is how the global economy responds to the large and rapid increase in interest rates around the world, while these uncertainties mean that there are a range of potential scenarios for the Australian economy. Chinese President Xi says will strive to achieve overall improvement in economic operations, via state media; Premier Li says China's economy still faces many challenges. European bourses are modestly firmer, Euro Stoxx 50 +0.2%, after yesterday's pronounced pressure and ahead of key Central Bank speak. Within Europe, sectors are mixed with Energy the clear outperformer post-BP, with the FTSE 100 bid, while Banking names are bolstered on yields/BNP Paribas. Stateside, the picture is very similar to the above though the NQ +0.3% is the incremental outperformer with US yields ever so slightly softer. BP (BP/ LN) Q4 2022 (USD): Adj. Net 4.81bln (exp. 5.11bln), Revenue 69.3bln (exp. 59.5bln). Adj. EPS 0.2644 (exp. 0.2713); Co. plans a further USD 2.75bln share buyback; Co. increases dividend by 10% Nintendo (7974 JT) 9-month (JPY): Net Profit 346mln, -5.8%; Operating Profit 410mln, -13%; Recurring Profit 482mln, -6%; Switch unit sales 14.91mln (prev. 18.95mln). FY22/23: Switch unit sales 18mln (prev. guided 19mln), Op. Income 480bln (exp. 500bln) Top European News ECB's Villeroy says we are not very far from the peak in inflation, does not think the ECB needs to choose between fighting inflation and avoiding a recession; better economic environment does make the monetary task easier. HS2 faces more delays and cuts as the UK looks to rein in the costs of the project, according to FT. Ion Markets began bringing clients back onto the clearer derivatives platform overnight following the ransomware attack, according to a Reuters source. UK Cabinet Reshuffle: Grant Shapps expected to be new energy security secretary, Kemi Badenoch expected to be new business and trade secretary, according to Times' Swinford; Greg Hands will be the new Conservative Party Chairman. FX DXY solid around 103.500 in advance of Fed chair Powell, Aussie boosted by hawkish RBA hike and guidance overnight, as AUD/USD rebounds firmly from sub-0.6900 lows to probe 0.6950 and AUD/NZD from 1.0908 to 1.0985. Yen rebounds circa 100 pips vs Dollar between 131.70-132.71 bounds as strong Japanese wages more than offset weak household consumption. Franc, Kiwi and Loonie claw back some heavy post-NFP losses vs Buck, but Euro and Sterling lag on 1.0700 and 1.2000 handles. PBoC set USD/CNY mid-point at 6.7967 vs exp. 6.7962 (prev. 6.7737) Russian Government is said to be pushing the CBR to hint at looser policy; Bank of Russia is unwilling to signal that easing is imminent; CBR is under pressure from the government to improve forecasts, according to Bloomberg. Fixed Income Core EGBs are softer, though off worst levels, with pressure emanating from hawkish remarks from ECB's Villeroy; Bunds down to 136.49 at worst. Gilts are similarly lower by just under 20 ticks ahead of BoE's Pill and despite a well received 2027 sale. Stateside, USTs are little changed overall with yields slightly lower though very much at the top-end of Monday's parameters ahead of Chair Powell and a 3yr sale. Commodities Crude benchmarks continue to climb as the momentum from APAC trade remains in play, with fresh developments somewhat limited after Monday's OSP updates; WTI and Brent are firmer by over 2.0%. BP alongside earnings remarked that it expects oil prices to remain supported in Q1 by recovering Chinese demand, ongoing uncertainty around the level of Russian exports and low inventory levels. Pumping has begun on the Kirkuk-Ceyhan oil pipeline from Iraq; exports from Ceyhan expected to being on Tuesday, according to an energy official. Fire at the Norsi Nizhny Novgorod (340k BPD) oil refinery in Russia has been extinguished, site is operating normally, via Lukoil. US official later confirmed the US is considering raising the tariff on Russian aluminium to 200% but stated no decision was made and no announcement is expected this week, according to Reuters. Spot gold is modestly firmer and at the top-end of the session's ranges, while base metals are mixed overall with LME Copper moving back towards the USD 9k/t mark. Geopolitics North Korean leader Kim presided over a military meeting and vowed to expand drills and bolster war readiness posture, according to Yonhap. US Event Calendar 8:30 am: Dec. Trade Balance, est. -$68.5b, prior -$61.5b 12:00 pm: Fed Chair Powell Speaks in Washington 2:00 pm: Fed’s Barr Discusses Financial Inclusion 2:00 pm.: US Secretary of State Antony Blinken will meet German Vice Chancellor Robert Habeck 3:00 pm: Dec. Consumer Credit, est. $25b, prior $28b DB's Jim Reid concludes the overnight wrap Off to Brussels this morning so for those attending the DB Outlook lunch see you later. A few people asked me yesterday how our 1990s fancy dress quiz went at our kid's school on Saturday. What I can say is that there are few benefits of being an older parent other than when there is a 1990s music round. There were many blank faces in the room but a mispent youth (rather not being born then) meant I aced that round and our team won overall. I can't say I added a huge amount outside of music and sport though. There unfortunately wasn't a round on 800 years of financial market data. For those that want to see how close I looked to Keith Flint of the Prodigy and how much my wife looked like Geri from the Spice Girls please let me know and I'll send. Markets got the week off to a "scary spice" start yesterday, with bonds and equities both soft, especially bonds. That was driven by growing doubts among investors about whether inflation would come down as hoped over the coming months, which in turn saw them price in a much more aggressive pace of rate hikes from central banks. Indeed, expectations of the Fed’s terminal rate for this cycle hit the first new high of the cycle since early November with the July contract ending yesterday with an implied rate of 5.157%, up from 4.81% at the recent lows last Wednesday. Indeed we’ve seen a full 25bps rate hike added to market pricing (and a bit more) since the jobs report came out on Friday. December 2023 contracts were up another 20bps yesterday and are now +48.5bps since just before the payroll report. If investors are questioning the terminal rate once again, then this could have some big implications for markets. We wrote in our Sweet Spot note from January how a big driver of the post-October rally has been the fact that expectations of the Fed’s terminal rate stabilised around 5% and stopped rising after that point. But if we see expectations of the terminal rate take another leg higher, then clearly that would knock out a key pillar of support from the recent rally. There was an inkling of this trend yesterday as Federal Reserve Bank of Atlanta President Bostic (non-voter this year) said that the strong Payroll report from last Friday increases the possibility that the Fed would have to increase rates further than previously forecast. President Bostic also echoed Chair Powell when referencing how inflation in core services ex-shelter has not improved as much as other sectors of the economy and sees that there is a lot of work left to do. With investors pricing in a significantly more hawkish policy response, all eyes will be on Fed Chair Powell’s interview today at the Economic Club of Washington, DC. That’s taking place from 5pm London time, and will be the first chance he’s had to publicly respond to the bumper jobs report on Friday, which came out after his post-FOMC press conference last week. Clearly any implication that there are upside risks to the Fed’s rate outlook would validate the shift in market pricing over the last couple of days. Ahead of that, US Treasuries lost ground across the board, with the 10yr yield up by +11.5bps on the day to 3.64% (although -2.2bps this morning in Asia). Bear in mind that on Thursday the 10yr yield hit an intraday low of 3.331%, so this is a significant bounceback. In the meantime, European sovereigns saw some sizeable shifts of their own, with yields on 10yr bunds (+10.3bps), OATs (+10.6bps) and BTPs (+13.3bps) rising significantly. The biggest underperformer were UK gilts though, where the 10yr yield rose by a massive +18.9bps on the day. That followed comments from the BoE’s Mann, who has recently been one of the most hawkish members on the MPC, but said that “in my view the next step in bank rate is still more likely to be another hike than a cut or hold.” She also struck some other hawkish tones, saying that “the consequences of under tightening far outweigh, in my opinion, the alternative.” Equities didn’t react that well to the prospect of higher rates either, and the S&P 500 (-0.61%) lost ground for a second day running. Given the move in rates the sector skew was in favour of defensives with insurance (+1.0%), utilities (+0.9%), and food & beverage (+0.6%) outperforming while apparel (-2.0%), tech hardware (-1.7%), and media (-1.3%) all were the biggest laggards. With tech and communication stocks selling off the NASDAQ (-1.00%) and NYFANG index (-0.99%) underperformed. The one thing that made both indices look slightly better than otherwise was the fact that Tesla (+2.5%) rallied on news that Elon Musk was cleared by a federal jury and also that prices on the company’s model Y would be increasing. Meanwhile Europe’s STOXX 600 was down -0.78%. Several negative geopolitical noises didn’t help either, and the NASDAQ Golden Dragon China index (-2.22%) that’s made up of US-listed Chinese companies struggled following the downing of the Chinese balloon by the US over the weekend. Later in the session, Bloomberg also reported from sources that the US was planning to place a 200% tariff on Russian aluminium. While the speech is usually light on foreign policy, President Biden might address both of these issues in his State of the Union address to a joint session of Congress tonight. In a preview released by the White House yesterday, Biden will be calling for a quadrupling of the 1% tax on stock buyback that was part of the Inflation Reduction Act passed last year, as well as a new minimum tax on billionaires. We should note that given a Republican majority in the House of Representatives, neither is likely to become law. Other speaking points released include capping the price of insulin, using US-made products for the projects funded by the Administration’s infrastructure law, and aiming to reduce the deficit. Elsewhere, the devastating earthquake that hit Turkey and Syria yesterday morning has had some ramifications across markets more broadly. In particular, oil prices were supported by the decision to stop oil flows to the Ceyhan export terminal, which exported around 1% of global oil supplies in January. That helped Brent crude close +0.49% higher at $80.99/bbl, although prices were knocked back later in the session amidst the global risk-off tone. Otherwise, Turkish assets saw significant losses yesterday, with the BIST 100 index down -1.35%, but only after recovering late in the session from an intraday low of -4.99%. In the meantime, yields on Turkey’s 2yr USD yield were up +43.2bps on the day. Asian equity markets have somewhat stabilised this morning shrugging off the overnight losses on Wall Street. Across the region, the Hang Seng (+0.84%) is leading gains with the KOSPI (+0.48%), the CSI (+0.34%) and the Shanghai Composite (+0.33%) all reversing their previous session losses so far. Elsewhere, the Nikkei (-0.04%) is fractionally lower while the S&P/ASX 200 (-0.57%) is losing ground after the Reserve Bank of Australia (RBA) increased its cash rate for the ninth consecutive month (more on this below). Outside of Asia, US stock futures tied to the S&P 500 (+0.10%) and NASDAQ 100 (+0.13%) are inching higher. In its latest monetary policy decision, the RBA raised its official cash rate by 25bps (as expected), taking it to 3.35%, its highest since September 2012, while warning of more rate hikes this year to dampen stubbornly high inflation. It was a pretty hawkish meeting. The Australian dollar has reacted positively, rallying + 0.67% to trade at 0.6929 against the US dollar at the time of writing. Earlier data showed that real wages in Japan (+0.1% y/y) in December rose for the first time in nine months (v/s -1.5% expected) due to robust temporary bonuses to ease the impact of inflation. It followed a downwardly revised -2.5% drop recorded previously. Meanwhile, nominal cash earnings advanced more than anticipated to +4.8% y/y in December, notching the fastest growth since January 1997’s +6.6%. There are some likely distortions but this was still much higher than the +2.5% expected. See our economists' note on it here. On the contrary, household spending (-1.3% y/y) dropped for the second consecutive month in December (v/s -0.4% expected) as people spent less on food. There wasn’t much data of note yesterday, although German factory orders were up by a stronger-than-expected +3.2% in December (vs. +2.0% expected). Otherwise, Euro Area retail sales were down -2.7% that same month (vs -2.5% expected). To the day ahead now, and we’ll hear from an array of central bank speakers, including Fed Chair Powell, Fed Vice Chair for Supervision Barr, the ECB’s Schnabel and Villeroy, BoE Deputy Governor Ramsden, Deputy Governor Cunliffe and Chief Economist Pill, and Bank of Canada Governor Macklem. Data releases include the US trade balance and German industrial production for December. Earnings releases include BP and Linde. Finally, tonight will see US President Biden deliver the State of the Union address. Tyler Durden Tue, 02/07/2023 - 08:06.....»»

Futures, Global Stocks Slide, Dollar Jumps On Rising US-China Tensions, Fed Outlook The post-payrolls slump in US stocks and global markets was set to deepen on Monday amid jitters around the Fed's policy outlook and an escalation of tensions between Washington and Beijing. Nasdaq 100 futures were down 1.2% as of 745 a.m. ET while S&P 500 futures fell 0.6%, both well off session lows, as investors watched developments between the US and China over a suspected spy balloon, with pressure mounting on President Joe Biden to retaliate with new export controls on sensitive technology, setting back a recent improvement in US-China relations. Japanese stocks climbed and the yen weakened after the Nikkei reported that the government had approached Bank of Japan Deputy Governor Masayoshi Amamiya about succeeding Haruhiko Kuroda as head of the central bank. While the Japanese government refuted the report, investors assume a greater likelihood of the current ultra-easy monetary policy enduring if one of its architects succeeds Kuroda. The Stoxx Europe 600 index dropped more than 1% after closing Friday in a bull market, with the technology and real estate sectors leading the retreat. 10Y TSY yields jumped as high as 3.60% while the dollar climbed for a third day, hitting a 4 week high after a gauge of its strength rose more than 1% Friday, oil drifted modestly higher after a massive earthquake in Turkey halted oil pipeline flows to the Ceyhan export terminal. US-listed Chinese stocks were on track to fall for a third session, after Washington’s move to shoot down an alleged surveillance balloon from China spurred new tensions between the two countries. The US sent divers to salvage what they believe is spy equipment from the Chinese balloon off the coast of South Carolina, with pressure mounting on President Joe Biden to hit back at Beijing with new export control measures. Among the biggest premarket movers, Newmont Mining dropped after it offered to buy Australia’s Newcrest Mining in a $17 billion deal that would strengthen the US mining powerhouse’s position in copper and gold. Datadog shares are in focus after KeyBanc Capital Markets downgraded the stock to sector weight from overweight. At the same time, the brokerage upgraded Splunk Inc. to overweight from sector weight. Here are some other notable premarket movers: US-listed Chinese stocks are on track to fall for a third session after Washington’s move to shoot down an alleged surveillance balloon from China spurred new tensions between the two countries. Alibaba declined 1.8% before the bell, Baidu -0.4%, Pinduoduo -3%, JD.com -2.4%, Trip.com -1.1%, Bilibili -2.8% Spotify (SPOT US) gains 1.5% after Wells Fargo and Atlantic Equities raise the music streaming company to buy-equivalent ratings, citing improved margins. PayPal (PYPL US) declines 2.8% as it was cut to market perform from outperform at Raymond James in view of the stock’s out-performance so far this year, paired with the broker’s “cautious stance” on the digital payment company’s 4Q results. Catalent (CTLT US) surges 20% following a Bloomberg report that Danaher (DHR US) is said to be interested in the company, valuing the target at a significant premium. Analysts highlighted that a deal would mean that Danaher would add a contract developing and manufacturing organization (CDMO) to its portfolio. Dow (DOW US) shares edge 0.4% higher as Credit Suisse raised the chemicals company and its peer LyondellBasell (LYB US) to outperform, saying that both should benefit from investors looking optimistically toward 2024 for the US polyethylene market. US stocks declined on Friday as a laughably strong jobs report fanned fears that the Fed could keep interest rates higher for longer. Still, the drop wasn’t sufficient to wipe out weekly gains in the S&P 500 as investors clung to optimism that the central bank’s policy meeting signaled it was preparing to soften its stance on policy over the next few months. The benchmark index has now gained nearly 8% so far this year, but market strategists warned the rally may have gone too far. “Central bankers did sound less hawkish last week, but they will remain data dependent, only ending rate hikes when economic data provides compelling evidence that inflation is returning to target,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “In our view, markets have moved too quickly to price in this pivot.” Goldman strategists also capitulated on the recent market meltup, lifting their 3-month S&P price target from 3,600 to 4,000 but also said they see limited upside for stocks from hereon amid pressure from higher valuations, elevated interest rates and a lackluster corporate earnings outlook. Morgan Stanley’s Michael Wilson broadly shares that view, while JPMorgan Chase & Co. strategists said international markets continue to screen as “much more interesting” than the US. In short: banks remain largely bearish which is why stocks will keep rising. “The state of the employment sector is a significant factor in the Federal Reserve’s decision-making process, and thus the number has certainly provided investors with another factor to consider when predicting the course of the Fed’s movements over the next couple of months,” economists at Rand Merchant Bank in Johannesburg wrote in a note. Elsewhere, more than 1,000 people have been killed in Turkey and neighboring Syria after the countries were hit by some of the most powerful quakes in the Middle East in decades. Turkey’s lira held steady against the dollar, while the country’s benchmark stock index dropped, with the Istanbul exchange suspending short selling as part of measures to limit wider market fallout. European stocks also started the week on the back foot: the Stoxx 600 is down 1.1% with real estate, tech and retailers the worst-performing sectors. Here are some of the most notable premarket movers: Vesuvius shares fall as much as 6.7% after the materials technology company reported a “cyber incident” involving unauthorized access to its systems Aurubis shares fall as much as 7%, the most since December, despite the copper smelting firm guiding to earnings at the upper end of expectations Idorsia shares slump as much as 15%, most ever, after the Phase 3 trial of clazosentan failed to meet its main goals Hargreaves Lansdown shares fall as much as 4% after the stockbroker is cut to underperform from neutral at Credit Suisse on concerns about key strands of its growth strategy 3i Infrastructure falls as much as 3.2% after the private equity firm announced a proposed placing at a price of 330p per placing share, representing about a 3% discount to the last close Lem shares fall as much as 3.5%, with Vontobel expecting a slowdown in demand in the near-term for the Swiss electrical component manufacturer Rothschild shares gain as much as 19% to €47.70 after the Rothschild family’s holding company announced its intention to file a simplified tender offer at €48/share with dividends attached Earlier in the session, Asian stocks also fell as concerns over US-China geopolitical tensions fueled risk-off sentiment in the region, with traders also mulling the prospect of further interest rate hikes by the Federal Reserve. The MSCI Asia Pacific Index dropped as much as 1.6%, the most in over seven weeks, dragged by technology shares. Stocks in China and Hong Kong were among the worst performers after the US shot down an alleged Chinese spy balloon off the South Carolina, raising the risk of retaliation from Beijing. Also weighing on sentiment was an unexpectedly strong US jobs report, seen as giving the Federal Reserve room to remain aggressive in its fight against inflation. Investor optimism had risen recently on signs of a moderation in Fed rate hikes as well as China’s post-pandemic reopening. “Admittedly, a reassessment of geopolitical and policy risks will almost certainly be forced upon markets, taking some air out of stretched ‘pivot’ and China cheer,” said Vishnu Varathan, Asia head of economics and strategy at Mizuho Bank Ltd.  Japanese shares bucked the region’s losses on Monday, as the yen weakened after a report that Masayoshi Amamiya was approached by the government to lead the Bank of Japan, fueling hopes of continued easy-money policy. Japanese stocks gained after the Nikkei reported that Masayoshi Amamiya was approached by the government for the role of Bank of Japan governor, a report which however was promptly denied by Japanese authorities. Investors expect a greater likelihood of Haruhiko Kuroda’s ultra-easy monetary policy being extended under Amamiya than with other candidates. “Since Amamiya was the most dovish candidate, this is positive news for the Japanese stock market,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd. “Share prices are likely to swing upward until the official announcement this Friday, and that might be the climax for stocks.” The Japanese currency fell as much as 1% Monday to around the 132.50 per dollar level, its lowest in three weeks. Shares of automakers and property firms climbed while banks and other financials fell. Yen Retreats After Report Amamiya Approached to Become BOJ Chief The Topix rose 0.5% to close at 1,979.22, while the Nikkei advanced 0.7% to 27,693.65. Mitsubishi Corp. contributed the most to the Topix gain, increasing 7.8%. Out of 2,164 stocks in the index, 1,416 rose and 640 fell, while 108 were unchanged. Australian stocks declined: the S&P/ASX 200 index fell 0.3% to close at 7,539.00, weighed by losses in real estate shares and banks.  Meanwhile, Newcrest Mining closed 9% higher after Australia’s biggest gold miner received an indicative takeover proposal from US-based Newmont Corp. Markets in New Zealand were closed for a public holiday. Stocks in India declined as most Asian markets slipped amid concerns over US-China geopolitical tensions. The rout in Adani Group’s shares eased as four of ten companies advanced after Billionaire Gautam Adani and his family prepaid $1.11b worth of borrowings backed by shares. The move comes amid the conglomerate’s attempts to allay investor fears and stem a stock rout that has wiped of about $118 billion of stock value. The S&P BSE Sensex fell 0.6% to 60,506.90 in Mumbai, while the NSE Nifty 50 Index declined 0.5%. Ten out of BSE Ltd.’s 20 sector sub-gauges advanced while the rest fell. Metals and utility companies were the worst performers.  Telecom stocks were higher after India agreed to convert $2b of Vodafone Idea’s dues into equity.    The Reserve Bank of India’s three-day policy meeting commenced Monday. The central bank will release its rate decision Wednesday morning, with majority analysts expecting a 25-bps rate hike to curb inflation. Infosys contributed the most to the Sensex’s decline, decreasing 1.8%. Out of 30 shares in the Sensex index, 21 fell and nine rose In FX, the Bloomberg Dollar Spot Index rose 0.4% to its highest level in nearly four weeks as the greenback strengthened against all its Group-of-10 peers apart from the Swiss franc; the Japanese Yen is the weakest among the G-10 currencies amid speculation over the next BoJ Governor. The euro fell below $1.08, to trade at the weakest level since mid- January, despite a slew of hawkish ECB commentary. Bunds fell, adding around 5-9bps to yields after hawkish commentary from policymakers. The ECB is far from stopping interest-rate increases, despite a slowdown in inflation, according to Governing Council member Bostjan Vasle. It should actively fight inflation until people feel price stability in their everyday lives, according to Governing Council member Robert Holzmann. The central bank would need to see data that “significantly differ” from what’s currently anticipated to avoid raising interest rates by 50 basis points in March as planned, Governing Council member Martins Kazaks said in a tweet. German factory orders grew 3.2% in December from the previous month, more than the 2% rise analysts had predicted in a Bloomberg survey The yen slipped against all Group-of-10 peers amid speculation that an appointment of Masayoshi Amamiya as a next governor wouldn’t deter the Bank of Japan from withdrawing monetary stimulus. The pound neared the $1.20 handle after posting its worst week against the dollar since September. Gilts bear-flattened with the two-year yield rising 19 basis points. The notes extended losses as Bank of England policy maker Catherine Mann warned against complacency in tackling inflation and says another rate hike is likely The Swedish krona fell to its lowest level against the euro since 2009, amid broad-based dollar strength and as concerns abound over the state of the nation’s economy In rates, treasuries extended Friday’s jobs-report selloff with yields climbing a further 5bp to 10bp across the curve over Asia, early London sessions as central bankers reinforce hawkish message and tightening premium is added into swaps. The Treasury curve bear-flattened as front-end yields added up to 12 bps with 10Y yields rising 8bps to 3.60%. US curve bear-flattens with front-end and belly of the curve cheaper up to 10bp on the day while long-end yields rise 4.5bp; 2s10s and 5s30s spreads are tighter by ~2bp and ~5bp. In 10-year sector gilts lag, underperforming by 9bp vs Treasuries, bunds by 2bp. Gilts extended declines after hawkish remarks from BoE policymaker Mann. UK two-year yields are up 15bps. In the US, the dollar issuance slate includes three dollar deals; projections for the week range between $30b and $35b as most companies emerge from their self-imposed earnings blackout periods. US auctions resume Tuesday with $40b 3- year notes, followed by 10- and 30-year sales Wednesday and Thursday. In commodities, oil climbed after Turkey halted flows to the Ceyhan export terminal on the Mediterranean coast as a precaution in response to the devastating earthquakes in the region Monday. Crude futures are higher with WTI rising 0.6% to trade near $73.80. Spot gold rises roughly 0.4% to trade near $1,873. There is no macro data on the calendar today. Market Snapshot S&P 500 futures down 0.6% to 4,123.00 MXAP down 1.5% to 165.97 MXAPJ down 2.2% to 541.80 Nikkei up 0.7% to 27,693.65 Topix up 0.5% to 1,979.22 Hang Seng Index down 2.0% to 21,222.16 Shanghai Composite down 0.8% to 3,238.70 Sensex down 0.6% to 60,499.33 Australia S&P/ASX 200 down 0.3% to 7,538.98 Kospi down 1.7% to 2,438.19 STOXX Europe 600 down 0.8% to 457.16 German 10Y yield little changed at 2.25% Euro down 0.1% to $1.0781 Brent Futures little changed at $79.98/bbl Gold spot up 0.5% to $1,875.08 U.S. Dollar Index up 0.24% to 103.16 Top Overnight News from Bloomberg The US sent divers to salvage what they believe is spy equipment from the Chinese balloon shot down off South Carolina, as pressure mounted on President Joe Biden to hit back at Beijing with new export controls on sensitive technology There are early indications traders are gearing up for another period of bond scarcity in Europe that risks blunting the impact of monetary tightening The UK Treasury is exploring a significant increase in the bonds it sells to retail investors, a move that analysts say may draw in as much as £70 billion ($85.8 billion) for financing deficits in the coming years If reports are accurate and Masayoshi Amamiya becomes the next BOJ governor, that would be bullish for bonds and weigh on the yen and local financial stocks, according to market participants Japan’s government plans to submit its nominations for the new Bank of Japan governor and 2 deputy governors next week, Kyodo reported, without attribution The Hong Kong dollar is rapidly heading toward the weak end of its trading band against the greenback as traders sell the currency to buy higher-yielding US assets One of the most powerful earthquakes to hit the Middle East in years has killed hundreds of people in Syria and Turkey, and forced a halt in crude oil flows to a key export terminal A more detailed look at global markets courtesy of Newsquawk APAC stocks began the week mostly on the back foot after last Friday’s losses in the US where a blowout jobs report spurred hawkish rate bets and was seen to boost the Fed’s resolve of lifting rates further to above 5%. ASX 200 was subdued heading into tomorrow’s RBA decision and after a jump in the MI Inflation Gauge added to the inflationary narrative, although the downside was limited after quarterly Retail Sales data printed not as bad as feared and amid M&A prospects with Newmont making a USD 16.9bln offer for Newcrest Mining. Nikkei 225 outperformed after a report that Japan’s government sounded out BoJ's Amamiya about becoming the next BoJ Governor with Amamiya seen as more dovish compared to other candidates and was also a key architect in many of the BoJ’s policies including QQE with YCC, although the report was later refuted by a senior government official. Hang Seng and Shanghai Comp. were lower with Hong Kong pressured by losses in tech, healthcare and property, while risk sentiment was also clouded by tensions after the US shot down China’s spy balloon. Top Asian News Japan’s government has sounded out BoJ Deputy Governor Amamiya about becoming the next BoJ Governor with the government to present its nominee to parliament this month, while Amamiya is seen as more dovish than the other potential candidates and will face the task of normalising the BoJ’s ultra-loose policy, according to Nikkei citing government and ruling party sources. However, Finance Minister Suzuki said he hasn't heard anything on BoJ Governor nominations yet and Deputy Chief Cabinet Secretary Isozaki later said there was no truth to the report that BoJ Deputy Governor Amamiya was sounded out for the next BoJ Governor. Japanese government is likely to present nominees for the new BoJ governor next week, according to Kyodo.    US military shot down the Chinese spy balloon off the US coast after US President Biden issued the order to take down the balloon, while a US defence official said it was a spy balloon intended to spy on sensitive military sites and part of a fleet of surveillance balloons that have spied over five continents, according to Reuters. China’s Foreign Ministry said it expresses strong dissatisfaction and opposition towards the US’s use of force to attack the airship, while it claimed that the balloon incident was a complete accident caused by a force majeure. Furthermore, it noted that top diplomat Wang Yi communicated with US Secretary of State Blinken on how to deal with accidental incidents in a calm and professional manner, as well as told Blinken that both parties need to communicate in a timely manner and avoid misjudgements, according to Reuters. China’s Defence Ministry said the use of force against the Chinese civilian unmanned airship was an obvious overreaction and China reserves the right to use necessary means to deal with similar situations, according to Reuters. US is considering sanctions for Chinese surveillance companies regarding sales to Iran’s security forces, according to WSJ. US is reportedly mulling deploying medium-range missiles in Japan as part of a plan to bolster defences against China along the East and South China Seas, according to Sankei. China's Commerce Ministry says the Australian and Chinese trade ministers held a virtual meeting on February 6th, conducted pragmatic and candid exchanges; meeting was an important step in getting relations back on track, willing to restart the economic and trade exchange mechanism with Australia. European bourses are lower across the board, Euro Stoxx 50 -1.5%, as Friday's post-NFP price action continues to reverberate. Stateside, futures are similarly pressured ES -1.0% given the hawkish repricing, as such the tech-laden/yield-sensitive NQ -1.3% is lagging. Top European News A magnitude 7.7 earthquake hit Turkey near the border with Syria which killed dozens on both sides and injured hundreds, while Turkey's disaster agency reported that 76 were killed and 440 were injured, according to Reuters. Subsequently, a new earthquake of magnitude 7.8 has struck southern Turkey, according to journalist Stein; earthquake was also reported in the Syrian capital Damascus. EU will accept the principle that GB goods shipped to N. Ireland and staying there should be treated differently to goods moving into the single market, as such will agree to a green & red lane model at ports, via RTE's Connelly citing a senior EU source; a separate source adds that there will not be an announcement this week. UK PM Sunak was warned by senior Tories that he would face a backlash from the party and certain defeat in the House of Commons if he attempts to take Britain out of the European Convention on Human Rights, according to FT. ECB’s Visco said short-term inflation expectations are dropping sharply and policy tightening can continue with due caution, while he added that longer-term inflation expectations are consistent with the price stability goal. Visco also commented that the risk of the Italian bond spread increasing will be contained as long as budgetary policies remain cautious and said that supervisors are monitoring credit, liquidity and refinancing risks as higher interest rates could impact banks’ funding costs quicker than in the past, according to Reuters. Central Banks BoE's Mann says looking for a significant and sustained deceleration in higher frequency price increases, "We need to stay the course, and in my view the next step in Bank Rate is still more likely to be another hike than a cut or hold." adding "In my view, a tighten-stop-tighten-loosen policy boogie looks too much like fine-tuning to be good monetary policy." BoE and UK Treasury draft document said that they believe a central bank digital currency will likely be needed by later in the decade, according to The Telegraph. ECB's Kazaks says if the data is in-line with expectations then rates will be hiked by 50bp in March, decision could be changed if the incoming data differs significantly. ECB's Holzmann says the risk of over-tightening policy appears to be dwarfed by the risk of doing too little. FX DXY continues to climb and has lifted to a 103.38 peak from a 103.00 base given the broad-based hawkish price action and despite fleeting/limited bids in GBP and EUR. Specifically, the EUR saw some shortlived support amid familiar commentary from hawkish ECB officials and upside in the region's construction PMIs; though, EUR remains lower and at the 1.0761 trough vs USD. Similarly, GBP received a slight bid following BoE's Mann; though, as above, this has been eroded by the USD's underlying strength and as such Cable is at the lower end of 1.2023-1.2070 parameters. JPY is the standout laggard amid, since refuted, reports that current BoJ Deputy Amamiya could be the gov'ts nominee for Governor, with USD/JPY up to 132.56 given Amamiya's dovish stance. Elsewhere, the non-US dollars are succumbing to the USD's bid with the RBA due this week and attention on the regions geopolitics. PBoC set USD/CNY mid-point at 6.7737 vs exp. 6.7755 (prev. 6.7382) Fixed Income A continuation of Friday’s post-NFP hawkish repricing has pushed Bunds to retest and eventually lose Thursday’s 137.00 trough after opening just below the post-NFP 137.70 low this morning. In the wake of BoE's Mann, Gilts slipped to a 106.29 low at the time; a trough that has since been significantly eclipsed with the contract down to 105.65 as the session’s broader hawkish tone intensifies. Stateside, the picture is very much the same as above. With the post-NFP hawkish repricing in full swing as participants await guidance from numerous Fed officials this week, with Chair Powell on Tuesday the on-paper highlight. US yields continue to lift with action much more pronounced at the short-end of the curve; nonetheless, the 10yr yield has printed a 3.616% peak ahead of the YTD 3.84% best. Commodities Crude benchmarks are firmer on the session and have largely been consolidating after the substantial post-NFP losses, with geopolitics and the halt of some oil deliveries in Turkey post-earthquake occurring perhaps factoring. Currently, the benchmarks reside towards the top-end of USD 73.13-74.03/bbl and USD 79.61-80.81/bbl parameters for WTI Mar and Brent Apr. IEA chief Birol said the price cap on Russian oil achieved the objectives of stabilising the oil markets and cutting Russia’s oil revenues with its oil and gas export revenues in January down by almost 30% or around USD 8bln in January from a year ago. Birol also commented that the largest uncertainty this year is China and expects half of global oil demand growth will be from China this year, while he also stated that China’s jet fuel demand is exploding this year which puts upward pressure on global demand and noted that the products markets will stabilise in H2 as more refineries come online, according to Reuters. Saudi’s Energy Minister said he hopes that sanctions, embargoes and a lack of investment don’t lead to a shortage of energy supplies, according to Reuters. UAE’s ADNOC set March Murban crude OSP at USD 82.63/bbl vs USD 80.11 in February. It was separately reported that the UAE, France and India established a tripartite initiative as they seek to cooperate in areas including energy and climate change, according to state news agency WAM. Saudi Arabia sets its March Arab Light Crude OSP to Asia at +2.00/bbl (+0.20/bbl vs exp. USD -0.30/bbl) vs Oman/Dubai averages, according to Reuters sources; the first increase in six months. Spot gold is attempting to nurse losses but has been drifting from USD 1881/oz best levels as the renewed upside in yields supports the USD; while base metals are succumbing to the broader risk tone. Geopolitical Ukrainian President Zelensky said there are fierce battles in the Donetsk region and the situation is very difficult with Russia intensifying pressure on various fronts and in terms of information heading into the first anniversary of the war, according to Reuters. Ukraine’s Defence Minister Reznikov was transferred to another ministerial job and the head of the Main Directorate of Intelligence of the Ministry of Defence Budanov was named as the new Defence Minister. Furthermore, there were prior comments by Reznikov that they expect a possible major Russian offensive this month and that Ukraine has the reserves to hold back the Russian offensive despite not receiving all of the latest military supplies from the west by then, according to Reuters. UK PM Sunak spoke with Ukrainian President Zelensky over the weekend and agreed it was vital for the international community to speed up assistance for Ukraine, according to Reuters. Russian Defence Ministry said Kyiv is preparing to blow up buildings in the eastern Ukrainian city of Kramatorsk and accuse Russia of war crimes in a false flag operation, according to Reuters. Russia’s Defence Ministry also announced that 63 Russian POWs were returned from Ukrainian captivity after complex negotiations with Ukraine that were mediated by the UAE. Russia and Iran advance plans for an Iranian-designed drone facility in Russia, according to WSJ. Russian Kremlin says a meeting between President Putin and IAEA Chief Grossi is not planned but Rossi will meet with the foreign ministry and Rosatom officials. Iran’s Supreme Leader Khamenei pardoned a large number of security-related prisoners that were arrested due to recent protests, according to state TV. US cybersecurity agency CISA is assessing the impact of reported incidents after Italy raised the alarm regarding a global hacking attack, according to Reuters. US Event Calendar Nothing major scheduled DB's Jim Reid concludes the overnight wrap The week after payrolls is usually quiet for data. All I can say is thank goodness for that as it'll take until next month's release to decipher Friday's report. We'll have a first stab at it below but before we do, we'll quickly outline the highlights of the week ahead. Given the blockbuster payrolls print, Fed Chair Powell's speech at the Economic Club of Washington tomorrow could be the highlight. The release valve post the blackout period will mean we have a mini deluge of other Fed speakers too including Vice Chair of Supervision Barr (tomorrow), New York Fed President Williams, Fed Governor Cook, Minneapolis President Kashkari and Fed Governor Waller (all Wednesday). Their comments on the payroll report will be devoured and it'll be interesting if they, and especially Powell, decide to slightly firm up the hawkish spin and be more explicit on a terminal rate above 5%. We continue to think we'll get that, but the market has been increasingly pricing a pause after March and cuts by year-end. To be fair, Friday saw terminal edge back above 5% (climbing +12.5bps to 5.025% on the day) with December 2023 contracts up +23bps to 4.58%. This week's Fedspeak on financial conditions will also be interesting as the relaxed attitude of Powell to them at the FOMC presser encouraged a big dovish market reaction. Much of this was reversed on Friday but the sensitivities to such comments remain high. There's plenty of other central bank speak this week. See it in the day-by-day calendar at the end. In terms of data, it's certainly a second-tier week ahead. The delayed German CPI report on Thursday might be one of the highlights. It was delayed due to technical issues around base year changes. Given the payrolls revisions, that does make one a little nervous (in either direction), but we will see. In the US, the UoM consumer sentiment survey (Friday) and the usual inflation expectations will be a focus as usual. Elsewhere, UK GDP numbers on Friday will be a highlight after the IMF last week suggested they would be one of the 2023 developed world growth laggards. Over in Asia, key macro indicators include China's CPI and PPI reports on Friday, with median Bloomberg estimates pointing to readings of 2.2% YoY (vs 1.8% in December) and -0.5% YoY (vs -0.7% in December), respectively. Earnings season continues in the background. Just under half of S&P 500 firms have now reported with results from Disney, Uber (Wednesday) and PayPal (Thursday) among the key ones for the large cap index this week. Private capital managers will also be in the spotlight with KKR (Tuesday), Brookfield (Wednesday) and Apollo (Thursday) releasing results throughout the week. European Big Oil heavyweights also report including BP (tomorrow) and Total (Wednesday). Consumer-driven names including Chipotle, Royal Caribbean (tomorrow), PepsiCo and L'Oreal (Thursday) report with other notable earnings releases including Activision Blizzard (today), AstraZeneca and Siemens (Thursday). Now that's out of the way, let's go back to an astonishing payrolls report where the annual revisions caused chaos amongst the economist community. Indeed, our economists noted (here) that the benchmark revisions have increased 2022 nonfarm payrolls by 586k. In addition, hours worked were revised up by a tenth to 34.6 and average hourly earnings (AHEs) revised up by 20bps (12-month average). The upshot is that the year-over-year growth rate of the payroll proxy for nominal income growth as of December 2022 was revised up by 80bps (to 7.3%) relative to what was previously reported prior to the benchmark revision. If an extra 586k jobs in 2022 wasn't enough, January saw both headline (517k vs. 260k last month) and private (443k vs. 269k) payrolls exceed consensus estimates. Unemployment fell a tenth to 3.4% to fresh 53-year lows, and the labour force participation rate edged up a tenth to 62.4%. Elsewhere, AHEs (+0.3% vs. +0.4%) was largely in line with expectations but weekly hours worked surprisingly rose 0.3 hours to 34.7hrs. Our economists also highlighted that the combination of strong job gains, a surge in hours worked and a still-sturdy increase in AHEs meant that the year-over-year growth rate of the payroll proxy for nominal income (particularly the compensation component) increased by 120bps to 8.5% -- nearly 200bps above what they had previously imagined. In trying to explain the bumper January, some have looked at the seasonal adjustment. Normally January is a big month for seasonal layoffs and these get accounted for in the seasonal adjustments. However, in January 2023 lay-offs were 300-400k less than usual. This is no smoking gun but shows the huge seasonals that take place in January. But make no mistake, the other parts of the report - past and present - were strong so it's more to try to assess whether it was as strong as appears. Asian equity markets are trading lower after the print. As I type, the Hang Seng (-2.31%) is leading losses across the region with the CSI (-1.67%), the Shanghai Composite (-1.01%) and the KOSPI (-1.02%) also falling sharply on renewed risk aversion. Adding to the downbeat mood are geopolitical concerns after the Chinese spy balloon was shot down by the US (more on this below). Elsewhere, the Nikkei (+0.76%) is bucking the trend in early trade as the Japanese yen initially weakened over -1% against the dollar, after a report indicated that the BOJ’s Deputy Governor Masayoshi Amamiya has been approached to potentially take over the role as the next Governor once Haruhiko Kuroda’s term ends on April 8. He is seen as dovish and thus prompting the reaction. The story has been denied and the Yen has halved its losses but the market will likely think that there is no smoke without fire. Outside of Asia, US stock futures are printing fresh losses with contracts tied to the S&P 500 (-0.31%) and NASDAQ 100 (-0.37%) edging lower. Meanwhile, yields on 10yr USTs (+2.04 bps) are trading at 3.55% as we go to press. Looking ahead, the diplomatic tensions over the Chinese balloon entering US air space will be worth watching this week. The US shot it down over a weekend that was supposed to mark a thawing of diplomatic relations between the countries, with Secretary of State Antony Blinken visiting China, the first such visit in four years. This was postponed last week and an originally conciliatory China turned more aggressive after the balloon was eventually shot down. We will see if there is any retaliation and/or how strong the rhetoric is. Looking back at last week now. Risk assets performed strongly over the week, but fell back on Friday after the US jobs data surprised significantly to the upside and moderated market expectations of the Fed cutting rates at the back end of 2023. The ISM services index for January also surprised to the upside, rising 6 points to 55.2 (vs 50.5 expected). This is the largest monthly advance since June 2020 and adds to the view that economic growth in the US remains resilient for the time being. The new orders subcomponent also jumped to 60.4, its highest level since the start of last year. These strong prints followed Chair Powell’s emphasis on Wednesday that a softer labour market, and particularly easing wage gains, were key to reducing inflation. Against this backdrop, markets moved to price in a higher terminal rate, with fed fund futures for June pricing a 5% terminal again after rising +12.6bps on the day to 5.025%. The implied rate for the final Fed meeting of 2023 also rose, increasing +23bps to 4.58%. US stocks swung between gains and losses following the strong data on Friday but they maintained their strong start to 2023 over the week. The S&P 500 was down -1.04% on Friday but +1.62% on the week. The NASDAQ also finished the week up +3.31% (but -1.59% on Friday), and the FANG+ index outperformed in being up +7.03% on the week (-2.57% on Friday), its largest weekly move-up since mid-March and to its highest level since mid-April. Over in Europe, the STOXX 600 closed up +0.34% on Friday, its highest level since mid-April. In weekly terms, the index was up +1.23%. In fixed income markets, US Treasuries fell back on Friday as markets priced in higher Fed rates. Policy sensitive 2yr Treasury yields spiked +18.4bps on Friday, closing up +8.9bps over the week. 10yr Treasuries also retreated, with yields up +13.2bps on Friday and up +2.1bps for the week. In Germany, the story was similar, with 2yr Bund yields climbing higher by +7.1bps to 2.53%, although they were down by -3.3bps in weekly terms. 10yr Bunds also retreated, with yields up +11.3bps on Friday to 2.19% but down -4.7bps on the week. Fixed income markets in the rest of the continent were also in red on Friday with OATs up +12.7bps (-6.0bps on the week) BTPs up +12.2bps (-7.2bps on the week after the biggest fall in a decade on Thursday after the ECB). Staying with fixed income, credit markets saw significant tightening last week to reach their richest valuations since last Spring. USD IG cash spreads tightened -4bps to 115bps over the week (unchanged Friday) to their lowest levels since early April. Meanwhile, USD HY spreads tightened -28bps on the week (-1bp Friday) to 385bps, which is the tightest spreads have been since the first week of May. In Europe, EUR IG was -10bps tighter (-2bps on Friday) and EUR HY cash spreads were -24bps tighter (-12bps Friday) to also finish at their tightest levels since April. Turning to commodity markets, WTI Crude had a poor week, down -6.29% (-3.28% on Friday) to $73.39/bbl, its lowest level since the first week of 2023. Brent Crude also fell back last week, down -7.75% (-2.71% on Friday). This weak performance also translated to other commodities, with copper down -3.93% last week (-0.84% on Friday) and gold -2.50% to $1,865 on Friday, down -3.27% on the week. Tyler Durden Mon, 02/06/2023 - 08:07.....»»

Hyperinflationary Hell: Lebanese Central Bank Devalues 'Lira' By 90% Cash is now king in Lebanon, where a three-year economic meltdown has led the country's once-lauded financial sector to atrophy and turned the country into a Venezuelan-esque hyperinflationary hell. The country has been hit hard by events over the past few years, starting with COVID. In August 2020, the city of Beiruit was practically destroyed by a massive blast which killed at least 200 people and triggered as much as $15 billion in damage... In March 2021, violent protests erupted across Lebanon as the currency collapse accelerated and with it the economy and people's living standards. And most recently, In December 2022, the Lebanese parliament failed for the eighth consecutive time to elect a new president, as a majority of lawmakers opposed the options laid on the table. The prolonged power vacuum only exacerbates the situation, as Beirut is currently unable to enact sweeping reforms demanded by international lenders as a condition for releasing billions of dollars in loans. All of which has sent the 'parallel' FX rate to a stunning 60,000/USD (compared to the official Pound - often nicknamed 'Lira' - rate of 1500/USD)... Source: LiraRate.org As Reuters reports, Zombie banks have frozen depositors out of tens of billions of dollars in their accounts, halting basic services and even prompting some customers to hold up tellers at gunpoint to access their money. This has prompted bank runs... Not a week goes by without Lebanese depositors storming their own banks in a desperate attempt to access savings frozen after the country's economy collapsed. Banks began imposing draconian limits on withdrawals and transfers in 2019, leaving depositors able to access only a fraction of their savings in dollars and Lebanese pounds. and heists... The National has recorded 27 depositor bank “heists” since the start of the year, including armed and unarmed hold-ups and sit-ins. Former director-general of the Ministry of Finance Alain Bifani estimated that $6 billion was “smuggled” by bankers outside Lebanon for the political and economic elites while they were blocking transfers abroad for ordinary people. “These forced withdrawals — we do not call them heists, because this would imply that these depositors are stealing other people's money — are a solution of last-resort after the exhaustion of all possible ways for depositors to recover their money,” said lawyer Fouad Debs, co-founder of Lebanese Depositors Union. People and businesses now operate almost exclusively in cash. The local currency in circulation ballooned 12-fold between Sept. 2019 and Nov. 2022, according to banking documents seen by Reuters. With more bank notes in circulation, crime has risen. Elie Anatian, CEO of security firm Salvado, said yearly sales of safes had grown steadily, with a 15% increase in 2022. And that has seemingly forced officials' hands as Reuters reports that Lebanon will adopt a new official exchange rate of 15,000 pounds per U.S. dollar on Feb. 1, central bank governor Riad Salameh said, marking a 90% devaluation from its current official rate that has remained unchanged for 25 years. The shift from the old rate of 1,507 to 15,000 is still far off the parallel market rate of around 60,000. Salameh said the change to 15,000 was a step towards unifying multiple exchange rates, in line with a draft agreement Lebanon reached with the International Monetary Fund last year that set out conditions to unlock a $3 billion bailout. Nassib Ghobril, chief economist at Lebanon's Byblos Bank, said the pound's continuing decline meant the cash economy was now also dollarised, "with dollars accounting for approximately 70-80% of operations". "The transformation to a cash economy means the collapse of the economy," said Mohammad Chamseddine, an economic expert at Lebanese research group Information International. The IMF deal is widely seen as the only way for Lebanon to begin restoring confidence in its financial system and recover from the collapse. However, as we previously noted, there have also been fights in supermarkets as people try to buy bread, sugar, oil, and other goods before they run out, with inflation 400 percent, the report said. Murder rates and other crimes are also rapidly rising. The economic collapse could reduce the country into a failed state, experts have warned. “Not only do we have an absence of government and a political vacuum, but we’re going to have a severe problem with the function of the state of Lebanon,” Lebanese American University political scientist Imad Salamey told The Wall Street Journal. “We are heading toward the unknown.” Tyler Durden Wed, 02/01/2023 - 04:15.....»»

A Dollar Collapse Is Now In Motion, Saudi Arabia Signals The End Of 'Petro' Status Authored by Brandon Smith via Alt-Market.us, The decline of a currency’s world reserve status is often a long process rife with denials. There are numerous economic “experts” out there that have been dismissing any and all warnings of dollar collapse for years. They just don’t get it, or they don’t want to get it. The idea that the US currency could ever be dethroned as the defacto global trade mechanism is impossible in their minds. One of the key pillars keeping the dollar in place as the world reserve is its petro-status, and this factor is often held up as the reason why the Greenback cannot fail. The other argument is that the dollar is backed by the full force of the US military, and the US military is backed by the US Treasury and the Federal Reserve – In other words, the dollar is backed by…the dollar; it’s a very circular and naive position. These sentiments are not only pervasive among mainstream economists, they are also all over the place within the alternative media. I suspect the main hang-up for liberty movement analysts is the notion that the globalist establishment would ever allow the dollar or the US economy to fail. Isn’t the dollar system their “golden goose”? The answer is no, it is NOT their golden goose. The dollar is just another stepping stone towards their goal of a one-world economy and a one-world currency. They have killed the world reserve status of other currencies in the past, why wouldn’t they do the same to the dollar? Globalist white papers and essays specifically outline the need for a diminished role for the US currency as well as a decline in the American economy in order to make way for Central Bank Digital Currencies (CBDCs) and a new global currency system controlled by the IMF. I warned about this years go, and my position has always been that the derailment of the dollar would likely start with the end of its petro status. In 2017 I published an article titled ‘Saudi Coup Signals War And The New World Order Reset’. I noted at the time that the sudden power shift over to crown prince Mohammed Bin Salman indicated a change in Saudi Arabia’s relationship to the US. I stated that: “To understand how drastic this coup has been, consider this — for decades Saudi Kings maintained political balance by doling out vital power positions to separate, carefully chosen successors. Positions such as Defense Minister, the Interior Ministry and the head of the National Guard. Today, Mohammed Bin Salman controls all three positions. Foreign policy, defense matters, oil and economic decisions and social changes are now all in the hands of one man.” The rise of MBS was backed by the Public Investment Fund (PIF), a fund comprised of trillions of dollars supplied by globalists within Carlyle Group (Bush family, etc.), Goldman Sachs, Blackstone and Blackrock. MBS garnered the favor of the globalists for one specific reason – He openly supported their “Vision For 2030”, a plan for the dismantling of “fossil fuel” based energy and the implementation of carbon controls. Yes, that’s right, the head of Saudi Arabia is backing the eventual end of oil based energy, and part of that includes the end of the dollar as the petro currency.   In exchange for their cooperation, the Saudis are being given access to ESG-like funding as well as access to AI advancements and the so-called “digital economy.”  It sounds crazy, but there is much talk of AI developments to cure numerous health problems and extend lifespan.  With those kinds of promises, it’s not surprising that Saudi elites would be willing to dump the dollar and even oil. In 2017 I noted that: “I believe the next phase of the global economic reset will begin in part with the breaking of petrodollar dominance. An important element of my analysis on the strategic shift away from the petrodollar has been the symbiosis between the U.S. and Saudi Arabia. Saudi Arabia has been the single most important key to the dollar remaining as the petrocurrency from the very beginning.” I believed that the threat to petro status would ultimately be spurred on by a proxy war between East and West: “World economic war is the real name of the game here, as the globalists play puppeteers to East and West. It is a geopolitical crisis they will have created to engineer public support for a solution they predetermined.” Back then I thought that such a proxy war would be initiated in the Middle East, possibly in Iran. However, it’s clear that Ukraine is the powderkeg the globalists have chosen, at least for now, with Taiwan being the next shoe to drop. In the years since I made these predictions the relationship between Saudi Arabia, Russia and China has grown very close. Arms deals and energy deals are becoming a mainstay of trade and this has led to a quiet but steady distancing of the Saudis from the dollar. This past week, the dominoes were set in motion for dollar collapse when Saudi Arabia announced at Davos that they are now willing to trade oil in alternative currencies. In response, Xi Jinping pledged to ramp up efforts to promote the use of the Chinese yuan in energy deals. This falls in line with another article I wrote in 2017 titled ‘The Economic End Game Continues,’ in which I described how conflict with Eastern nations (China and Russia) would be exploited to create a catalyst for the end of the dollar’s petro status. The importance of the Saudi announcement cannot be overstated; this is the beginning of the end of the dollar. The dollar’s world reserve status is largely dependent on its petro-status. Without one, you cannot have the other. This is almost the exact same dynamic that led to the implosion of the British Sterling decades ago as the global petro currency which resulted in the rise of the dollar to take its place. This time, though, it will not be a single foreign currency that takes on the role of world reserve, it will be a basket currency system controlled by the IMF called Special Drawing Rights, along with a single global digital currency that is yet to be named but is now under development. The consequences of the loss of reserve status will be devastating to the US economy. It is the only glue holding our system together – The ability to defer inflation by exporting it overseas is a superpower only the US enjoys. The Fed can print money perpetually if it wants to in order to fund the government or prop up US markets, as long as foreign central banks and corporate banks are willing to absorb dollars as a tool for global trade. If the dollar is no longer the primary international trade mechanism, the trillions upon trillions of dollars the Fed has created from thin air over the years will all come flooding back to the US through various avenues, and hyperinflation (or hyperstagflation) will be the result. This dynamic is already in play, as foreign holders of US debt and dollars have been dumping them at record pace since 2017. The process continues at a time when the Federal Reserve is cutting it’s balance sheet and raising interest rates, which means there is no longer a buyer of last resort. This may be why multiple foreign central banks have renewed their purchases of gold reserves and are once again stockpiling precious metals. They seem to be well aware of what is about to happen to the dollar, while the American public is kept in the dark. The effects of the decline of the dollar may not be immediately felt, or become obvious for another year or two. What will happen is consistent inflation on top of the high prices we are already dealing with. Meaning, the Federal Reserve will continue to hold interest rates higher and prices will barely budge or they may climb in spite of monetary tightening. Even in the face of a major recessionary contraction, which I predict will be triggered starting in April, prices will STILL remain higher. All the while the mainstream media and government economists will say they have “no idea” why inflation is so persistent, and that “nobody could have seen this coming.” Some of us saw it coming, but only because we accept the reality that the dollar’s days are numbered. *  *  * If you would like to support the work that Alt-Market does while also receiving content on advanced tactics for defeating the globalist agenda, subscribe to our exclusive newsletter The Wild Bunch Dispatch.  Learn more about it HERE. Tyler Durden Fri, 01/27/2023 - 08:20.....»»

This week’s Intelligence Squared U.S. debate asks the question: Is Elon Musk Killing Twitter? Journalist Kara Swisher argues Yes. Investor Anthony Scaramucci argues No. Wired’s Steven Levy and Insider’s Monica Melton chime in as well with questions. Is Elon Musk Killing Twitter? Kara Swisher vs Anthony Scaramucci Debate Transcript Guests: Arguing Yes: Kara Swisher Arguing […] This week’s Intelligence Squared U.S. debate asks the question: Is Elon Musk Killing Twitter? Journalist Kara Swisher argues Yes. Investor Anthony Scaramucci argues No. Wired’s Steven Levy and Insider’s Monica Melton chime in as well with questions. Is Elon Musk Killing Twitter? Kara Swisher vs Anthony Scaramucci Debate Transcript Guests: Arguing Yes: Kara Swisher Arguing No: Anthony Scaramucci Moderator: John Donvan John Donvan: Hi, everybody, and welcome to Intelligence Squared. I’m John Donvan. And in this program, we are debating the impact that one man is having on the future of an enterprise you have all heard of. That enterprise is called Twitter. And the man, I know you’ve heard of him, is Elon Musk. 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 Activist Investing Case Study! Get the entire 10-part series on our in-depth study on activist investing in PDF. Save it to your desktop, read it on your tablet, or print it out to read anywhere! Sign up below! (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q4 2022 hedge fund letters, conferences and more   Boy, have we heard of him and from him, especially since he became sole owner of Twitter last fall, paying $44 billion for it, firing half of its employees, and vowing for the 230 million users of Twitter to make it better. His words: "Twitter has extraordinary potential, I will unlock it." So, has Elon Musk done that or are the steps he's made so far a lot of missteps? That is what we are debating. To be more specific, the Yes/No question: is Elon Musk killing Twitter? We recorded this one before a live virtual audience. You will not hear them but just wanted you to know that they were there. So, let's get to the debate, starting with my introduction of our two debaters. So, let's meet our debaters. Arguing Yes, Elon Musk is killing Twitter, here is host of "On with Kara Swisher," co-host of the podcast "Pivot," and editor-at-large of New York Magazine, Kara Swisher. Kara Swisher: Thank you. John Donvan: And arguing No, that Elon Musk is not killing Twitter, we have the founder and managing partner of Skybridge, former White House communications director, and host of the podcast "Open Book," Anthony Scaramucci. Thanks for joining us. Anthony Scaramucci: Thank you. John Donvan: Before we start the debate, I'm interested in your personal connections to Elon Musk because you both know him. And you've both interacted with him. And we just, as a matter of curiosity, want to sort of get a sense of how you know him. So, Anthony, why don't you go first on that? Anthony Scaramucci: Well, you know, my one of my closest friends, Antonio Gracias, is on the board of two of his companies. So, it would be SpaceX and Tesla, he was an early investor in PayPal. And so, I'm gonna say that I know Elon tangentially. We've interacted a few times over the years, but I don't have a personal relationship with Elon. Obviously, I'm very impressed with him as an investor and as a business executive. John Donvan: And what about you, Kara? Kara Swisher: Oh, I've known him since the last century, actually, when he was at a company called X.com. It was a startup, he had had other startups, he had a sort of yellow pages directory company that he sold and made a little bit of money from, and then he moved on to X. And it was competing at the time with PayPal, and where they were quite big competitors. And I covered them for The Wall Street Journal. They merged and later sold to eBay. So, I've known him for a very long time. And while the rest of them went off and did other things, he started investing in lots of interesting things like space and cars, which was unusual, because everybody else was doing a dating service and something stupid with their money. And so, he was doing some interesting things. So, I knew him for a long, long time, and covered him while he was building these companies. And I've interviewed him, I don't know dozens of times and including many live appearances at some of my events. And we've texted and emailed over the years. John Donvan: So, for neither of you is he a distant figure, you both have some connection to him. So, let's get to the debate itself. We'll go in three rounds. And our first round is going to be comprised basically of opening statements and Kara Swisher again, you are arguing Yes, in answer to the question, is he killing Twitter? So, take three to four minutes to tell us why you're a Yes. Kara Swisher: Okay. Okay, I wrote something up. So, I hope you don't mind. I think the question is not is Elon killing Twitter, but is owning Twitter, killing Elon, essentially, at least the brand, which I think has seen more deterioration in the last six months than anyone I can think of. In doing so he's created the perfect storm of self-inflicted harm. He's shot himself in the foot and then the other foot and he went back to the first foot. And while it'd be easy to focus solely on his demented daily tweets spewing homophobic misinformation to bear-hugging despicables to firing people with the stylings of the very worst of robber barons, I think the only thing you can do here is follow the money which I'm going to focus on. First of all, he blew up a stable $5 billion ad business in a few months. It wasn't that good, but it was still $5 billion losing huge opportunities like the World Cup and the holiday season. The site’s ad experience is now like 2 a.m. on cable with a series of grifty ads and come-ons and more porn than ever, which some people might like. Number two, he adopted misguided advice from one of his dumber minions to focus the company on an enterprise software company. It's failed to launch anything stable or unable not to troll corporate clients. You saw that when they did Twitter Blue and everybody faked companies. He's gotten himself into class action lawsuits and how he cloddishly handled the firing of Twitter employees. As former Twitter Blue head Tony Hale wrote: "New York's hottest club is a Zoom call with the lawyers for the Twitter class action suit." It will be a drag on him and all his companies, even if he throws lawyers at it, as he always tends to do. He's been involved in lots of lawsuits over the years, this is a big one. He's allowed the conversation to get uglier by allowing 60,000 of the very worst to return to Twitter to, wait for it, improve the conversation. That's akin to Voldemort letting all the prisoners out of Azkaban prison. He said he would make decisions for these different people via a council which doesn't exist, never happened, and it turns out it's just him late at night mainlining Cheetos, Ozempic, and conspiracy theories. So, a group of managers making decisions managers are paid to make has been replaced by essentially one guy. According to internal sources, usage has started to decline among active users, which make up a small part of the population and a large percentage of the tweets. Mine, for example, have gone from a couple hours a day to under one and it's declining every single day. I only use it for marketing and nothing else now, which as a platform I used rather actively, including where I met Anthony Scaramucci, where I trolled him for quite a lot of time. And he has such a good sense of humor that he allowed me to do so, and we've become I think friends in some way. It's allowed competitors to emerge, like Mastodon, which has been compared to a waiter handing you a gun, pointing at a cow and saying, "Get dinner." So, he's given lots of opportunity for a number of competitors to get in here when Twitter could have dominated here with someone like Elon at the top. Speaking of nothing burgers, the Twitter files. Nine, he's taking other businesses with him. Tesla has owned a lion's share of the electric light vehicle registrations in the U.S. according to a number of different measurement services, but that's down 79% in 2020. There's a surge of competition including lower price models. One Wedbush Securities person wrote, "Musk must take a more-hands on approach in 2023 at the company, as a Twitter distraction along with the current demand situation it's falling off, is a perfect storm for the stock." Tesla stock is down 70%. Even though it's way ahead in EV production, in batteries. It has four plants globally. All kinds of competitors are now– he's leaving it open to competitors to launch models from Lucid and others. He's certainly trying to do so, but his eye is definitely off the ball there and they're facing the more competition they've ever had in a really bad economic environment. And lastly, follow the money. Let me read from Bill Cohan [William D. Cohan]. Just he just wrote a piece yesterday about this. 'The banks, Morgan Stanley and Bank of America will be reporting what it's doing with the debt it has,' the $13 billion in debt, 'and what the banks will be revealing, if I'm right,' this is according to Bill Cohan, 'is that thanks to the demand of the Federal Reserve, Wall Street's prudential regulator, the Twitter bank debt has been marked on the books of both Morgan Stanley and Bank of America at 50 cents on the dollar.' That means the $13 billion of Twitter debt is now worth about half that amount, or 6.5 billion thanks to a combination of rising interest rates and Twitter's shrinking EBITA, as well as questions about whether Elon will be able to make roughly $600 million of interest payment due on the Twitter bank debt in April. And following the logic here, if the bank debt is only worth half its face amount, it has now been recorded as such, it means Twitter equity, which is owned mostly by Elon and a bunch of his rich friends is virtually wiped out after a mere two months under Elon's rule. To put it bluntly, this is an astounding and virtually unprecedented outcome in the world of leveraged buyouts. But he is doing something about income inequality, I guess. Anyway, that's my argument. John Donvan: Thanks Kara, Kara Swisher. And now, the No answer comes from Anthony Scaramucci. Anthony, it's your turn. Anthony Scaramucci: Well, I'll start out by saying that if the definition of friendship is that you can be critical of somebody and still like and enjoy their personality, then we are definitely friends, Kara, because you have been very critical of me. And I do like and enjoy your personality. And I will say this, you've made my life more interesting as a result of our relationship. But I think the specific question, Is Twitter, dying, yes or no? And I'm going to say no, for several reasons. And the main reason is something that Warren Buffett has said long ago about businesses, if it's a high-quality business, even a very bad management team or bad decisions, the high-quality business can endure, they'll take the high-quality business any day. And I think the facts are indisputable about Twitter being a high-quality business in the following sense. It is a pervasive part of our Zeitgeist, now. It is the town square, proverbially. And I think there are more active users today if you look at their numbers. This is an important metric for social media, as we both know. In addition to that, things happen on Twitter. The interaction, the FTX debacle as an example, a lot of micro-journalists covered nuances to that story on Twitter. The World Cup, while not advertising there–and we'll get into the advertising in a second. Lots of the drama that played out in social media related to the World Cup happened on Twitter. And of course, most recently, the Damar Hamlin situation in the NFL, which my heart goes out to him and his family. And seems that he's doing well, also happening on Twitter. So, I think it's indisputable that we're talking more about Twitter as a result of Elon Musk, and the user base is up, you know, you and I both know, Twitter Spaces is a pretty effective medium today, sort of replaces Clubhouse, if you will. When Elon's on Twitter Spaces, there could be upwards to 100,000 people in that town square listening and potentially asking questions. So, you are bringing up things, though, that I think are true. And so, I do, I do want to validate those things. I think you said once on CNN, I was watching, that he may have spent $44 billion for a $7 billion company. That may or may not be true. I think the financials, if they're marking down the debt, certainly people believe that there's a deterioration in the financials. And both of us know, because of our years of experience, either on Wall Street or in journalism, that large scale corporations are typically risk averse. And they certainly don't want to be caught in a negative spotlight. And there's something that Elon Musk is doing right now, that would cause those people to pull away and I just want to spend one minute on it. And then we'll go back to the debate. And that is our discussion in Zeitgeist about free speech. Ultimately, you're either a believer of free speech or not, I know that you are a believer, you know, I am. I once worked for a president of the United States that called the press the enemy of the people. Of course, I had to write an op-ed in The Hill, responding to that saying, 'Mr. President, the press is not, in fact, the enemy of the people.' But what free speech actually does for our society is not only keeps our politicians honest, but it creates economic innovation. John Donvan: More from Intelligence Squared U.S. when we return. Welcome back to Intelligence Squared U.S., let's get back to our debate. Anthony Scaramucci: We teach our second-grade children that they can think and speak freely, they go on to create Facebook and Twitter and Google and Apple Computer. In societies where that free speech is suppressed, where they're not allowed to talk about their government, or certain potential dramatic things that are going on in this society. They get curtailed, and then they end up stealing our intellectual property rights. So, for me, what Elon Musk is doing, by opening it up. You mentioned 60,000 criminals coming out of the asylum, I think we've got a big problem in our society, right now, I grew up in a blue-collar neighborhood, lower middle-class neighborhood. And I can tell you, there's a very large group of people in our society now that feel left out. And if you're going to shut those people off on Twitter or shut those people off on other realms of social media, I think that's very long-term damaging, if anything, we have to embrace those people and figure out a way to bring them back into the social contract. And I think Elon Musk is trying to do that. I see him as a radical moderate, by the way, self-described in terms of my conversations with him. And I think it's early, we'll have to see how this thing plays out. But it's far from dead. In fact, if anything, it's more vital than ever. And over the next 6, 12, 36 months, I think we'll see really good progress ahead for Twitter. John Donvan: Anthony, I have a very quick question of clarification, when you say you think Twitter is more vital than ever, are you saying it's more necessary than ever? Or are you saying it's more thriving than ever? Anthony Scaramucci: Well, I think it's a combination. Certainly advertising, corporate advertising revenues are down. The business itself has been impaired. But if you look at social media data in terms of the usage and the vibrancy of the network, that, in fact, is up. And so, it's a mixed bag, but yes, I do believe it's more vital than ever. And I think he's going to figure it out. I think it's very early in the process of him taking the company. John Donvan: Alright, thanks, Anthony. So, thanks to both of you for your opening statements. And what I think I hear are two kinds of arguments about what we mean by the survivability and the viability of Twitter. One is an argument for the business for the numbers and the direction that's taking, and the other is a description of Twitter's vitality and vibrancy having to do with its place in the culture and its relevance, its appeal to people as a place to continue to go to as a kind of public square as it's been described. So those are two different framings. They do overlap, but I want to separate them just for the start of the conversation and start with the business argument that you made Kara. Kara, do you anticipate this company being on the road to bankruptcy? Is it that extreme? Kara Swisher: Well, he's talked about it himself. I didn't– not the one to say it. Who knows if he's telling the truth when he says that? Because he often just spouts out something just to cause, you know, and Anthony should know about this, just to say something to cause a news cycle to happen. So, he's talked about bankruptcy. I don't believe it will be bankrupt, because he's one of the world's richest people. I don't believe he's the world's richest man anymore because of what's happening here. But I do think that he has plenty of rich friends who will save him from disaster. But he does have to come up, at some point, you don't love throwing good money after bad, but he will come up with money over the next year at least to pay off these bank debts. I think the danger is that this bank debt goes on Wall Street, and it's bought up by an Apollo or someone else who were much tougher on. They don't want to have lunch with Elon Musk, as other rich people, as you noticed in the text tend to want to do including Sam Bankman-Fried wanted to sort of hang out with Elon. So, I think it depends on who gets a hold of this thing. If he's unable to– if this debt goes on the market, and if he's unable to pay his debt obligations– I don't think the latter is going to happen. But he certainly puts himself at risk. That said, he could buy the debt himself and throw more of his money at this thing, and then own it completely. So, there's ways that he can keep it in business. It's just, it never was a very good business. And now it's a really bad business. And as to Anthony's thing about vitality, it's a very small business, even though it gets the attention of the media and politicians. Most people do not live their lives on Twitter. And so, it's a very small business that has a very outsized profile because of the users who are on it. John Donvan: Anthony, your response to that? Anthony Scaramucci: Again, so you know, I always want to be fair to Kara and the facts. I think she's right about the size and scale of the business. You know, listen, I have– I think Kara has 1.4 million Twitter followers. I have a million Twitter followers. I am on Twitter; I do look at it. I do scroll through it, and I sometimes tweet, I think it would be impossible– and she would have to answer this better than me as a journalist. But I think most journalists would find it to be relatively impossible not to have access to that site, because there are things that are going on. Kara will remember this. There was someone in Pakistan that basically said on Twitter, 'I hear the rumblings of helicopter, there seem to be aircraft over my house.' Shortly thereafter, Osama bin Laden's house was invaded. And so, there's relevancy to Twitter, again, going back to the original premise: is Twitter dying or not? We can debate whether it's a large or small business, we can debate whether or not Elon Musk has impaired the business. But is it dying or not? I'm going to take the position that no, it is not dying, even if Elon Musk were to leave the business and we were to write a story about the abject failure of his management team, I think Twitter goes on to live. And I think Twitter has found its niche in the society where celebrities are on there, politicians are on there, average users are on there to gather information. John Donvan: And you think that that position is somewhat ironclad? You think that's unassailable, that that can't be changed by anything? Anthony Scaramucci: Well, nothing in our lives, unfortunately, is unassailable. But I do think that this has levels of resiliency as a result of the organic nature of Twitter over the last 15-ish years. Kara Swisher: On that, Anthony, I have a couple words for you: AIM, AOL, Yahoo, MySpace. You ever heard of ‘Oy?’ – Yo, excuse me– Yo, Peach. It goes on and on and on. And now unfortunately, the conversation has moved away from Twitter and so– it was a small conversation. It never took advantage of the opportunities that it had, because of a lot of reasons. It was badly managed before. But now it's sort of malevolently managed and so it's trying to take a business that it had and change it into something else. It is, you know, you don't want to use a rocket thing, but he's building the rocket in flight. And he's also doing things that are causing the rocket to go the other direction, which is downward. And so, you wonder how these decisions are being made and who they're being made by? And it turns out, it's just literally one guy and so that's a real problem when you don't have a team around. John Donvan: Why– What do you mean by downward? Kara Swisher: Well, I think, you know, you don't kill– I'm perplexed as to why you would insult advertisers when you have a very– an okay advertising business. It's certainly tiny in comparison– John Donvan: Remind listeners what exactly you're referring to? Kara Swisher: He started tweeting. Well, it was so random and so abrupt each time. When he got there, he started insulting advertisers, and told them– and said they were un-American not to– I think that was one of them. He had, like, there's so many. It's like Trump, there's so many I don't remember the last one he did. But he basically insulted advertisers and said they were woke if they didn't advertise on Twitter. It seems to me that they would advertise on you know, 'Satan.com,' if it would sell them a Fitbit. I just– I feel like advertisers will go anywhere. And so, he insulted them. And then they got him on a call with advertisers where he seemed to have been somewhat medicated in some fashion, where he was somewhat nice to them. And then the very next day, he insulted them again. And so, a lot of these people, they really don't want controversy. They just want to sell things, and they're not woke, they're capitalists. He did that with a– He's doing that very Trump-like in insulting people. Sometimes, it doesn't make any sense why he's doing it. And maybe Anthony can talk to this because he's been with someone who does that. It is a strategy to do that, on some level, is to create chaos almost continually. So, you take away– it's sort of jazz hands in a weird way. Anthony Scaramucci: Alright, so let me just respond to the AOL, MySpace. If we're taking that standard, then listen, everything, the Roman Empire, you know, you pick– Kara Swisher: The Roman Empire! Anthony Scaramucci: We can go– I mean, it did decline, Kara. So, you know what we do know– Kara Swisher: I did, I heard. I read that.   Anthony Scaramucci: You know, in General Electric, who had started in the Dow, I think it was out of the Dow for a few years in the 1920s, and was the longest tenured Dow member, is no longer part of the Dow. So, we do know that none of these businesses are eternal. I guess what I'm saying is, in the next half a decade to decade is Twitter dying, I think it's not dying. I think if anything, it will become more relevant. And I think ultimately, as he executes this plan, and whatever the erratic nature is of his personality, we can go back to the situation with Elon Musk in 2008, where he was on the verge of bankruptcy in two companies: SpaceX and Twitter. He was able to use his guile, his relationships to save those two companies. Those two companies propelled him to be the richest person in the world. We just went through one of the worst market environments in 50 years. At least the first half of 2022 was the worst since 1970. The entire year was the worst that we've had in stock market since 2008. The NASDAQ as we both know, is down 30%. So, Elon Musk's high-growth, Tesla stock down a lot, no surprise to me. If you're going to make the case that it's down even more as a result of his erratic behavior– If Elon Musk was listening to this and he asked me that as a friend, I would say, "Yes, it is." You've got to figure out a way to comport yourself better. You don't want to be accused of being Donald Trump, by anybody, just trust me. It's not a good comparison. Because ultimately, anybody that worked for Donald Trump knows about the insanity and knows about the instability. And so, Elon Musk is a brilliant guy. He's a brilliant visionary. You certainly know him better than me. John Donvan: Well, let me jump in. Anthony Scaramucci: Let just finish this one sentence. When I step back and look at his vision for the company, despite whatever missteps he's having right now, I'm making the bet on Elon Musk, this could be 2008 SpaceX and Tesla. Kara Swisher: What is that actual vision? Because a lot of these things he's doing– Listen, I had been very critical of Twitter for years and had suggested subscriptions, we've suggested something that was more of a value, you know, a value proposition that you could pay for that'd be worth it like Amazon Prime is. I certainly pay for it. I'm very happy paying for it, because it's worth it to me. I know a lot of his ideas are retreads of ideas that lots and lots of people have had, and he's unable to execute on any of these ideas. And everyone, because he's Elon Musk, thinks he's a genius and therefore, because he's good at rockets and cars, which are physical, and have physical aspects, that he's going to be fantastic at media. Media is hard. And this is a media company. And so, I think it's a very different situation. He's got to find another business or sell something that's worthwhile in order to make it a business. Or else it’s just a plaything for a rich person. John Donvan: Kara, you're somewhat answering the question I was going to ask both of you because Anthony was kind of alluding to this. That he has been highly unpredictable in the choices he made in terms of businesses to take on and the ways that he did that. And the question was going to be: could this be one more case of that? That it's looking sort of erratic at the moment, but he's pivoting? Obviously, he's floated ideas like the blue checkmark and then pulled it off and then put it back again, that he's responding to mistakes quickly, that that's kind of his way. And that there's something about him, this thing that you refer to as the genius that I think you think is overrated, but nevertheless, it's there. Kara Swisher: I don't think it's overrated. I think it's just you assume because someone is good– It's like saying, "I'm gonna be good at basketball because I'm good at journalism." It's just not the same. I'm not good at basketball, by the way. But you know, it's just one of these things that we just take it for granted. Steve Jobs, who really truly was a visionary, stayed in his lane and kept expanding from that. Now, he certainly said controversial things over the years. Mostly– his biggest– compared to Elon Musk, he parked badly. That's really pretty much the controversy around Steve Jobs. There's a bunch of them, but one of the things that's– He stayed within his lane, and you understood the daisy chain of what he was doing. Here, it's just, it's erratic. Let Kanye West on, kick him off, do this, do that, and everything is– nothing– everything is hypocritical to everything else. And so, it doesn't make– it becomes exhausting. Twitter was already exhausting. Now it's, I find– I am a very heavy Twitter user. I was– my numbers are going down from, again, a couple hours a day, to an hour a day to six minutes. John Donvan: Why is that? Kara Swisher: Because it's exhausting. I turned off comments on Twitter, because I suddenly started getting– I put up something around the shooting in Colorado. And I got the most repulsive group of comments, which I'd never gotten. And I don't need it. I don't. I don't have the time. John Donvan: Anthony, are you still tweeting as before? Anthony Scaramucci: You know, I'm a yes. I mean, the answer is: I'm tweeting as before. I'm probably– you know, I get yelled at by my wife staring at my phone too much, so I'm probably not looking at it as much as I used to. But I think Kara's bringing up an interesting point about a circle of competence. And if you're inside the circle of competence, you do way better. And if you're outside the circle of competence, you may do less better. And so, I just want to validate something that she's saying because she is right, the media is quite different. Because you get an image in the media, it is very hard to change or turn that image. Okay. And so, the media, the mainstream establishment media, has declared a personal foul on Elon Musk and a personal foul on Twitter. Okay, why are they doing that? That's what you have to ask yourself the question of: are they doing that because he's bringing back controversial characters? Whether it's Michael Flynn, Carpe Donktum, Donald Trump, is that the reason why they're doing it? Are they doing it because they don't like his personality and some of the things that he's saying? Okay, and I think, again, if I was on Elon's board, what I would be saying to him, "Hey, listen, it is a little bit different than rockets. And it's a little bit different than cars. Because if you're in the media business, whether you like it or not, the media is going to have a say about your business. You're going to have a constant slew of critics, analyzing and critiquing your business." But you guys asked about the vision, let me just give it in less than a minute. Because I did read through the PowerPoint presentation. And through Cathie Wood's fund– I just should also point this out: I am an investor, although it's a very small amount of money, in Cathie Wood's fund that's been directed towards Twitter. The vision for the company, and Kara may say this is a retread, but I at least find it interesting that he wants to broaden the base of the social media. He wants to be more inclusive as it relates to the free speech dynamic. And he eventually wants to create a 'super app,' which is somewhat similar to WeChat, where you could have a payment structure going through Twitter. And you could have other things going on inside of Twitter, in terms of way more robust, WhatsApp-like communication. And so, when I look at all those different things, and I look at the install base of Twitter, if he gets that right– John Donvan: Let me just– I want to jump in for a point of clarification, Anthony, because you've been arguing against the argument that Twitter is dying. What we're really arguing is whether Musk's impact on Twitter is good or bad for it, is driving it to higher or lower places. Anthony Scaramucci: Well, temporarily, it's driving it lower. I think Kara is right about that again. The question was, “Is it Twitter dying?” I'm saying no, it's not dying. John Donvan: No, no, the question is: is Musk killing Twitter? Anthony Scaramucci: Is Musk killing– Musk is temporarily hurting Twitter. But I believe that Musk will be an agent for formidable positive change. John Donvan: When he wrote– when he wrote his letter to the board last year, he wrote, "Twitter has extraordinary potential. I will unlock it." Do you think he is unlocking potential there now, Anthony? Anthony Scaramucci: But you see that– but you see this is the problem with our society, okay. We're– you know, you talk about technology? We're in 100,000-year-old pieces of machinery that haven't evolved in 100,000 years. My iPhone went from one to 14 in 15 years, but we think linearly. So right now, if he's not doing well, we think that's going to be the permanent state, the same way we thought in 2008 that Tesla and SpaceX were going out of business. John Donvan: Okay, I think that's a fair point. I want to take that very point to Kara. Kara Swisher: Tesla's not at a– Tesla is buoyed by this stock that is way out of line with the other stocks and there are competitors now catching up to him. He's still ahead. Let me be clear, they're still way ahead. But it's like Netflix. Right as Disney and others started getting involved in streaming– Anthony Scaramucci: No, no. But, Kara, I'm making the point that Tesla looked like it was out of business in 2008. Kara Swisher: Yes, but making those comparisons aren't the same thing. Let me just say, when you say 'super app,' let me give you an– Guess what the 'super app' is. TikTok, right now. New apps will come in and do this. 'Super apps' have never worked in this country. It works in China. It has never worked in this country. Do you trust Elon Musk with your payments, money? I don't. I would trust Apple with it. I would trust Amazon with it way before I would do that. Each of these companies has tried to do a 'super app' or is doing a version of it. It's another retread idea that is very difficult to pull off. Because you need people, you need people behind you. You need to build this up. You have to get people using it. Let me just tell you, young people are not flocking to Twitter to use their 'super app.' And they're not going to. They're using Snapchat for communications. They're using TikTok for entertainment. They're using Facebook less and less. John Donvan: Is that Musk's fault, though? Is that Musk's fault? Kara Swisher: No, it's just the– it's just the state of competition. Now he's in a state of competition in cars, where GM, Ford, Mercedes, Volkswagen, everybody is in now the business and now they're, you know, they're not doing as well as Tesla. But they will do as well as Tesla. John Donvan: This is Intelligence Squared U.S. More debate in a moment. John Donvan: Welcome back to Intelligence Squared U.S. I'm John Donvan. Let's get back to our debate. I want to go to the point that, Anthony, you made in your opening. You said, as sort of a side point, about the fact that Musk is saying that he wants to restore free speech to the platform. Critical of some of the people who were taken down, Kara– obviously describing them as 60,000 deplorables coming back to the site. But the fact is that– Kara Swisher: Despicables. John Donvan: –Despicables, I apologize. I want to talk about its impact as we head into a new election cycle. Where Twitter is in this process. Where we are and what Musk's challenge will be in moderating or not moderating. He's obviously not a free speech absolutist because– Even since he's taken over, he's kicked people or suspended people over the platform for criticizing him and for impersonating him. So, just how free speech-y is he, really, Anthony? And where does that– where does that take us and, you know, the role of Twitter in our political cycle right now? Anthony Scaramucci: You're the moderator. You're supposed to be impartial and indifferent to the to the question, but you're fortifying me right now. And so, just want to caution you about that, because what you're basically saying is the upcoming election, Twitter is going to have this unbelievable influence in the upcoming election. And I obviously believe that it will. And so here we are. Eighteen months from now, Twitter will be very vibrant and a very big part of the upcoming election. John Donvan: So, you're saying, I'm taking your side? Anthony Scaramucci: You're making my point, you're making my point, John, that Twitter is not dying. So, I just want you to go back to your impartial position that you are supposed to be in. But I thank you for making the point. John Donvan: Well done. Well played, Anthony. Anthony Scaramucci: But here we are right now. We're discussing this, okay. And so, there's big problems. Okay. We all know that there's robotic technology on Twitter, we know there's Russian and Chinese and other adversarial states– adversarial disinformation on Twitter. We know that there's got to be a cleanup of that. We also know that there's electioneering that's done on Twitter that's loaded with disinformation. Look at this guy, George Santos as an example. He's almost the apotheosis now of The Great Lie being manifested into an individual. But here's what I would say to everybody listening. Okay. We are a free speech country. It was grounded in free speech for a lot of different reasons. But the main one would be for all of us to be free. And a result of which, when you're in a free speech country, you do have qualifications. We do know the case law, about free speech, hate speech is not protected. A threat to the public is not really protected. You know, the debate about yelling fire in the theater would be an example of that. So, we know that there has to be guardrails on free speech that you brought up the fact that Elon Musk doesn't like people being critical of him. And so, he took some of them off the platform, and he deplatformed them. But if you remember, it was a– temporary deplatform. I think one thing we can say about Elon Musk and maybe Kara will agree or disagree. But when he gets things wrong, good entrepreneurs, typically when they get something wrong, they don't stay– Kara Swisher: –Why get it– Anthony, why get it wrong in the first place? It just seems like the peak of a man at night who had too much sugar. Like that's what happened. Anthony Scaramucci: That may be the case. And I ceded those points to you, that there's some managerial erraticism that's going on. And you are right about that. But I'm talking about the broader point about the vitality of Twitter, and what will Twitter look like in 2024 and 2028, etc. And I also bring up the point, is– even with the erratic behavior, does Elon Musk manifestly get things right? Is he a value generator for his investors and for himself? And you've made the point. Yes, and rockets. Yes, and cars. But likely not in the media– John Donvan: Anthony, let me jump in because to return to the point you were making that his commitment to, to make it very blunt, to allow people like Donald Trump back in after they were suspended and others– Kara Swisher: Who's not coming, who's not showing up. John Donvan: Who you said, were in your communities, that there's a sort of disconnect and disaffection with the wokeness that you said was, to some degree, you feel influencing the decisions that Twitter made prior to Musk's takeover. And I want to know, is the return of those individuals, and I'm not sure if I'm characterizing how you would put it correctly, but the broadening of the spectrum of allowed speech on the site, going to be one of the things that he makes better about Twitter? Anthony Scaramucci: I hope, I hope so. But let me say this, you okay, John? And I got this wrong. Donald Trump got it right. So, you should really listen. I grew up in an aspirational blue-collar family. Thirty-five short years later, those very same families, they went from economically aspirational, to economically desperational, okay? And we've left them out of the story. And they're very angry about it. And somebody like Donald Trump saw that. And he became an avatar for their anger. Now, he didn't offer any policy solution for them. But when he was sticking a finger in the eye of the media establishment, the political establishment, the business establishment, they loved it. And I'm just making the point that if you want a fairer, better, broader society, we have to get those people back into the fray. Kara Swisher: But you see, Anthony, the issue is– they're not– those people aren't on Twitter. They're not using Twitter, look at the– look at the recent election, rife with election denialism on that platform, on Twitter, and many other platforms. What did the voters do? They didn't vote for that. They voted out those people, the people that were screaming. Kari Lake screams on Twitter, didn't work for her, you know. Michael Flynn screams wherever he happens to be, didn't work for him. So, I don't think it has an impact. Because I don't think these people are using the platform. Anthony Scaramucci: Kara, you just made my argument even better then, because you're just saying that those people, them being brought back on Twitter, somebody like Michael Flynn, they're not really having that big of an impact. Kara Swisher: Now it isn’t because it's a tired product. That's what I'm arguing is that it's a product that's now noisy and angry. Anthony Scaramucci: I want to beat these people– I want to beat these people in the free marketplace of ideas. I want to beat Michael Flynn or Donald Trump in the free marketplace of ideas. You brought out that Donald Trump's not back on Twitter. He's not for a specific reason. He's getting paid on Truth Social not to be back on Twitter. John Donvan: Okay, we're wandering a little bit now from the topic of whether Musk is killing Twitter. And I have to break in, Anthony, because we need to move along– Anthony Scaramucci: –Go ahead. John Donvan: –to bring in some members of the press, media– Kara Swisher: –Okay. John Donvan: –to join the conversation now. So, I want to welcome Steven Levy. Thanks for joining us. Tell people who you are and then enter the conversation please with a question. Steven Levy: Yeah. Hi. This is a fascinating debate. I'm editor-at-large at Wired Magazine. I've been writing about technology for a long time, following Twitter for a long time. And so first for Kara, you know, to me– we ask is Elon killing Twitter. As a Twitter user, I'm super concerned about whether this is going to still be usable for me. And throughout Twitter's history, it really has been the users to shape how Twitter works. They invented all kinds of stuff like the reply, the retweet and other things. And I'm wondering whether Twitter, despite Elon, might not be some sort of cockroach, where the users can figure out how to get around whatever mischief he does and, you know, erosions he does to the platform. So, I'm wondering, you know, how do you respond to say, you know, look, as a user, there's a way I can kind of like, fix my– who I follow and other things change to make that happen? Kara Swisher: I think you can do that. Sure, sure. But because, like a lot of products, you know, from using stuff, I have a box full of products that I used to use that I don't use anymore. A lot of physical products, a lot of software products, that just became either onerous or difficult or something better came along. And so, I do think you can sit there and fiddle with it. But one of the dirty secrets of Twitter for media people, as you may know, as I know, having run sites is that it doesn't really give you much business and one of the reasons you want to use this is so that you get people to listen and read what you're doing. Maybe virtue signal to other journalists of what you're up to and things like that. But in general, if I had to look at the stuff which actually got me money, like made money as a journalist, it was always Apple podcasts for example, references from them, or Facebook or LinkedIn. Twitter was always way down on that scale. And so, the question is, do you realize, suddenly, that you're putting way too much work into something that doesn't give something back? And I do think the more exhausting it gets, and the easier that other competitors make things that are attractive, the more you move to them– it's the same thing with cars. As there's more choices for Tesla, Tesla's market share is going to inevitably and should go down, because people, you know, don't want the Tesla look. They want to be in a Porsche, they want to be in, like me, a Chevy Bolt, they want to have a lesser price of something. And so, I think he's opening it up to other competitors in a lot of ways and he's made the experience more difficult to use. And why would you want to do work arounds? He himself said it. He said it to advertisers that day when he was nice to advertisers. He said, if you use it for an hour, and you feel bad, why would you come to that product? Exactly. John Donvan: Okay. Thanks, Steven. And you had a question also for Anthony. Steven Levy: Yeah, another thing that's been going on in Twitter for a long time, and early in its time, and when it first began to take off, it was sort of an assumption that they would get a billion users, right, which is really what it takes for a social media site to break through and become successful more than what Kara says is an okay business. Now, they've never been able to do that. And it seems to me that what Elon is doing by, you know, sort of arguing for his subscriptions, which is a great way to kill the number of people you have, basically creating this privileged class, which is going to like flood your timeline, if you don't pay $8, you're not getting the whole experience. It seems to me between that and the things he does, which people just don't like and make your timeline more toxic, it's going to be even tough to keep what he has now, let alone build up to that billion, which would make it a successful enterprise. How do you answer that? Anthony Scaramucci: It's one or the other, right? He's either a cockroach, where he's going to survive the nuclear blast or these types of things. So, I'm just saying to me, maybe he's just an upsetting cockroach. You know, ultimately, you know, what you're looking at is a short-term window of the Elon Musk behavior as owner of Twitter. And I'm saying to you, if you look at Elon Musk's past behavior, as owner of SpaceX and Tesla, there were near death experiences of both those great companies. And he was able to figure it out and execute bold and grand visionary strategies for those companies. The question before us right now: is Elon Musk killing Twitter? And I'm saying Elon Musk may be hurting Twitter in the short term, but I think long term, if you look at his management skill set and his capability, he is going to regrow and create great vibrancy in Twitter. I'm saying three things. I'm saying that the business is incredibly durable. I cede that to Kara that it's smaller than he would like it to be, but it's incredibly durable. Number two, it's very relevant. We're already talking about 2024. And number three, his track record is such that I do not want to bet against him. And I believe he's going to create this free intellectual marketplace of ideas that's growing and very vibrant. It may not become the 'super app' that he wants, but I bet it could become a 'Superboy-ish' app, as opposed to a 'Superman-ish' app, and I'm betting on him. John Donvan: Want to bring in Monica Melton also to jump in with a question and can you tell folks who you are and go for it? Monica Melton: Hi, everyone. I'm Monica Melton, a senior tech editor at Insider Business, formerly Business Insider. Kara, you nicely laid out how Twitter may be killing Elon. While Anthony, you mentioned Elon sort of leveraging relationships to propel himself after 2008. But do either you think Elon's reputation not only as a techno king, but as a businessperson in general is being irreparably harmed by the chaos he's created at Twitter? How does he realistically come back from this moment? Kara Swisher: Well, I don't think anyone's irreparably harmed in this society, honestly. I mean, look, Bill Gates used to be Darth Vader, and now he's the biggest giver of philanthropy. I think people can recover their reputation. And there's a whole lot of forgiveness around certain business behavior. I mean, there's certain people that aren't– Harvey Weinstein's not coming back, but lots of people can, so I don't think it's irreparable. I just think that why do it? You know, he sort of styled himself after Iron Man, right? That's what he was trying to go for here. And I think that's a very pleasant way to think of him. And I think a lot of stuff he's done, as I've said, time and again, is visionary and really interesting. That said, there's something happening here there's something– some demons that follow this guy that he has to create controversy and contrarianism just for the sake of it. And I don't know his personal life. I don't know what's going on. But one of the people I interviewed who worked for him, Yoel Roth, said it was– when you deal with them 90% of the time, it used to be very reasonable. And I think Anthony's right, it was very reasonable and interesting and sometimes odd things, he'd say odd things off the top of his head. And then 10% of it was really quite mad, like angry for no reason, overly sensitive to criticism. That part seems to have grown enormously. Unless it's all a performative act, and the other parts seem to have died down. I wish he had just stuck with the part that made him that way. He was the one most capable of doing this. And what he's doing now makes no sense to me, and it's turned his brand into something that's really unattractive. It's having impact on Tesla. It's having impact on lots of things. John Donvan: I have to call for time, we're gonna wrap up this round. I want to thank Steven and Monica, for joining us in the conversation. In our final round, you each get 90 seconds to summarize your position or move it forward on why you're a Yes or why you're a No. Anthony, I'm going to let you go first. You're the No on the question of whether Elon Musk is killing Twitter. So take 90 seconds, please. Anthony Scaramucci: Well, you know, I'll probably take less than 90 seconds, because I think I've made my points and I'll make three last ones. We'll be looking at Twitter for the 2024 election, we certainly will be looking at what candidates are writing on Twitter. And we'll be looking for what journalists are potentially reporting or getting out onto Twitter first, because that seems to be a medium of delivery for journalists that are trying to break stories. Number two, I do believe Elon Musk is a very successful and very effective executor and manager. And despite his current erraticism, I think he's going to self-correct. And I think he's going to find his way to making that 'Twitterverse,' if you will, better. And the last point, I think it's the most important point, you can call it the 'cockroach theory' or whatever you want to call it.   This is a durable business; it may be smaller than he wants it to be. But it's a durable business, and it can take a lot of hits before it quote unquote, gets killed off. So Elon Musk is not killing Twitter. If anything, we'll be looking at Twitter, in the 2024 presidential election. Kara Swisher: I'm sure we'll be looking at that. I think the politicians will be the last people out the door, to turn out the lights there. They enjoy, they're narcissistic, and they get to yell at each other. It's a perfect medium for that. The question is, 'is it an actually good product?' And it is not as good a product as it was. And they have no signs of showing anything that's valuable to a vast majority of people, except for political journalists and politicians. And increasingly, celebrities are coming off of it. Journalists that don't have anything to do with politics are coming off of it. It's become somewhat of an amusement. Now it's become a more toxic amusement, it's like sort of watching stuff that– or eating stuff that isn't very good for you, at some point, you sort of feel sick, doing it. He's got to make it a great product. That's the only way out of this as it is with most things. If it's not a great product, it, like all the other bad products, will die as every other tech product has died over time. We're not using all those things because either something better came along, or the product just wasn't as good, it wasn't as enjoyable, wasn't as relevant. You have to be relevant to a vast amount of people to be successful. And when you say you can't do that? Whatever you think of the Chinese ownership of Tiktok, it's an incredibly enjoyable product. It's really fun to use. It's addictive. It's interesting, it's creative, and he's got to do those things. Instead, he wastes his time in some sort of weird personal vendetta against himself. That's really what's so sad about it, is that, you know, I sometimes feel like that he just– I feel like some days, he just needs a hug, so he could stop doing this and actually make something beautiful. He has done in the past. He's absolutely capable of it. I'm not so sure media is as easy as building a rocket. I know it sounds crazy. But he's got to really stop the nonsense and make a product that's worth it to people and worth paying for. It's a very basic thing of capitalism. This is not about wokeism. This is not about the mind virus and all these other tiresome, petty grievances against people, it's about making a great product and making a product that people want to pay for or use in some way that's enjoyable to them. And it's as easy as that. And so, and by the way, tech is the young eats its old. What's coming next is what's going to be the cool thing, not Twitter. Twitter's had enough lives. And we'll see if he can transform for a little while longer, but it's not going to be much longer. John Donvan: And that concludes our debate. And not only did I really, really enjoy this conversation, but the way that the two of you conducted it totally embodies what we aim for when we do these debates, the fact that the two of you could disagree, and still be so, not just respectful, but amicable with one another. We appreciate that you did homework on this and that you came and you actually listened to one another. So, thank you very much for being part of this debate with us. Anthony Scaramucci: Well, it's an honor to be here, John. Kara Swisher: Thank you. John Donvan: Thank you for tuning into this episode of Intelligence Squared, made possible by a generous grant from the Laura and Gary Lauder Venture Philanthropy Fund. As a nonprofit, our work to combat extreme polarization through civil and respectful debate is generously funded by listeners like you, the Rosenkrantz Foundation and friends of Intelligence Squared. Robert Rosencrantz is our chairman. Clea Conner is CEO. David Ariosto is head of editorial, Julia Melfi, Shea O'Meara, and Marlette Sandoval are our producers. Damon Whitmore is our radio producer, and I'm your host, John Donvan. We'll see you next time. This transcript has been lightly edited for clarity. Please excuse any errors......»»

Futures Rise On China Reopening, End Of Tech Crackdown As Asia Enters Bull Market Futures extended their Friday post payrolls gain on the back of Chine reopening optimism coupled with speculation that China's tech crackdown is finally ending - just as we speculated this weekend when reporting on Jack Ma's ceding control of Ant Financial. S&P futures rose 0.4% as of 7:30 am ET while Nasdaq contracts 100 added 0.5%. And while European stocks were mostly in the green, the bulk of overnight action was in Asia where the Hang Seng Tech Index jumped 3.2% Monday, led by Alibaba Group after a top central bank official said the clampdown on the Internet sector was drawing to a close. The broader market also advanced, with a gauge of Chinese equities listed in Hong Kong rising 2%, helping push the MSCI Asia Index up 20% from its October low, setting it up for a bull market. The dollar weakened to a seven month low and oil rallied. Among premarket movers, Bed Bath & Beyond shares surged as much as 75%, set to rally after losing nearly half of their value in the previous week on bankruptcy worries amid mounting losses, and ahead of the company’s earnings due Tuesday. Coinbase and Riot Platforms led cryptocurrency-exposed stocks higher in premarket trading as Bitcoin rallied to extend gains for a sixth consecutive session — its longest streak in nearly a year. Lululemon dropped after the athletic apparel maker forecast a weaker gross margin. Here are other notable premarket movers: Oracle is upgraded to overweight from neutral at Piper Sandler as its cloud transformation takes hold. The brokerage also noted that fiscal 2024 might be a watershed year for the software company, where growth in operating profits and earnings per share could accelerate to more than 10%. Oracle shares are up 1.3%. Piper Sandler upgrades Uber to overweight and cuts DoorDash to underweight, recommending a pair-trade between the two as it favors ride-hailing over delivery in 2023. Elsewhere, Jefferies starts DoorDash with an underperform rating, with a buy on Uber. Uber shares rose 2.3%. Dash shares down 4.2%. Ally Financial upgraded to neutral from underweight at Piper Sandler, with headwinds seen as now priced into the stock. Shares rise 1.9%. Credit Suisse says fertilizer prices are on a downward trajectory in a note double-downgrading Mosaic (MOS) to underperform. Shares fall 1.1%. Elf Beauty is downgraded to hold from buy at Jefferies, with broker saying risk-reward is balanced for the cosmetics company against an uncertain macroeconomic backdrop. Shares fall 1.1%. Ipsen shares drop after it agreed to acquire Albireo for $42/share in cash plus a contingent value right (CVR) of $10/share related to the U.S. FDA approval of Bylvay in biliary atresia. Albireo shares soar 93%. Jefferies sees another year of uncertainty ahead for US bank stocks, in a note upgrading its ratings on Truist (TFC) and First Republic (FRC) and downgrading both Signature Bank (SBNY) and Regions Financial (RF). TFC falls 0.09%. FRC rises 1.2%. SBNY shares fall 0.4%. RF falls 1%. KeyBanc trims its natural gas price estimates for 2023 following a relatively mild winter to date and cuts its ratings on Comstock Resources (CRK) and Pioneer Natural Resources (PXD). CRK shares rise 0.8%. PXD rises 1%. There is a strong industry backdrop for Harmonic (HLIT), with greater competition in the broadband service market pushing cable multiple-system operators (MSOs) to invest aggressively, Jefferies writes in note that upgrades the stock to buy. Shares rise 1.8%. Lanvin Group is rated neutral at Citi, which initiated coverage on the stock noting that the luxury fashion group has solid brands but clear evidence of a turnaround is required to merit a buy call. Shares rise 3.5%. Markets closed last week solidly in the green, encouraged by Friday's jobs report which showed wage growth slowing, lifting the S&P 500 2.3% to notch its first winning week in over a month. They face another test on Thursday with CPI data that will likely help determine the size of the Federal Reserve’s next interest-rate increase. After the easing in wage inflation, swaps contracts showed investors expect the policy rate to peak at under 5% this cycle, down from 5.06% just before Friday’s jobs report. While traders remain divided about the size of February’s hike, with 32 basis points of tightening priced in, it appears that a quarter-point move is seen as more likely than a half-point increase. While pressure on the Fed to hike by 50 basis points on Feb. 1 has eased, “policy makers appear to be increasingly frustrated by market-pricing at odds with Fed signaling in terms of both the terminal funds rate and timing of initial rate cut,” BNP Paribas economists led by Carl Riccadonna wrote in a note to clients. “This could tilt their bias toward a more forceful response at the next meeting.” And while market pessimism is still dominant, analysts at Wells Fargo said Friday’s gains may be more durable than some expect, being “driven by a pro-cyclical post-jobs report reaction — not by risk/short-covering.” This market action “probably creates some positive investor sentiment since long-only’s are making money and short-sellers are faring better than one might expect.” On the other hand, Morgan Stanley strategists said US equities face much sharper declines than many pessimists expect with the specter of recession likely to compound their biggest annual slump since the global financial crisis. The bank's equity strategist, Michael Wilson, long one of the most vocal bears on US stocks, said while investors are generally pessimistic about the outlook for economic growth, corporate profit estimates are still too high and the equity risk premium is at its lowest since the run-up to 2008. That suggests the S&P 500 could fall much lower than the 3,500 to 3,600 points the market is currently estimating in the event of a mild recession, he said. At the same time, US stocks have been lagging the rebound in European, Asian and emerging-market peers as American equities trade at a hefty valuation premium. European markets also started the week amid a generally buoyant mood, as continental bourses opened higher, after posting the best week since March on optimism about China’s reopening, an easing energy crisis and signs of cooling inflation. Europe’s Stoxx 600 Index climbed 0.5%, touching the highest since mid-December with construction, technology and energy leading gains amid optimism over China’s demand for raw materials.  On the data front, euro zone unemployment was unchanged in November at 6.5% as expected. Here are some of Europe's biggest movers: UCB gains as much as 4.9%, the most in almost 11 months, after the Belgian biopharma company said its 2022 results should come in toward the high end of guidance Geberit shares climb as much as 3.5% after Goldman Sachs raised its recommendation on the Swiss manufacturer to neutral from sell, citing reduced risk related to energy prices BioArctic rises as much as 29% after Eisai and Biogen’s Alzheimer’s drug Leqembi (lecanemab-irmb) received accelerated approval from the FDA. The treatment originates from BioArctic TGS gains as much as 15%, the most intraday since 2020, after a 4Q update that DNB said showed a strong beat on late sales and supportive management comments on order inflow SAES Getters shares surge as much as 36%, the most on record, after SAES Group entered an agreement with Resonetics to sell its Nitinol production business for about $900m in cash AstraZeneca falls after agreeing to buy US biotech CinCor Pharma for as much as $1.8 billion. Analysts say the acquisition is a good fit for the firm’s existing cardiovascular franchise Fresnillo falls as much as 2.5% as RBC Capital Markets downgrades stock to sector perform, as it sees operational momentum widely priced in and expects limited growth in the pipeline Frontier Developments shares fall as much as 42%, its biggest intraday decline on record, after the video-game firm said it no longer expects to meet FY23 consensus expectations Ambea drops as much as 6.9%, the most since Dec. 23, after the Swedish elder care company saw its target price cut at DNB to SEK52 from SEK73 on continued headwinds due to inflation Devolver Digital shares fall as much as 9.5%, dropping to a record low, after downgrading profit expectations for FY22 in a trading update. Goodbody called the update “disappointing.” Earlier in the session, Asia’s benchmark stock index was on track to enter a bull market, as China’s reopening and a weakening dollar lure investors back to the region. The MSCI Asia Pacific Index climbed as much as 1.9% on Monday, taking its advance from an Oct. 24 low to more than 20%. The Asian benchmark is up 3.7% so far in 2023, beating the S&P 500 Index by about two percentage points. That’s after they both slumped about 19% last year, their worst performance since 2008. Gauges in Hong Kong, Taiwan and South Korea led gains in the session, while Japan was closed for a holiday. Strategists have predicted a better year for Asian equities after a dismal 2022, especially as stocks in China, which carry the second-highest weighting in the regional gauge after Japan, turned a corner in November following the nation’s shift away from stringent virus curbs. The bull market milestone comes after the MSCI Asia gauge tumbled nearly 40% from a peak in early 2021. The MSCI Emerging Markets Index is on track to enter a bull market after surging more than 20% from its October low, boosted by Chinese stocks after the nation pivoted on its Covid strategy and offered more policy support for the economy.   “The rally has been fast and furious, so it is only natural to expect some profit-taking,” said Charu Chanana, senior strategist at Saxo Capital Markets Pte. “There are also some risks to keep a tap on, such as BOJ’s hawkish shift and company earnings. But that being said, there is still room for Asian markets to outperform global peers in 2023.” Australian stocks climbed for a fourth day as miners advanced. The S&P/ASX 200 index rose 0.6% to close at 7,151.30, capping four consecutive days of advances. The winning streak is the benchmark’s longest since Nov. 25. The gauge followed Wall Street shares higher after US economic data boosted optimism for slower Fed rate hikes. Miners and energy shares contributed the most to the Australian index’s move. In New Zealand, the S&P/NZX 50 index rose 0.2% to 11,646.45. In FX, the Bloomberg Dollar Spot Index fell to its lowest level since June as the dollar weakened against all of its Group-of-10 peers apart from the yen. It pared the drop in European hours. NOK, NZD are best performers among G10’s. The euro pared gains after rising to $1.07. Bunds and Italian bonds underperformed Treasuries, with the largest losses seen in the belly of curves, while money markets added to peak ECB rate wagers. Focus is also on the EU’s first bond sales of the year The pound advanced, while gilts bear flattened. Bank of England Chief Economist Huw Pill comments are due later Norway’s krone and the Australian dollar led G-10 gains, with the latter climbing to $0.6947, its highest level in more than four months, supported by China’s reopening. AUD curve bull steepens with 3-year yield ~13bps lower Turkey’s lira weakened as investors weighed President Recep Tayyip Erdogan’s signal that general elections will be held in early May, a month earlier than scheduled In rates, Treasuries were pressured lower with losses led by long-end, continuing Friday’s post-payrolls steepening move amid wave of block trades. US yields are higher by as much as 4bp at long-end, steepening 5s30s, 2s10s spreads by around 2bp; 10-year around 3.595%, cheaper by 3.5bp on day but outperforming bunds in the sector by ~2.5bp.  Treasuries took their cue from wider bear-steepening move across core European rates following first EU bond sales of the year. Another heavy IG credit issuance slate is expected this week, which also includes December CPI data Thursday and Fed Chair Powell appearance Tuesday.   In commodities, crude futures advanced, pushing Brent up almost 3.5% to trade near $81.11. Spot gold rises roughly $8 to trade near $1,873/oz while base metals are in the green. In crypto, Bitcoin is firmer and has managed to surpass and gain a more convincing foothold above USD 17k, after fleeting breaches of the figure in recent sessions, with the 16th Dec USD 17524 peak into play The only event on today's quiet calendar is the consumer credit print at 3pm ET. There are two Fed speakers on deck as well, Bostic and Daly, speaking shortly after noon. Market Snapshot S&P 500 futures up 0.4% to 3,932.00 STOXX Europe 600 up 0.5% to 446.56 MXAP up 1.7% to 161.51 MXAPJ up 2.4% to 535.12 Nikkei up 0.6% to 25,973.85 Topix up 0.4% to 1,875.76 Hang Seng Index up 1.9% to 21,388.34 Shanghai Composite up 0.6% to 3,176.08 Sensex up 1.4% to 60,752.44 Australia S&P/ASX 200 up 0.6% to 7,151.33 Kospi up 2.6% to 2,350.19 German 10Y yield little changed at 2.27% Euro up 0.3% to $1.0677 Brent Futures up 3.0% to $80.90/bbl Brent Futures up 3.0% to $80.89/bbl Gold spot up 0.4% to $1,873.06 U.S. Dollar Index down 0.27% to 103.60 Top Overnight News from Bloomberg Central banks aren’t giving up their inflation fight yet with the peak in interest rates still to come in most economies, but pauses will come at some point in 2023 — and perhaps even pivots The ECB predicts wage growth — a key indicator of where inflation is headed — will be “very strong” in the coming quarters, strengthening the case for more interest-rate hikes, the institution said Monday in an article to be published in its Economic Bulletin UK Prime Minister Rishi Sunak is set for talks with the union leaders directing the wave of strikes that have hobbled the UK since the start of the year, as the threat of more widespread action hangs over the country Russian President Vladimir Putin’s plans to squeeze Europe by weaponizing energy look to be fizzling at least for now. Mild weather, a wider array of suppliers and efforts to reduce demand are helping, with gas reserves still nearly full and prices tumbling to pre- war levels The SNB expects an annual loss of about 132 billion francs ($143 billion), more than five times the previous record, it said Monday in preliminary results. The largest part of this, 131 billion francs, stems from collapsed valuations of its large pile of holdings in foreign currencies, accrued as a result of decade-long purchases to weaken the franc A ship has been refloated after running aground in the Suez Canal and briefly disrupting traffic in the waterway that’s vital for global trade Brazil’s capital was recovering early Monday from an insurrection by thousands of supporters of ex-President Jair Bolsonaro who stormed the country’s top government institutions, leaving a trail of destruction and testing the leadership of Luiz Inacio Lula da Silva just a week after he took office Chinese officials are considering a record quota for special local government bonds this year and widening the budget deficit target as they ramp up support for the world’s second- largest economy, according to people familiar with the matter Japanese Prime Minister Fumio Kishida said careful explanation and communication with markets would be part of consideration on monetary policy, when asked about possible future changes in the Bank of Japan’s ultra-loose policy A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks gained with the MSCI Asia Pacific index on course to enter a bull market as the region took impetus from last Friday’s rally on Wall St. ASX 200 was led higher by strength in the commodity-related sectors and with sentiment also helped by China’s border reopening which JPMorgan predicts could boost Australia’s economy by nearly one percentage point over the next two years, although gains are capped following disappointing building approvals data. KOSPI outperformed with the index and shares in LG Electronics unfazed by the Co.’s softer preliminary Q4 earnings. Hang Seng and Shanghai Comp were supported after China’s border reopening over the weekend added to the hopes of an economic recovery and with Alibaba shares spearheading the advances in Hong Kong after Jack Ma ceded control of affiliate Ant Group. Top Asian News Chinese President Xi Jinping stressed the importance of remaining committed to advancing reform, exploring new ground and carrying forward the fighting spirit, in a bid to modernize the work of judicial, procuratorial, and public security organs, according to China Economic Net. PBoC official Guo Shuqing said China’s growth will return to a normal path as China provides further support to households and companies to help recover following the end of the zero-Covid policy, according to People’s Daily. Tens of thousands of travellers began to fly in and out of mainland China on Sunday following the removal of nearly all of China’s border restrictions, according to WSJ. China’s health security administration said talks to include Pfizer’s (PFE) Paxlovid in the drug list for basic state health insurance failed due to the Co.’s high quotation for the antiviral medicine, according to Reuters. Six Chinese cities set GDP targets for this year ranging from 5.5%-7.0%, according to Securities Daily. Japanese PM Kishida said they must choose a successor to BoJ Governor Kuroda best suited for the post at the time when Kuroda’s term ends in April and must discuss with the next BoJ Governor the relationship between the government's and BoJ's policies. Kishida added that the government and BoJ must work closely together and each should play their own roles in achieving sustained price stability, while he noted that the government is ready to respond flexibly using reserves when asked if further steps could be taken to soften the blow on households from rising prices, according to Reuters. China reportedly considering a record special debt quota and a wider budget deficit, via Bloomberg; considering a deficit ratio of circa. 3% for the year. New special bond quota of up to CNY 3.8tln. European bourses are firmer across the board, Euro Stoxx 50 +0.3%, as the constructive APAC tone continues amid a limited European docket. Sectors are primarily in the green, with defensive names lagging somewhat in-fitting with the risk tone. US futures are in the green, ES +0.4%, in-fitting with the above sentiment ahead of Fed speak and a NY Fed Consumer Expectations survey. Apple's (AAPL) iPhone exports from India have doubled to a record USD 2.5bln, via Bloomberg. Top European News BoE’s Mann said energy price caps could be lifting inflation in other sectors by boosting consumer spending and noted it is unclear what would happen to inflation when caps are removed, according to Bloomberg. UK PM Sunak said inflation is not guaranteed to decline this year and that the government will need to be disciplined to ensure inflation is brought down, according to Reuters. In other news, PM Sunak said he was willing to discuss pay increases for nurses in an effort to end strikes as ministers prepare to meet union leaders on Monday, according to FT. Czech Central Bank Governor Michl said they expect a significant drop in inflation from spring and are ready to raise rates further if the baseline scenario of a decline in inflation does not materialise, while he added that policy will be strict until inflation begins declining, according to Reuters. FX   DXY continues to slip below the 104.00 mark between 103.860-420 parameters towards key technical support and its December low (103.380). Action which is benefitting peers across the board ex-JPY, which is suffering amid the easing in USTs/EGBs and a Japanese holiday, with USD/JPY above 132.50. Antipodeans are the current outperformers with AUD surpassing 0.69 and Kiwi eclipsing 0.64 vs USD, before waning slightly. EUR/USD hit, but failed to breach, 1.07 while Cable is off best but still above 1.21 in a 1.2089-1.2174 range. PBoC set USD/CNY mid-point at 6.8265 vs exp. 6.8276 (prev. 6.8912)   Fixed Income EGBs under pressure and continuing to retreat from Friday's best, with Bunds down by nearly 100 ticks and Gilts similarly dented though managing to retain 102.00 at present USTs are similarly softer, though have largely been consolidating towards the APAC trough given the absence of Japanese participants ahead of Fed speak and NY survey, with yields modestly firmer across the curve. Commodities Crude benchmarks are bid this morning, with WTI Feb and Brent Mar posting upside in excess of 3.0% or USD 2.0/bbl respectively. Action has been driven by China’s ongoing reopening and fresh geopolitical headlines, alongside other crude-specific developments (see below). Qatar set February marine crude OSP at Oman/Dubai plus USD 0.75/bbl and land crude OSP at Oman/Dubai plus USD 2.10/bbl. In relevant news, Qatar Energy is to sign Ras Laffan Petrochemicals Complex agreements with the project to cost USD 6bln and it created a JV with Chevron Phillips Chemicals of which it owns 70% and Chevron (CVX) owns 30%, according to Reuters. Iraq’s Oil Minister said the Karbala oil refinery will begin commercial production in mid-March, according to Reuters. US DoE rejected the initial batch of bids from oil companies to resupply a small amount of oil to the SPR in February, according to Reuters. Colonial Pipeline said repairs at the Witt Booster Station were completed and Line 3 returned to normal operations as of 17:51 EST on Sunday, according to Reuters. China has issued a second batch of 2023 crude oil import quotas to independent refiners totalling 111.82mln/T, via Reuters citing sources. Iraq February Basrah medium crude OSP to Asia -USD 1.40/bbl vs Oman/Dubai average, via Somo; to Europe at -USD 8.95/bbl vs Dated Brent. Spot gold is fairly contained around the mid-point of USD 1864-1880/oz parameters, with the yellow metal deriving some upside from the DXY struggling to attain a positive foothold; next resistance mark is USD 1885/oz from the 9th of May. Geopolitics Ukrainian President Zelensky said Ukrainian forces were repelling Russian attacks on Bakhmut in eastern Donbas and were holding position in nearby Soledar under very difficult conditions, according to Reuters. Russia’s Defence Ministry said it struck a building in eastern Ukraine which killed more than 600 Ukrainian troops in retaliation for Ukraine’s deadly strike against a Russian barracks, although Ukrainian officials denied there were any casualties and said the strike by Russia only damaged civilian infrastructure, according to Reuters and ITV. Russia and Belarus will conduct joint air force drills on January 16th-February 1st, according to the Belarusian Defence Ministry cited by Reuters. Russian Kremlin has rejected suggestions from Ukraine that Russian official Kozak is sounding out officials in Europe about a potential peace deal. Swedish PM Kristersson said they have fulfilled commitments made to Turkey at the Madrid summit but noted that Turkey is demanding concessions that Stockholm cannot give to approve its application to join NATO, according to FT. China's military said it carried out combat drills around Taiwan on Sunday, while Taiwan's Defence Ministry stated 28 Chinese aircraft crossed the Taiwan Strait median line and entered the air defence zone in the past 24 hours. Furthermore, Taiwan's presidential office said it condemns China's recent military drills around Taiwan and that Taiwan's position is very clear whereby it will not escalate conflict nor provoke disputes but added that it will firmly defend its sovereignty and national security, according to Reuters. Crypto Bitcoin is firmer and has managed to surpass and gain a more convincing foothold above USD 17k, after fleeting breaches of the figure in recent sessions, with the 16th Dec USD 17524 peak into play. Bafin warns of Godfather malware attack on banking/crypto apps. US Event Calendar 15:00: Nov. Consumer Credit, est. $25b, prior $27.1b Central bank Speakers 12:30: Fed’s Bostic Takes Part in Moderated Discussion 12:30: Fed’s Daly Interviewed in WSJ Live event DB's Jim Reid concludes the overnight wrap I hope your Sunday was more peaceful than mine. I played my first round of golf since back surgery (don't tell my consultant) and got stuck at the golf course afterwards as there was a big police search with helicopters over the area I walk home across. My wife and kids were out in the garden at the time and had to rush in as the copter nearly landed in the adjoining field. So at least they knew I wasn't making up being delayed. Had it not been pouring with rain I would have had time for another 9 by the time I could make it home via a huge detour. To be fair for me there are worst places to be stuck but it was a touch concerning. That capped the end of a week where if you thought 2023 might start calmer than 2022 then you may have wanted to think again as there was plenty to debate and plenty of big swings in markets and data. In fact, after weak European headline inflation last week and a bad miss for the US Services ISM on Friday it was the best week for 10yr German bunds (-35.8bps) since data on Bloomberg starts around reunification in 1990. This week the main highlights are a speech from Powell in Sweden tomorrow morning, US and China CPI on Thursday, and Q4 US earnings season starting in earnest with 3 big financials on Friday. Before we go through things in more detail it's worth recapping Friday's US data which resulted in a major shift lower in yields. Payrolls were firm as expected with the headline at +223k and unemployment unexpectedly falling a tenth to 3.5%, the lowest since Neil Armstrong first walked on the moon. As our US economists discuss here though, there were signs of slowing growth in the report with, for example, hours worked (34.3hrs vs. 34.4hrs) and average hourly earnings (+0.3% vs. +0.4%) declining. These factors led US yields lower after the report but the Services ISM dropping from 56.5 to 49.6 was a bit of shocker, especially when the consensus was at 55. There’s a chance the exceptionally cold weather could have artificially depressed the survey but the associated commentary wasn’t great and new orders fells 10.8 points to 45.2 which outside the pandemic is the lowest since the GFC and levels only previously associated with recessions. 2 and 10yr yields fell -21bps and -16bps on the day but around 15-16bps of both moves came after the ISM which shows its impact. Ironically the S&P 500 climbed +2.28% on the day but c.1.75% of this was after this shocker of a print showing that the influence of rates on equities outweighed the economic concerns. Such an equity move couldn't possibly last if this ISM print heralded in a stream of recessionary data. It can only last if the data suggests an environment weak enough to merit the Fed pausing soon with the economy managing a soft landing. Remarkably European PMIs now stand near a record high relative to the US which is part of the reason for preferring European credit given it still trades wide to the US. A fuller review of the week for assets (a significant one to start the year) can be found at the end as usual. Let's move on to this week now and start with the US CPI print for December on Thursday which will be the pivotal data point in January. In terms of the MoM rate, the headline CPI is expected at -0.15% at DB (consensus 0.0% vs. +0.10% previously) with core CPI expected at +0.22% at DB (+0.3% consensus vs. +0.20% previously). In terms of YoY, headline is expected to drop from 7.1% to 6.3% at DB (6.5% consensus) with core falling from 6% to 5.6% (5.7% consensus). Another inflation-related data point will come from the University of Michigan survey on Friday, where the gauge of consumer inflation expectations will be in focus. Other US data releases will include consumer credit (DB forecast +$30.5B vs +$27.1 in October) today and the NFIB small business optimism index on Tuesday. Central bank speakers will also be in the spotlight with appearances from Fed Chair Powell and BoE Governor Bailey at the Riksbank's International Symposium on Central Bank Independence tomorrow. We will also hear from a number of other Fed and ECB speakers throughout the week (see day by day calendar for the list). In Europe, key data releases will include industrial production and trade data in Germany, France and the Eurozone. Over in the UK, all eyes will be on the monthly GDP report for November on Friday. Elsewhere, retail sales (Wednesday) figures will be published in Italy along with the unemployment rate (today) for November. Over in China, the CPI and the PPI on Thursday will be the standout. Turning to earnings now and some of the largest American banks including JPMorgan, Citi and BofA will kick off the earnings season on Friday. We will also hear from BlackRock and UnitedHealth that day. The day before all eyes will be on results from TSMC as concerns over supply-demand dynamics and US-China tensions continue to weigh on the sector, with the Philadelphia semiconductor index down -35% in 2022. Asian equity markets are continuing their buoyant start to the year overnight and carried on where Wall Street left off it on Friday night. As I type, the KOSPI (+2.33%) is the strongest performer across the region with the Hang Seng (+1.60%), the CSI (+0.67%) and the Shanghai Composite (+0.54%) also edging higher amid receding risk-off sentiment after Hong Kong and China resumed quarantine-free travel over the weekend thereby marking the end of the Covid Zero policy. Elsewhere, markets in Japan are closed for a holiday. Futures on the S&P 500 (+0.36%), the NASDAQ 100 (+0.54%) and the DAX (+0.75%) are trading higher as well. Crude oil prices are also higher with Brent futures (+1.18%) at $79.50/bbl and WTI (+1.25%) at $74.69/bbl as we go to print. Early morning data showed that Australia’s building approvals (-9.0% m/m) dropped further in November compared to a downwardly revised -5.6% decline in October. In the US, the House Republican leadership standoff came to an end over the weekend after Republican Kevin McCarthy was elected as speaker after 14 failed attempts following days of gruelling negotiations. Recapping last week now, and markets put in a strong start to 2023 as signs of economic weakness and declining inflationary pressures raised hopes that central banks wouldn’t be as aggressive as feared on hiking rates. In particular, the aforementioned ISM services index on Friday created a major bond and equity rally to end the week. However ominously it means December was the first month since May 2020 that both the ISM US services and manufacturing components were in contractionary territory. On the back of ISM and payrolls, investors immediately moved to price in a less aggressive pace of rate hikes from the Federal Reserve. For instance, futures pricing for the end-2023 rate came down by -10.3bps over the week (-19.0bps on Friday) to 4.48%. That was a big catalyst for risk assets, with the S&P 500 surging +2.28% on Friday, which brought the index back into positive territory for the week at +1.45%. It also led to a massive decline in Treasury yields, with the 10yr down -31.7bps over the week (-16.0bps Friday) to 3.558%. Over in Europe there was a similarly optimistic picture, aided by the news on Friday from the flash Euro Area CPI release. That showed headline inflation falling to +9.2% in December (vs. +9.5% expected), although core inflation did hit a record high of +5.2%. This backdrop meant equities and bonds surged across the continent, with the STOXX 600 up +4.60% (+1.16% Friday) to mark its strongest weekly performance since March. At the same time, 10yr bund yields fell -35.8bps (-10.5bps Friday), marking their largest weekly decline in records going back to German reunification in 1990. Let's see what week 2 of 2023 brings Tyler Durden Mon, 01/09/2023 - 08:05.....»»

An Age Of Decay Authored by Chris Buskirk via AmGreatness.com, This essay is adapted from "America and the Art of the Possible: Restoring National Vitality in an Age of Decay," by Chris Buskirk (Encounter, 192 pages, $28.99) The fact that American living standards have broadly stagnated, and for some segments of the population have declined, should be cause for real concern to the ruling class... America ran out of frontier when we hit the Pacific Ocean. And that changed things. Alaska and Hawaii were too far away to figure in most people’s aspirations, so for decades, it was the West Coast states and especially California that represented dreams and possibilities in the national imagination. The American dream reached its apotheosis in California. After World War II, the state became our collective tomorrow. But today, it looks more like a future that the rest of the country should avoid—a place where a few coastal enclaves have grown fabulously wealthy while everyone else falls further and further behind. After World War II, California led the way on every front. The population was growing quickly as people moved to the state in search of opportunity and young families had children. The economy was vibrant and diverse. Southern California benefited from the presence of defense contractors. San Diego was a Navy town, and demobilized GIs returning from the Pacific Front decided to stay and put down roots. Between 1950 and 1960, the population of the Los Angeles metropolitan area swelled from 4,046,000 to 6,530,000. The Jet Propulsion Laboratory was inaugurated in the 1930s by researchers at the California Institute of Technology. One of the founders, Jack Parsons, became a prominent member of an occult sect in the late 1940s based in Pasadena that practiced “Thelemic Magick” in ceremonies called the “Babalon Working.” L. Ron Hubbard, the founder of Scientology (1950), was an associate of Parsons and rented rooms in his home. The counterculture, or rather, countercultures, had deep roots in the state. Youth culture was born in California, arising out of a combination of rapid growth, the Baby Boom, the general absence of extended families, plentiful sunshine, the car culture, and the space afforded by newly built suburbs where teenagers could be relatively free from adult supervision. Tom Wolfe memorably described this era in his 1963 essay “The Kandy-Colored Tangerine Flake Streamline, Baby.” The student protest movement began in California too. In 1960, hundreds of protesters, many from the University of California at Berkeley, sought to disrupt a hearing of the House Un-American Activities Committee at the San Francisco City Hall. The police turned fire hoses on the crowd and arrested over thirty students. The Baby Boomers may have inherited the protest movement, but they didn’t create it. Its founders were part of the Silent Generation. Clark Kerr, the president of the UC system who earned a reputation for giving student protesters what they wanted, was from the Greatest Generation. Something in California, and in America, had already changed. California was a sea of ferment during the 1960s—a turbulent brew of contrasting trends, as Tom O’Neill described it:  The state was the epicenter of the summer of love, but it had also seen the ascent of Reagan and Nixon. It had seen the Watts riots, the birth of the antiwar movement, and the Altamont concert disaster, the Free Speech movement and the Hells Angels. Here, defense contractors, Cold Warriors, and nascent tech companies lived just down the road from hippie communes, love-ins, and surf shops. Hollywood was the entertainment capital of the world, producing a vision of peace and prosperity that it sold to interior America—and to the world as the beau ideal of the American experiment. It was a prosperous life centered around the nuclear family living in a single-family home in the burgeoning suburbs. Doris Day became America’s sweetheart through a series of romantic comedies, but the turbulence in her own life foreshadowed America’s turn from vitality to decay. She was married three times, and her first husband either embezzled or mismanaged her substantial fortune. Her son, Terry Melcher, was closely associated with Charles Manson and the Family, along with Dennis Wilson of the Beach Boys—avatars of the California lifestyle that epitomized the American dream.  The Manson Family spent the summer of 1968 living and partying with Wilson in his Malibu mansion. The Cielo Drive home in the Hollywood Hills where Sharon Tate and four others were murdered in August 1969 had been Melcher’s home and the site of parties that Manson attended. The connections between Doris Day’s son, the Beach Boys, and the Manson Family have a darkly prophetic valence in retrospect. They were young, good-looking, and carefree. But behind the clean-cut image of wholesome American youth was a desperate decadence fueled by titanic drug abuse, sexual outrages that were absurd even by the standards of Hollywood in the 60s, and self-destructiveness clothed in the language of pseudo-spirituality. The California culture of the 1960s now looks like a fin-de-siècle blow-off top. The promise, fulfillment, and destruction of the American dream appears distilled in the Golden State, like an epic tragedy played out against a sunny landscape where the frontier ended. Around 1970, America entered into an age of decay, and California was in the vanguard.   H. Abernathy/ClassicStock/Getty Images Up, Up, and Away The expectation of constant progress is deeply ingrained in our understanding of the world, and of America in particular. Some metrics do generally keep rising: gross domestic product mostly goes up, and so does the stock market. According to those barometers, things must be headed mostly in the right direction. Sure there are temporary setbacks—the economy has recessions, the stock market has corrections—but the long-term trajectory is upward. Are those metrics telling us that the country is growing more prosperous? Are they signals, or noise? There is much that GDP and the stock market don’t tell us about, such as public and private debt levels, wage trends, and wealth concentration. In fact, during a half-century in which reported GDP grew consistently and the stock market reached the stratosphere, real wages have crept up very slowly, and living standards have flatlined or even declined for the middle and working classes. Many Americans have a feeling that things aren’t going in the right direction or that the country has lost its societal health and vigor, but aren’t sure how to describe or measure the problem. We need broader metrics of national prosperity and vitality, including measures of noneconomic values like family stability or social trust. There are many different criteria for national vitality. First, is the country guarded against foreign aggression and at peace with itself? Are people secure in their homes, free from government harassment, and safe from violent crime? Is prosperity broadly shared? Can the average person get a good job, buy a house, and support a family without doing anything extraordinary? Are families growing? Are people generally healthy, and is life span increasing or at least not decreasing? Is social trust high? Do people have a sense of unity in a common destiny and purpose? Is there a high capacity for collective action? Are people happy? We can sort quantifiable metrics of vitality into three main categories: social, economic, and political. There is a spiritual element too, which for my purposes falls under the social category. The social factors that can readily be measured include things like age at first marriage (an indicator of optimism about the future), median adult stature (is it rising or declining?), life expectancy, and prevalence of disease. Economic measures include real wage trends, wealth concentration, and social mobility. Political metrics relate to polarization and acts of political violence.  Many of these tend to move together over long periods of time. It’s easy to look at an individual metric and miss the forest for the trees, not seeing how it’s one manifestation of a larger problem in a dynamic system. Solutions proposed to deal with one concern may cause unexpected new problems in another part of the system. It’s a society-wide game of whack-a-mole. What’s needed is a more comprehensive understanding of structural trends and what lies behind them. From the founding period in America until about 1830, those factors were generally improving. Life expectancy and median height were increasing, both indicating a society that was mostly at peace and had plentiful food. Real wages roughly tripled during this period as labor supply growth was slow. There was some political violence. But for decades after independence, the country was largely at peace and citizens were secure in their homes. There was an overarching sense of shared purpose in building a new nation.  Those indicators of vitality are no longer trending upward. Let’s start with life expectancy. There is a general impression that up until the last century, people died very young. There’s an element of truth to this: we are now less susceptible to death from infectious disease, especially in early childhood, than were our ancestors before the 20th century. Childhood mortality rates were appalling in the past, but burying a young child is now a rare tragedy. This is a very real form of progress, resulting from more reliable food supplies as a result of improvements in agriculture, better sanitation in cities, and medical advances, particularly the antibiotics and certain vaccines introduced in the first half of the 20th century. A period of rapid progress was then followed by a long period of slow, expensive improvement at the margins. When you factor out childhood mortality, life spans have not grown by much in the past century or two. A study in the Journal of the Royal Society of Medicine says that in mid-Victorian England, life expectancy at age five was 75 for men and 73 for women. In 2016, according to the Social Security Administration, the American male life expectancy at age five was 71.53 (which means living to age 76.53). Once you’ve made it to five years, your life expectancy is not much different from your great-grandfather’s. Moreover, Pliny tells us that Cicero’s wife, Terentia, lived to 103. Eleanor of Aquitaine, queen of both France and England at different times in the 12th century, died a week shy of her 82nd birthday. A study of 298 famous men born before 100 B.C. who were not murdered, killed in battle, or died by suicide found that their average age at death was 71. More striking is that people who live completely outside of modern civilization without Western medicine today have life expectancies roughly comparable to our own. Daniel Lieberman, a biological anthropologist at Harvard, notes that “foragers who survive the precarious first few years of infancy are most likely to live to be 68 to 78 years old.”  In some ways, they are healthier in old age than the average American, with lower incidences of inflammatory diseases like diabetes and atherosclerosis. It should be no surprise that an active life spent outside in the sun, eating wild game and foraged plants, produces good health. Recent research shows that not only are we not living longer, we are less healthy and less mobile during the last decades of our lives than our great-grandfathers were. This points to a decline in overall health. We have new drugs to treat Type I diabetes, but there is more Type I diabetes than in the past. We have new treatments for cancer, but there is more cancer. Something has gone very wrong. What’s more, between 2014 and 2017, median American life expectancy declined every year. In 2017 it was 78.6 years, then it decreased again between 2018 and 2020 to 76.87. The figure for 2020 includes COVID deaths, of course, but the trend was already heading downward for several years, mostly from deaths of despair: diseases associated with chronic alcoholism, drug overdoses, and suicide. The reasons for the increase in deaths of despair are complex, but a major contributing factor is economic: people without good prospects over an extended period of time are more prone to self-destructive behavior. This decline is in contrast to the experience of peer countries. In addition to life expectancy, other upward trends have stalled or reversed in the past few decades. Family formation has slowed. The total fertility rate has dropped to well below replacement level. Real wages have stagnated. Debt levels have soared. Social mobility has stalled and income inequality has grown. Material conditions for most people have improved little except in narrow parts of life such as entertainment. Spencer Platt/Getty Images Trends, Aggregate, and Individuals  The last several decades have been a story of losing ground for much of middle America, away from a handful of wealthy cities on the coasts. The optimistic story that’s been told is that both income and wealth have been rising. That’s true in the aggregate, but when those numbers are broken down the picture is one of a rising gap between a small group of winners and a larger group of losers. Real wages have remained essentially flat over the past 50 years, and the growth in national wealth has been heavily concentrated at the top. The chart below represents the share of national income that went to the top 10 percent of earners in the United States. In 1970 it was 33.3 percent; in 2019 the figure was 45.4 percent. Disparities in wealth have become more closely tied to educational attainment. Between 1989 and 2019, household wealth grew the most for those with the highest level of education. For households with a graduate degree, the increase was 31 percent; with a college degree, it was 17 percent; with a high school degree, about 4 percent. Meanwhile, household wealth declined by a precipitous 60 percent for high school dropouts, including those with a GED. In 1989, households with a college degree had 2.74 times the wealth of those with only a high school diploma; in 2012 it was 3.08 times as much. In 1989, households with a graduate degree had 4.85 times the wealth of the high school group; in 2019, it was 6.12 times as much. The gap between the graduate degree group and the college group increased by 12 percent. The high school group’s wealth grew about 4 percent from 1989 to 2019, the college group’s wealth grew about 17 percent, and the wealth of the graduate degree group increased 31 percent. The gaps between the groups are growing in real dollars. It’s true that people have some control over the level of education they attain, but college has become costlier, and it’s fundamentally unnecessary for many jobs, so the growing wealth disparity by education is a worrying trend. Wealth is relative: if your wealth grew by 4 percent while that of another group increased by 17 percent, then you are poorer. What’s more crucial, however, is purchasing power. If the costs of middle-class staples like healthcare, housing, and college tuition are climbing sharply while wages stagnate, then living standards will decline. More problematic than growing wealth disparity in itself is diminishing economic mobility. A big part of the American story from the beginning has been that children tend to end up better off than their parents were. By most measures, that hasn’t been true for decades. The chart below compares the birth cohorts of 1940 and 1980 in terms of earning more than parents did. The horizontal axis indicates the relative income level of the parents. Among the older generation, over 90 percent earned more than their parents, except for those whose parents were at the very high end of the income scale. Among the younger generation, the percentages were much lower, and also more variable. For those whose parents had a median income, only about 40 percent would do better. In this analysis, low growth and high inequality both suppress mobility. Over time, declining economic mobility becomes an intergenerational problem, as younger people fall behind the preceding generation in wealth accumulation. The graph below illustrates the proportion of the national wealth held by successive generations at the same stage of life, with the horizontal axis indicating the median age for the group. Baby Boomers (birth years 1946–1964) owned a much larger percentage of the national wealth than the two succeeding generations at every point. At a median age of 45, for example, the Boomers owned approximately 40 percent of the national wealth. At the same median age, Generation X (1965–1980) owned about 15 percent. The Boomer generation was 15–18 percent larger than Gen X and it had 2.67 times as much of the national wealth. The Millennial generation (1981–1996) is bigger than Gen X though a little smaller than the Boomers, and it has owned about half of what Gen X did at the same median age. Those are some measurable indicators of the nation’s vitality, and they tell us that something is going wrong. A key reason for stagnant wages, declining mobility, and growing disparities of wealth is that economic growth overall has been sluggish since around 1970. And the main reason for slower growth is that the long-term growth in productivity that created so much wealth for America and the world over the prior two centuries slowed down. Wealth and the New Frontier There are other ways to increase the overall national wealth. One is by acquiring new resources, which has been done in various ways: through territorial conquest, or the incorporation of unsettled frontier lands, or the discovery of valuable resources already in a nation’s territory, such as petroleum reserves in recent history. Getting an advantageous trade agreement can also be a way of increasing resources.  Through much of American history, the frontier was a great source of new wealth. The vast supply of mostly free land, along with the other resources it held, was not just an economic boon; it also shaped American culture and politics in ways that were distinct from the long-settled countries of Europe where the frontier had been closed for centuries and all the land was owned space.  But there can be a downside to becoming overly dependent on any one resource. Aside from gaining new resources, real economic growth comes from either population growth or productivity growth. Population growth can add to the national wealth, but it can also put strain on supplies of essential resources. What elevates living standards broadly is productivity growth, making more out of available resources. A farmer who tills his fields with a steel plough pulled by a horse can cultivate more land than a farmer doing it by hand. It allows him to produce more food that can be consumed by a bigger family, or the surplus can be sold or traded for other goods. A farmer driving a plough with an engine and reaping with a mechanical combine can produce even more.  But productivity growth is driven by innovation. In the example above, there is a progression from farming by hand with a simple tool, to the use of metal tools and animal power, to the use of complicated machinery, each of which greatly increases the amount of food produced per farmer. This illustrates the basic truth that technology is a means of reducing scarcity and generating surpluses of essential goods, so labor and resources can be put toward other purposes, and the whole population will be better off. Total factor productivity (TFP) refers to economic output relative to the size of all primary inputs, namely labor and capital. Over time, a nation’s economic output tends to grow faster than its labor force and capital stock. This might owe to better labor skills or capital management, but it is primarily the result of new technology. In economics, productivity growth is used as a proxy for the application of innovation. If productivity is rising, it is understood to mean that applied science is working to reduce scarcity. The countries that lead in technological innovation naturally reap the benefits first and most broadly, and therefore have the highest living standards. Developing countries eventually get the technology too, and then enjoy the benefits in what is called catch-up growth. For example, China first began its national electrification program in the 1950s, when electricity was nearly ubiquitous in the United States. The project took a few decades to complete, and China saw rapid growth as wide access to electric power increased productivity. The United States still leads the way in innovation—though now with more competition than at any time since World War II. But the development of productivity-enhancing new technologies has been slower over the past few decades than in any comparable span of time since the beginning of the Industrial Revolution in the early 18th century. The obvious advances in a few specific areas, particularly digital technology, are exceptions that prove the rule. The social technologies of recent years facilitate consumption rather than production.As a result, growth in total factor productivity has been slow for a long time. According to a report from Rabobank, “TFP growth deteriorated from an average annual growth of 1.1% over the period 1969–2010 to 0.4% in 2010 to 2018.”  In The Great Stagnation, Tyler Cowen suggested that the conventional productivity measures may be misleading. For example, he noted that productivity growth through 2000–2004 averaged 3.8 percent, a very high figure and an outlier relative to most of the last half-century. Surely some of that growth was real owing to the growth of the internet at the time, but it also coincided with robust growth in the financial sector, which ended very badly in 2008.  “What we measured as value creation actually may have been value destruction, namely too many homes and too much financial innovation of the wrong kind.” Then, productivity shot up by over 5 percent in 2009–2010, but Cohen found that it was mostly the result of firms firing the least productive people. That may have been good business, but it’s not the same as productivity rising because innovation is reducing scarcity and thus leading to better living standards. Over the long term, when productivity growth slows or stalls, overall economic growth is sluggish. Median real wage growth is slow. For most people, living standards don’t just stagnate but decline. Spencer Platt/Getty Images You Owe Me Money As productivity growth has slowed, the economy has become more financialized, which means that resources are increasingly channeled into means of extracting wealth from the productive economy instead of producing goods and services. Peter Thiel said that a simple way to understand financialization is that it represents the increasing influence of companies whose main business or source of value is producing little pieces of paper that essentially say, you owe me money. Wall Street and the companies that make up the financial sector have never been larger or more powerful. Since the early 1970s, financial firms’ share of all corporate earnings has roughly doubled to nearly 25 percent. As a share of real GDP, it grew from 13–15 percent in the early 1970s to nearly 22 percent in 2020.  The profits of financial firms have grown faster than their share of the economy over the past half-century. The examples are everywhere. Many companies that were built to produce real-world, nondigital goods and services have become stealth finance companies, too. General Electric, the manufacturing giant founded by Thomas Edison, transformed itself into a black box of finance businesses, dragging itself down as a result. The total market value of major airlines like American, United, and Delta is less than the value of their loyalty programs, in which people get miles by flying and by spending with airline-branded credit cards. In 2020, American Airlines’ loyalty program was valued at $18–$30 billion while the market capitalization of the entire company was $14 billion. This suggests that the actual airline business—flying people from one place to another—is valuable only insofar as it gets people to participate in a loyalty program. The main result of financialization is best explained by the “Cantillon effect,” which means that money creation, over a long period of time, redistributes wealth upward to the already rich. This effect was first described in the 18th century by Richard Cantillon after he observed the results of introducing a paper money system. He noted that the first people to receive the new money saw their incomes rise, while the last to receive it saw a decline in their purchasing power because of consumer price inflation. The first to receive newly created money are banks and other financial institutions. They are called “Cantillon insiders,” a term coined by Nick Szabo, and they get the most benefit. But all owners of assets—including stocks, real estate, even a home—are enriched to some extent by the Cantillon effect. Those who own a lot of assets benefit the most, and financial assets tend to increase in value faster than other types, but all gain value. This is a version of the Matthew Principle, taken from Jesus’ Parable of the Sower: to those who have, more will be given. The more assets you own, the faster your wealth will increase. Meanwhile, the people without assets fall behind as asset prices rise faster than incomes. Inflation hawks have long worried that America’s decades-long policy of running large government deficits combined with easy money from the Fed will lead to runaway inflation that beggars average Americans. This was seen clearly in 2022 after the massive increase in dollars created by the Fed in 2020 and 2021.  Even so, they’ve mostly been looking for inflation in the wrong place. It’s true that the prices of many raw materials, such as lumber and corn, have soared recently, followed by much more broad-based inflation in everything from food to rent, but inflation in the form of asset price bubbles has been with us for much longer. Those bubbles pop and prices drop, but the next bubble raises them even higher. Asset price inflation benefits asset owners, but not the people with few or no assets, like young people just starting out and finding themselves unable to afford to buy a home. The Cantillon effect has been one of the main vectors of increased wealth concentration over the last 40 years. One way that the large banks use their insider status is by getting short-term loans from the Federal Reserve and lending the money back to the government by buying longer-term treasuries at a slightly higher interest rate and locking in a profit.  Their position in the economy essentially guarantees them profits, and their size and political influence protect them from losses. We’ve seen the pattern of private profits and public losses clearly in the savings and loan crisis of the 1980s, and in the financial crisis of 2008. Banks and speculators made a lot of money in the years leading up to the crisis, and when the losses on their bad loans came due, they got bailouts. Moral Hazard The Cantillon economy creates moral hazard in that large companies, especially financial institutions, can privatize profits and socialize losses. Insiders, and shareholders more broadly, can reap massive gains when the bets they make with the company’s capital pay off. When the bets go bad, the company gets bailed out. Alan Krueger, the chief economist at theTreasury Department in the Obama Administration, explained years later why banks and not homeowners were rescued from the fallout of the mortgage crisis: “It would have been extremely unfair, and created problems down the road to bail out homeowners who were irresponsible and took on homes they couldn’t afford.” Krueger glossed over the fact that the banks had used predatory and deceptive practices to initiate risky loans, and when they lost hundreds of billions of dollars—or trillions by some estimates—they were bailed out while homeowners were kicked out. That callous indifference alienates and radicalizes the forgotten men and women who have been losing ground. Most people know about the big bailouts in 2008, but the system that joins private profit with socialized losses regularly creates incentives for sloppiness and corruption. The greed sometimes takes ridiculous forms. But once that culture takes over, it poisons everything it touches. Starting in 2002, for example, Wells Fargo began a scam in which it paid employees to open more than 3.5 million unauthorized checking accounts, savings accounts, and credit cards for retail customers. By exaggerating growth in the number of active retail accounts, the bank could give investors a false picture of the health of its retail business. It also charged those customers monthly service fees, which contributed to the bottom line and bolstered the numbers in quarterly earnings reports to Wall Street. Bigger profits led to higher stock prices, enriching senior executives whose compensation packages included large options grants.  John Stumpf, the company’s CEO from 2007 to 2016, was forced to resign and disgorge around $40 million in repayments to Wells Fargo and fines to the federal government. Bloomberg estimates that he retained more than $100 million. Wells Fargo paid a $3 billion fine, which amounted to less than two months’ profit, as the bank’s annual profits averaged around $19.7 billion from 2017 to 2019. And this was for a scam that lasted nearly 15 years. What is perhaps most absurd and despicable about this scheme is that Wells Fargo was conducting it during and even after the credit bubble, when the bank received billions of dollars in bailouts from the government. The alliance between the largest corporations and the state leads to corrupt and abusive practices. This is one of the second-order effects of the Cantillon economy. Another effect is that managers respond to short-term financial incentives in a way that undermines the long-term vitality of their own company. An excessive focus on quarterly earnings is sometimes referred to as short-termism. Senior managers, especially at the C-suite level of public companies, are largely compensated with stock options, so they have a strong incentive to see the stock rise. In principle, a rising stock price should reflect a healthy, growing, profitable company. But managers figured out how to game the system: with the Fed keeping long-term rates low, corporations can borrow money at a much lower rate than the expected return in the stock market. Many companies have taken on long-term debt to finance stock repurchases, which helps inflate the stock price. This practice is one reason that corporate debt has soared since 1980. The Cantillon effect distorts resource allocation, incentivizing rent-seeking in the financial industry and rewarding nonfinancial companies for becoming stealth financial firms. Profits are quicker and easier in finance than in other industries. As a result, many smart, ambitious people go to Wall Street instead of trying to invent useful products or seeking a new source of abundant power—endeavors that don’t have as much assurance of a payoff. How different might America be if the incentives were structured to reward the people who put their brain power and energy into those sorts of projects rather than into quantitative trading algorithms and financial derivatives of home mortgages. While the financial industry does well, the manufacturing sector lags. Because of COVID-19, Americans discovered that the United States has very limited capacity to make the personal protective equipment that was in such urgent demand in 2020. We do not manufacture any of the most widely prescribed antibiotics, or drugs for heart disease or diabetes, nor any of the chemical precursors required to make them. A close look at other vital industries reveals the same penury. The rare earth minerals necessary for batteries and electronic screens mostly come from China because we have intentionally shuttered domestic sources or failed to develop them. We’re dependent on Taiwan for the computer chips that go into everything from phones to cars to appliances, and broken supply chains in 2021 led to widespread shortages. The list of necessities we import because we have exported our manufacturing base goes on. Financialization of the economy amplifies the resource curse that has come with dollar supremacy. Richard Cantillon described a similar effect when he observed what happened to Spain and Portugal when they acquired large amounts of silver and gold from the New World. The new wealth raised prices, but it went largely into purchasing imported goods, which ruined the manufactures of the state and led to general impoverishment. In America today, a fiat currency that serves as the world’s reserve is the resource curse that erodes the manufacturing base while the financial sector flourishes. Since the dollar’s value was formally dissociated from gold in 1976, it now rests on American economic prosperity, political stability, and military supremacy. If these advantages diminish relative to competitors, so will the value of the dollar. Dollar supremacy has also encouraged a debt-based economy. Federal debt as a share of GDP has risen from around 38 percent in 1970 to nearly 140 percent in 2020. Corporate debt has had peaks and troughs over those decades, but each new peak is higher than the last. In the 1970s, total nonfinancial corporate debt in the United States ranged between 30 and 35 percent of GDP. It peaked at about 43 percent in 1990, then at 45 percent with the dot-com bubble in 2001, then at slightly higher with the housing bubble in 2008, and now it’s approximately 47 percent. As asset prices have climbed faster than wages, consumer debt has soared from 43.2 percent of GDP in 1970 to over 75 percent in 2020.  Student loan debt has soared even faster in recent years: in 2003, it totaled $240 billion—basically a rounding error—but by 2020, the sum had ballooned to six times as large, at $1.68 trillion, which amounts to around 8 percent of GDP. Increases in aggregate debt throughout society are a predictable result of the Cantillon effect in a financialized economy. The Rise of the Two-Income Family The Cantillon effect generates big gains for those closest to the money spigot, and especially those at the top of the financial industry, while the people furthest away fall behind. Average families find it more difficult to buy a home and maintain a middle-class life. In 90 percent of U.S. counties today, the median-priced single-family home is unaffordable on the median wage. One of the ways that families try to make ends meet is with the promiscuous use of credit. It’s one of the reasons that personal and household debt levels have risen across the board. People borrow money to cover the gap between expectations and reality, hoping that economic growth will soon pull them out of debt. But for many, it’s a trap they can never escape. Another way that families have tried to keep up is by adding a second income. In 2018, over 60 percent of families were two-income households, up from about 30 percent in 1970. This change is not a result of a simple desire to do wage work outside the home or of “increased opportunities,” as we are often told. The reason is that it now takes two incomes to support the needs of a middle-class family, whereas 50 years ago, it required only one. As more people entered the labor market, the value of labor declined, setting up a vicious cycle in which a second income came to be more necessary. China’s entry into the World Trade Organization in 2001 put more downward pressure on the value of labor. When people laud the fact that we have so many more two-income families—generally meaning more women working outside the home—as evidence that there are so many great opportunities, what they’re really doing is retconning something usually done out of economic necessity. Needing twice as much labor to get the same result is the opposite of what happens when productivity growth is robust. It also means that the raising of children is increasingly outsourced. That’s not an improvement. Another response to stagnant wages is to delay family formation and have fewer children. In 1960, the median age of a first marriage was about 20.5 years. In 2010, it was approximately 27, and in 2020 it was an all-time high of over 29.18  At the same time, the total fertility rate of American women was dropping: from 3.65 in 1960 down to 2.1, a little below replacement level, in the early 1970s. Currently, it hovers around 1.8. Some people may look on this approvingly, worried as they are about overpopulation and the impact of humans on the environment. But when people choose to have few or no children, it is usually not a political choice. That doesn’t mean it is simply a “revealed preference,” a lower desire for a family and children, rather than a reflection of personal challenges or how people view their prospects for the future. Surely it’s no coincidence that the shrinking of families has happened at the same time that real wages have stagnated or grown very slowly, while the costs of housing, health care, and higher education have soared. The fact that American living standards have broadly stagnated, and for some segments of the population have declined, should be cause for real concern to the ruling class. Americans expect economic mobility and a chance for prosperity. Without it, many will believe that the government has failed to deliver on its promises. The Chinese Communist Party is regarded as legitimate by the Chinese people because it has presided over a large, broad, multigenerational rise in living standards. If stagnation or decline in the United States is not addressed effectively, it will threaten the legitimacy of the governing institutions.  But instead of meeting the challenge head-on, America’s political and business leaders have pursued policies and strategies that exacerbate the problem. Woke policies in academia, government, and big business have created a stultifying environment that is openly hostile to heterodox views. Witness the response to views on COVID that contradicted official opinion. And all this happens against a backdrop of destructive fiscal and monetary policies. Low growth and low mobility tend to increase political instability when the legitimacy of the political order is predicated upon opportunity and egalitarianism. One source of national unity has been the understanding that every individual has an equal right to pursue happiness, that a dignified life is well within reach of the average person, and that the possibility of rising higher is open to all. When too many people feel they cannot rise, and when even the basics of a middle-class life are difficult to secure, disappointment can breed a sense of injustice that leads to social and political conflict. At first, that conflict acts as a drag on what American society can accomplish. Left unchecked, it will consume energy and resources that could otherwise be put into more productive activities. Thwarted personal aspirations are often channeled into politics and zero-sum factional conflict. The rise of identity politics represents a redirection of the frustrations born of broken dreams. But identity politics further divides us into hostile camps. We’ve already seen increased social unrest lately, and more is likely to follow. High levels of social and political conflict are dangerous for a country that hopes to maintain a popular form of government. Not so long ago, we could find unity in civic rituals and were encouraged to be proud of our country. Now our history is denigrated in schools and by other sensemaking institutions, leading to cultural dysphoria, social atomization, and alienation. In exchange, you can choose your pronouns, which doesn’t seem like such a great trade. Just as important as regaining broad-based material prosperity and rising standards of living—perhaps more important—is unifying the nation around a common understanding of who we Americans are and why we’re here. Tyler Durden Sat, 01/07/2023 - 23:30.....»»

For weekend reading, Gary Alexander, senior writer at Navellier & Associates, offers the following commentary: I’ll be the first to admit that my 10 “rather boring” 2022 predictions weren’t so great – batting about 50-50 – but I was rowing against the tide of conventional wisdom, so that’s not bad. In the spirit of “less,” […] For weekend reading, Gary Alexander, senior writer at Navellier & Associates, offers the following commentary: I’ll be the first to admit that my 10 “rather boring” 2022 predictions weren’t so great – batting about 50-50 – but I was rowing against the tide of conventional wisdom, so that’s not bad. In the spirit of “less,” I’ll cut back to 8 ideas and not be so bold for most of them – just a continuation of some current trends, but (blessedly) far less of the bad stuff we saw in 2022. I’ll start with the four financial forecasts first. .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); Q4 2022 hedge fund letters, conferences and more   Find A Qualified Financial Advisor Finding a qualified financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you're ready to be matched with local advisors that can help you achieve your financial goals, get started now. Four Fearless Financial Forecasts For 2023 Inflation will calm down to 3% by mid-year. Since reckless monetary inflation in 2020 and 2021 caused runaway price inflation in 2021 and 2022, the rapid tightening of money supply and record fast interest rate increases of 2022 will reduce the rate of inflation quite rapidly in the first half of 2023. Money creation is a seductive solution to the world’s ills, giving rise to Modern Monetary Theory (MMT), the belief that sovereign nations can print unlimited amounts of new money, so long as they have the authority to redeem it in ways they choose. They have no historic precedent of this working out well, and plenty of evidence of the opposite. Even John Maynard Keynes, later a fan of deficit spending, wrote in 1919, agreeing with Lenin: “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.” –From “The Economic Consequences of the Peace,” by John Maynard Keynes, 1919 Sadly, the Fed may push us into a recession – due to its monetary folly over the past three years – but they will “lick inflation” in the process, just like Paul Volcker did back in the painful years of 1979-1982. The U.S. Dollar will lose its mojo as euro rates rise. Europe was the first continent to try MMT and the first to abandon it with rapidly rising rates to try to match the U.S. dollar’s returns. For years, global capital fled to the U.S. dollar for real returns and stability, pushing the euro and yen down and the dollar up. That should reverse in 2023, as global rates rise to meet the dollar, giving the euro a boost and the dollar no advantage, reversing the 8.2% gain in the U.S. Dollar Index (DXY) in 2022, and a phenomenal 25.8% gain in that index from May 24, 2021, to October 10, 2022. The Dollar Index has already dropped almost 10 points from 113.3 to 103.5 since October 10, so it is well on its way to fulfilling this prediction. Gold (rising to $2,100), oil (at $110), and other commodities will rise as the dollar falls. Gold has had a bad year because the dollar mostly rose, since the dollar and gold tend to move in a mirror image, but gold and silver have rallied strongly in the fourth quarter, due largely to the decline in the U.S. dollar. Gold and silver actually ended 2022 up a bit, due to the dollar’s decline since October. In the last two months of the calendar year, gold shot up over $200 per ounce, from $1,627 to $1,830 (+12.5%), while silver rocketed from $18.01 on October 13 to $24.13 at year’s end, up 34%. A couple of respected analysts are predicting $3,000 to $4,000 gold this year. I won’t go near those figures, but a new high at $2,100 gold and a 10-year high of $30 silver seem reasonable, as well as $110 oil sometime in the spring. Stocks should recover in the third year of the Presidential cycle. Fed Chair Jerome Powell scuttled the Santa Claus rally and the normal post-mid-term election euphoria, but he can only play Scrooge for so long. Even in December 2018, when he played the same Ebenezer Scrooge role, the market soared in 2019, the last Year 3 of a Presidential cycle. Most Year 3 gains are concentrated in the first half of Year 3 of the cycle. The average November-April S&P 500 returns for the 10 mid-term election cycles since 1980 are +12.9% with only 3% added in the next six months (a +15.7% return for the year after the mid-terms). Four Global Victories for the Good Guys (and Gals) Putin will lose in Ukraine Vladimir Putin will be forced to withdraw from Ukraine. He may not admit defeat. He may not be dethroned, but either (1) the average Russians will not support him or report for the draft; or (2) his generals will revolt; or (3) he will be forced to negotiate a truce; or (4) he will die of illness or be “terminated” from within by the same brutal means he used to kill so many of his rivals. By whatever means, when the end of the Ukrainian war becomes evident, global stock markets will rally. Covid chaos will resume in China Covid chaos will resume in China, crippling their manufacturing capacity again. This is sad for the innocent people of China, but there is a certain justice to the leaders of China, as they exported this killer bug three years ago. Since then, China’s leaders refused the best vaccines in favor of their own ineffective cures, then they cracked down on their infected or endangered population. Let’s hope it is a more benign, less deadly strain for the benefit of the innocent victims, but the effect may be that manufacturing hubs will move elsewhere or to America, posing a threat to the power of China’s dictator-for-life, Xi Jinping. Fossil fuels will stage a rally. With this brutal winter killing so many hundreds in affluent Europe and North America, we are reminded that cold weather has always killed 7 to 10 times more people than heat*, and so our premature rush to alternative energy sources has been a deadly decision. Fossil fuels will stage a rally, as they are now cleaner and in abundant supply, and there are hidden dangers, costs, and environmental threats inherent in the wind and solar alternatives. Global cooling is also a major risk. *In November 2022, Bjorn Lomborg wrote in the Wall Street Journal that from 2000 to 2019, 20,000 North Americans died from heat but 170,000 died from cold, writing, “Cheap and reliable energy to keep us warm used to be the hallmark of prosperous countries; no more because of our climate obsession.” The U.S. women will win the World Cup this summer (winter in Australia). After the U.S. men’s soccer team won one game and then bowed out, preparing for a bigger spectacle at home in 2026, the U.S. women’s team has long been considered the world’s best, thanks in part to our Title IX equality in sports access in U.S. colleges. The 32-team Women’s World Cup tournament will gather in Australia and New Zealand from July 20 to August 20 (their winter). The U.S. team is led by 33-year-old Alex Morgan, with 119 goals in 200 international matches, but there is talent from top to the bottom in this gifted roster. I’ll close with a wish more than a prediction. I wish that Congress and the President would spend less on pork and just about everything else, especially with average interest rates on our $32 trillion national debt nearing 5%. We can’t afford spending over $1 trillion on debt service each year. Now is the wrong time to draft “wish lists” for 435 home districts and pie-in-the-sky schemes for spending more tax dollars. Say “Amen,” somebody......»»

2023: The ABCs Of CBDC, The Great Reset(s), & More Centralized Control Authored by Matthew Piepenburg via GoldSwitzerland.com, If you want to understand modern CBDC, it may be worth considering the context of history, the philosophy of man, the math of debt and the geology of gold. Broke Countries Do Bad Things When broken, debt-soaked “developed economies” suffering from years of fantasy money printing to “solve” fatally rising debt levels collide with history-blind and economically-ignorant policy makers, the end result is always the same: Liberty sinks, currencies die and control rises. This is not sensationalism, but the toxic evolution of economic, political and psychological patterns seen throughout time. Sadly, our “times” (as well as the global abundance/convergence of weak leadership) are no exception. Or stated more simply, inept financial and political leadership leads to even more dangerous financial opportunists and tyrannical policies masquerading as efficient solutions. Toward this end, the evidence is literally everywhere—left, right and center. The Inevitable Klaus Schwab-Type Nowhere is such will-to-power opportunism and fantasy (i.e., centralized) solutions more exemplified than in the so-called “Great Reset” authored by the head of the World Economic Forum, Klaus Schwab. Like all opportunists and historical as well as current “types,” Schwab (like the IMF, the BIS, the Fed, the White House, the European or British Parliament etc.) is exploiting a crisis to enhance control while appearing humanitarian and visionary. We’ve seen this demagogue movie before in Italy, France, Germany, Spain, Yugoslavia, Cuba, China, Russia etc. In each example (from the 1780’s to the 1960’s to now), leaders who promised miracle solutions to financial disaster brought only centralization and disorder while erecting statues (or book deals and Parisian shopping sprees) to themselves. Never Let a Good Crisis Go to Waste And what better crisis to exploit than the bat-made narrative of the Covid pandemic with its case fatality rate of less than 2%? Post-Covid, it is now patently obvious to anyone who has taken the time to look unemotionally at the science, math and data (including courageous British journalists like Matt Ridely, well-spoken celebrities like Russell Brand, dark horses like Bret Weinstein or the non-political [and hence more honest] scientists convening at Great Barrington) that COVID most likely came from a lab and that the policy reaction of a global shut down and forced vaccine was a moral, scientific, economic and political disaster for the record books. Despite the fact that history has seen (and stoically survived) far greater per-capita death tolls in the form of cholera, the bubonic plague, small pox, or influenza, our policy makers, with the embarrassingly complicit support of a Pravda-like and politically-influenced main stream media, would have us believe they care so much about you and I. So, they locked us down, went trillions more into debt (and a hidden, second market bailout) for our sake. In fact, the IMF in 2020 compared the war on Covid to the Second World War and its 85 million deaths. That’s an insult to history. As an equally courageous Christine Anderson declared from the European Parliament during the height of the Covid hysteria (mandates, restrictions, masks etc.): Covid politics were not about concern for the masses. Despite such sober honesty and macabre math, Klaus Schwab, along with just about every other global leader, was taking a more dramatic and opportunistic approach, declaring that, “the Corona Virus pandemic has no parallel in history. It is our defining moment.” Huh? What he really meant in this classic Freudian slip was that Covid was his defining moment. Namely, the perfect crisis to exploit global fear and promote his new “Great Reset” vision as the leader of a better tomorrow, akin to Lenin’s losing-war promise/bribe of simple “bread and peace” in 1917… And what is Schwab’s (and others like him) vision of a better tomorrow? What is the “Great Reset”? Like most politically and financially bad ideas (from Quantitative Easing to the Patriot Act), the Great Reset envisioned by Schwab has a seductive title and facade—namely “Stakeholder Capitalism.” Unlike current shareholder capitalism, his concept of stakeholder capitalism aims to infuse global corporate board seats with a higher percentage of special interest representation (i.e., labor, environmental, social justice etc.). In the USA, Elizabeth Warren has a similar, and indeed superficially noble, and more inclusive agenda. China, whose leader-for-life (Xi Jinping) is a Schwab favorite and Davos keynote speaker, takes this autocratic vision one step further by simply inserting governmental agents into every Chinese boardroom. For many, including myself, one can understand a desire to improve corrupt financial/banking systems and fractured social structures. One can understand more inclusion and less corporate greed. Toward that end, I don’t think Schwab is a transhumanist creature of a dark global conspiracy to depopulate the world and rule as supreme leader of a one-world government. I actually feel he believes he can help himself (and others) at the same time. And as for the current version of capitalism in which central banks like the Fed (and derivative-sick commercial bankslike Credit Suisse) have become THE driving/liquidity force of supply and demand, I’ve written and spoken countless times on my view that true capitalism died long ago. But what we are being told by folks like Schwab is hardly better; in fact, it’s much worse. Schwab’s Flawed Premise: Institutional Faith Like China’s Xi Jinping, Schwab’s Great Reset is based upon the notion that systemic risks like inflation, pandemics and geopolitical as well as economic distortion can be better managed by a global “coordination” of wise centralized and institutional players. Like Xi, Schwab believes “giant ships survive storms, whereas small boats sink.” But such faith (and premise) that massive and globally coordinated institutional wisdom is somehow safer and superior to individual freedom ignores the titanic example, of well…the Titanic. In short: Big ships sink too—and usually with higher casualty rates. Schwab’s vision of a “coordinated economy” and the redefining of the “social contract” to tackle real or exaggerated (pick your view) crises like climate change or future pandemics is based upon an inherently flawed premise that enlightened yet increasingly CENTRALIZED institutions or even governments (like China?) can save us. But what folks like Schwab (or for that matter Biden, Trudeau, Macron, Scholz, Johnson and just about every other embarrassing but modern national leader) failed to confess is that not once in the entire history of homo sapiens has a centralized system (fascist, Bolshevik, communist or socialist) ever brought an ounce of sustainable good to the world. (Though such centralization certainly brought a lot of temporary luxury, wealth and power to folks like Castro, Lenin, Mussolini and Robespierre…) The simple, tragic yet historically and (psychologically) confirmed reality is this: “Efficient” safety via central planning at the expense of individual freedoms NEVER works. America’s Brief & Shining Moment That is why the founding fathers of the greatest constitutional and democratic (yet now failed) experiment in history declared (via Ben Franklin) that “those willing to give up their freedoms for greater security deserve neither.” For a brief and shining moment in 18th century Philadelphia, a document and vision of individual freedoms and constitutional protections declared the priority of the individual over the “security” of centralized tyranny as the cornerstone of its national vision. America’s Flawed Premise: Faith in Human Nature? Perhaps, however, these founding fathers under-estimated the human-all-too-human (nod to Nietzsche) susceptibility to self-interest and a desire for more personal and political control—i.e., the common extroverted psychopathy of most politicians—even those posing under a democratic flag. That is why the same Ben Franklin casually (though sadly) remarked to a passer-by on the very day of America’s Declaration of Independence that “eventually all democracies die, and usually by suicide.” This suicide has been gradual but undeniable, marked by such slow-drip turning points toward increasing centralization as exemplified by: 1) the 1913 birth of the Federal (Central) Reserve (against which Thomas Jefferson warned in 1806); 2) the now increasingly obvious and centralized (coup d’état) murder of a sitting president in 1963; 3) the imperialist drift toward false flag wars of expansion (from “remember the Maine” of 1898, the Gulf of Tonkin Resolution in 1964 or the 2003 WMD fiction in Iraq) to 4) the exploitation of cataclysmic crises to slowly eradicate personal liberties in the name of “national security” under such euphemistically-titled legislation like the post-9/11 “Patriot Act.” In short, given that all systems and experiments, be they liberty-based or centralized, are envisioned and then managed by human systems, the age-old (Hobbes/Locke) debate as to whether humans are intrinsically in a state of war or a state of peace (i.e., good or bad) remains the core dilemma and question. The Modern Flawed Premise: Faith in Technology This timeless dilemma, of course, has taken an entirely new course in a smart-phone era of increasing faith in a technological, virtual and even robotic solutions to man’s quest for a better, freer tomorrow. There are many who believe that we can replace corrupt institutions (from Davos to Brussels, DC to Beijing) with wiser technologies, which can and sometimes do allow a freer and more decentralized flow of information (as evidenced by non-main-stream platforms like this one) and even money (as evidenced by the thirst for decentralized, encrypted currencies like BTC). Rapidly evolving technologies, for example, allow more people to leave crime-infested (and police defunded) cities for more work-at-home personal freedoms or income and even more personal expression. As technology advances, many rightly or wrongly believe that civilization will experience more freedoms and hence more of the “happy accidents” (nod to F.A. Hayek) which only freedom-based (rather than centralized) systems allow. For them, technology offers a “great escape” from the dangers of the “great reset.” This feels promising at first glance, but it too ignores the human-all-too-human reality that even advanced technologies are still steered by un-advanced humans, as the recent debacle at FTX easily reminds. In short, like faith in human nature or faith in institutions, faith in technology is no cure all. Enter CBDC—The Latest Lie from Above As we now see in the slow yet inevitable evolution of Central Bank Digital Currencies, technology can in fact be used to further diminish rather than enhance human liberties. It seems that in 2022 and now 2023, everyone is suddenly asking about CBDC. And they should be. But what is it? To begin with, CBDC is not a new currency, it’s a new payment system—one that is digital and encrypted rather than paper-based. Instead of dollars, yen, lira and euros, we’ll soon have e-dollars, e-yen, e-liras and e-euros etc. In short, more crappy fiat money—just in digital form. Furthermore, CBDCs are not cryptos. Yes, they are digital, encrypted and kept in a ledger, but they do not involve blockchain. In essence, and much like a Visa or Mastercard service, CBDC involves a similar ledger technology, but in this new and twisted case it’s a controlled (rather than distributed) ledger of encrypted digital currencies managed by central banks. In this new payment system, we hold digital money accessed by apps on our smart phones with an account directly linked to a central bank with (as the policy makers remind us) far greater speed and less intermediary costs (otherwise typical to credit cards). All good, right? Not so fast… The CBDC Official Narrative: Only Half the Story Like all dangerous, centralized and controlling ideas, CBDC was snuck in with consoling words during times of crisis. But CBDC is far more than just an evolving and technological “eureka” moment. CBDCs were first openly announced by the IMF at the onset of the Covid Crisis, which the IMF used as a convenient pretext to excuse decades of their own and other central-bank-driven (and historically unprecedented) debt sins. Crises always boost the power of the state, and the Covid crisis boosted the power of the IMF to create new ways to promote bad ideas while centralizing more power. Although ignored by the media in 2020, I immediately warned of this in 2020. Then came the BIS in 2021. Like the IMF, the BIS telegraphed all the warm and fuzzy good news in a calm little video of CBDC “efficiencies,” “safety,” and “speed.” The BIS took credit for leading the technological CBDC charge alongside 4 other key central banks (i.e., the Fed, the ECB etc.) and a select handful of 20 other “participants” (i.e., the same disastrous commercial banks who gave us the GFC in 2008) to eliminate certain “pain points and friction” in hitherto inefficient cross border settlements and FX transactions. Then came Powell. In the midst of a global inflationary crisis, gyrating markets and an avoidable yet disastrous war in the Ukraine, the Fed stepped in with its own one-sided puff piece as the world was distracted by bigger headlines. With a calm expression and forked-tongue, Powell causally announced that the US will have a CBDC as the Fed plays a “leading role” in its development. According to Powell, “the Fed is charged with the safety and efficiency of payment systems,” and that by “embracing innovation,” we good citizens can help the Fed in this historical process as the modern world evolves from telegraph wires and clearing houses to the new “Fed Now Service” driven by CBDC to ensure “safer financial transactions.” Powell kindly reminds us that distributed ledgers of cryptos are not safe, as their swings in value prove. Despite admitting that stable coins (directly linked to currencies) are better, he said they too are riddled with risks and thus not nearly as safe as digital currencies under “the same regulatory measures as our banking and financial firms.” (Apparently, Powell thinks the public has forgotten Bear Stearns, Lehman, AIG, Long Term Capital Management and other “regulated” enterprises of this corrupted ilk…) Powell closed this blue-pill video by saying that the Fed’s focus with a CBDC is to improve on an already safe system—as a compliment to, not a replacement of cash. He further promised to take into consideration issues of law and privacy, and warmly announced that, “we look forward to hearing your thoughts on this important topic.” All warm and fuzzy, safe, innovative and democratic, right? Again: Not so fast. CBDC’s Other Story: One Big Lie of Many Omissions There are many obvious yet omitted dangers (and motives) behind CBDC (as lies of omission are the most common symptom of benevolent tyranny). What neither the IMF, the BIS nor Powell discussed are likely the most honest motives behind CBDC. 1. Kill the Crypto Competition As I’ve argued almost from the onset of the crypto mania, the success of cryptos would eventually become their ultimate undoing, as the concept of alternative digital currencies outside of the banking system was a direct threat to sovereign power. If forced to choose a “winner” in a war between the power of a blockchain BTC and a corrupt banking system (tied to the hip of sovereign power), my bet (sadly) was always on the corrupt. CBDC, in short, is a direct assault on the growing (and in many ways free and admirable) crypto narrative. 2. Debt “Reset:” Impose Negative Rates & Screw the People As I’ve also argued for years, all debt-soaked regimes need negative rates to climb out of the bottomless debt hole they alone created. By forcing citizens into a CBDC system, banks like the Fed can “efficiently and quickly” impose negative rates (i.e., where you pay banks to hold your money rather than receive positive interest for your deposits). This already happened in Europe. Furthermore, given that all major nations are suffering debt to GDP ratios well past the fatal 100% level,  with capital to asset levels surpassing the 200:1 mark, it’s now patently obvious in a rising rate and declining tax-revenue environment that nations like the U.S. can’t afford to pay even the interest on their unprecedented debt piles. In this sickening backdrop, CBDC systems allow indebted nations to better control, and hence steel from, their citizens. When currencies are “reset” (like Germany in 48), the government can “convert” your old money to the new money while simultaneously (due to a “crisis”) keeping a percentage for themselves as a clever way to pay their debts via digital hold-backs (i.e., theft). And given that the entire world is over $300T in debt, one can bet that a massive debt restructuring (akin to a global bankruptcy declaration) is inevitable. CBDCs are thus being rolled out beforehand to make this intra-bank and cross border restructuring (theft) more “efficient.” But that’s just the tip of the iceberg when it comes to controlling citizen money and freedoms. 3. A Cashless Control State Despite Powell’s words to the contrary (as unreliable as his transitory inflation promise), the longer-term aim and practice of a forced digital currency system is to take cash out of the system. Under a CBDC regime, citizen money can be digitally monitored, withheld, frozen, taxed, penalized or otherwise controlled should such a citizen (or collection of citizens) challenge or threaten the state—rightfully or wrongly. I’m thinking of those truckers in Canada… But as Mussolini himself said: “Fascism is the perfect marriage of corporations and the state.” CBDC is a giant leap in that sadly familiar direction. In short, financial and personal privacy slowly but surely disappears under a CBDC system, and you can be assured that if the Mad King George had access to CBDC in 1776, folks with poor social credit scores like Ben Franklin, Thomas Jefferson, George Washington or James Madison would have been monitored, frozen and made financially impotent long before they ever had a chance to freely assemble near the Liberty Bell in Philadelphia. Thus, even if Powell promises legal and privacy rights today, what happens tomorrow when we inevitably (if not already) fall under another mad king? Stated bluntly, CBDC is not about freedom, individual rights or privacy. It is pure control masquerading as a safer payment system and faster trans-national currency settlements. But which would you prefer? What is more important– personal liberty or “efficient payment systems”? Powell said he was “looking forward” to our thoughts. Well, now he has mine. Frankly: Shame on him. Gold, CBDC and a Shortage of Easy Answers Given the case made above that no easy answers to our current global nightmare (political, financial or ethical) can rest solely upon a faith in institutions, individual leaders or even technologies, as each of these “solutions” is vulnerable to the human element of corruption and ignorance—what will save us? Do I have an answer to these manifold and increasingly troubling signs and times? I do not. Gold, of course, can not solve the laundry list of fracturing faiths, economies, politics, societies, currencies, borders and systems making the headlines of each passing day. That’s a human, or even spiritual question which I will not pretend to answer/solve here. Nor can I fully predict the precise timing, measures and misuses of CBDC near-term or long term. Will gold-backed SDR’s come? Will banking systems and credit card systems change immediately or slowly? When will gold free-float? When will derivative markets implode? What will trigger the next banking crisis? Again: I can’t say or time. No one can. What I can say, sadly, is that political and monetary corruption, from ancient China to modern DC, or from Roman coins or crappy paper dollars to “advanced” CBDCs is nothing new under the sun. But gold (sourced from the periodic table rather than a periodic printer) has never been corrupted by the sun’s rays nor man’s mechanizations. It can’t be printed, mouse-clicked or digitalized. Alas: It’s harder for governments and banks to control. Without exception, physical gold has always been the only form of real money that has survived the death of one system and currency after the next, be they debased by ancient metallurgists, modern money printers or digital cons. As history continues its sad and desperate pattern of more control, more debasement and more double-speak, I can only place portions of my faith and wealth in the one asset—the only asset—that has always preserved citizen wealth in a world where its leaders have consistently destroyed it (from coins, cash and digital) for thousands and thousands of years. Tyler Durden Fri, 01/06/2023 - 07:20.....»»

After a sour Dec of no Santa Claus rally, S&P 500 is readying a nice Jan move – and I say it would be up. Value hasn‘t retreated deeply while tech is getting ready for a reflexive bounce when it can keep pace with better sectoral picks in the first week of 2023. Let‘s bring […] After a sour Dec of no Santa Claus rally, S&P 500 is readying a nice Jan move – and I say it would be up. Value hasn‘t retreated deeply while tech is getting ready for a reflexive bounce when it can keep pace with better sectoral picks in the first week of 2023. Let‘s bring up Thursday‘s super extensive analysis – I hope you didn‘t miss the yearly recap and outlook inside such as: (…) True, inflation has peaked, but I had been telling you earlier in summer that it‘s going to be sticky and stubborn, better to expect only a shallow retreat that would go painfully slow. And PPI incl. core data show that‘s still the case, with more inflation in the pipeline. 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 2022 hedge fund letters, conferences and more   The Fed has been and will be forced to take Fed funds rate restrictive, and the figure wouldn‘t be 5%, but rather 5.50% - if they get there before breaking the real economy, which I doubt they would be able to avoid. Actually, it‘s the hopes of tightening breaking something far away that would force the Fed to pivot without any real damage washing across the U.S. shores, that forms the Moynihan bullish case for stocks which I argued and refuted some two weeks ago. The Fed is going to be frustrated by persistent inflation, commodities retreating no more, and both hot job market with wage inflation running hot, participation rate turning lower (not only for males), and unemployment claims slowly trending up. We‘ll continue witnessing cost-push inflation combined with tight labor market – and it would be crude oil‘s time again to gain in value from current levels. I think that apart from long-term share purchases slated for the start of the year, it‘ll be Jan 2023 inflation data would be the catalyst for stock market‘s good month, whereby we would make a peak, quite consistently with the 3rd Presidential cycle year pattern. Remember, all of the above is set to squeeze profit margins, leading to lower earnings and guidance. Similarly on the non-corporate front, the consumer confidence data would turn south after the Dec outperformance, which would then reflect upon retail sales, worsening credit and deliquencies. If in doubt, have a look at e.g. used car prices, which were also one of the key drivers of retreating inflation lately. Yes, the consumer is going to get squeezed as well, it‘s not just about deflating housing and sharply going down manufacturing as recent data have shown. Notably, I‘m not arguing for a housing crash, but for a solid, long lasting (18 months?) and well managed (by the Fed as housing is the first leading indicator to get changing nominal rates – and of course mortgage rates, which have bottomed quite a while ago already, worldwide) retreat in peak to through housing values of say 20%. So, we‘re firmly on the countdown to recession, which is in several sectors already here, but will strike with full force in 1H 2023. Yes, it‘s the coming six months that would illustrate in stocks what we have seen internationally in bonds – just compare the magnitude of retreat in U.S. yields to that seen in European bonds or UK gilts. Have a look at lumber, home sales or housing starts taking it on the chin if you doubt the housing market‘s direction. This time, the Fed doesn‘t have your back, and is willing to (over)tighten. Have a look at the dollar, at how it‘s been unable to catch a bid even as the Fed & co killed the bond market rally in mid Dec. Financial conditions have also eased last month, working against the greenback. While USD may finally stage a relief rally in Jan for instance on the still hot inflation, it would though remain under strategic defensive throughout the year as the Fed‘s tightening pace and leadership in setting the pace, goes away. Actually, we might be looking at the opening shot in the USD rally provided that the greenback keeps above first 104, then 104.80. Have a look at real assets during the 2022 times of rising USD – and just imagine what these would do when the dollar fails to catch (very solid) breath later in the year. Talk about decreasing sensitivity late in the tightening cycle, coupled with the the upcoming recession that would take yields down in the second half of 2023. Soft landing is the only thing that would preclude retreat in yields, and we know how likely is that to occur… LEIs don‘t lie. I‘ll conclude by saying the bond market doesn‘t believe in soft landing one bit. Keep enjoying the lively Twitter feed serving you all already in, which comes on top of getting the key daily analytics right into your mailbox. Plenty gets addressed there (or on Telegram if you prefer), but the analyses (whether short or long format, depending on market action) over email are the bedrock. So, make sure you‘re signed up for the free newsletter and that you have my Twitter profile open with notifications on so as not to miss a thing, and to benefit from extra intraday calls. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook 3,810s are the support zone which I don‘t look for to be broken – conversely, 3,875 would be overcome early in the week. XLV, XLF, XLI and XLB with XLE are likely to do well while XLK wouldn‘t stand much in the way. Credit Markets Encouraging signs from corporate junk bonds – stocks are likely to get a tailwind to open 2023. Let‘s now break above $73.75 in HYG. Thank you for having read today‘s free analysis, which is a small part of my site‘s daily premium Monica's Trading Signals covering all the markets you're used to (stocks, bonds, gold, silver, miners, oil, copper, cryptos), and of the daily premium Monica's Stock Signals presenting stocks and bonds only. Both publications feature real-time trade calls and intraday updates. While at my site, you can subscribe to the free Monica‘s Insider Club for instant publishing notifications and other content useful for making your own trade moves. Turn notifications on, and have my Twitter profile (tweets only) opened in a fresh tab so as not to miss a thing – such as extra intraday opportunities. Thanks for all your support that makes this great ride possible! 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. 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2022 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 2021, we said that the year would be a very tough act to follow as "the sheer breadth of narratives, stories, surprises, plot twists and unexpected developments" made 2021 the most memorable year yet in our brief history, and that it would be an extremely tough act to follow. And yet despite the exceedingly high bar for 2022, not only did the year not disappoint but between the constant news barrage, the regime shifts, narrative volatility, market rollercoasters, oh and the world being on the verge of a nuclear Armageddon for much of the year, the past year was the most action, excitement, and news (including fake news)-packed yet. Where does one even start? While covid - which was the story of 2020 - finally faded away from the front page and the constant barrage of fearmongering coverage (with recent revelations courtesy of Elon Musk's "Twitter Files" showing just how extensively said newsflow was crafted, orchestrated and -y es - censored by the government, while a sudden U-turn by China in its Covid Zero policy prompting a top Chinese research to admit that the "fatality rate from the omicron variant of the virus is in line with the flu"), and the story of 2021 was the scourge of soaring inflation (which contrary to macrotourist predictions that it would prove "transitory" just kept rising, and rising, and rising, until it hit levels not seen since the Volcker galloping inflation days of the 1980s)... ... then the big market story of 2022 was the coordinated central bank crusade to put the inflation genie back into the bottle and to contain soaring prices (which were no longer transitory, especially after Putin launched his "special military operation" in Ukraine which we will discuss shortly)... ... even if it meant crushing the housing market... ... sparking a global recession, or as Goldman calls it a "broad-based but necessary slowdown in global growth"... ... and leaving millions out of work (the BLS still pretends hundreds of thousands of workers are being added to payrolls even though as we all know - as does the Philadelphia Fed - that is a lie, and the real employment number has not changed since March)... ... not to mention triggering the worst bear market in both stocks and bonds since the global financial crisis. Yes, less than a year after the S&P hit a record just above 4800 in January of this year, both global stock and bond markets have cratered, and in a profound shock to an entire generation of "traders" who have never lived through a hiking cycle and rising inflation, for the first time since 2008 no central banks are riding to the market's rescue. Meanwhile, with a drop of more than 20% in 2022 translating into a record $18 trillion wipeout, the MSCI All-Country World Index is on track for its worst performance since the 2008 crisis, amid the Fed's relentless rate hiking campaign. Add bond market losses - because in 2022 everything was sold - and you get a staggering $36 trillion in value vaporized, which in absolute terms is nearly double the damage from the Lehman failure and the global financial crisis. None of this should come as a surprise: the staggering liquidity injections that started in 2020, continued throughout 2021 and extended into the first half of 2022 before gently reversing as QT finally returned; 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 another $2 trillion in the subsequent period, most of which 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). And then, when a modest $500 billion in Fed balance sheet liquidity was withdrawn... everything crashed. This reminds us of something we said two years ago: "it's almost as if the world's richest asset owners requested the covid pandemic." Well, last year we got confirmation for this rhetorical statement, when we calculated that in the 18 months after the covid pandemic hit, the richest 1% of US society saw their net worth increase by over $30 trillion, which in turn officially made the US into 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, the lowest in Federal Reserve data, while for the first time the super rich had a bigger share, at 27%. Yes, for the first time ever, the 1% owned more wealth than the entire US middle class, a definition traditionally reserve for kleptocracies and despotic African banana republics. But as the Fed finally ended QE and started draining its balance sheet in 2022, the party ended with a thud, and this tremendous wealth accumulation by the top 1% went into reverse: indeed, just the 500 richest billionaires saw their fortunes collapse by $1.4 trillion with names such as Mark Zuckerberg, Elon Musk, Jeff Bezos, Masa Son and Larry Page and Sergey Brin all losing more than a third (in some cases much more) of their net worth. This also reminds us of something else we said a year ago: "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." In other words, for all its faults, 2022 was a year in which inequality finally reversed - if only a little - and as Michael Hartnett said in one of his final Flow Shows, "Main St finally outperformed Wall St significantly in 2022" as the value of financial assets relative to the economy slumped from 6.3x to 5.4x. Sadly, we doubt that this will cheer anyone up - be it workers - who have seen their real, inflation-adjusted earnings decline for a record 20 consecutive months (or virtually all of Joe BIden's presidency)... ... or investors who have seen crushing losses across all industries, with the exception of the one sector we have been pounding-the-table-on bullish on since the summer of 2020: energy (with our favorite stock, Exxon, blowing away the competition with its nearly triple digit return YTD). There is some good news for jittery bulls looking ahead at 2023: statistics show that two consecutive down years are rare for major equity markets — the S&P 500 index has fallen for two straight years on just four occasions since 1928, and they usually marked market crashes or social cataclysms -  the Great Depression, World War II, the 1970s oil crisis and the bursting of the dot-com bubble. The scary thing though, is that when they do occur, drops in the second year tend to be deeper than in the first. And with Joe Biden at the helm, betting on a second great depression may be prudent. Even if that sounds hyperbolic, when it comes to markets the big question for 2023 is simple: have markets bottomed or is there much more room to fall, in other words, are we facing a hard or soft landing. And speaking of Joe Biden at the helm, another glaring risk factor for 2023 is - of course- nuclear war. Because while the great inflation fight and Biden bear market were the defining features of 2022 from an economic and capital markets standpoint, the biggest event in terms of geopolitical and social importance was the war between Russia and Ukraine. While one could write - pardon the pun - the modern day equivalent of "war and peace" on the causes behind the war in Ukraine, for the sake of brevity we will merely note that a conflict that had been simmering for years if not decades... ... finally got its proverbial spark in February when - encouraged by NATO to join the military alliance in an act that Russia had repeatedly warned would be casus belli against Ukraine - Putin ordered a "special military operation" against Ukraine, sending Russian troops to invade the country because, as he subsequently explained, "if Russia did not do this now, it itself would be invaded by neighboring NATO countries a few years later." And speaking of what else Putin said in the lead up to the Ukraine war, the following snapshots reveal much of the Russian leader's thinking about the biggest geopolitical conflict since World War II. And while the geopolitical implications of the war are staggering and long-reaching, the single most important consequence to the world, and especially Europe, is the threat of persistent energy shortages over the coming years as Russian energy output has been sanctioned and curtailed for the foreseeable future... ... in the process sending energy prices in Europe and elsewhere soaring, and pushing inflation sharply higher. Which is especially ironic, because the same central banks we showed above that are hiking rates like crazy in hopes of containing inflation are doing precisely nothing to address the elephant in the room, namely that inflation is not demand-driven (which the Fed can control by adjusting the price of money) but entirely on the supply-side. And since the Fed can't print oil or gas, all that central banks are doing is executing Vladimir Putin's indirect bidding and pushing the world into a global recession if not all out depression as they hope to crush enough energy demand to lower prices in a world where energy supply is also much lower. What they forget is that this will lead to tens of millions of unemployed people, and while that is not a major issue yet, something tells us that the coming mass layoffs - both in the US and around the globe - and not just in tech but across all industries, will be the story of 2023. One final thing worth mentioning in the context of the Ukraine war is what it means strategically for the future of the world, and here we would argue that some of the best analysis belong to former NY Fed repo guru, Zoltan Pozsar whose periodic dispatches throughout 2022 (all of which are available to professional subscribers), and whose year-end report on the fate of Bretton Woods III, the petrodollar, the petroyuan and petrogold, are all must-read for anyone who hopes to be ahead of the curve in today's rapidly changing world. Away from Inflation and the Ukraine war, the next most important topic in the past year, were the revelations from the Twitter Files, exposed by the social medial company's new owner, Elon Musk, who paid $44 billion so that the world can finally see first hand just how little free speech there really is in the so-called land of the free and the home of the First Amendment, and how countless three-lettered, deep-state alphabet agencies - and the military-industrial complex - will do anything and everything to control both the official discourse and the unofficial narrative to keep their preferred puppets in the White House, and keep those they disapprove of - censored and/or locked up, both literally and metaphorically... or simply designate them "conspiracy theorists." None other than Matt Taibbi wrote the best summary of what the Twitter Files revealed, namely America's stealthy conversion into a crypto-fascist state where some unelected government bureaucrat tells corporations what to do: This last week saw the FBI describe Lee Fang, Michael Shellenberger and me as “conspiracy theorists” whose “sole aim” is to discredit the agency. That statement will look ironic soon, as we spent much of this week learning about other agencies and organizations that can now also be discredited thanks to these files. A group of us spent the last weeks reading thousands of documents. For me a lot of that time was spent learning how Twitter functioned, specifically its relationships with government. How weird is modern-day America? Not long ago, CIA veterans tell me, the information above the “tearline” of a U.S. government intelligence cable would include the station of origin and any other CIA offices copied on the report. I spent much of today looking at exactly similar documents, seemingly written by the same people, except the “offices” copied at the top of their reports weren’t other agency stations, but Twitter’s Silicon Valley colleagues: Apple, Facebook, Microsoft, LinkedIn, even Wikipedia. It turns out these are the new principal intelligence outposts of the American empire. A subplot is these companies seem not to have had much choice in being made key parts of a global surveillance and information control apparatus, although evidence suggests their Quislingian executives were mostly all thrilled to be absorbed. Details on those “Other Government Agencies” soon, probably tomorrow. One happy-ish thought at month’s end: Sometime in the last decade, many people — I was one — began to feel robbed of their sense of normalcy by something we couldn’t define. Increasingly glued to our phones, we saw that the version of the world that was spat out at us from them seemed distorted. The public’s reactions to various news events seemed off-kilter, being either way too intense, not intense enough, or simply unbelievable. You’d read that seemingly everyone in the world was in agreement that a certain thing was true, except it seemed ridiculous to you, which put you in an awkward place with friends, family, others. Should you say something? Are you the crazy one? I can’t have been the only person to have struggled psychologically during this time. This is why these Twitter files have been such a balm. This is the reality they stole from us! It’s repulsive, horrifying, and dystopian, a gruesome history of a world run by anti-people, but I’ll take it any day over the vile and insulting facsimile of truth they’ve been selling. Personally, once I saw that these lurid files could be used as a road map back to something like reality — I wasn’t sure until this week — I relaxed for the first time in probably seven or eight years. Well said Matt, and we say this as one of the first media outlets that was dubbed "conspiracy theorists" by the authorities, long before everyone else joined the club. Oh yes, we've been there: we were suspended for half a year on Twitter for telling the truth about Covid, and then we lost most of our advertisers after the Atlantic Council's weaponized "fact-checkers" put us on every ad agency's black list while anonymous CIA sources at the AP slandered us for being "Kremlin puppets" - which reminds us: for those with the means, desire and willingness to support us, please do so by becoming a premium member: we are now almost entirely reader-funded so your financial assistance will be instrumental to ensure our continued survival into 2023 and beyond. The bottom line, at least for us, is that the past three years have been 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. Two years ago, 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 for good. 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. 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 three years showed conclusively 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, now that any future big stimulus plans are off the table until at least 2024 thanks to a divided Congress, and the Fed is still planning on hiking until it finally crushing inflation, we would like to remind readers of one of our favorite charts: every financial crisis is the result of Fed tightening, and something always breaks. Which brings us to the simplest forecast about the coming year: 2023 will be the year when something finally breaks. As for more nuanced predictions about the future, as the past three 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, dramatic changes in 2022 persisted and new sources of global shocks emerged, 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 deciding that the US is finally weak enough and the time has come to invade Taiwan. 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 either Putin or the KGB either, sorry CIA) 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 only accelerate in the coming year - Elon Musk's Twitter Files revelations notwithstanding, especially as the following list of Top 20 articles for 2022 reveals, many of the most popular articles in the past year were precisely those which the conventional media would not touch with a ten foot pole, both out of fear of repercussions and because the MSM has now become a PR agency for either a political party or some unelected, deep state bureaucrat, which in turn allowed the alternative media to continue to flourish in an information vacuum (in less than a decade, Elon Musk's $44 billion purchase of Twitter will seem like one of the century's biggest bargains) and take significant market share from the established outlets by covering topics which established media outlets refuse 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 2022 - have realized that 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 14-year existence, starting with 2009 and continuing with 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020 and 2021. 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 just over 510,000 views, was one of the seminal market strategy reports of 2022 by the man who has become the most prescient and accurate voice on Wall Street, former NY Fed repo guru Zoltan Pozsar, whose periodic pieces previewing the post-war world - one where Bretton Woods III makes a stunning comeback, where the petrodollar dies, and is replaced by the Petroyuan - have become must-read staple fare for Wall Street professionals. In "Wall Street Stunned By Zoltan Pozsar's Latest Prediction Of What Comes Next", Zoltan offered his first post-Ukraine war glimpse of the coming "Bretton Woods III" world, "a new monetary order centered around commodity-based currencies in the East that will likely weaken the Eurodollar system and also contribute to inflationary forces in the West." Subsequent events, including the growing proximity of Russia, China and various other non-G7 nations, coupled with stubborn inflation, have gone a long way to proving Zoltan's thesis. The only thing that's missing is the overhaul of the world reserve currency. In 19th spot, some 526,000 learned that amid the relentless crackdown against free speech by a regime which Elon Musk's Twitter Files have definitively revealed is borderline fascist (as in real fascism, not that clownish farce which antifa thugs pretend to crusade against) Zero Hedge was among the first websites to be targeted by the CIA when that deep state mouthpiece, the Associated Press, said that "intelligence officials accused a conservative financial news website [Zero Hedge] with a significant American readership of amplifying Kremlin propaganda." As we explained in "Now We've Done It: We Pissed Off The CIA" - the 19th most viewed article of 2022 - we have done no such thing but as the AP also revealed, the real motive behind the hit piece is that "Zero Hedge has been sharply critical of Biden and posted stories about allegations of wrongdoing by his son Hunter." Of course, only a few weeks later we would learn that reports of wrongdoing by "his son Hunter" as unveiled in the infamously censored laptop story fiasco, were indeed accurate (despite dozens of "former intel officials" saying it is Russian disinfo) but since only "Kremlin propaganda" sites dare to attack Joe Biden while the MSM keeps deathly silent, nobody in the so-called "free press" bothered to mention it. Incidentally, since the CIA did a full background check on us and republishing some pro-Russian blogs was the best they could find, we are confident that  On the other hand, since being designated a pro-Russian operation meant that we have been blacklisted by most advertisers, we are increasingly reliant on you, dear readers (and not Vladimir Putin) for support, and we would be extremely grateful to everyone who can sign up for our premium product to support us into 2023 and onward. In 18th spot, and suitably right below our little tete-a-tete with the CIA, was the disclosure of a huge trove of corruption Hunter Biden's "laptop from hell." In April, with over 568,000 page views, readers learned that "450GB Of 'Deleted' Hunter Biden Laptop Material To Be Released Within Weeks." The ultimate result was the long overdue confirmation by the mainstream press (NYT and WaPo) that the Biden notebook was indeed real (again, despite dozens of "former intel officials" saying it is Russian disinfo) but since the state-corporatist apparatus had already achieved its goal, and suppressed and censored the original NYPost reporting just ahead of the 2020 presidential election and Biden had been elected president, few cared (just a few months later, thanks to Elon Musk and the Twitter files would we learn just how deep the censorship hole went, and that it involved not only the US government, the Democratic Party, the FBI, but also the biggest tech and media companies, all working together to censor anything that they found politically unpalatable). Yes, 2022 was also a midterm year, and with more than 617,000 views, was our snapshot of what happened on Nov 8 when in a carbon copy of 2020 it initially seemed like Republicans would sweep Congress as we described in the 17th most popular article of 2022, "Election Night Results: FL "Catastrophic" For Dems, Vance Takes OH, Fetterman Tops Oz"... but it was not meant to be and as the mail-in votes crawled in days and weeks later, the GOP lead not only fizzled (despite a jarring loss among Florida Hispanics), but in the end Democrats kept the Senate. Ultimately the result was anticlimatic, and with Congress divided for the next two years, governance will be secondary to what the Fed will do, which in our humble view, will be the big story of 2023. For all the political, market and central bank trials and tribulations of 2022, one could make the argument that the biggest story of the past year was Elon Musk's whimsical takeover of twitter, which started off amicably enough as laid out in the 16th most popular article of 2022 (with more than 627,000 page views) "Buffett Says "Musk Is Winning...It's America" As TWTR Board Ponders Poison Pill", then turned ugly and hostile, transitioned into a case of buyer's remorse with Musk suing to back out of the deal only to find out he can't, and culminated with the release of the shocking Twitter Files, Musk's stunning expose of the dirt and secrets of how the world's most popular news outlet had effectively become a subsidiary not only of the Democratic party but also of the FBI, CIA and various other deep state alphabet agencies, validating once again countless "conspiracy theories" and confirming once and for all that any outlet that still dares to oppose the official party line is the biggest enemy of the deep state. And speaking of the deep state, we had a glaring reminder in September why one should be very careful when crossing the US secret police FBI when pro-Trump celeb pillow entrepreneur Mike Lindell was intercepted by the Feds during a hunting trip and had his cell phone seized as described in "FBI Tracks Down Mike Lindell On Hunting Trip, Surrounds His Car And Seizes Cell Phone". That this happened to one of the most vocal critics of the 2020 election just two months before the midterms, was surely a coincidence, as over 625,000 readers obviously concluded. 2022 was not a good year for markets, and certainly wasn't good for retail investors whose torrid gains from the meme stock mania of 2021 melted down almost as fast as the Fed hiked rates (very fast). But not everyone was a loser, and one story stood out: that of 20-year-old student Jake Freeman (who together with his uncle) bought up a substantial, 6.2% stake in soon-to-be-broke retailer Bed Bath and Beyond, and piggybacking on the antics of one Ryan Cohen, quietly cashed out after making a massive $110 million by piggybacking on one of the most vicious short/gamma squeezes in recent history. The "Surreal Story Of A 20-Year-Old Student Who Acquired 6% Of Bed Bath & Beyond, And Made $110 Million In 3 Weeks" was the 14th most read article of 2022. The 13th most read story of 2022 with over 668,000 reads was the bizarre interlude involving superstar-trader and outgoing House Speaker Nancy Pelosi's husband, Paul, and his bizarre attack by a "right wing" progressive as described in "Paul Pelosi Undergoing Brain Surgery Following 'Brutal' Attack; Suspect Identified." While authorities have struggled to craft a narrative that the attacker, nudist transient David Depape of Berkeley, was a pro-Trumper and the attack was politically motivated, the evidence has indicated that he suffered from serious mental illness and drug addiction and lacked any coherent political ideology; some have even claimed that there was a sexual relationship between him and Pelosi, a theory that could be easily disproven if only the police would release the bodycam footage from the moment of the arrest. Unfortunately, San Fran PD has vowed to keep it confidential. Depape's trial is set to be 2023's business, so expect more fireworks. 2022 was also a year in which Europeans realized how brutally expensive electricity can be when the biggest commodity, nat gas and oil supplier to Europe, Russia, is suddenly cut off. And judging by the 668,500 people who read "How In The Name Of God": Shocked Europeans Post Astronomical Energy Bills As 'Terrifying Winter' Approaches" and made it into the 12th most popular article of the year, the staggering number were also news to our audience: indeed, the fact that Geraldine Dolan, who owns the Poppyfields cafe in Athlone, Ireland, and was charged nearly €10,000 for just over two months of energy usage, was shocking to everyone. To be sure, there were countless other such stories out of Europe and with the Russia-Ukraine war unlikely to end any time soon, Europe's commodity hyperinflation will only continue. Adding insult to injury, Europe is on a fast track to a brutal recession, but the ECB remains stuck in tightening mode, perhaps because it somehow believes that higher rates will ease energy supplies. Alas that won't happen and instead the big question for 2023 will be whether Europe is merely hit with a recession or if instead the ECB's actions escalates the local malaise into a full-blown depression. Earlier we said that one of the most prophetic voices on Wall Street in 2022 (and prior) was that of Zoltan Pozsar, who laid out his theory of a Bretton Woods III regime in the days immediately following the Russian invasion of Ukraine. Well, just one month later we saw the first tentative steps toward just such a paradigm shift when in April the Russian central bank offered to buy gold from domestic commercial banks at a fixed price of 5000 rubles per gram; by doing so the Bank of Russia both linked the ruble to gold and, since gold trades in US dollars, set a floor price for the ruble in terms of the US dollar. We described this in "A Paradigm Shift Western Media Hasn't Grasped Yet" - Russian Ruble Relaunched, Linked To Gold & Commodities", an article red 670,000 times making it the 11th most popular of the year. This concept of "petrogold" was also the subject of extensive discussion by Pozsar who dedicated one of his most recent widely-read notes to the topic; if indeed we are witnessing the transition to a Bretton Woods 3 regime, 2023 will see a lot of fireworks in the monetary system as the dollar's reserve status is challenged by eastern commodity producers. The 10th most popular article of 2022, with 686K views was a reminder of just how much "the settled science" can change: as described in "You Murderous Hypocrites": Outrage Ensues After The Atlantic Suggests 'Amnesty' For Pandemic Authoritarians, many were shocked when after pushing for economy-crushing lockdowns, seeking to block children from going to school (and stunting their development), and even calling for the incarceration or worse of mask, vaccine and booster holdouts, the liberal left - realizing that it was completely wrong about everything to do with covid, a virus with a 99% survival rate - suddenly and politely was hoping to "declare a pandemic amnesty." Brown Professor Emily Oster - a huge lockdown proponent, who now pleads from mercy from the once-shunned - wrote "we need to forgive one another for what we did and said when we were in the dark about COVID. Let’s acknowledge that we made complicated choices in the face of deep uncertainty, and then try to work together to build back and move forward." The response from those who lost their small business, wealth, or worse, a family member (who died alone or from complications from the experimental gene therapy known as "vaccines" and "boosters") was clear and unanimous; as for those seeking preemptive pardons from the coming tribunals, their plea was clear: “We didn't know! We were just following orders."  And from one covid post we segue into another, only this time the focus is not on the disease but rather the consequences of mandatory vaccines: over 730K readers were shocked in February when a former finance professional discovered a surge in "excess mortality", or unexplained deaths among otherwise healthy young adults, yet not linked directly to covid (thus leaving vaccines as the possible cause of death), as we showed in "Long Funeral Homes, Short Life Insurers? Ex-Blackrock Fund Manager Discovers Disturbing Trends In Mortality." This wasn't the first time we had heart of a surge in excess mortality: a month earlier it was the CEO of insurance company OneAmerica to observe that the death rate for those aged 18-64 had soared by 40% over pre-pandemic levels (this was another post that received a lot of clicks). While the science is clearly not settled here - on either covid or the vaccines - the emerging trend is ominous: at this rate the excess deaths associated with covid (and its vaccines) will soon surpass the deaths directly linked to covid. And anyone who dares to bring this up will be branded a racist, a white supremacists, or a fascist, or all three. One of the defining features of 2022 was the record surge in the price of food. And while much of this inflation could be attributed to the trillions in helicopter money injected over the past three years, as well as the snarled supply chains due to the war in Ukraine, a mystery emerged when one after another US food processing plant mysteriously burned down. And with almost 800,000 page views, a majority of our readers wanted to know why "Another US Food Processing Plant Erupts In Flames", making it the 8th most read post of the year. While so far no crime has been alleged, the fact that over 100 "accidental fires" (as listed here) have taken place across America's food facilities since the start of 2021, impairing the US supply chain, remains one of the biggest mysteries of the year. While some will argue that runaway inflation was the event of 2022, we will counter that the defining moment was the war between Ukraine and Russia, which broke out in February after what the Kremlin said was a long-running NATO attempt to corner Russia (by pushing Ukraine to seek membership in the military alliance), forcing it to either launch an invasion now, or wait several years and be invaded by all the neighboring NATO countries. Still, many were shocked when Putin ultimately gave the order to launch the "special military operations", as most had Russia to merely posture. But it was not meant to be and nearly 840K readers followed the world-changing events on February 2 when "Putin Orders "Special Military Operation" In Ukraine's Breakaway Regions." The war continues to this day with no prospects of peace or even a ceasefire. And from one geopolitical hotspot we go to another, namely China and Taiwan, which many expect will be the next major military theater at some time in the near future when Beijing finally invades the "Republic of China" and officially brings it back into the fold. Thing here got extra hot in early August when Democrat Nancy Pelosi decided to make an unexpected trip to the semiconductor-heavy island, sparking an unprecedented diplomatic escalation, with many speculating that China could simply fire at Nancy's unsanctioned airplane. In the end, however, as nearly 950,000 found out, the situation fizzled as "China Summoned US Ambassador Overnight, Says Washington "Must Pay The Price"." Since then Pelosi's political career has officially ended, and while China has not yet invaded Taiwan, it is only a matter of time before it does. While Covid may have been a 2021 story, that was also the year when nobody was allowed to talk about the Chinese pandemic. Things changed in 2022 when liberal censorship finally crashed under its own weight, and long overdue discussions of Covid became mainstream. nowhere more so than on Twitter where Elon Musk fired all those responsible for silencing the debate over the past three years, and of course, the show of the always outspoken Joe Rogan, where mRNA inventor Robert Malone, gave a fascinating interview to Joe Rogan which aired on New Year's Eve 2022 and which took the world by storm in the first days of the new year. It certainly made over 908,000 readers click on "COVID, Ivermectin, And 'Mass Formation Psychosis': Dr. Robert Malone Gives Blistering Interview To Joe Rogan." The doctor, who had been suspended by both LInkedIn and Twitter, for the crime of promoting "vaccine hesitancy" argued that if the risks of vaccines are not discussed, informed consent is not possible. As Malone concluded "Informed consent is not only not happening, it's being actively blocked." Luckily, now that Elon Musk has made it possible to discuss covid - and so much more - on twitter without fears of immediate suspension, there is again hope that not only is informed consent once again possible, but that the wheels of true justice are starting to steamroll liberal censorship. A tragic and bizarre interlude took place in early July when "Former Japanese PM Abe Shot Dead During Speech, "Frustrated" Assassin Arrested", a shocking development which captured the attention of some 927,000 readers.  While some expected the assassination to be a Archduke Ferdinand moment, coming at a time of soaring inflation around the globe and potentially catalyzing grassroots anger at the ruling class, the episode remained isolated as it did not have political motives and instead the killer, Yamagami, said that he killed the former PM in relation to a grudge he held against the Unification Church, to which Abe and his family had political ties, over his mother's bankruptcy in 2002. That's the good news. The bad news is that with the fabric of society close to tearing across most developed nations, it is only a matter of time before we do get a real Archduke 2.0 moment. Just days after Rogan's interview with Malone (see above), another covid-linked "surprise" emerged when Projected Veritas leaked military documents hidden on a classified system showing how EcoHealth Alliance approached DARPA in March 2018, seeking funding to conduct illegal gain of function research of bat borne coronaviruses. But while US infatuation with creating viral bioweapons is hardly new (instead it merely outsourced it to biolabs in China), one of the discoveries revealed in "Ivermectin 'Works Throughout All Phases' Of COVID According To Leaked Military Documents" - the third most popular post of 2022 with 929K page views, is that the infamous "horse paste" Ivermectin was defined by Darpa as a "curative" which works throughout all phases of the illness because it both inhibits viral replication and modulates the immune response. Of course, had that been made public, it would have prevented Pfizer and Moderna from making tens of billions in revenue from selling mRNA-based therapies (not vaccines) whose potentially deadly side effects we are only now learning about (as the 9th most popular post of 2022 noted above confirms). The fake news apparatus was busy spinning in overtime this past year (and every other year), and not only when it comes to covid, inflation, unemployment, the recession, but also - or rather especially - the Ukraine fog of propaganda war. A striking example was the explosion of both pipelines connecting Russia to Europe, Nord Stream I and II, which quickly escalated into a fingerpointing exercise of accusations, with Europe blaming Putin for blowing up the pipelines (even though said pipelines exclusively benefit the Kremlin which spent billions building them in the recent past), while the Kremlin said it was the US' fault. This we learned in "EU Chief Calls Nord Stream Attack "Sabotage", Warns Of "Strongest Possible Response", which was also the 2nd most read article of the year with just over 1,050,000 page views. In the end, there was no "response" at all. Why? Because as it emerged just two months later in that most deep state of outlets, the Washington Post, "Evidence In Nord Stream Sabotage Doesn't Point To Russia." In other words, it points to the US, just as professor Jeffrey Sachs dared to suggest on Bloomberg, leading to shock and awe at the pro-Biden media outlet. The lesson here, inasmuch as there is one, is that the perpetrators of every false flag operation always emerge - it may take time, but the outcome is inevitable, and "shockingly", the culprit almost always is one particular nation... Finally, the most read article of 2022 with nearly 1.1 million page views, was "White House Says Russian Forces 20 Miles Outside Ukraine's Capital." It cemented that as least as far as ZH readers were concerned, the biggest event of the year was the war in Ukraine, an event which has set in motion forces which will redefine the layout of the world over the next century (and, if Zoltan Pozsar is right, will lead to the demise of the US dollar as a reserve currency and culminate with China surpassing the US as the world's biggest superpower). Incidentally, while Russian forces may have been 20 miles outside of Kiev, they were repelled and even though the war could have ended nearly a year ago and the world would have returned to some semblance of normalcy, it was not meant to be, and the war still goes on with little hope that it will end any time soon. And with all that behind us, and as we wave goodbye to another bizarre, exciting, surreal year, what lies in store for 2023, 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 repeat baseless 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 2022 (when the entire world realized just how clueless the Fed had been when it called the most crushing and persistent inflation in two generations "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 both the scientific method and the "expert class" with their catastrophically 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 with central banks now desperate to contain inflation and undo 13 years of central bank mistakes - after all it is the trillions and trillions in monetary stimulus, the helicopter money, the MMT, and the endless deficit funding by central banks that made the current runaway inflation possible, the current attempt to do something impossible and stuff 13 years of toothpaste back into the tube, will be a catastrophic failure. 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 14, we will be there to document every aspect of it. Finally, and as always, we wish all our readers the best of luck in 2023, with much success in trading and every other avenue of life. We bid farewell to 2022 with our traditional and unwavering year-end promise: Zero Hedge will be there each and every day - usually with a cynical smile (and with the CIA clearly on our ass now) - helping readers expose, unravel and comprehend the fallacy, fiction, fraud and farce that defines every aspect of our increasingly broken economic, political and financial system. Tyler Durden Sat, 12/31/2022 - 11:05.....»»

Futures Rise On China Growth Hopes After US stocks were set to start week with modest gains as optimism around an economic recovery in China offset fears that the Fed is pushing the US economy off a recessionary cliff. S&P and Nasdaq futures were both up 0.4% as of 7:45 a.m. ET led by energy and tech shares, after China’s leaders said they will focus on boosting the economy next year, hinting at business-friendly policies, and further support for the property market. In premarket trading, Tesla gained after Chief Executive Officer Elon Musk polled users on Twitter over whether he should step down as head of the social-media company, with the result so far leaning toward yes. At the same time, Ardelyx slumped after the biotech said that the FDA may need “up to a few more weeks” to finalize its response to the company’s appeal over the complete response letter for its new drug application for its kidney disease therapy XPHOZAH (tenapanor). Here are some other notable premarket movers: Tesla shares gain 5.1% in US premarket trading after CEO Elon Musk polled users on Twitter over whether he should step down as head of the social-media company, with the result so far leaning toward yes. Moderna gains 4% as Jefferies upgraded the stock to buy from hold, saying it can rebound in 2023 on a return of pipeline opportunities. Ardelyx shares drop 13% after the biotech said that the FDA may need “up to a few more weeks” to finalize its response to the company’s appeal over the complete response letter for its new drug application for its kidney disease therapy XPHOZAH. Aerojet shares rise 3% after L3Harris Technologies (LHX US) agreed to buy the rocket engine maker in a deal valued at about $4.7 billion. The purchase makes strategic sense, although analysts at Truist said the offer price looks expensive. Watch Netflix stock as its price target was raised at Morgan Stanley on the back of currency “swings,” though broker flagged risk that expectations and valuation have run “too far too fast.” Vertex Pharmaceuticals stock is downgraded to hold at Jefferies, which says that the company continues to offer a good pipeline, but risk/reward and valuation seem “balanced” following strong gains this year. KeyBanc adds to recent upgrades for PerkinElmer moving to overweight from sector weight based on transformational sale of analytical instruments business. A fourth-quarter rally in the S&P 500 fizzled out as investors grew worried the Fed would keep interest rates higher for longer despite signs of cooling in inflation. Unexpectedly hawkish comments from the European Central Bank added to the pessimism last week, keeping the benchmark index on course for its biggest annual slump since 2008. Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said although stock-index futures were climbing today, sentiment is still expected to be subdued into the year-end. “Concerns that the US will be dragged into recession as the Fed tries to tame the wild horse of inflation are still front and center,” she said. Morgan Stanley strategist Michael Wilson warned US corporate earnings next year are facing their biggest drop since the global financial crisis as the economy weakens. That could spark a new stock-market low that’s “much worse than what most investors are expecting,” he wrote in a note. Yet while underlying stock indexes remain on track to end the month lower, some investors are starting to look past fears of an economic recession triggered by higher interest rates, and betting that inflation has peaked allowing the Federal Reserve and other central banks some leeway in tightening policy.   “Markets have begun to price in that inflation will decline, in part due to the action by central banks,” Jacob Vijverberg, multi-asset investment manager at Aegon Asset Management, told clients, pointing to recent below-forecast US inflation figures. This would help riskier assets such as higher yielding fixed income and equities to outperform, he added. European stocks also gained after a downbeat close to the past week, the Stoxx 600 rising 0.5% led by energy shares which outperformed on Monday as oil advanced following a pledge from China to revive consumption and a plan from the Biden administration to begin refilling US strategic crude reserves. The Stoxx 600 Energy sub-index rose 2.2% as of 8:30 a.m. in London, outpacing all other groups in the regional equity benchmark, which gained 0.5%. Here are the biggest Eureopean movers: BP shares rise as much as 3.3%, Shell 3.2% and TotalEnergies 3.4%. European energy shares outperform on Monday as oil advances following a pledge from China to revive consumption and a plan from the Biden administration to begin refilling US strategic crude reserves. Suedzucker shares rise as much as 6.4%, adding to last week’s strong gains following the German sugar producer’s guidance increase, with Warburg today upgrading the stock to buy from hold. Innate Pharma surged as much as 19% at the open after the French biotech company announced it had expanded its collaboration with Sanofi for natural killer cell therapeutics in oncology. Freenet shares rise as much as 4.8% after Deutsche Bank raises the stock to buy from hold, saying the telecom and media firm could be a defensive addition to portfolios in 2023. TietoEVRY shares gain as much as 3.5% after Nordea raised its recommendation to buy from hold, saying the break-up case for the firm is “becoming partly de-risked” following the announced disposals of Banking, Connect and Transform businesses. Nexi shares advance as much as 5% to lead gains on the FTSE MIB index after the government dropped a proposed measure on a minimum threshold to accept digital payments. Fugro shares dropped as much as 30%, the most since 1995, after report on involvement with 2019 dam breach in Brazil that killed 270 people. Tokmanni shares fall as much as 6.8%, extending losses into a fourth session, after Nordea cut its recommendation for the shares to hold from buy, noting the company’s “unwillingness to increase prices” hurts its investment case “at least temporarily.” Asia stocks headed lower for a third day as traders assessed rising infection numbers in China and risks of a regional economic slowdown. The MSCI Asia Pacific Index erased initial gains to fall as much as 0.4%, as health care and industrials dragged on the gauge. Initial optimism for stocks in China and Hong Kong faded amid concerns that Asia’s biggest economy will suffer from a spike in virus cases in Beijing, Shanghai and other major cities. Beijing Covid Death Reports Fuel Concern China Hiding Data Benchmarks also slumped in Japan as the yen strengthened, joining the Philippines and South Korea lower, while India and Singapore advanced.   Asian shares could climb more than 9% through 2023, according to strategists surveyed by Bloomberg. But the road may be bumpy as uncertainty remains over the pace of China’s reopening and the outlook for Federal Reserve policy. Moreover, the world’s biggest money managers are set to unload up to $100 billion of stocks in the final few weeks of the year. Still, “modest valuations, light investor positioning and good fundamentals are buffers that should help Asian stocks withstand near-term volatility,” said Zhikai Chen, head of Asian and global emerging market equities at BNP Paribas Asset Management. The yen strengthens and JGB futures fall on report PM Kishida may add flexibility to BOJ’s 2% inflation goal. Japan’s 5-year yield climbs to 0.145%, highest since 2015. The moves are later pared after Japan’s Matsuno denies plans to revise BOJ accord. Most currency majors grind higher against the dollar; yuan marginally softer. Asian stocks fall for third day, with Japan and China leading the retreat. Hang Seng erases a gain of as much as 1.7%, Shanghai Composite falls 1.5%. S&P futures nudge 0.1% higher, Nasdaq contracts also slightly firmer. Treasury 10-year yield adds three basis points to 3.51%; Australian curve bear steepens after 10-year yield jumps six basis points. WTI crude rises to around $75.20; gold muted near $1,792. Australia stocks edged lower: the S&P/ASX 200 index fell 0.2% to close at 7,133.90, with real-estate shares leading declines on the gauge. Shares of Star Entertainment slid 18% to become the worst performer on the gauge after the government issued new proposed tax changes that may impact its business. In New Zealand, the S&P/NZX 50 index fell 0.7% to 11,518.14 Indian stocks rose the most in nearly a month, in contrast to the broader Asian market that traded lower.  The S&P BSE Sensex gained 0.8% to 61,806.19, while the NSE Nifty 50 Index also advanced by a similar measure. Benchmark indexes in most other regional economies, including China, Hong Kong and Japan, fell. Broad-based buying in the market lifted overall sentiments, said Osho Krishan, senior analyst, technical and derivative research, Angel One. “Technically, there has been no substantial change in the market outlook as the bulls made a comeback from their support zone and showcased their resilience,” Krishan said.  The gains come as demand in India’s large domestic market cushions it from the impact of a slowing global economy. High-frequency indicators show the economic activity has stayed steady in recent months but may slow going forward as resilience wanes.  Reliance Industries gave the biggest boost to the index, adding 1.4%. In FX, the Bloomberg Dollar Spot Index fell 0.5% as the greenback weakened against all of its Group-of-10 peers. Here is how other key pairs did: The euro rose by 0.6% to 1.0653, erasing Friday’s loss after ECB Vice President Luis de Guindos said half-point increases in borrowing costs will continue as officials try to tame soaring prices. In Germany, the IFO business confidence index rose to 88.6 (estimate 87.5) in December from revised 86.4 in November, according to the IFO Institute The pound rose while gilts plunged across the curve with the belly outperforming slightly as money markets added to BOE tightening wagers and traders looked ahead to QE sales starting January The yen whipsawed after reports on a potential change to a key agreement between the government and central bank fueled speculation policy makers are moving closer to a hawkish pivot. The BOJ is expected to keep monetary stimulus unchanged Tuesday, yet elevated overnight volatility in the yen reflects risk of a shift in tone when it comes to forward guidance Australian dollar climbed amid broad greenback weakness spurred by speculation of a hawkish pivot in Japan. Gains were refreshed on news that Australia’s Foreign Minister Penny Wong will travel to Beijing on Tuesday In rates, the Treasury curve twist-steepened; the 2-year yield fell 1bp and the 10-year yield rose by around 4bps. US 10-year yields around 3.54%, cheaper by 6bps vs. Friday close with bunds and gilts lagging by additional 1.5bp and 10bp in the sector; long-end led losses widens 2s10s, 5s30s spreads by 3.5bp and 3bp on the day. Dollar issuance slate remains light, with issuance likely concluded now for the year. Treasuries follow more aggressive bear steepening move across gilts, where long-end yield are cheaper by 13bp as traders look ahead to QE sales starting January. This week’s US auctions include $12b 20-year bond reopening Wednesday and $19b 5-year TIPS Thursday. In Europe, Bunds and Italian bonds extend the streak of declines to four, the longest in 6 weeks and money markets added to ECB tightening bets as markets continued to digest last week’s hawkish policy messaging. In commodities, oil futures rose boosted by Beijing’s pro-growth pledge and a US move to refill strategic crude reserves boosted oil futures, though economic growth fears kept prices on track for a second monthly loss.   Bitcoin is softer on the session, but resides towards the mid-point of relative narrow parameters. It's a quiet economic calendar, with just the NAHB Housing Market Index on deck (est. 34, prior 33). Market Snapshot S&P 500 futures up 0.4% to 3,894.00 STOXX Europe 600 up 0.5% to 426.88 MXAP down 0.2% to 156.07 MXAPJ little changed at 507.98 Nikkei down 1.1% to 27,237.64 Topix down 0.8% to 1,935.41 Hang Seng Index down 0.5% to 19,352.81 Shanghai Composite down 1.9% to 3,107.12 Sensex up 0.7% to 61,781.21 Australia S&P/ASX 200 down 0.2% to 7,133.87 Kospi down 0.3% to 2,352.17 German 10Y yield little changed at 2.19% Euro up 0.6% to $1.0647 Brent Futures up 1.1% to $79.90/bbl Gold spot up 0.2% to $1,796.99 U.S. Dollar Index down 0.46% to 104.22 Top Overnight News from Bloomberg EU member states will on Monday discuss a gas-price cap that’s almost one-third lower than an original proposal as they attempt to break a deadlock over the controversial proposal to contain the impact of a historic energy crisis After this winter, the EU will have to refill gas reserves with little to no deliveries from Russia, intensifying competition for tankers of the fuel. Even with more facilities to import liquefied natural gas coming online, the market is expected to remain tight until 2026, when additional production capacity from the US to Qatar becomes available. That means no respite from high prices China’s swift abandonment of Covid Zero has seen infections explode, especially in Beijing, which has seen shortages of medicine, overwhelmed hospital staff and deserted streets as residents stay home sick or to avoid the virus. That aligns with what other places experienced as they shifted from eliminating Covid to living with it — except for the lack of officially reported deaths China’s top leaders said they will focus on boosting the economy next year, hinting at business-friendly policies, further support for the property market while likely scaling back fiscal stimulus A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks eventually traded lower across the board following the downbeat performance on Wall Street on Friday. ASX 200 was weighed on by its heavyweight Financials and Healthcare sectors but losses were cushioned by gains in the metals-related names. Nikkei 225 was pressured following weekend reports that Japan's government is set to revise a 10-year-old joint statement with  the BoJ that commits the central bank to achieve its 2% inflation "at the earliest date possible," while Toshiba Corp shares slid over 5% amid Nikkei reports that its preferred bidder JIP reportedly appears to be mulling a lower valuation for a buyout. Hang Seng and Shanghai Comp were initially mixed but the former failed to hold onto opening gains whilst the latter overlooked the PBoC injecting fresh funds via 14-day reverse repo for the first time in nearly two months, with sentiment dampened by reports of two COVID-related deaths in mainland China. US equity futures traded flat within tight ranges - the ES March contract remained under 3,900. Top Asian News China reported two new COVID-related deaths in the mainland on December 18th vs zero a day earlier, according to Reuters. China's Shanghai Education Bureau said it is to shut down all in-person classes in kindergartens and childcare centres in the city from December 19th due to COVID-19 infections, according to Reuters. Chip maker Renesas Electronics (6723 JT) suspended work at its Beijing plant from Friday for several days due to the spread of COVID-19 in the city, according to Reuters. Beijing has removed or adjusted 126 COVID-19 prevention measures, and all factories and construction sites above designated size and commercial buildings in the city have fully resumed work, officials cited by Global Times said Sunday. Macau's government is to cancel COVID risk regulations for mainland China from Tuesday; arrivals from China must have a negative COVID test in the last 72 hours, according to Reuters. Hong Kong leader Lee to begin a four-day trip to Beijing on Wednesday, at which he is expected to discuss the reopening of the border with mainland China, via SCMP citing sources. Beijing, China is to buy imported COVID medicines to relive pressure on domestic shortages, via Reuters citing an official; customs will speed up the clearance for imported COVID medicines. USTR Office has announced a nine-month extension of tariff exclusion on 352 Chinese import product categories, according to Reuters. China is to maintain ample liquidity in 2023 to implement proactive fiscal policy, according to state media citing the PBoC Vice Governor. China’s Central Economic Work Conference suggested China will focus on stabilising its economy in 2023 and step up policy to ensure key targets are met, according to a statement cited by Reuters. PBoC injected CNY 9bln via 7-day reverse repos with the rate maintained at 2.00%; injects CNY 76bln via 14-day reverse repos with the rate maintained at 2.15% - for a daily net injection CNY 83bln. according to Reuters. Toshiba Corp's (6502 JT) preferred bidder JIP reportedly appears to be mulling a lower valuation for a buyout, according to Nikkei. Japan is reportedly eyeing an initial budget at a record JPY 114tln for FY23, according to Kyodo. Australia’s sovereign wealth fund is positioning for inflationary pressures to persist globally and believes that gold and other commodities will offset hindered returns across asset classes, according to Bloomberg. South Korean Finance Minister said the economy is slowing more rapidly than expected; economic slowdown is to be at its worst pace in H1 2023, via Reuters. European bourses have commenced the week on a firmer footing, Euro Stoxx 50 +0.7%, shaking off the softer APAC handover in minimal newsflow. Sectors are firmer ex-Media/Real Estate, featuring outperformance in Energy after Friday's pressure. Stateside, futures are similarly supported, ES +0.5%, in-tandem with the European tone ahead of a sparse US docket. Top European News UK Chancellor Hunt has commissioned the OBR to prepare an economic & fiscal forecast, to be presented alongside the Spring Budget due 15th March, 2023. UK PM Sunak scrapped Liz Truss' plan to purchase energy from foreign producers, according to Sky News. Elsewhere, Sunak is set to sign off an extension to the government's energy support package for businesses for up to 12 months. Bank of France cut France's 2023 growth forecast to 0.3% (prev. 0.5%) and cut the 2024 forecast to 1.2% (prev. 1.8%), according to Reuters. ECB's de Guindos says the ECB will keep hiking rates and does not know when they will stop, not planning on altering the 2% mid-term price stability goal. ECB's Simkus is in no doubt that there will be a 50bps hike in February. ECB's Kazimir says rates will not only need to go to restrictive territory but stay there much longer. FX USD has faded despite hawkish weekend Fed rhetoric, with the DXY nearer the lower-end of 10412-83 parameters. Action which benefits peers across the board, with marked outperformance in the JPY as USD/JPY gapped lower from the 136.69 close to either side of the figure. Antipodeans are the current best performers, with the Kiwi through 0.64 vs USD at best and AUD holding above 0.67. EUR is bid but to a slightly lesser extent despite hawkish (as expected) ECB rhetoric and strong German Ifo release while Cable has reclaimed 1.22 convincingly. ZAR is the marked outperformer after Ramaphosa secures re-election as ANC leader for the 2024 presidential campaign. PBoC sets USD/CNY mid-point at 6.9746 vs exp. 6.9753 (prev. 6.9791) South African President Ramaphosa has been re-elected as leader of the governing ANC party. Fixed Income Bunds are facing modest pressure, though are off worst levels which occurred in wake of ECB's Kazimir which prompted the 10yr German yield to test 2.20%, action which is being felt more keenly in the periphery. Gilts are the marked underperformers after last week's relative resilience, with the UK yield around 3.45%. USTs are softer, but comparably more contained and haven't really threatened a breach of initial early-European parameters. Commodities A choppy but ultimately fairly contained start to the week for the crude benchmarks. Price action throughout the European morning has been two-way in nature and at times without an overt catalyst or driver. Currently, WTI & Brent Fed’23 are firmer by around USD 1.00/bbl on the session but are shy of their overnight peaks by around another USD 1.00/bbl, and as such are someway from last week’s respective USD 77.77/bbl and USD 75.26/bbl best levels. EU countries are reportedly mulling a gas price cap at levels lower than suggested to date, with the bloc set to meet on Monday in a bid to come to an agreement, according to a document cited by Reuters. Czech Republic proposed a EUR 188/MWh cap on Dutch TTF front-month contract vs the EUR 275/MWh cap originally suggested, according to Reuters. Saudi Aramco, Sinopec and SABIC have expanded refining and petrochemical cooperation and expect to start operations by the end of 2025, according to Reuters. Algeria is considering exporting its spare power capacity to Europe, according to the Algerian Energy Minister cited by Reuters. Uniper (UN01 GY) said the first German LNG terminal is to open in Wilhelmshaven; an annual volume of at least 5bcm of natural gas is expected to be imported, according to Reuters. El Paso Natural Gas Co. has lifted the force majeure at its Amarillo compressor station, according to Reuters. North Dakota Pipeline Authority said an estimated 200-250k BPD of oil was curtailed on Friday as a result of an extended storm system but anticipated a relatively quick return of production over the next several days, according to Reuters. USDA and USTR chiefs said Mexican officials have presented potential amendments to restrictions on genetically modified corn and other biotech products, according to Reuters. Indian antitrust agency raided some steel firms for alleged price collusion, according to Reuters sources. Peruvian President has urged congress to pass a bill to bring forward general elections amid protests, according to Reuters. Spot gold and silver are benefitting from the dented dollar while base metals derive support from the generally positive risk tone and the aforementioned unwinding of restrictions in China, with LME Copper firmer by over 1.0%. Geopolitics Blasts were heard across Ukrainian capital Kyiv early Monday morning, according to a Reuters witness. Russian military stationed in Belarus are to conduct tactical exercises, according to Interfax citing the Russian Defence Ministry Ukrainian advisor Podolyak says, to European partners, Ukraine will not surrender to or fulfil the demands of Russia; adds, "War ending can only be accelerated by increasing artillery/tanks supply. Even unilaterally…" Qatari diplomat said Qatar has been "exclusively criticised and attacked" in the investigation into the European parliament, according to a statement cited by Reuters. Qatari diplomat added that "limiting dialogue and cooperation" on Qatar before the legal process has ended will negatively affect discussions on global energy security and security cooperation. North Korea fired two ballistic missiles towards the Korean Peninsula's east coast on Sunday, according to the South Korean military cited by Reuters. The missiles appeared to have landed outside of Japan's Exclusive Economic Zone (EEZ), according to NHK. US State Department said the US is gravely concerned that Iranian authorities are reportedly continuing to kill protesters, according to Reuters. Italian Economy Minister urged the EU to give a strong and strategic response to the US Inflation Reduction Act (IRA), and suggested some Italian companies are considering moving production to the US, according to Reuters. Australian PM said Foreign Minister Wong is to travel to Beijing on Tuesday at the invitation of China, according to Reuters. US Event Calendar 10:00: Dec. NAHB Housing Market Index, est. 34, prior 33 DB's Jim Reid concludes the overnight wrap Well, I had Argentina in the research World Cup sweepstake. After hours of studying form, player fatigue, different systems, the climate etc., I skillfully closed my eyes and put my hand in a jar and pulled the winners out. I will try to not let my success change me. As everyone recovers from a breathtaking final, it'll be interesting to see whether market activity drops off a cliff this week as we approach Christmas even if there was lots of unfinished business after last week. The market doesn't believe the Fed, with a pricing disconnect now opening up, and the market is now worried the ECB has upped its level of hawkishness. Outside of the ECB's Guindos and Simkus speaking today we won't hear much from these two central banks before Xmas so there is unlikely to be much official follow-through to last week's meetings. It will therefore be left to quite a full slate of data to move markets in what is likely to be a week low on liquidity. The US consumer will be a big focus with consumer confidence (Wednesday) and personal income data, along with PCE inflation (both Friday). We'll also see various housing market and business activity indicators from the US, as well as Japan's CPI report and PPI numbers from Europe. Elsewhere, the BoJ will be the last major central bank to make a monetary policy decision this year tomorrow. It could be a bit more interesting than usual as we'll see below. In terms of some of the highlights now, we start with US housing. This is obviously a big focus at the moment and today's NAHB housing index (33 DB forecast vs 33 previously), tomorrow's housing starts (1.400mn vs. 1.425mn) and building permits (1.500mn vs. 1.512mn), Wednesday's existing home sales (4.25mn vs. 4.43mn) and Friday's new home sales (600k vs. 632k) will all be important. The hard data is all expected to slow further from last month. Probably more important is Friday's income and consumption report which contains the latest reading on core PCE. Our economists think it should come in at 0.2% mom (vs. 0.2% previously), taking the YoY rate down three-tenths to 4.7%. Normally core PCE is above core CPI but over the next 12 months our economists think that anomalies in healthcare components between the two means that the former will edge above the latter at 3.2% for 2023 Q4/Q4 against 3.1%. Friday also see the final revisions to the University of Michigan consumer sentiment, including the important consumer expectations of inflation. Other business activity gauges for the US include durable goods orders on Friday, with both headline (DB forecast -3.5% vs +1.1% in October) and core (DB forecast unch vs +0.6%) seen showing signs of weakening by our US economists. Indicators of manufacturing activity from regional Feds are also due throughout the week. These releases will follow an array of downside surprises in activity-related gauges recently, including the fall in industrial production last Thursday. Over in Europe, we will get PPIs from several countries starting with Germany tomorrow. As a reminder, the latest YoY reading stands at 34.5%, some way off the 45.8% peak reached in August. October's report also showed the first MoM decrease in producer prices since May 2020 amid falling energy costs. From central banks, all eyes will be on the BoJ tomorrow and we will also get minutes from their October meeting on Thursday. Our Chief Japan economist previews the meeting and addresses the potential for YCC revision or a policy assessment here. The yen initially rallied as much as +0.61% this morning after Kyodo News reported on Saturday that Japan’s Prime Minister Fumio Kishida was looking to add flexibility around the 2% inflation goal and would discuss it with the next governor after Kuroda's term ends in April. This follows Bloomberg last week reporting that a policy review is being considered for next year. However, some of the Japanese currency’s early gains today were reversed after a government spokesman denied the report and the Yen (+0.28%) is currently trading at $136.22. Following the BoJ's decision, the CPI report for Japan will be released on Thursday. Our Chief Japan economist (full preview here) expects the overall index to reach 3.9% YoY (vs +3.7% in October), the core index excluding fresh food to be up 3.8% (+3.6%), and core-core index excluding fresh food and energy to rise to 2.8% (+2.5%) as food and durable goods continue to be the key drivers of inflation. Speaking of energy prices, EU energy ministers will meet today to resume talks regarding a natural gas price cap as well as other measures to cope with the energy crisis as winter looms. Similar to the US, a number of sentiment indicators will be released in Europe. For Germany, they will include the Ifo survey today and the GfK's consumer confidence reading on Wednesday. Manufacturing and consumer confidence will also be released for Italy on Friday. Asian stock markets had a negative start to the final full trading week of 2022, tracking Friday’s losses on Wall Street as synchronised interest rate hikes and a hawkish tone from global central banks weigh on sentiment. Rising Covid-19 cases in China, particularly in Beijing, following the abandonment of Covid Zero are also adding to the bearish mood. Chinese equities are retreating with the Shanghai Composite (-1.31%) and the CSI (-1.03%) both in the red. The Nikkei (-1.15%), the KOSPI (-0.60%) and the Hang Seng (-0.45%) are also weak in early trading. In overnight trading, US stock futures are little changed with contracts on the S&P 500 (-0.06%) and the NASDAQ 100 (-0.07%) slightly down after posting two consecutive weekly losses. In energy markets, oil futures have moved higher in Asian trading hours with Brent oil (+0.94%) trading at $79.81/bbl and WTI futures (+1.00%) at $75.03/bbl after China indicated its intention to revive consumption heading into 2023. Meanwhile, yields on 10Yr USTs are up +2.92 bps, trading at 3.51%. Looking back at last week, it was a familiar 2022 story in markets since hawkish central bank announcements from the Fed and the ECB sparked a fresh selloff. The decisions themselves were actually in line with expectations, with both hiking by 50bps. But what struck investors was the much more aggressive tone on future rate hikes than the consensus had expected. For instance, the FOMC’s dot plot signalled that rates would be at 5.1% even by end-2023, which was up from 4.6% in the September dot plot. Meanwhile, the ECB said that rates would “still have to rise significantly”, with President Lagarde explicitly pointing to further 50bp moves ahead. Given those developments, risk assets sold off across the board, with the S&P 500 ending the week -2.08% lower (-1.11% Friday). That was a massive turnaround from earlier in the week, when the index had surged on the back of the US CPI print on Tuesday that surprised to the downside. Indeed, by the close on Friday the S&P 500 was down -6.06% from its intraday peak for the week just after the release. It was a similar story elsewhere too, with the STOXX 600 down -3.28% over the week (-1.20% Friday), and the Nikkei down -1.34% (-1.87% Friday). In Europe, sovereign bonds saw significant losses in light of the ECB’s rhetoric, and yields on 10yr German bunds rose by +21.9bps (+7.0bps Friday) to 2.14%. The moves at the front-end of the curve were even larger, with the 2yr German yield up +26.5bps (+3.7bps Friday) to a post-2008 high, which came as investors increased their expectations for the ECB terminal rate. For Treasuries there was a rather different reaction however, with 10yr yields ending the week down -9.6bps (+3.6bps Friday). That occurred as investors grew increasingly confident that the Fed would be able to keep long-term inflation in check, with the 10yr breakeven down to a nearly two-year low of 2.13%. Tyler Durden Mon, 12/19/2022 - 08:06.....»»

Macleod: The Upside-Down World Of Currency Authored by Alasdair Macleod via GoldMoney.com, The gap between fiat currency values and that of legal money, which is gold, has widened so that dollars retain only 2% of their pre-1970s value, and for sterling it is as little as 1%. Yet it is commonly averred that currency is money, and gold is irrelevant. As the product of statist propaganda, this is incorrect. Originally established in Roman law, legally gold is still money and the states’ debauched currencies are not — only a form of credit. As I demonstrate in this article, the major western central banks will be forced to embark on a new round of currency debasement, likely to put an end to the matter. Central to my thesis is that commercial bank credit will contract sharply in response to rising interest rates and bond yields. This retrenchment is already ending the everything bubble in financial asset values, is beginning to undermine GDP, and given record levels of balance sheet leverage makes a major banking crisis virtually impossible to avoid. Central banks which are already in a parlous state of their own will be tasked with underwriting the entire credit system. In discharging their responsibilities to the status quo, central banks will end up destroying their own currencies. So, why do we persist in pricing everything in failing currencies, when that will almost certainly change? When the difference between legal money and declining currencies is finally realised, the public will discard currencies entirely reverting to legal money. That time is being brought forward rapidly by current events.  Why do we impart value to currency and not money? A question that is not satisfactorily answered today is why is it that an unbacked fiat currency has value as a medium of exchange. Some say that it reflects faith in and the credit standing of the issuer. Others say that by requiring a nation’s subjects to pay taxes and to account for them guarantees its demand. But these replies ignore the consequences of its massive expansion while the state pretends it to be real money. Sometimes, the consequences can seem benign and at others catastrophic. As explanations for the public’s tolerance of repeated failures of currencies, these answers are insufficient. Let us do a thought experiment to highlight the depth of the problem. We know that over millennia, metallic metals, particularly gold, silver, and copper came to be used as media of exchange. And we also know that the use of their value was broadened through credit in the form of banknotes and bank deposits. The relationships between legal money, that is gold, silver, or copper and credit in its various forms were defined in Roman law in the sixth century. And we also know that this system of money and credit with the value of credit tied to that of money, despite some ups and downs, has served humanity well ever since. Now let us assume that in the absence of metallic money, in the dawn of economic time a ruler instructed his subjects to use a new currency which he and only he will issue for the public’s use. This would surely be seen as a benefit to everyone, compared with the pre-existing condition of barter. But the question in our minds must be about the durability of the ruler’s new currency. With no precedent, how is the currency to be valued in the context of the ratios between goods and services bought and sold? And how certain can one be about tomorrow’s value in that context? And what happens if the king loses his power, or dies? Clearly, without a reference to something else, the king’s new currency is a highly risky proposition and sooner or later will simply fail. And even when a new currency has been introduced and linked to an existing form of money, if the tie is then cut the currency will struggle to survive. Without going into the good reasons why this is so, the empirical evidence confirms it. Chinese merchants no longer use Kubla Khan’s paper made out of mulberry leaves, and German citizens no longer use the paper marks of the early 1920s. But they still refer to metallic money. Yet today, we impart values to paper currencies issued by our governments in defiance of these outcomes. An explanation was provided by the great Austrian economist, Ludwig von Mises in his regression theorem. He reasonably argued that we refer the value of a medium of exchange today to its value to us yesterday. In other words, we know as producers what we will receive today for our product, based on our experience in the immediate past, and in the same way we refer to our currency values as consumers. Similarly, at a previous time, we referred our experience of currency values to our prior experience. In other words, the credibility and value of currencies are based on a regression into the past. Mises’s regression theory was broadly confirmed by an earlier writer, Jean-Baptiste Say, who in his Treatise on Political Economy observed:  “Custom, therefore, and not the mandate of authority, designates the specific product that shall pass exclusively as money, whether crown pieces or any other commodity whatever.”[i] Custom is why we still think of currencies as money, even though for the last fifty-one years their link with money was abandoned. The day after President Nixon cut the umbilical cord between gold and the dollar, we all continued using dollars and all the other currencies as if nothing had happened. But this was the last step in a long process of freeing the paper dollar from being backed by gold. The habit of the public in valuing currency by regression had served the US Government well and has continued to do so. The role of a medium of exchange Being backed by no more than government fiat, to properly understand the role that currencies have assumed for themselves, we need to make some comments about why a medium of exchange is needed and its characteristics. The basis was laid out by Jean-Baptiste Say, who described the division of labour and the role of a medium of exchange. Say observed that human productivity depended on specialisation, with producers obtaining their broader consumption through the medium of exchange. The role of money (and associated credit) is to act as a commodity valued on the basis of its use in exchange. Therefore, money is simply the right, or title, to acquire some consumer satisfaction from someone else. Following on from Say’s law, when any economic quantity is exchanged for any other economic quantity, each is termed the value of the other. But when one of the quantities is money, the other quantities are given a price. Price, therefore, is always value expressed in money. For this reason, money has no price, which is confined entirely to the goods and services in an exchange. So long as currency and associated forms of credit are firmly attached to money such that there are minimal differences between their values, there should be no price for them either, other than a value difference arising from counterparty risk. A further distinction between money and currencies can arise if their users suspect that the link might break down. It was the breakdown in this relationship between gold and the dollar that led to the failure of the Bretton Woods agreement in 1971. Therefore, in all logic it is legal money that has no price. But does that mean that when its value differs from that of money, does currency have a price? Not necessarily. So long as currency operates as a medium of exchange, it has a value and not a price. We can say that a dollar is valued at 0.0005682 ounces of gold, or gold is valued at 1760 dollars. As a legacy of the dollar’s regression from the days when it was on a gold standard, we still attribute no price to the dollar, but now we attribute a price to gold. To do so is technically incorrect. Perhaps an argument for this state of affairs is that gold is subject to Gresham’s law, being hoarded rather than spent. It is the medium of exchange of last resort so rarely circulates. Nevertheless, fiat currencies have consistently lost value relative to legal money, which is gold, so much so that the dollar has lost 98% since the suspension of Bretton Woods, and sterling has lost 99%. Over fifty-one years, the process has been so gradual that users of unanchored currencies as their media of exchange have failed to notice it.  This gradual loss of purchasing power relative to gold can continue indefinitely, so long as the conditions that have permitted it to happen remain without causing undue alarm. Furthermore, for lack of a replacement it is highly inconvenient for currency users to consider that their currency might be valueless. They will hang on to the myth of its use value until its debasement can no longer be ignored. What is the purpose of interest rates? Despite the accumulating evidence that central bank management of interest rates fails to achieve their desired outcomes, monetary policy committees persist in using interest rates as their primary means of economic intervention. It was the central bankers’ economic guru himself who pointed out that interest rates correlated with the general level of prices and not the rate of price inflation. And Keynes even named it Gibson’s paradox after Arthur Gibson, who wrote about it in Banker’s Magazine in 1923 (it had actually been noted by Thomas Tooke a century before). But because he couldn’t understand why these correlations were the opposite of what he expected, Keynes ignored it and so have his epigonic central bankers ever since. As was often the case, Keynes was looking through the wrong end of the telescope. The reason interest rates rose and fell with the general price level was that price levels were not driven by interest rates, but interest rates reacted to changes in the general level of prices. Interest rates reflect the loss of purchasing power for money when the quantity of credit increases. With their interests firmly attached to time preference, savers required compensation for the debasement of credit, while borrowers — mainly businesses in production — needed to bid up for credit to pay for higher input costs. Essentially, interest rates changed as a lagging indicator, not a leading one as Keynes and his acolytes to this day still assume. In a nutshell, that is why Gibson’s paradox is not a paradox but a natural consequence of fluctuations in credit and the foreign exchanges and the public’s valuation of it relative to goods. And the way to smooth out the cyclical consequences for prices is to stop discouraging savers from saving and make them personally responsible for their future security. As demonstrated today by Japan’s relatively low CPI inflation rate, a savings driven economy sees credit stimulation fuelling savings rather than consumption, providing capital for manufacturing improvements instead of raising consumer prices. Keynes’s savings paradox — another fatal error — actually points towards the opposite of economic and price stability.  It is over interest rate management that central banks prove their worthlessness. Even if they had a Damascene conversion, bureaucrats in a government department can never impose decisions that can only be efficiently determined by market forces. It is the same fault exhibited in communist regimes, where the state tries to manage the supply of goods— and we know, unless we have forgotten, the futility of state direction of production. It is exactly the same with monetary policy. Just as the conditions that led the communists to build an iron curtain to prevent their reluctant subjects escaping from authoritarianism, there should be no monetary policy. Instead, when things don’t go their way, like the communists, bureaucrats double down on their misguided policies suppressing the evidence of their failures. It is something of a miracle that the economic consequences have not been worse. It is testament to the robustness of human action that when officialdom places mountainous hurdles in its path ordinary folk manage to find a way to get on with their lives despite the intervention. Eventually, the piper must be paid. Misguided interest rate policies led to their suppression to the zero bound, and for the euro, Japanese yen, and Swiss franc, even unnaturally negative deposit rates. Predictably, the distortions of these policies together with central bank credit inflation through quantitative easing are leading to pay-back time.  Rapidly rising commodity, producer and consumer prices, the consequences of these policy mistakes, are in turn leading to higher time preference discounts. Finally, markets have wrested currency and credit valuations out of central banks’ control, as it slowly dawns on market participants that the whole interest rate game has been an economic fallacy. Foreign creditors are no longer prepared to sit there and accept deposit rates and bond yields which do not compensate them for loss of purchasing power. Time preference is now mauling central bankers and their cherished delusions. They have lost their suppressive control over markets and now we must all face the consequences. Like the fate of the Berlin Wall that had kept Germany’s Ossies penned in, monetary policy control is being demolished. With purchasing powers for the major currencies now sinking at a more rapid rate than current levels of interest rate and bond yield compensation, the underlying trend for interest rates is now rising and has further to go. Official forecasts that inflation at the CPU level will return to the targeted 2% in a year or two are pie in the sky.  While Nero-like, central bankers fiddle commercial banks are being burned. A consequence of zero and negative rates has been that commercial bank balance sheet leverage increased stratospherically to compensate for suppressed lending margins. Commercial bankers now have an overriding imperative to claw back their credit expansion in the knowledge that in a rising interest rate environment, their unfettered involvement in non-banking financial activities comes at a cost. Losses on financial collateral are mounting, and the provision of liquidity into mainline non-financial sectors faces losses as well. And when you have a balance sheet leverage ratio of assets to equity of over twenty times (as is the case for the large Japanese and Eurozone banks), balance sheet equity is almost certain to be wiped out. The imperative for action is immediate. Any banker who does not act with the utmost urgency faces the prospect of being overwhelmed by the new interest rate trend. The chart below shows that the broadest measure of US money supply, which is substantially the counterparty of bank credit is already contracting, having declined by $236bn since March. Contracting bank credit forces up interest rates due to lower credit supply. This is a trend that cannot be bucked, a factor that has little directly to do with prices. By way of confirmation of the new trend, the following quotation is extracted from the Fed’s monthly Senior Loan Officers’ Opinion Survey for October: “Over the third quarter, significant net shares of banks reported having tightened standards on C&I [commercial and industrial] loans to firms of all sizes. Banks also reported having tightened most queried terms on C&I loans to firms of all sizes over the third quarter. Tightening was most widely reported for premiums charged on riskier loans, costs of credit lines, and spreads of loan rates over the cost of funds. In addition, significant net shares of banks reported having tightened loan covenants to large and middle-market firms, while moderate net shares of banks reported having tightened covenants to small firms. Similarly, a moderate net share of foreign banks reported having tightened standards for C&I loans. “Major net shares of banks that reported having tightened standards or terms cited a less favourable or more uncertain economic outlook, a reduced tolerance for risk, and the worsening of industry-specific problems as important reasons for doing so. Significant net shares of banks also cited decreased liquidity in the secondary market for C&I loans and less aggressive competition from other banks or nonbank lenders as important reasons for tightening lending standards and terms.” Similarly, credit is being withdrawn from financial activities. The following chart reflects collapsing credit levels being provided to speculators. In the same way that the withdrawal of bank credit undermines nominal GDP (because nearly all GDP transactions are settled in bank credit) the withdrawal of bank credit also undermines financial asset values. And just as it is a mistake to think that a contraction of GDP is driven by a decline in economic activity rather than the availability of bank credit, it is a mistake to ignore the role of bank credit in driving financial market valuations. The statistics are yet to reflect credit contraction in the Eurozone and Japan, which are the most highly leveraged of the major banking systems. This may be partly due to the rapidity with which credit conditions are deteriorating. And we should note that the advanced socialisation of credit in these two regions probably makes senior managements more beholden to their banking authorities, and less entrepreneurial in their big-picture awareness than their American counterparts. Furthermore, the principal reason for continued monetary expansion reflects both the euro-system and the Bank of Japan’s continuing balance sheet expansion, which feed directly into the commercial banking network bolstering their balance sheets. It is likely to be state-demanded credit which overwhelms the Eurozone and Japan’s statistics, masking deteriorating changes in credit supply for commercial demand.  The ECB and BOJ’s monetary policies have been to compromise their respective currencies by their continuing credit expansion, which is why their currencies have lost significant ground against the dollar while US interest rates have been rising. Adding to the tension, the US’s Fed has been jawing up its attack on price inflation, but the recent fall in the dollar on the foreign exchanges strongly suggests a pivot in this policy is in sight. The dilemma facing central banks is one their own making. Having suppressed interest rates to the zero bound and below, the reversal of this trend is now out of their control. Commercial banks will surely react in the face of this new interest rate trend and seek to contract their balance sheets as rapidly as possible. Students of Austrian business cycle theory will not be surprised at the suddenness of this development. But all GDP transactions, with very limited minor cash exceptions at the retail end of gross output are settled in bank credit. Inevitably the withdrawal of credit will cause nominal GDP to contract significantly, a collapse made more severe in real terms when the decline in a currency’s purchasing power is taken into consideration. The choice now facing bureaucratic officialdom is simple: does it prioritise rescuing financial markets and the non-financial economy from deflation, or does it ignore the economic consequences of protecting the currency instead? The ECB, BOJ and the Bank of England have decided their duty lies with supporting the economy and financial markets. Perhaps driven in part by central banking consensus, the Fed now appears to be choosing to protect the US economy and its financial markets as well.  The principal policy in the new pivot will be the same: suppress interest rates below their time preference. It is the policy mistake that the bureaucrats always make, and they will double down on their earlier failures. The extent to which they suppress interest rates will be reflected in the loss of purchasing power of their currencies, not in terms of their values against each other, but in their values with respect to energy, commodities, raw materials, foodstuffs, and precious metals. In other words, a new round of higher producer and consumer prices and therefore irresistible pressure for yet higher interest rates will emerge. The collapse of the everything bubble The flip side of interest rate trends is the value imparted to assets, both financial and non-financial. It is no accident that the biggest and most widespread global bull market in history has coincided with interest rate suppression to zero and even lower over the last four decades. Equally, a trend of rising interest rates will have the opposite effect. Unlike bull markets, bear markets are often sudden and shocking, especially where undue speculation has been previously involved. There is no better example than that of the cryptocurrency phenomenon, which has already seen bitcoin fall from a high of $68,000 to $16,000 in twelve months. And in recent days, the collapse of one of the largest crypto-exchanges, FTX, has exposed both hubris and alleged fraud, handmaidens to extreme public speculation, on an unimaginable scale. For any student of the madness of crowds, it would be surprising if the phenomenon of cryptocurrencies actually survives. Driving this volte-face into bear markets is the decline in bond values. On 20 March 2020, when the Fed reduced its fund rate to zero, the 30-year US Treasury bond yielded 1.18%. Earlier this week the yield stood at 4.06%. That’s a fall in price of over 50%. And time preference suggests that short-term rates, for example over one year, should currently discount a loss of currency’s purchasing power at double current rates, or even more. For the planners who meddle with interest rates, increases in rates and bond yields on that scale are unimaginable. Monetary policy committees, being government agencies, will think primarily about the effect on government finances. In their nightmares they can envisage tax revenues collapsing, welfare commitments soaring, and borrowing costs mounting. The increased deficit, additional to current shortfalls, would require central banks to accelerate quantitative easing without limitation. To the policy planners, the reasons to bring interest rates both lower and back firmly under control are compelling. Furthermore, officials believe that a rising stock market is necessary to maintain economic confidence. That also requires the enforcement of a new declining interest rate trend. The argument in favour of a new round of interest rate suppression becomes undeniable. But the effect on fiat currencies will accelerate their loss of purchasing power, undermining confidence in them and leading to yet higher interest rates in the future. Either way, officialdom loses. And the public will pay the price for meekly going along with these errors. Managing counterparty risk Any recovery in financial asset values, such as that currently in play, is bound to be little more than a rally in an ongoing bear market. We must not forget that commercial bankers have to reduce their balance sheets ruthlessly if they are to protect their shareholders. Consequently, as over-leveraged international banks are at a heightened risk of failing in the new interest rate environment, their counterparties face systemic risks increasing sharply. To reduce exposure to these risks, all bankers are duty bound to their shareholders to shrink their obligations to other banks, which means that the estimated $600 trillion of notional over the counter (OTC) derivatives and on the back of it the additional $50 trillion regulated futures exchange derivatives will enter their own secular bear markets. OTC and regulated derivatives are the children of falling interest rates, and with a new trend of rising interest rates their parentage is bound to be tested. We can now see a further reason why central banks will wish to suppress interest rates and support financial markets. Unless they do so, the risk of widespread market failures between derivative counterparties will threaten to collapse the entire global banking network. And that is in addition to existential risks from customer loan defaults and collapsing collateral values. Central banks will have to stand ready to rescue failing banks and underwrite the entire commercial system.  To avert this risk, they will wish to stabilise markets and prevent further increases in interest rates. And all central banks which have indulged in QE already have mark-to-market losses that have wiped out their own balance sheet equity. We now face the prospect of central banks that by any commercial measure are themselves financially broken, tasked with saving entire commercial banking networks. When the trend for interest rates was for them to fall under the influence of increasing supplies of credit, the deployment of that credit was substantially directed into financial assets and increasing speculation. For this reason, markets soared while the increase in the general level of producer and consumer prices was considerably less than the expansion of credit suggested should be the case. That is no longer so, with manufacturers facing substantial increases in their input costs. And now, when they need it most, bank credit is being withdrawn.  It is not generally realised yet, but the financial world is in transition between economies being driven by asset inflation and suppressed commodity prices, and a new environment of asset deflation while commodity prices increase. And it is in the valuations of unanchored fiat currencies where this transition will be reflected most. Physical commodities are set replace paper equivalents The expansion of derivatives when credit was expanding served to soak up demand for commodities which would otherwise have gone into physical metals and energy. In the case of precious metals, this is admitted by those involved in the expansion of London’s bullion market from the 1980s onwards to have been a deliberate policy to suppress gold as a rival to the dollar.  According to the Bank for International Settlements, at the end of last year gold OTC outstanding swaps and forwards (essentially, the London Bullion Market) stood at the equivalent of 8,968 tonnes of bullion, to which must be added the 1,594 tonnes of paper futures on Comex giving an identified 10,662 tonnes. This is considerably more than the official reserves of the US Treasury, and even its partial replacement with physical bullion will have a major impact on gold values. Silver, which is an extremely tight market, is most of the BIS’s other precious metal statistics content and faces bullion replacement of OTC paper in the order of three billion ounces, to which we must add Comex futures equivalent to a further 700 million ounces.  On the winding down of derivative markets alone, the impact on precious metal values is bound to be substantial. Furthermore, the common mistake made by almost all derivative traders is to not understand that legal money is physical gold and silver — despite what their regulating governments force them to believe. What they call prices for gold and silver are not prices, but values imparted to legal money from depreciating currencies and associated credit.  While it may be hard to grasp this seemingly upside-down concept, it is vital to understand that so-called rising prices for gold and silver are in fact falling values for currencies. Some central banks, predominantly in Asia are taking advantage of this ignorance, which is predominantly displayed in western, Keynesian-driven derivative markets. Perhaps after a currency hiatus and when market misconceptions are ironed out, we can expect legal money values to behave as they should. If a development which is clearly inflationary emerges, it should drive currency values lower relative to gold. But instead, in today’s markets we see them rise because speculators take the view that currencies relative to gold will benefit from higher interest rates. A pause for thought should expose the fallacy of this approach, where the true relationship between money and currencies is assumed away. In the wake of the suspension of the Bretton Woods agreement and when the purchasing power of currencies subsequently declined, interest rates and the value of gold rose together. In February 1972, gold was valued at $85, while the Fed funds rate was 3.3%. On 21 January 1980 gold was fixed that morning at $850, and the Fed funds rate was 13.82%. When gold increased nine-fold, the Fed’s fund rate had more than quadrupled. And it required Paul Volcker to raise the funds rate to over 19% twice subsequently to slay the inflation dragon.  In the seventies, the excessive credit-driven speculation that we now witness was absent, along with the accompanying debt leverage in the financial sectors of western economies and in their banking systems. A Volcker-style rise in interest rates today would cause widespread bankruptcies and without doubt crash the entire global banking system. While markets might take us there anyway, as a deliberate act of official policy it can be safely ruled out.  We must therefore conclude that there is another round of currency destruction in the offing. Potentially, it will be far more extensive than anything seen to date. Not only will central-bank currency and QE expansion fund government deficits and attempt to compensate for the contraction of bank credit while supporting financial markets by firmly suppressing interest rates and bond yields, but insolvent central banks will be tasked with underwriting insolvent commercial banks. At some stage, the inversion of monetary reality, where legal money is priced in fiat, will change. Instead of legal money being priced in fiat, fiat currencies will be priced in legal money. But that will be the death of the fiat swindle. Tyler Durden Sun, 11/20/2022 - 07:00.....»»

In fall 2021, an Afghan family was resettled in Maine. This is the story of how they rebuilt their lives, and the community that welcomed them. Omid, left, and Nasir walk on a path winding through farm fields near their homes in Cape Elizabeth, Maine.Jodi Hilton for InsiderIn the fall of 2021, a family from Afghanistan was resettled in Cape Elizabeth, Maine. This is the story of how they rebuilt their lives, the community that welcomed them, and a friendship that bridged two cultures.CAPE ELIZABETH, Maine — Last November, at about midnight, Omid was lying in bed in his new home in Cape Elizabeth, Maine — exhausted, but unable to sleep. He texted Nasir Shir, his old friend from Afghanistan who lived down the street. Was Nasir awake, and was he up for a walk?Nasir was awake; he often stays up late to talk to friends and relatives in Afghanistan, nine and a half hours ahead. On this night, and on many nights during Omid's first few months in Maine, Nasir was soon at his door. The two men set off. Under the night sky, they passed driveways with basketball hoops, porches with American flags, and the occasional boat parked in someone's yard.Omid and Nasir had met in 2004 on the site of an international development project in Kabul. At that point, Nasir had been living in the US for 20 years, but his work in geographic information systems took him all over the world, and sometimes back to Afghanistan, for international development contracts. Omid, 14 years younger, was an IT specialist.A deep friendship began, and the two stayed close. When Nasir's family would pass through Kabul, Omid would host them. "Anyone who travels to Afghanistan goes to his house," Nasir told me. "He's the ticket agent, the hotel, and the food place." Omid got to know Nasir's extended family — "cousins, uncles, aunts, everybody." The two men share a similar sense of humor and laughter comes easily when they're together.When the Taliban regained control of Afghanistan weeks before the planned US withdrawal, Omid fled with his wife and their four young children.Nasir urged them to come to Cape Elizabeth. "I warned him about the cold weather, and that there are not many Muslims there," Nasir said. He also talked up its virtues. "I said: 'If you want to make money, don't come to Maine. But if you want to raise your family, come to Maine.'"But it wasn't just Nasir who welcomed Omid. The whole town had. In the weeks before Omid's family arrived, an army of neighbors had rolled up their sleeves to help get the house ready, dropping by at odd hours to scrape up subfloors, install a new kitchen, mount cheerful decor, and plant flowers.Omid felt immense gratitude toward everyone who had helped his family. "I will never stop appreciating them," he told me. But the transition to his new life in Maine was still hard — even with all the goodwill in the world.  Omid's family arrived in Maine just before Halloween in 2021 and recently celebrated one year in Maine.Jodi Hilton for InsiderKabul The call came in the afternoon. It was August 27, 2021. Twelve days earlier, Kabul had fallen to the Taliban. Now, Omid was being told to gather his family and head to the airport immediately. For days, Omid had lived with a constant feeling of dread. He worried that the Taliban government would target him as a collaborator for his work on US and United Nations-backed development projects. In case he was killed in a blast and no loved ones could be called upon to carry out the Muslim funeral ritual of ghusl, in which the body of the dead is washed before it is laid to rest, he took care to wash himself every day. In 2018, Omid had applied for a Special Immigrant Visa, which was still in process. (Editor's Note: We are using a pseudonym for Omid and his family members.) Omid and his wife, Palwasha, hurriedly filled a suitcase with clothing for their four children. They grabbed diapers and a swaddle for the youngest, Safa, who was just a month old. From the roof of his apartment building, Omid could see Kabul's international airport, where thousands of people had been lining up but most were denied entry. Just the day before, a suicide bombing had killed nearly 200 people. Omid was still not sure that he would be leaving Afghanistan that day. Everyone wanted to leave, but not everyone was able to. "No one wants to leave their country," Omid would tell me later. "All your friends, your family members, your culture, your language. But the thing that you are missing is security. For the sake of your children, you know you should leave everything and get out of that hell."At the airport, Omid's family was ushered through a gate. Others tried to use the moment to scramble through, and a cloud of tear gas exploded around them. Inside, Omid was told he wouldn't be able to board the plane with a suitcase. "I left everything there in the airport," he told me. "But at the time, it was important for me to save my life, not my clothes."Wearing bracelets with barcodes wrapped around their wrists, the family was led onto an airplane bound for Doha, Qatar. As the plane took off, Safa, the baby, was still red in the face from the tear gas.In all, 124,000 Afghans were evacuated in the final two weeks before the US withdrawal, which was timed to coincide with the 20th anniversary of 9/11, and more would follow. Of the 76,000 who were resettled in the US, most went to Texas, California, and Virginia — places with established Afghan American communities. But evacuees ended up in nearly every state.For Omid and his family, that final destination would be Maine — the whitest (91%), oldest (the median age is just shy of 45), and most rural (60% of Mainers live in rural areas) state in the US. How that happened is the story of a community that banded together to welcome a family of strangers, and a friendship that has bridged two cultures. The Portland Head Light is Maine's oldest lighthouse and an iconic tourist destination.Jodi Hilton for InsiderFriends in need Back in Cape Elizabeth during those tense days in August 2021, Nasir's phone was ringing off the hook as friends and former colleagues in Afghanistan desperately sought help getting out. He and Omid were speaking every day. On one call, Nasir could hear gunfire in the background and Omid, alone in his family's apartment, seemed to be in a state of shock.  Nasir also left Afghanistan as a refugee, during the Soviet-Afghan war, and had come to Portland, Maine, in 1984 when he was 13. Nasir's sister, Shukria, who's six years younger, recalled learning English by watching Bob Ross' painting shows and "Sesame Street."Both she and Nasir received full scholarships to attend Waynflete, a highly-regarded private school in Portland. While the school was mostly white, they had classmates from Cambodia and Laos. Nasir and others were encouraged to share stories about their immigrant experiences, and he said he developed pride in his background and an appreciation for the value of listening to one another. said the school encouraged him to take pride in his background. "Back then, the state was new with refugees," Nasir told me. "There were hardly any Muslims, never mind any Afghans." Halal meat wasn't widely available, and Nasir remembers going with his grandfather to local farms to help slaughter lambs, and then packing the meat into bags to store in the freezer.  There is a saying in Maine that people who are not born there or do not come from a long lineage of Mainers are from "away." In some communities in Maine, families have lived there for so many generations that roads and bodies of water are named after them. If you tell people the town you grew up in, and they are familiar with it, they might know your whole family, and all of your neighbors too. In the 1800s, Irish and French Canadian immigrants started arriving in Maine. In the early  1900s, House Island, off the coast of Portland, was used to process overflows of new arrivals to the United States and became known as "Ellis Island of the North." Immigrants and refugees from Cambodia, Vietnam, and Laos came in the mid-to late 1970s and a Somali community began emerging in the early 2000s in Lewiston. According to the Portland Press Herald newspaper, around 250 Afghans were in Maine before the Taliban's takeover of the country.   Nasir considers himself a true Mainer because it's the place he keeps coming back to. "For most people, any place where they spend their childhood is home. I spent my childhood from 13 on, here, so it's home," he said. "I went to Dubai, Pakistan, traveled the world, but I still chose to come back." Nasir and his wife, Nazia, made their home in Cape Elizabeth, nearby Portland, in the late 1990s, and it's here where they're raising their five children, who range in age from 11 to 25. Once a farming and fishing village, the town of 9,500 people now has a reputation for excellent schools. A few miles away from the multimillion-dollar homes that hug the inlet of Casco Bay, Nasir's neighborhood is dense with suburban homes on relatively small lots. Shukria lives nearby. His two brothers live across the street.Cape Elizabeth is both rural and residential. Ocean House Farm is located near the town's center.Jodi Hilton for InsiderKettle Cove is one of several beaches popular with locals.Jodi Hilton for InsiderAfter the 9/11 attacks, as American troops began deploying to Afghanistan, Muslims in the area were sometimes harassed or intimidated. Nasir, then in his early 30s, was involved in a local mosque and active on local boards, and he started being asked to speak at churches and other community gatherings. People wanted to know about the Taliban, and they had questions about Islam. "It's human nature to fear what you don't know," Nasir told me. The outreach seemed to come naturally to Nasir, Shukria told me. He was patient and knowledgeable — and not one to easily take offense, even when he had every right to. Instead, on the occasions through the years when someone would make a comment that was either subtly or outright rude or derogatory, his responses would be gracious and respectful, and he'd often offer to have more conversations.Nasir's calm approach "takes an unbelievable amount of self-control," said Denney Morton, Nasir's former teacher who's now a friend. "It also," Morton continued, "takes a person who believes that the future is going to be worth putting up with that kind of stuff."Nasir's mission is "to make this country live up to what it says it's going to be," Morton said. "He does it all the time — and he does it with laughter, and joy, and inviting people over to his house."In 2016, after Donald Trump's election, Nasir's daughter Haleema remembers hearing, "Now that we have a new president, all the Muslims will be deported." Nasir's son, who was born in Maine, was told to "go back" to where he came from. Maine's governor at the time, Paul LePage, who coined himself "Trump before Trump," was regularly called out for racist statements. In 2016, he sent a letter to President Barack Obama saying that Maine would no longer participate in resettling refugees. (LePage, who left office because of term limits, challenged his successor, Gov. Janet Mills, in this year's election but lost by a wide margin.)Nasir's response, again, was outreach. He got involved in local politics and won a seat on the school board in 2017. And he and Nazia often invited dozens of locals from the Cape Elizabeth area to their home to break the Ramadan fast with a big meal. By opening their home and sharing their lives with their Cape Elizabeth neighbors, Nasir and Nazia, and his sister Shukria, created a model of community-building for others in town to emulate — "not at Nasir levels, but in some way," said Jim Sparks, a friend who's worked with Nasir on community projects. "He's brought a warmth and generosity and large-heartedness that's pretty contagious," Sparks said. As it happened, Nasir was about to lean on that community as he prepared to welcome Omid and his family to Cape Elizabeth. Unlike his own arrival to the US, Nasir wanted his old friend to "start from the top."'Would others help me, even if they didn't know me?'Two miles away from Nasir's home in Cape Elizabeth, Emily Mavodones was also watching the news from Afghanistan. A video showing desperate people clinging to an airplane as it took off from Kabul International Airport had left her shaken. "What would I do to protect my family, my children?" she asked herself. "Would others help me, even if they didn't know me?"Emily found Nasir's name and contact information in a local paper. They had met once at a kid's birthday party, and she later learned that they had other passing connections: Her father-in-law had gone to school with Nasir and her mother had worked with him. "Our words were in parallel," she told me.Even as she reached out, Emily wasn't exactly sure what helping out could mean. A mom of three kids, she had volunteered here and there at a soup kitchen and she'd donated blood to the Red Cross. But she had never been involved in a long-term humanitarian effort.Nasir replied, hastily, with links to the USCIS website for sponsoring Afghans. Between the $575 application fee and the pledge to support the person financially, at least initially, Emily quickly realized it was too big a commitment for her family. She let it drop.Several weeks later, Nasir had caught his breath. Omid's family was out of Afghanistan. Catholic Charities, the local refugee-resettlement organization in Maine, was working with Omid's family to help them resettle. Nasir expected his friend to arrive in the next few weeks. Nasir circled back to everyone who had reached out to him earlier. For one thing, Omid's family would need a place to live.Emily Mavodones, who was part of the team who helped prepare a home for Omid and his family, holds Safa, the youngest of Omid and Palwasha's four children.Jodi Hilton for InsiderAs an Afghan evacuee, Omid would be given some financial assistance to help pay for housing. A two-story structure, a few doors down from Nasir, seemed like a good choice. It was one of several properties that Nasir owned in the area. When he bought it, it had most recently been used as a dentist's office, which meant there was no kitchen, and there was a large sink in almost every room.Nasir often rented out his properties to refugees and asylum seekers, or families from the area who qualified for Section 8 or General Assistance housing. It was reliable income, and Nasir saw it as a way to help newcomers who often lack the up-front cash or the credit and employment history that many landlords required. He'd bought this house a year earlier, with the idea that a local Congolese family would move in. During the Black Lives Matter protests of 2020, their son had given a speech that had moved Nasir, and he had gotten to know them a bit. But the home still needed a lot of work to function as a residential space. After a while, the family had gone someplace else.Now, with Omid heading to Maine, finishing the house was urgent.Emily offered to set up a GoFundMe page to help pay for renovations, and donations poured in — at final count, $12,890 from 142 people.Haleema, now in her early 20s, and Shukria set up a Google doc with a wish list of items. Packages started arriving at the house — mixing bowls, a pressure cooker, mortar and pestle, a bunk bed, a vacuum, clothing, diapers, toys, a crib."It was amazing how many people reached out to us," Shukria told me. "I think people were ready to help. You know, there were things being talked about." Specifically, she said, "We were talking about racism, we were talking about prejudice."What Shukria was referring to was how the residents of Cape Elizabeth had spent the past few years in a period of intense reflection. Trump-era policies, like the "Muslim ban," and then the Black Lives Matter movement had challenged them to talk openly about what kind of community they wanted to be, what their values were, and how to translate their values into action.Along with a handful of other volunteers, Nasir had helped form the Cape Diversity Coalition, which drew up a resolution saying Cape Elizabeth was welcoming to all. The school board passed it quickly. The town council took a bit longer — there was concern that the resolution was political and therefore not appropriate for the nonpartisan body — but, ultimately, it passed it too. A "global competency" goal was set for Cape Elizabeth students to be "personally responsible, aware, empathetic, and engaged local and global citizens."Perhaps this was why, when Nasir presented his neighbors with an urgent need, he had found a ready audience. Volunteers showed up to the house mostly in the early evening after work. They pulled up old flooring, installed new appliances, and painted walls. Some knew their way around a construction site, and others didn't.Nasir and Emily shared the code to enter the building so volunteers could come and go when it suited them. A to-do list was posted at the entrance, with items to be crossed off."He provided a vehicle for community members for stepping up and helping," Susana Measelle Hubbs, who served on the school board and the Cape Diversity Coalition, said of Nasir. "And I think everyone who did was so appreciative of that opportunity." "He walks the talk," she added. One Sunday afternoon, Barbara Leen stopped by. An immigration lawyer, she had been fielding calls all week about getting people out of Afghanistan. She found Nasir at the house and, when she asked what he needed, he pointed to one of the bedrooms and said with a shrug, "Well, it's a nasty job, but you can scrape up the subfloor."Friends Barbara Leen, an immigration lawyer (left) and Emily Mavodones, holding daughter Thea, are among those who helped get the house ready for Omid and his family.Jodi Hilton for InsiderFor the next few hours, Leen went to work scraping up a rubbery substance so a new floor could be laid down. Afterward, when Nasir learned about Leen's day job, he laughed. "I'm not sure scraping subfloors is exactly what I need you for," he said.As the house neared completion, Nasir gave me a tour: "This is where the reception was, this is where the laboratory was, this is where you got your teeth drilled." A drawing of the Cape Elizabeth lighthouse, the Portland Head Light — Maine's oldest — was hung on the wall, beside wooden letters that spelled out HOME. In the front yard, Emily had dug up some evergreen bushes that blocked light from entering the downstairs windows and replaced them with junipers, dogwoods, and irises. From a refugee camp in Virginia, Omid and his family awaited the paperwork to move, then a COVID-19 quarantine, and then a second quarantine after a measles case was identified in their camp.Omid still had no idea about the house, or what was awaiting them in Cape Elizabeth. Nasir had decided it would all be a surprise.Art on one of the walls in Omid's home.Jodi Hilton for InsiderWelcomeOmid arrived in Maine wearing a loose pair of sweatpants and a phone charger fashioned into a belt. The family had almost nothing of their own. They would spend their first night in a hotel, and Nasir promised to pick them up the next day and drive them to a welcome party at his sister's house.The next morning, they all pulled up in front of the old dentist's office.Some 20 members of Nasir's extended family were standing out front. Emily was there too, along with her family. Pink, blue, and yellow balloons bobbed around them, and, inside, streamers dangled from the kitchen ceiling.Nasir led them into the house and showed Omid his new bedroom. "This is your house," he said, as he handed Omid a ring of keys.After a pause, Omid placed his hand over his heart, several times. Omid hugged Nasir, burying his head in his friend's shoulder. Both of them were in tears. They stood there, holding each other for a long time.A sense of belongingWithin two days of their arrival, Omid's two older children, 7-year-old Aref and 6-year-old Farzan, were attending elementary school in Cape Elizabeth. They had been set up with a social worker, a teacher for English as a Second Language, and a translation app. The younger kids, Karimah, 3, and Safa, the baby, stayed home with their mom.Omid worried that his kids had been scarred by their experience at the camps. No one had much of anything, and everyone competed for the clothing and toys that were doled out. "For the first three weeks when we arrived, my kids were completely wild," Omid told me.Nasir, perhaps playing the role of the advocate he wished he'd had when he first arrived in Portland as a refugee kid, met with the school's staff to explain what the children had experienced in the refugee camps. "Please don't judge them — they are really good kids," Nasir said.Omid holds his house keys.Jodi Hilton for InsiderSoon, though, Omid said with relief, things started to feel normal again. Nasir, just a few doors down, was happy to explain playdates, sleepovers, and other ins and outs of raising kids in the US. Emily would occasionally drop by to see how they were settling in. Privately, though, Omid was struggling. He was looking for a job, but nothing had come through yet. In these early days, while he waited to get an American driver's license, he relied mostly on donated Uber rides, a gift from someone in the Cape Elizabeth community. He missed being able to hop in his own car and make spontaneous trips with his wife and kids.For Nasir, the Maine countryside reminded him of the village in the north of Afghanistan where he was born — lots of trees and farmland, and quiet, which he liked. But Omid's life in Afghanistan had been in Kabul, a city of 4.6 million people when he was last there — more than three times the population of Maine. The city required constant vigilance. Driving around town meant navigating the security barriers that had been laid down to deter suicide car bombings. But it was home.In Afghanistan, Omid and his friends believed in seizing the day. They would make plans to go out for billiards and kebabs on a moment's notice. He couldn't adjust to the highly scheduled culture in which he now found himself. When people would suggest doing something days or weeks in the future, Omid would sometimes think to himself: "Who knows that you'll be alive then? Enjoy yourself!"Beyond Nasir and his extended family, neither Omid nor his wife, Palwasha, had found friends they could really talk to. Omid was also losing touch with his community from back home; it felt almost too painful to reach out. Friends of his had ended up in Turkey, England, Uzbekistan, and Pakistan, and others were back in Afghanistan. "My friends say, 'Now you have reached America, and you forgot everything.'" In fact, he'd found that staying in touch had made him miss them too much. Better to focus on the present, Omid thought. "What I am doing, and I'm sure what Palwasha is doing, is all for our kids," Omid told me. "We say to each other, and ourselves, that we lived in Afghanistan, we lived enough. So now, whatever it is, it is for our kids."It was at about this time when Omid and Nasir began taking their midnight walks. On those chilly, quiet nights, Omid could confide in his old friend.One night, during that first autumn, rain was falling, and Omid suggested — absurdly — that they go for a drive to check on one of Nasir's rental properties. Nasir gamely went along with it, understanding that his friend needed the company and the distraction. "Nasir was kind to me," Omid said, recalling the moment. Sometimes, Nasir told me, he'd forget that Omid was "freshly from Afghanistan," and that some of the things he observed in Omid were only natural. "You're fearful of people, you don't trust people easily'... I'm trying to tell him, 'This is America, you have freedom. Don't be fearful.'" "It will take a while for him to feel a sense of belonging," Nasir told me. Safa balances on Omid's palm.Jodi Hilton for InsiderEmily Mavodones, right, visits with Omid, left and Nasir at Omid's home, formerly a dentist's office.Jodi Hilton for InsiderOmid serves tea, nuts and dried fruits to Nasir, who on weekends and special occasions likes to wear Afghan clothes.Jodi Hilton for InsiderNasir, left, plays basketball with one of Omid's sons.Jodi Hilton for InsiderOn a crisp sunny day that first fall, the yellow leaves resplendent against a clear blue sky, Nasir was again playing host, as he and Emily welcomed guests to Omid's front yard for an official welcome party. Nasir's extended family prepared baklava and other treats. A local radio station was there, as well as Anne Carney, a Maine state senator. Neighbors stood about, holding cups of apple cider and cans of seltzer.Nasir climbed to the top of a chair and beamed down at the crowd. Wearing a vest over a long white tunic and loose pants, he joked that he looked the part of a traditional Afghan, while Omid, dressed in a navy-blue fleece and jeans, easily passed for an American. Omid stood beside him, looking slightly uncomfortable, as Nasir told the story of Omid's journey."I don't have words for Nasir," Omid told me later. "Thank is a small word. I love him, simply," Nasir tells him that, if he is trying to repay him, Omid is "in the wrong friendship."The length of your blanketOn a Friday afternoon in late July of this year, Omid's two older kids — Aref and Farzan — were hurtling through the house and yard, switching happily from game to game. Aref was demonstrating his karate kick. Farzan had taken a blue marker to their whiteboard. "Look what I'm drawing, a ghost!" he said. Then he lined up the dry-erase markers, red, green, and black. "It's the flag of Afghanistan," he said.By now, the boys spoke nearly perfect English. Omid told me that Farzan, in particular, preferred English. Palwasha is teaching their kids how to read and write in Pashto. She's also teaching Nasir's kids; they were all born in the US, and it's their first time taking lessons.  Later, as the boys looped around on their bikes, a neighbor from across the street came over with three zucchini from his garden. "We had extra," he said. His family is from Ukraine, and the blue-and-yellow Ukrainian flag hangs in his doorway. While the kids were living very much in the moment, the adults were still finding that more difficult. They are the keepers of too many memories, and too much hinged on their decisions.The house in Cape Elizabeth.Jodi Hilton for InsiderIt's not as if you can just snap your fingers and transform your life, Omid told me. But the family's progress in Cape Elizabeth was evident.After the welcome party, a neighbor had connected Omid with an IT job in Portland. He started in December, once he'd received his Social Security number. It was a contract role, from afternoon to evening, but it allowed Omid to support the family. In early January, Omid got his driver's license and started leasing a black Highlander. "It gave me the power to get out of the house," he said. So far, the family had made two big trips — to Virginia, nine hours away, and to Boston. On both trips, they delighted in time spent with Afghan Americans. Palwasha struck up a conversation with a woman from Pakistan, and the two women have stayed in touch. "Here, you will not find any Afghans, to at least talk with and share your feelings," Omid told me.Still, the progress could feel halting, and Omid was still seeking a permanent legal status for his family. Omid had an unexpected surgery in the spring and took a leave from his IT job; he'd been doing food-delivery service for extra income while he planned his next steps. Eventually, Omid would like to save up for a house, and start a business. He'd like to find work that feels challenging. He was accustomed, previously, to a comfortable life. Now, he worries that he will not be able to keep up with the wealth he sees around him, and that his kids will feel bad about it. He quoted an Afghan proverb that says you should wear the blanket that is your size, not the size of others; otherwise your feet will hang out the end and get cold. "Stretch your feet to the length of your blanket," the proverb says.  Palwasha, meanwhile, had been studying to get her driver's license. "We're having a lot of problems with the driving stuff, so she can at least come out of the house," Omid explained. "In Afghanistan, ladies drive, but it is not common. People there, if they see a lady driving, they tease her. 'Hey, you don't have a husband? Do you want a husband?'" He looked over at his wife. "She is my power. She is my advisor," he said. "She seems quiet, but she is not."Their neighbors have been a gift, they said. One of them, they refer to as "uncle." At various times, neighbors have dropped by to help fix the kids' bikes, lent Omid protective gear for his ears and eyes when he was spotted using a weed wacker without them, and inviting them over to pizza dinner. Together, they play basketball in one another's driveways and celebrate birthdays. "It's nice to look out the windows and see kids out there, and hear laughter," one of their neighbors told me.On a recent evening, the power had gone out while Omid was out delivering food. The neighbors came by with flashlights and games and kept the kids company until Omid got home. In the dark, Palwasha brought out a big tray of fruit. It was a cold evening, and they all sat together, huddled under a quilt to stay warm.The family visited an apple orchard in nearby Falmouth.Jodi Hilton for Insider'We had a beautiful life'Omid took a seat next to Palwasha on the couch, as Safa wiggled between their laps. Omid held up his laptop and they flipped through photos, starting with their wedding.Theirs had been an arranged marriage. It was held in Kabul, where they're both from, and 1,000 guests were there to celebrate. The two grew animated as they pointed out relatives and friends and memories from their former life. In one photo, Omid wore a shiny gray suit. Palwasha had picked it out for him. "I had about 20 suits while I was living in Afghanistan," Omid said. "And I left it all behind." He paused. "I'm the guy who never went to the office with jeans."Omid clicked on a photo of their apartment in Kabul. It had high ceilings, and they had painted every room a different color — pink, maroon, light gray, and white. "If you get bored in one room, you go to the next room, and your mind will be changed," Omid said. "We loved these colors." After Omid's family escaped Kabul, members of his extended family came by to collect some of their more precious items, and gave other things away. The apartment is no longer theirs. Omid pointed to the living-room rug, with its bold flowers, and said he had paid about $3,000 for it. "I was fond of this stuff," he said. "We had a beautiful life." Then, a photo of Omid in his office, at his last job in Afghanistan. "It was a big project," he said. "I miss it."They paused over a family photo from the day they left. Omid stiffened on the coach and the room went still. The portal had closed, and the mood, broken.They'd taken the picture to send to the US Marines at the airport so that they would be recognized. No one was smiling; they all looked straight at the camera, except for Safa, who stared up at the sky.Transported back to the present, Omid stood up and stepped away from the couch.Carnival They'd had a late lunch — creamy shola rice — so no one was hungry. Omid and Palwasha suggested an outing.They climbed into the Highlander, and the voice of Ahmad Zahir, singing in Dari, came on from the speakers. Palwasha relaxed into her seat. Aref's voice came from behind her: "I love family time."Crossing the Casco Bay Bridge, Omid drives into Portland. One of his first priorities upon arriving in Maine was to get his U.S. driver’s license and acquire a car.Jodi Hilton for InsiderThey drove a bit, and then Omid pulled up to the Old Orchard Beach carnival. Spotting the lit-up Ferris wheel and roller coaster, the boys jumped up and down, as their mother carefully transferred Safa, already fast asleep, to a stroller.Once inside, they passed an arcade, which Omid said reminded him of the video-game arcade they liked in Kabul. He bought a bundle of tickets, and Palwasha and the boys headed over to the Matterhorn and then the Pirate's Ship, snapping selfies as the boys shrieked with delight. Karimah, too little for most of the rides, poked her head through a cutout of a lobster's body and a Southwestern-themed scene called "Tortilla sunrise."The family reunited at the carousel. "It smells like the ocean," Aref murmured as his horse glided up and down a gold pole.Before too long, Karimah had claimed Safa's stroller, and Palwasha was carrying the baby. Requests for ice cream were met with gentle reminders that they had ice cream at home.They climbed back into the Highlander, content and sleepy. Omid took out his phone. "Siri, take me home," he said. "Siri, take me home."Read the original article on Business Insider.....»»