With Inflation So High, The Elites Have Some Suggestions For How You Can Save Money This Thanksgiving...

With Inflation So High, The Elites Have Some Suggestions For How You Can Save Money This Thanksgiving... Authored by Michael Snyder via The Economic Collapse blog, Normally, inflation is not a major theme on Thanksgiving.  Unfortunately, these are not normal times.  Thanks to Joe Biden and our other crooked politicians in Washington, we are facing an inflation crisis that is unlike anything that we have experienced since the 1970s.  Earlier this week, I discussed a new poll which showed that 88 percent of Americans are deeply concerned about inflation, and a different poll found that 67 percent of Americans disapprove of the way that Biden is handling rising prices.  Now Thanksgiving is nearly upon us, and most Americans are finding that their grocery dollars are not stretching as far as they once did. This is being hailed as “the most expensive Thanksgiving ever”, but don’t worry, because the elite are offering some suggestions for how you can save some money. For example, NBC News is telling us to “consider not buying a turkey” in order to save some cash. If that wasn’t offensive enough, they are also saying that “some people think turkey is overrated” and that an “Italian feast” might be a better alternative… “I know that is the staple of the Thanksgiving meal. However, some people think turkey is overrated, and so it tends to be the most expensive thing on the table. Maybe you do an Italian feast instead.” I love Italian food, but Americans have eaten turkey on Thanksgiving for generations. Sadly, many Americans won’t be having turkey this year because it has just gotten too expensive. Of course NBC has an answer for that too.  They are suggesting that if you tell those you have invited that there won’t be any turkey on the table “some guests may drop off the list, and that’s a way to cut costs too.” Seriously? That is what they actually think ordinary Americans should do? It just makes me sick how the elite talk down to us like this. The Federal Reserve Bank of St. Louis is being even more offensive.  A few days ago, they encouraged Americans to consider a “soybean-based dinner” because turkey is so much more expensive… “A Thanksgiving dinner serving of poultry costs $1.42. A soybean-based dinner serving with the same amount of calories costs 66 cents and provides almost twice as much protein” Yuck. Just yuck. Over the years, I have tried “alternative” soybean-based products from time to time, and to be frank all of them were disgusting. And I find it to be highly offensive for the people that actually created this inflation crisis to be pushing Americans toward less expensive and more “eco-friendly” alternatives. We wouldn’t be in this mess if the Federal Reserve had not created trillions upon trillions of dollars out of thin air over the past couple of years. And we wouldn’t be in this mess if NBC News and other media outlets had not endlessly promoted the corrupt politicians in Washington that just keep borrowing and spending money as if the future will never come. We didn’t get here by accident. What we are now experiencing is a perfect example of cause and effect.  Our insane leaders flooded the system with new money, and now a typical Thanksgiving dinner is 14 percent more expensive than it was last year… The cost of providing a traditional Thanksgiving turkey dinner to 10 people in 2021 is 14% higher than a year ago, according to the American Farm Bureau Federation’s annual survey. Thankfully, your income has gone up 14 percent over the past year as well, right? Sadly, most of you will not be able to answer that question affirmatively. The cost of turkey is rising at a particularly blazing pace.  At this point, the average price of a 16 pound turkey is $4.60 higher than it was at this time in 2020… Ranking the data this way lets us see that the increase in the cost of turkey is responsible for most of the year-over-year increase. Rising by $4.60 from 2020’s $19.39 to 2021’s $23.99 for a 16-pound bird, turkey alone accounts for nearly 72% of the year-over-year increase in the total cost for the meal. But at least soybean-based dinners are still affordable. Of maybe you could even eat bugs this year. The global elite would really love that. In addition to changing the menu, the elite are also giving us pointers for how to minimize the spread of COVID during our Thanksgiving celebrations. According to the New York Times, children should wear masks, eat as quickly as they can, and stay as far away from the adults as possible… I’m glad to hear that the children and all guests are vaccinated. As the kids will not be fully vaccinated until two weeks after their second shot, I think some care is warranted, especially because some attendees are 65 and older and thus at greater risk of more serious breakthrough infections. You could have the kids wear masks, eat quickly and stay away from the older adults when eating. So I guess that hugging grandma and grandpa is out of the question. These control freaks really do want to micromanage all of our lives, and those that obediently do whatever they say without thinking are part of the problem. The truth is that the vast majority of the “experts” that they put on television to tell us how to live our lives really aren’t “experts” at all. It is all a big con game, and it amazes me that there are still so many people out there that fall for it. Once you get a look behind the curtain and you realize what a giant fraud their entire system is, there is no going back. Unfortunately, much of the population is still under their spell, and so we need to work really hard to wake people up while there is still time to do so. Look, I really do hope that all of you have a wonderful Thanksgiving. Eat lots of turkey, enjoy your family and friends, and try to smile. We should find joy in these moments while we still can, because soon everything will change. *  *  * It is finally here! Michael’s new book entitled “7 Year Apocalypse” is now available in paperback and for the Kindle on Amazon. Tyler Durden Wed, 11/24/2021 - 22:30.....»»

Category: blogSource: zerohedgeNov 24th, 2021

Avoid AMC Entertainment; Metaverse Real Estate Selling Like Hotcakes

Whitney Tilson’s email to investors suggesting to avoid AMC Entertainment Holdings Inc (NYSE:AMC); investors snap up metaverse real estate in a virtual land boom; Scott Galloway: Inflated. Q3 2021 hedge fund letters, conferences and more Avoid AMC Entertainment 1) The 25 stocks in my “Short Squeeze Bubble Basket” that I identified in my January 27 […] Whitney Tilson’s email to investors suggesting to avoid AMC Entertainment Holdings Inc (NYSE:AMC); investors snap up metaverse real estate in a virtual land boom; Scott Galloway: Inflated. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more Avoid AMC Entertainment 1) The 25 stocks in my "Short Squeeze Bubble Basket" that I identified in my January 27 e-mail have declined by an average of 34%, while the S&P 500 Index has risen by 22% – 56 points of underperformance. However, one notable exception is the largest movie theater operator in the world, AMC Entertainment (AMC), which is up 52% since then. So am I throwing in the towel and admitting a mistake? Heck no! This article is a good summary of why AMC continues to be among my least favorite stocks: Movie theaters must 'urgently' rethink the experience, a study says. Excerpt: About 49% of pre-pandemic moviegoers are no longer buying tickets. Some of them, roughly 8%, have likely been lost forever. To win back the rest, multiplex owners must "urgently" rethink pricing and customer perks in addition to focusing on coronavirus safety. Those were some of the takeaways from a new study on the state of the American movie theater business, which was troubled before the pandemic – attendance declining, streaming services proliferating – and has struggled to rebound from coronavirus-forced closings in 2020. Over the weekend, ticket sales in the United States and Canada stood at roughly $96 million, compared to $181 million over the same period in 2019. I, for one, have yet to return to a movie theater, even as pretty much every other aspect of my life has gone back to normal (sporting events, Broadway shows, etc.). I was actually planning to see the new movie about Venus and Serena Williams' father, King Richard, but then saw it was released simultaneously on HBO Max, so my wife and I just watched it at home (and loved it). This new development is very bad news for AMC... Investors Snap Up Metaverse Real Estate 2) I'm no longer in the short-selling business (thank goodness!), but if I were, I'd feel perfectly comfortable shorting AMC, especially now that it's already been pumped to the moon by the Reddit speculators and subsequently crashed (it's down nearly 60% from its all-time high on June 2). While, as we've seen, it could trade anywhere in the short term. At the end of the day, its stock will ultimately be valued on the performance of the underlying business, which I believe will be dreadful relative to the expectations built into its current $15 billion market cap and $24 billion enterprise value. I don't even think the company is worth $9 billion in net debt, meaning the stock will eventually be worthless. But as an old-school value guy, I take zero comfort in evaluating things like cryptocurrencies, non-fungible tokens ("NFTs"), and the latest craze, buying real estate in the metaverse. I'm not making this up – here are two recent in-depth articles about it in the Wall Street Journal and New York Times, respectively: a) Metaverse Real Estate Piles Up Record Sales in Sandbox and Other Virtual Realms. Excerpt: The latest hot real estate market isn't on the scenic coasts or in balmy Sunbelt cities. It's in the metaverse, where gamers are flocking, and digital property sales are setting new records. A growing number of investment firms are acquiring digital land in worlds such as the Sandbox and Decentraland, where players simulate real-life pursuits, from shopping to attending a concert. They are betting that individuals and companies will spend money to use virtual homes and retail space and that the value of properties will increase as more people join the worlds. b) Investors Snap Up Metaverse Real Estate in a Virtual Land Boom. Excerpt: Investors were watching, too. Preparing for a digital land boom that appears just months away, they are snapping up concert venues, shopping malls, and other properties in the metaverse. Interest in this digital universe skyrocketed last month when Mark Zuckerberg announced that Facebook would be known as Meta, an effort to capitalize on the digital frontier. The global market for goods and services in the metaverse will soon be worth $1 trillion, according to the digital currency investor Grayscale. My knee-jerk, old-school-value-guy reaction is that this is an obvious and ridiculous bubble, but I've been humbled too many times to have any conviction in that judgment. So I'm just going to defer to my colleagues Enrique Abeyta and Gabe Marshank, who have already done a deep dive into the metaverse. In fact, they recommended one of the leading companies in the space, Roblox Corp (NYSE:RBLX), to their Empire Elite Growth subscribers in September, and it's already up 38%. (Click here for a free trial to Empire Elite Growth.) Scott Galloway On Inflation 3) Run, don't walk, to read NYU professor Scott Galloway's latest column, Inflated. It's the essay of the year, I think. It should be required reading for everyone interested in our higher education system, starting with college administrators. Excerpts: In 1980 a gallon of gasoline cost $1.19. Today it's $3.41, a 2.7% annual increase. But undergraduate tuition has risen nearly 3 times as fast: 6.7% a year at public colleges, for an increase of nearly 1,400%. The greatest assault on middle-class America's prosperity may be the relentless, four-decade-long inflation in higher education. Student loan debt ($1.7 trillion) is now greater than credit card debt. And that doesn't account for the busted 401(k)s, second mortgages, and general financial oppression [that] me and my colleagues have levied on lower- and middle-income households. The number of Americans who have more than $100,000 in student debt is greater than the population of Utah. This sustained inflation has been devastating for lower- and middle-income households. Higher education's ability to soak America is a function of limiting the supply of freshman seats at our best universities in concert with the continued fetishization of their brands. We can scale Salesforce (NYSE:CRM), Facebook (NASDAQ:AAPL), and Google (NASDAQ:GOOGL) by 25% to 60% per annum, but we can't seem to bust above 1% per year at our great public universities. The top 200 schools in America educate only 10% of college attendees. And these universities raise prices in perfect lockstep, miraculously, resulting in millions of kids who get arbitraged to mediocre universities but pay an elite price. It's a cartel enforced by the accreditation organizations, institutions who are as corrupt as the NCAA... minus the charm. Acceptance rates have plummeted, turning senior spring from a time of optimism and opportunity to one of anguish and sacrifice. Kids are still getting into college (total enrollment has kept pace with the growth in graduating seniors), but more and more are shuffled down to lower-tier schools that charge a top-tier price for a credential worth far less. College deans boast about low admissions rates. But if you accept five of every 100 applications, that's not a 5% admission rate. It's a 95% rejection rate. This is un-American. Rejectionism is cloaked in progressive policies. It's true that the student body at these institutions is more diverse than it was 40 years ago. And that's great. But it's not an excuse for maintaining a rejectionist posture. The mission is to expand opportunity, not reallocate elites. Bigotry is prejudice against a person or people on the basis of their membership in a particular group. Haven't we in higher education become bigoted against unremarkable kids from lower- and middle-income households? I love his personal story at the end – it was a similar story for my mom, the daughter of a Seattle fireman, who graduated from the University of Washington in 1962: The best things in my life – kids who made the head's list this semester, a supportive mate, and financial security that (generally) enables me to do whatever I want, whenever I want – are a function of one thing: 74. Specifically, in the 80s, UCLA had an acceptance rate of 74%. I (no joke) had to apply twice. I was the first person on either side of my family to graduate from high school, much less get to attend amazing institutions for undergraduate and graduate degrees. The cost? $7,000 (total) in tuition for a BA and an MBA. In addition, I was presented this opportunity as a function of being good, not great... much less remarkable. Higher ed catalyzed an upward spiral of prosperity for me and my family that's been good for the commonwealth – we love America and are good citizens. Today the acceptance rate at UCLA is 12%. Since I graduated, the number of graduating high school seniors in California has grown nearly twice as fast as the number of undergraduate seats at UCLA. To its credit, the UC system has announced plans to add 20,000 more seats to the system by 2030. At night, alone with the dogs, I hear voices. (No shit.) Not strange voices like the dogs telling me to head to Kroger's in my underwear. But the voices of millions of kids who have one question: "Boss, you got yours, where is mine? When do I get my shot?" America is not about making the children of rich people and the remarkable billionaires but giving everyone a shot at being a millionaire and/or making a contribution. American higher ed has become un-American. We need to fall back in love with the unremarkables and return to America. Best regards, Whitney P.S. I welcome your feedback at Updated on Dec 3, 2021, 3:13 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalk18 hr. 29 min. ago

Leapfrogging Legacy Banking To A Bitcoin Standard

Leapfrogging Legacy Banking To A Bitcoin Standard Authored by Mitch Klee via, How looking at the history of technological adoption can give us insights into where Bitcoin could be embraced the fastest... INTRO Throughout time, technology has proven to change our lives by leveraging efficiencies in energy. New ways in how we hunt have saved time and energy for innovation and to live more intentionally. Currently, Bitcoin presents an immense opportunity to change the lives of those who are burdened by old forms of manipulated money and preserve their time and energy. It is the first self-sovereign, programmable money that is proving to destroy expectations of every “expert” imaginable. At the intersection of money and technology, Bitcoin's network effect is spreading like a mind virus to all corners of the globe. This is not a coincidence but the manifestation of a zero to one moment; a radical new technology that will change nearly everything it touches. This article explores the idea that some regions and nations have a higher susceptibility to adoption in new monetary networks. Specifically, I will outline how the unbanked populations of emerging countries can leapfrog legacy systems, straight into a new monetary standard. But first, let's lay the groundwork for understanding how this can happen with some concepts. DEMOCRATIZATION OF TECHNOLOGY To understand leapfrogging, let’s first look into something that naturally happens when humans produce technology: the democratization of technology. As we make technology, the cost reduces, while the ease of production increases. Our tools get better, people’s skills improve, securing the material for production gets easier, logistics improve, and everything is less costly as humans continue increasing the output/yield over time. Simply put, cost goes down, while production goes up. Figure 1. A great example is the printing press. Before this innovation, each book had to be typed out or written one by one and distributed almost by osmosis. This means books were more expensive and were only in the hands of the few. After the printing press, people were able to automate a portion of the process by creating blueprints of the books. This cut down labor costs, and there was a huge explosion in printed material. This may have put people out of work; but it also introduced better dissemination of information to a wider group of people and new opportunities to produce more books for less cost and effort. Another example is photography. Historically, taking photos on film took hours to produce in a dark room. The film had to be brought to a local expert and it would take several days to get back the finished product. Smartphones and photoshop technology made this essentially free. It was then possible to download an app or use the built-in app on smartphones, take pictures, and immediately process them. Democratization of technology has been happening across every single aspect of human society since the beginning of time. Humans create tools to make it easier and cheaper to survive. Each tool becomes better, we then expand and evolve with less energy improving the quality of life. Fast-forward to the internet age. Emerging countries are just now tapping into the power of the internet. Although there are many factors underlying the reasons for expansion, one thing that is known is that technology builds on itself, making each successive technology easier to produce. Not only is there growth, but there is exponential growth. Certain times throughout history, technology has made such a large leap forward that it allows extremely poor countries to skip the legacy technology and quickly adopt the new one. This is called leapfrogging. LEAPFROGGING EXPLAINED Leapfrogging is when the cost to produce one technology is too great for a population, so when a new, drastically cheaper technology is created it’s quickly adopted and the old tech is skipped. This is the coexistence and benefit of separate populations within society. Let's look at the mobile phone revolution as a way to explain leapfrogging. Some societies did not have the wealth or infrastructure to adopt landlines and phone communication when it was brand new, but when the mobile phone was introduced, this gave mostly everyone around the world the ability to opt-in. Figure 2. Landlines in the U.S., 1900–2019. Figure 2 shows the number of landlines in the U.S. population from the 1900s to 2019. Throughout the entirety of the 20th century, the landline was being adopted in the U.S. Consequently it only took a decade to dethrone this old technology. The decline started when the benefit of cell phones outweighed the cost compared to landlines. This is where democratization hit the tipping point and we saw a huge jump from one technology to the next. Now it’s extremely cheap to use technology that is 100 times or even 1,000 times more advanced than the previous. Mobile phones usurped landlines because they were more affordable, easier to use and more mobile. Figure 2 shows how quickly a society can adopt a technology that has significantly more benefits than the previous, even in an advanced society. A similar thing is happening with television and the internet. Netflix came out and disrupted how people consume media on the television. As more platforms emerged, and people realized they could pay a fraction of the cost for a Netflix subscription rather than $100 for cable and a bunch of commercials, the switch was easy. Legacy systems were bogged down by all of the brick-and-mortar stores and overhead costs. They could not compete and pivot quickly enough, so they lost their seat at the table. Figure 3. Number of telephone subscriptions in the U.S. versus worldwide. When comparing fixed telephone subscriptions to other countries, the U.S. was way ahead of most. Many factors were contributing to this. Wealth played a huge part, but much of it was the production and first movers’ advantage. The U.S. was the first country to set up telephone lines from Boston to Somerville Massachusetts and expanded from there. Other countries did not have this opportunity, so they were laggards in the technology simply by default. It also made it easy to have a grid to run on top of, being a technologically advanced country with a power grid. Because it was so resource-heavy to set up this grid, this took over 30 years to build up the infrastructure. Figure 4. Landline subscriptions compared to GDP per capita, 2019. One of the main reasons why it was so hard to increase telephone subscriptions in other countries is because of the initial cost. You can’t just tap into a telephone line, there needs to be a large grid, infrastructure and companies/governments willing to build out this grid. Figure 4 shows that there is a rough line at a GDP per capita of $5,000 to get off zero and start communicating via landline. As the GDP per capita grows in a country, it is more likely they adopt fixed landlines. This is a huge barrier to entry as they try and compete to be a part of the 21st century. With telephones, it brings an easier flow of information across long distances quickly. These are important technologies that helped first-world countries advance quicker than their counterparts. This technology could mean the difference between surviving and thriving in the modern era. Figure 5. Mobile phone subscriptions versus GDP per capita, 2019. Things get much different when you start looking at mobile phones in Figure 5. To have a mobile phone is drastically cheaper than having a landline, all costs considered. Before, you needed the infrastructure and everything that came with installing a landline phone. But with mobile phones, even at a GDP per capita of less than $1,000, you get ~50% penetration of adoption within the population. All of the countries that were left out of communication with landlines, now have leapfrogged the old technology, right into a new standard of mobile phones. People benefit, businesses benefit and countries benefit immensely from these technologies. With mobile communication, people have higher leverage over their energy output. Businesses and life in general are more efficient, in turn creating a higher GDP for the country. It is a feedback loop that is good for all of humanity. When one group of people creates new technology, everyone benefits at one point or another. FROM LANDLINES TO MOBILE PHONES TO INTERNET-CONNECTED SMARTPHONES Not only are poorer countries leapfrogging into mobile phone communication, but they are, in turn, jumping right into the internet age. On top of that, (Android) smartphone costs are dropping significantly every year, with the average cost down by 50% from 2008 to 2016. With the growing ability to connect with the rest of the world comes more opportunities to learn and grow with the rest of the world. An incredible amount of information is available on the internet, and the benefit of being on the network is immeasurable. Figure 6. Mobile versus landline subscriptions, worldwide, 1960–2019. When comparing the numbers of mobile phone users to the numbers of landlines, you get a huge disparity in the pace at which they were adopted. Fixed landlines were around for almost 50 years before they started to see some real competition. Thinking back to our Figure 5, this makes sense, because the cost to build infrastructure is drastically higher than that of mobile phones. The opportunity a landline brought to civilization was immense, but the cost-effective mobility of cell phones transcends previous communication technology by a longshot. As of September 2021, the world’s population was ~7.89 billion people. Of that, there are 10.5 billion cell phones with network connections. That is 2.52 billion more activated phones than there are people. This becomes thought-provoking when adoption data starts to reveal where mobile phones are headed next. As people adopt mobile phones, smartphones are becoming cheaper and more abundant. The cost of production for smartphones is less and less each year, and soon there will be little reason to have a cell phone without internet connection because the cost difference will be so minuscule. Smartphone abundance is allowing people around the world to tap into the internet and it is estimated that “by 2025, 72% of all internet users will solely use smartphones to access the web.” Figure 7. Share of the population using the internet, 1990–2019. Currently, the world is in a transitionary period of communication. Not all of the world has access to the internet, only 65%, with an increasingly rapid pace of adoption. Because it is so inexpensive to get a mobile phone, and the benefits are immense, the world is being onboarded at an incredible rate. To answer the question “What is Leapfrogging?” we can look directly at mobile phones. But it’s not just one leapfrog, it’s more of a continuous onboarding to the digital revolution for the entire human population. Things are getting cheaper, and technology is moving exponentially forward, toward a more connected future. Soon, everyone will have access to the internet and will bring about new and exciting opportunities for the world to grow. With the high rate of adoption in communication technology, mobile phones swept across low-GDP countries allowing information to spread. Smartphones are a small hop away from mobile phones. With smartphones comes all sorts of opportunities not to mention the connection to the world's internet. In developing countries, the internet is starting to hit its hockey stick moment. Adoption continues to grow and as smartphones get cheaper, more people in the world have access to the internet, connecting them to their local and global economies and new innovations will come about in unforeseen ways. This begs the question, what monetary network will they use to transact in the digital age? It's taken years to get the legacy banking system up to speed. We’ve bootstrapped and “Frankensteined” many different ways to connect the internet to a centuries-old banking infrastructure, but these newly onboarded countries have the opportunity to skip that altogether. With no legacy banking infrastructure rooted within the nation, this leaves the door wide open for a new legacy. LEAPFROGGING ONTO A BITCOIN STANDARD It seems the stage is set for a paradigm shift. A perfect storm is brewing in populations that lack bank accounts and access to store their wealth. Coupling this with connection to the internet, and 21st-century e-commerce and monetary system, it is impossible for countries not to adopt it. Because bitcoin is a global asset with no intermediaries, its infrastructure is inherently global. Any improvements to the network, the entire world will benefit automatically without having to update the old tech. Unlike landlines, there is no infrastructure to build, and the barrier to entry is almost zero. You just opt in with a bit of hardware and an internet connection. As of 2017, according to the World Bank, there are 1.7 billion adults in the world without a basic transacting account. Most of these countries with higher rates of unbanked are poor, have high rates of inflation and lower currency stability, not to mention a disconnected state government ripe with problems. This is extremely common when looking at currencies in other low-GDP countries. So, what are some of the biggest factors in which people would want or need to adopt Bitcoin? If we can answer this question, then maybe we can quantify and pinpoint which countries have the biggest opportunity and most to gain from adopting a Bitcoin standard. Figure 8. World’s most unbanked countries (Source). Figure 8 shows the top-10 most unbanked countries as of February 2021. The Oxford dictionary defines “unbanked” as “not having access to the services of a bank or similar financial organization.” Much like building the infrastructure for landlines, it’s expensive to build banks and serve the local economy. Not to mention, many of the people living in these countries don't have the amount of money that would warrant the cost of owning a bank account. Some even share bank accounts with members of their families to save on costs. There is a huge opportunity to solve the problem of banking in low-GDP countries, but many of the digital banking companies around the world are constrained by regulation and geographical jurisdiction. It may be hard to grasp the importance of a bank account having never lived without one, but without a bank, citizens cannot secure funds safely. Without secure funds, the future is uncertain. This is where Bitcoin can solve some of the problems in these less developed and emerging countries. There are three specific ways in which these problems could be solved. 1. Bank the Unbanked Bitcoin gives everyone the ability to be their own bank with something as little as a cell phone. All that's needed is to be connected to the network and accept funds. The smartphone does all of this. It allows people to download a bitcoin wallet, connect to the internet and start transacting. There are many ways in which one can use this wallet. Coincidentally, the countries above who have low banking numbers within their population, also have mobile phones and high internet penetration. This is an open door from a technological standpoint, allowing people to opt into Bitcoin and secure their funds digitally. In addition to using the Bitcoin network to transact on your phone, you can also use it as a cold storage solution. Cold storage is similar to a savings account. This savings account or cold storage is disconnected from the internet, making it harder for people to steal your funds. With the old technology of banks, you would have to pay for this solution, but with Bitcoin, it's free, just download the software and/or buy a hardware wallet. There are some cold storage solutions where you can pay for a hardware device, but creating a phone wallet and securing your keys, gives the people an entry point and on-ramp to storing their wealth in a digital bank. 2. Securely Store Value Over Time The second opportunity is the store of value function. Many of the countries that have unbanked populations and poverty issues are a result of a currency problem. In my previous article, “Bitcoin As A Pressure Release Valve,” I wrote that certain countries have hyperinflated currencies with no option but to turn to the black market. Most of the time, these countries use the U.S. dollar to transact since it holds its value better relative to their currency. Strictly from a monetary standpoint, bitcoin is scarce. It is the most scarce form of money there is. There will only ever be 21 million bitcoin in existence and when the value rises, the production does not increase. This is called elasticity or the lack of elasticity in bitcoin’s case. Unlike fiat money, no government, central bank or agency can print more. And unlike gold, silver or any other commodity, when the demand rises, the amount that is mined stays the same. The first completely inelastic asset in existence is a result of preprogrammed architecture, with consensus in the network that’s default is to not change the protocol. People that live in countries where the money is known to be manipulated, understand Bitcoin almost immediately. When the idea of something that can't be manipulated is presented, the concept of scarcity and 21 million is understood. With the reality of incorruptible money, the current regime in power can't stuff their pockets without alienating the population through force. These people understand this idea because they have experienced it firsthand. When food prices rise faster than people can spend a weekly budget on groceries, it is immediately apparent the importance of a completely scarce, un-manipulatable asset. In developed countries with low levels of unbanked, people have ways of storing their wealth. They have a 401k and IRA, and most people own property. This is a way of storing value over time. It may not be completely efficient, but it is sufficient enough to escape some level of inflation. The alternative would be to keep your dollars in a savings account, and the real yield of that is negative and not a smart way to store money. These countries put money in financial devices, because it is the smart thing to do and it preserves time and energy. Unbanked countries have no way of storing long-term value. It is degraded and evaporated through manipulation and high levels of money printing. Emerging countries cannot store time and value into financial instruments. There is no Apple stock or S&P 500 to put money into. They are stuck with low levels of wealth that are stolen away on an ever-moving treadmill. There is no way of truly saving value or energy spent over time. For the first time, Bitcoin gives the world, particularly those in emerging countries, the ability to hold their value in a closed system that cannot be inflated. Much like the opportunity the mobile phone brought to change communication, bitcoin is the first “store of value'' that is available for low-GDP countries to buy and hold. It allows them to securely transfer their wealth over time, without fear of inflation or confiscation. Add on top of that, if they need to transfer wealth out of the country and flee an oppressive regime, bitcoin is the first asset that gives the ability to do so. Large amounts of gold cannot be taken on a plane or property and homes cannot be transferred to another country. Bitcoin gives people the freedom to do what they want with their earned value, without fear of a centralized power removing it. Bitcoin preserves the fundamental human right of property. 3. Connection to the Digital Economy The third problem Bitcoin solves is connecting and transacting digitally. Being a digitally native asset, bitcoin smooths the rails of commerce allowing low-GDP countries to join the 21st century of commerce. This is huge, and what cell phones did for communication, digital commerce will do the same. It immensely increases our ability to transact and exchange value. Bitcoin allows anyone, anywhere, to join a digital transacting network and exchange value natively over the internet, whether in person or without knowing them at all. Digital economies move at the speed of light, while old-school economies move at the speed of osmosis. This brings more time and efficiency for people on both ends of the transaction. Businesses spend less time on transactions, widen their addressable market, and start putting more time and effort into other things that can improve their work. It is the difference between transacting daily in cash and using a preprogrammed point of sales system. It is simply better. Not only does Bitcoin make things easier and frees up more time, but it is programmable money. Like the internet, Bitcoin can be built in layers. Each layer brings a new way to use it that widens the possibilities and use cases. What the internet did for communication, Bitcoin will do for money. Combining all three of these factors, you get a massive magnetic pull toward adoption of the new technology. It is hard to slow the movement of technological adoption and impossible to stop. Like throwing a match on a tinder-filled hillside, years of opportunity build up in countries that lack technology where innovation and adoption prepare to explode at the right moment. QUANTIFYING BITCOIN ADOPTION IN LOW-GDP COUNTRIES Figure 9. LocalBitcoins and Paxful Vietnamese dong (VND) combined volume in Vietnam (Source). Looking at every one of the top-10 countries from Figure 8, they all have meaningful adoption in Bitcoin and it is growing every week. Not only is Vietnam number two on the unbanked list, but it is also number one on the “Chainalysis 2021 Global Adoption Ranking.” In fact, looking at Figure 10 of adoption through LocalBitcoins and Paxful, USD volume shows that every one of the countries in the top-10 list of unbanked have meaningful adoption. Figure 10. LocalBitcoins and Paxful Vietnamese dong (VND) combined volume. What does this tell us about Bitcoin adoption in unbanked countries? It tells us that it's working. Continuing to see these trends improve will be good for Bitcoin adoption and not to mention the countries in which they are adopting it. All the ingredients are there. Most are unbanked with high internet access and an unreliable currency that isn't natively digital. All you need is time for the adoption to take hold. There are also some concerns that come up when thinking about Bitcoin adoption. Like, “How can they adopt bitcoin when it is so volatile?” Well, there are a few solutions to this problem. The first is that when a population has no choice, something as volatile as bitcoin could mean the difference between losing 30% or losing 90% over the span of one year. Keep in mind that bitcoin is already solving three of the major problems listed above, we are just remedying the problem of volatility. First, look at just bitcoin and its use cases today. For some countries, their currency is just as volatile if not more volatile than bitcoin. Not only that, but it is volatile to the downside, continuing to lose value as the government steals and prints away spent time and energy. If bitcoin were to be used, sure it might be volatile, but this volatility is either short lived, or it’s to the upside. Now look at bitcoin while using it for everyday transactions through Strike, as a more technical solution. This solution is currently available now in El Salvador as a test case and is starting to roll out to more and more countries. People use the Bitcoin and Lightning rails every single day but transact in USD, choosing to either save in bitcoin or not. This solution gives the best of both worlds. One, a population has the ability to transact short term in a currency that isn't volatile, like other emerging countries. Two, this gives access to the payment rails of Bitcoin and the ability to save in the most scarce asset in existence. Looking back historically, bitcoin has grown at a 200% compound annual growth rate and this has the opportunity to conserve and grow wealth immensely. For someone in a developing world, this is life changing. As this trend of adoption in underbanked countries continues, new and exciting ways where Bitcoin is used will emerge. For the first time in history, countries have the ability to store wealth in something that cannot be stolen. It gives the opportunity to transact freely without the permission of the state or government, and it allows people to break free from imposed serfdom. Bitcoin is here and it is only getting bigger. There is a change in the tides of time, and Bitcoin is a once-in-a-millennia technology that is pulling the shores. Tyler Durden Fri, 12/03/2021 - 18:20.....»»

Category: blogSource: zerohedgeDec 3rd, 2021

Why Inflation Is A Runaway Freight Train

Why Inflation Is A Runaway Freight Train Authored by Charles Hugh Smith via OfTwoMinds blog, The value of these super-abundant follies will trend rapidly to zero once margin calls and other bits of reality drastically reduce demand. Inflation, deflation, stagflation--they've all got proponents. But who's going to be right? The difficulty here is that supply and demand are dynamic and so there are always things going up in price that haven't changed materially (and are therefore not worth the higher cost) and other things dropping in price even though they haven't changed materially. So proponents of inflation and deflation can always offer examples supporting their case. The stagflationist camp is delighted to offer a compromise case: yes, there are both deflationary and inflationary dynamics, and what we have is the worst of both worlds: stagnant growth and declining purchasing power. What's missing in most of these debates is a comparison of scale: deflationists point to things like big-screen TV prices dropping. OK, fine: we save $300 on a TV that we might buy once every two or three years. So we save $100 a year thanks to this deflation. Meanwhile, on the inflationary side, healthcare insurance went up $3,000 a year, childcare went up $3,000 a year, rent (or property taxes) went up $3,000 a year and care for an elderly parent went up $3,000 a year: that's $12,000. Now how many big-screen TVs, shoddy jeans, etc. that dropped a bit in price will we have to buy to offset $12,000 in higher costs? This is the problem with abstractions like statistics: TVs dropped 20% in cost, while healthcare, childcare, assisted living and rent all went up 20%--so these all balance out, right? There are two glaring omissions in all the back-and-forth on inflation and deflation: 1. Price is set on the margins. 2. Enterprises cannot lose money for very long and so they close down. Let's start with an observation about the dynamics of price/cost: supply and demand. As a general rule, things that are scarce and in high demand will go up in price, and things that are abundant and in low demand will drop in price. Whatever is chronically scarce and necessary for life will have a ceaseless pressure to cost more, whatever is abundant and no longer desirable will have a ceaseless pressure to cost less. Now we come to the overlooked mechanism #1: Price is set on the margins. Housing offers an example: take a neighborhood of 100 homes. The five sales last year were all around $600,000, and so appraisers set the value of the other 95 homes at $600,000. Things change and the next sale is at $450,000. This is dismissed as an outlier, but then the next two sales are also well below $500,000. By the fifth sale at $450,000, the value of each of the 95 homes that did not change hands has been reset to $450,000. The five houses that traded hands set the price of the 95 houses that didn't change hands. Price is set on the margins. The biggest expense in many enterprises and agencies is labor. Those who own enterprises know that it's not just the wage being paid that matters, it's the labor overhead: the benefits, insurance and taxes paid on every employee. These are often 50% or more of the wages being paid. These labor overhead expenses have skyrocketed for many enterprises and agencies, increasing their labor costs in ways that are hidden from the employees and public. It's important to recall that roughly 3/4 of all local government expenses are for labor and labor overhead--healthcare, pensions, etc. Where do you think local taxes are heading as labor and labor-overhead costs rise? What happens to pension funds when all the speculative bubbles all pop? The cost of labor is also set on the margins. The wage of the 100-person workforce is set by the five most recent hires, and if wages went up 20% to secure those employees, the cost of the labor of the other 95 workers also went up 20%. (Employers can hide a mismatch but not for long, and such deception will alienate the 95% who are getting paid less for doing the same work.) Labor is scarce for fundamental reasons that aren't going away: 1. Demographics: large generation is retiring, replacements are not guaranteed. 2. Catch-up: labor's share of the economy has declined for 45 years. Now it's catch-up time. 3. Cultural shift in values: Antiwork, slow living, FIRE--all are manifestations of a profound cultural shift away from working for decades to pay debts and enrich billionaires to downshifting expenses and expectations in favor of leisure and agency (control of one's work and life). 4. Long Covid and other chronic health issues: whether anyone cares to admit it or not, Long Covid is real and poorly tracked. A host of other chronic health issues resulting from overwork, stress and unhealthy lifestyles are also poorly tracked. All these reduce the supply of labor. 5. Competing demands of family and work. Work has won for 45 years, now family is pushing back. Put these together--diminishing supply of labor and labor being priced on the margins--and you get a runaway freight train of higher labor costs. Add in runaway increases in labor overhead and you've got a runaway freight train with the throttle jammed to 11. Deflationists make one fatally unrealistic assumption: that enterprises facing sharply higher costs for labor, components, shipping, taxes, etc. will continue making big-screen TVs, shoddy jeans, etc. even as the price the products and services fetch plummets below the costs of producing them. The wholesale price of the TV can't drop below production and shipping costs for very long. Then the manufacturers close down production and the over-abundance of TVs, etc. goes away. Nation-states can subsidize production of some things for a time, but selling at a loss is not a long-term winning strategy: subsidizing failing enterprises and money-losing state-owned companies is a form of malinvestment that bleeds the economy dry. The only thing that will still be super-abundant as demand plummets is phantom-wealth "investments", i.e. skims, scams, bubbles and frauds. The value of these super-abundant follies will trend rapidly to zero once margin calls and other bits of reality drastically reduce demand. Real-world costs: much higher. Speculative gambles: much lower. As in zero. *  *  * Thank you, everyone who dropped a hard-earned coin in my begging bowl this week--you bolster my hope and refuel my spirits. If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via Tyler Durden Tue, 11/30/2021 - 06:30.....»»

Category: blogSource: zerohedgeNov 30th, 2021

Transcript: Steve Fradkin

     The transcript from this week’s, MiB: Steve Fradkin Northern Trust, is below. You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ RITHOLTZ: This week on the podcast… Read More The post Transcript: Steve Fradkin appeared first on The Big Picture.      The transcript from this week’s, MiB: Steve Fradkin Northern Trust, is below. You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ RITHOLTZ: This week on the podcast I have a special guest. His name is Steve Fradkin, and he runs one of the larger pools of assets that you probably had no idea about. He is the President of Northern Trust Wealth Management. They run over $350 billion in client assets. They serve some of the wealthiest families in America. One in five wealthy families actually has assets with Northern Trust. They have something like 20 percent of the Forbes 400, just a very interesting perspective on how to manage through periods of uncertainty, changing tax laws, rising inflation. Also, it’s really interesting perspectives. It’s less about predicting the future, Steve tells us, then thinking in terms of planning and probabilities. And I think that was really interesting advice. He — he is about as knowledgeable as anybody is going to get in the – both wealth management business and ultra-high net worth management business. I found the conversation really intriguing, and I think you will also. So, with no further ado, my interview of Steve Fradkin of Northern Trust. VOICE-OVER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio. RITHOLTZ: My special guest this week is Steve Fradkin. He is the President of Northern Trust Wealth Management. Running about $355 billion in assets, they serve about one in five of the wealthiest families in America. Previously, Steve ran the Corporate and Institutional Services. He was Head of International Business for Northern Trust, as well as the firm’s Chief Financial Officer. Steve Fradkin, welcome to Bloomberg. FIRRMA Thank you, Barry. Great to be here. RITHOLTZ: So, you spent your entire career at Northern Trust having joined in — in 1985. How do you make the leap from really CFO to President which, to me, I think of President I think of someone who’s running like a CEO, running a — a division? What were the challenges of that transition? FRADKIN: Well, it’s a great question and, you know, careers are mysterious experiences. The — the bigger mystery really, Barry, was the move to CFO. So I joined Northern Trust as a youngster, didn’t know what I wanted to do, worked my way through a variety of entry-level jobs, ultimately culminating at that point in running our growing international business, and loving it, traveling the world to clients in Asia, Europe, the Middle East, Africa, South America, you know, really fun and interesting stuff, and was asked, at that point, to serve as CFO, which was the unnatural job. Was not a controller, was not a treasurer, and so serving as CFO of a large public company was — shall we say traumatic when they asked. But did that for six years, including through the global financial crisis. And it was, at that point, I went back to doing what I normally do, which is running businesses. I ran our Corporate and Institutional Services business, and then after that Wealth Management. So — so it wasn’t so much going from CFO to wealth management as it was ending up as CFO, if you will, by accident from my point of view. RITHOLTZ: Really interesting. So — so you guys had a pretty good year in 2020. How did that carry over to this year? Is it just more of the same? What were the big success stories relative to all those challenges we soar last year? Well, you know, it’s — it’s really an interesting phenomenon, and it shows you the – in some ways, the unpredictability of what can happen. You know, if you think about COVID-19 and its impact in 2020, and if I said to you, you know, look here’s what’s going to happen, we’re — we’re going to go as a society not just Northern Trust from, you know, we all come in and we work and so forth and so on. And one day, on about the same day worldwide, everyone’s going to start working from home facetiously. What — what do you think is going to happen to the markets? I think most people have said, well, first of all, it could never happen that way. It’s not going to be true that people in Sydney, and London, and New York, and Sao Paulo are all going to be, you know, as much as one can working from home. That’s just impossible. And second of all is that where to happen on a sustained basis. Well, gee, you know, the economy is going to crater because no baseball games, no concerts, no – you know, less use of restaurants, et cetera, et cetera. I don’t think people would have said, you know, the markets would do as well as they’ve done. So look, it’s been an incredible journey. Northern Trust has navigated exceptionally well through it last year and continues to perform well today. And there are a variety of factors in that. But each and every day has been a navigation because we’re still not out of the pandemic and we’re still operating in a hybrid mode. And, you know, balancing safety of our partners, our — our employees, and the needs of our clients is a — a daily — a juggling act that we’re still working through and I suspect will be working through for a while longer here. RITHOLTZ: We’re going to talk a little more about how you guys manage doing the pandemic in a bit, but I want to stay with the success of Northern Trust. You’re one of the biggest ultra-high net worth investment managers. But relative to your size, you guys kind of fly under the radar. Why is that? FRADKIN: Well, you know, it’s — it’s an interesting question, Barry. The – so in terms of size, we’re in the top 20 banks in the country as measured by our balance sheet. But really the — the better marker of our size is the assets that we manage and the assets that we administer for clients. And we’re a very quiet company. We don’t do lots of big acquisitions. We do the same thing today that we’ve been doing since 1889, serving the same clientele, and so we’re a very focused institution. A little over half our profits come from the provision of services to wealthy families in America and around the world. And the other half come from essentially providing the same services, but to large global institutional investors, serving wealth funds, pension funds and the like. And so, we’re a quiet company that has been extraordinarily successful and consistently so for many, many years. So, we’re proud of what we’ve got, but we — we — we — we fly under the radar scream — screen intentionally to just keep a low profile and stay focused on our clients. RITHOLTZ: And — and that would make sense given the nature of your clients who are less Instagram stars and more quiet wealth. Is that a — is that a fair way to describe it? FRADKIN: Yeah. Today, we serve little over 30 percent of the Forbes 400 wealthiest Americans and, obviously, many other affluent families. And interestingly, Barry, you know, sometimes people think of Northern Trust in its wealth management business as focusing on — or serving multigenerational well-healed, you know, families. And that’s true, we certainly serve many of those. But there are many entrepreneurs in Silicon Valley, in New York, in Miami, in Dallas, in — all over the country and all over the world. And if there’s one thing I’ve learned in being here is that wealth is created in a lot of mysterious ways. And so, your — your reference to Instagram and so forth, I would say our clients are definitely low profile, but where they create their wealth emanates from every segment of the economy. It’s really a — a fascinating part of the privilege of being in this — this kind of role. RITHOLTZ: Let’s stay with that because I was just involved in a conversation recently about the amount of wealth that has been created over the past couple of decades. Wherever you look, especially in the United States, it seems that people are coming up with new ideas, new technologies, new just even business processes that if you go back to the 90’s, I don’t think people could have imagined the sort of things that are generating the massive amounts of wealth that we’ve seen. And — and I’m not even talking about NFTs or things like that, I mean, businesses with clients that are just doing tens of millions of dollars of — of revenue a year. FRADKIN: Well, I think the — the fascinating thing that I think we see is that wealth can be created in a lot of different ways. And I — and I think you’re right that as the world has sped up, the wealth creation has sped up, too. You know, to caricature it, it used to be you would start a business in your garage in Louisiana and, overtime, you would, you know, build a vacuum cleaner, whatever it happened to be. And you would start selling it from a store and, you know, it would — you know, you — you’d have a second store. And — and the next thing you know, you have a — a — a big business that you never envisioned having, and you could sell that company and — and create tremendous amount of wealth. Today, that phenomenon still absolutely happens, but it also happens with the power of the Internet that the pace at which companies in some industries can grow and accelerate has — has really multiplied. So, wealth creation, in some instances, is still a slow laborious step-by-step process. But in others, I don’t want to say it’s overnight, but it happens a lot faster with digitalization in the — the pace at which the world moves today. So, we — we see both phenomena, and that’s part of the fun and excitement of the American economy. And this certainly happens elsewhere in the world as well. RITHOLTZ: Quite interesting. So, let’s talk about how you guys had to operate during the lockdown. You mentioned this earlier. What were you doing when, you know, it became clear the country was shutting down in March of 2020? FRADKIN: It’s a great question, Barry. Well, we started like many other institutions with the safety of our clients and the safety of our employees. And it all happened relatively quickly in terms of shutting down offices to the bare minimum, getting people home, and making sure that they could function effectively from home. And if you go back to — and — and, by the way, we have 20,000 employees worldwide, so we were doing the same thing in Manila, in the Philippines as we were doing in London, as we were doing in Dublin, as we were doing in Houston, as we were doing in Las Vegas. And so I want you to think about the operational, and logistical, and infrastructural needs of pretty much all at the same time trying to get people out of the office, enable them to function effectively from home, still be able to serve our clients, and all the family and other issues that people were wrestling with. So, I would say the beginning of the pandemic was stressful. You know, we were working 24/7 trying to make sure that technology worked and people could still get cash and all those things. It has gotten to a much better, you know, I’ll call it normalcy in a strange sort of way. But the early days of the pandemic were — were challenging. We navigated through well, but it’s certainly not something that anyone had anticipated. RITHOLTZ: Really quite interesting. So, I’m assuming you guys have your offices, more or less, reopened. What are you going to do going forward? Is it going to be a hybrid model or is everyone back in the office or people working from home? FRADKIN: Our offices are open and — and really to different extents in different geographies, you know, which makes sense. The — the infection rates, hospitalization rates, all the metrics that we track are very different in different cities and countries around the globe. You know, in terms of where it goes in the future, I think the future of work and how people work is forever changed. You know, we always had a pretty flexible workforce and the ability to work from home and, you know, people’s — people’s lives and — personal lives and business lives had crossed over long ago that, as an employer, we had to be flexible. I think that’s going to be even more so coming out of the pandemic. People have gotten used to it. The technology has gotten better. Client expectations are different. And so, I think we will be in a — you know, what we — what we think of today as a hybrid model will be a normal model tomorrow. And that doesn’t mean everyone will work from home, but it certainly means a lot more flexibility for employees to inevitably juggle the — the conflicting needs of family and work life. And we’re well prepared for that. (COMMERCIAL BREAK) RITHOLTZ: So as investors, COVID was pretty much an exogenous shock. It — it came out the left field. How did the whole COVID crash and recovery compare to past crises, whether it’s 9/11 or dot-com implosion or the great financial crisis? How do you — how do you wrap your head around this one compared to ones from — from recent past? FRADKIN: You know, it’s — it’s a great question. And I think, Barry, my perspective would be that we often call events like the COVID-19 pandemic tail events or once in a lifetime events. And in some ways, they are and, in some ways, they aren’t. If — if I think about it through the prism of my career experience, we had the crash of October 1987. We’ve seen the collapses of things like Enron and WorldCom. We’ve seen September 11th. We’ve seen Bear Stearns go down. We had the global financial crisis of 2008 and, of course, the pandemic. And each time we call it a tail event, but at some point, we have to admit that there are a lot of tails. So, I want to take you back just to compare and contrast COVID-19 with 2008. I’ll give you this example. I want you to imagine it’s the end of 2007, and you’re presenting the 2008 plan for Northern Trust to our board. And you go to the board and you say, “Look, we expect our revenues to do this and our expenses to do that, and so forth and so on.” And one of the board members raises his or her hand and he says — he or she says, “Barry, that’s — that’s terrific. Sounds like a great plan for 2008.” But I — I — I just want to get your perspective. What happens if Bear Stearns collapses, Freddie, Fannie, Washington Mutual, Wachovia, Merrill Lynch, you know, et cetera, et cetera, Lehman? You know, the whole thing collapses in 2008. How will we perform? I think you’d — you know, I — I think if you had been CFO at that time, you would have said, “Well, you know, that’s just — that’s never going to happen,” but it did. And Northern Trust navigated through that exceptionally well. Not unscarred, but exceptionally well. If you take — if you fast forward from that paradigm to COVID-19, it’s very similar. You know, if — if we had been talking to our board the year before and put forward our plan, I think our board would have said, “Well, okay, you know, that sounds like a great plan. What happens if there’s a global pandemic in every office from which we operate is going to be shut down or substantially shut down? Everyone’s got to work from home on the same day globally.” And, by the way, it’s going to be for a year and a half or more. I’m quite confident you or we would have said, well, that — you know, that’s just not — you know, I don’t know what we’ll do. That’s not going to happen, but it did. And so, I think the — the lesson from these crises is that while they’re different every time, they happen a lot. And so, we have to think about our approach to business, our approach to research, our approach to preparing for the unanticipatable. And as I say, each — each of your examples, September 11th, and COVID, and 2008 are different, but they were all — they all featured substantial disruption, substantial unanticipatable disruption. And at Northern Trust and every other company around the world, you have to be prepared to be agile and adapt quickly. And — and that’s what we’ve been able to do pretty consistently over our 130 plus years of experience. RITHOLTZ: So, given that history and the fact that a big chunk of your clients are ultra-high net worth, how do you think about managing assets compared to what — I don’t know, let’s use the phrase “mass affluent,” that typical approach. Is this more about preserving wealth and it is striking at rich. These folks are, after all, already fairly wealthy. How does this specific demographic change and challenge the way you manage assets for them? FRADKIN: Well, I think, look, wherever one sits on the spectrum of wealth, they generally want to optimize their returns over time. And people have different risk preferences as you would expect. So to caricature it, if you come from nothing and you’ve done exceptionally well financially, you may — not always, but you may have a predisposition to have a stronger defensive component to your portfolio because you don’t want to end up back where you were. You know what it’s like not to have money, you have it, and you want to be defensive. On the other hand, there are people who whether they came from nothing or not, they’ve had tremendous success. They’ve seen the power of capitalism, and they want to not only do as well as they can, but keep going. So, we see things through the eyes of our clients across the continuum. What I would say is people in the ultra net — ultra-high net worth space, at least from my point of view, it’s not so much about they’re more defensive or more offensive. They have more flexibility for choice. They can be defensive because they’ve, you know, so to speak, got more than enough or they can lean in and be more aggressive because they have a bigger cushion than the rest of us. And our clientele is all ends of that spectrum. There’s no — the — the — the notion that some people have, well, once someone’s made a certain amount of money they’re — they’re just trying to preserve it. There are certainly clients that — that exhibit that behavior, but there are an equal number who want to optimize it and aren’t in a completely defensive mindset. So, it depends on the personality type. RITHOLTZ: Very interesting. One of the clichés of the industry is three generations from, you know, short tales to short tales, referring that generational wealth very often gets — I don’t want to say wasted, but frittered away irresponsibly or recklessly. Some people take too much risk. How do you manage around that? Do you — do you ever have families coming to you and say, “Hey, we want to leave money to the next generation, but we want to make sure they get it and that it’s not just, you know, Ferraris and — and weekends in Vegas.” FRADKIN: Yes, all the time. Again, every family is different. Every client is different but, you know, one thing to — one thing that I think is a little bit unfair in — in — not by you, but in the characterization that you refer to is this notion, well, you know, by the third generation it is, you know, frittered away. I think you — you have to remember a couple things. First, when — when we say it’s frittered away, the comparison point is often to someone who did the extraordinary. So if I started from nothing and created $1 billion — $1 billion of wealth, it’s a little unfair to say my kids or my grandkids, you know, they’re not as smart as I am because, you know, they didn’t do it, too. You know, People who have created extraordinary wealth have done so, by definition, it’s — it’s extraordinary, and it’s not reasonable. Even if you have bright, talented, you know, high-functioning kids, it’s not reasonable to assume that each generation is just going to — you know, mom made $1 billion. Mom’s kid made $2 billion and — and mom’s grandkid made — made $4 billion. You know, it’s — mathematically, that’s not a reasonable probability. That’s sad. There is definitely an art to optimizing wealth through the generations. And, of course, it starts in the home and how you raise kids and values and, you know, what you demand of them or not. But a lot of our clients do a great job of trying to steward their wealth, trying to educate their kids, trying to make use of family governance to — to help everyone understand how things work for the family. And so, each client is different, but as with most things, the more you put into it, the more you’re likely to get out of it. And for those who believe it’s an important responsibility to steward that wealth, pass it to future generations, educate those generations, make them or trying to help them be important members of society, they tend to get better outcomes than the rest of us. It’s a — it’s a very — it’s, you know, raising kids and money are two challenging vectors, but we see some great examples of people stewarding wealth through multiple generations not just the — the founder, so to speak. RITHOLTZ: Quite interesting. Let’s talk a little bit about what you call Goals Driven Wealth Management. Start out with what — what exactly is that. FRADKIN: Sure. Goals Driven Wealth Management at Northern Trust is the framework that — that we’ve devised to build personalized wealth plans for clients and it focuses on helping them achieve their individual goals with confidence. It provides a big picture of their wealth and transparent steps on how to manage and optimize wealth over time. So, Barry, one way to think about it is — and I’m being a little bit facetious, but just to make the point, it used to be in this industry that the starting point for how money might be managed was a function of your outlook on the market. You think equities are going to go up, et cetera, so you allocate more to equities. Goals Driven Wealth Management comes at investing through a different lens. The starting point is not so much our call on the markets though that will be important at some point. Our starting point in Goals Driven is what are you and your family trying to accomplish. Once we understand what you’re trying to accomplish and the assets you need to accomplish it, we can, in effect, back in to how to deploy those assets — in stocks, bonds, other asset classes — to give you the best probability of achieving your life goals over time. So, it’s really just a different starting point for how to think about creating an asset allocation that is most effective for you and your family. RITHOLTZ: So, let’s talk about that framework. And again, the question comes back, how different is it for the ultra-high net worth than for the merely wealthy or — or is there a lot of overlapping between the two different types of planning? FRADKIN: The process is really the same no matter where you are on the wealth spectrum. You and your family have goals, and whether you have $1 million, $100 million, $1 billion, $10 billion or whatever the number is, you have something you want to achieve over time. You plan to live to age 90 or 100. This is what you need to live in the style to which you want to be accustomed, and we do a variety of work to figure out, first of all, are you asset-sufficient, meaning under reasonable scenarios, do I have enough if I steward it effectively to live my life the way I want to live it over time? And that happens whether you have, you know — again, whatever the number is, $500,000 or $10 million. The difference, Barry, comes in with the flexibility and options that you have as you create more wealth. So, the starting point is the same: understand your goals, understand your needs, and let’s figure out an asset allocation to give you the best chance to get there. What becomes different for people in the ultra-high net worth space relative to the rest of us is that they can take advantage of more planning techniques. They can take advantage of more techniques to optimize philanthropy. They can take advantage of gifting to future generations and so forth, and so the process is the same. But as you accumulate more money, in general, you have more flexibility on some other things you can do. The ultra-high net worth also have more investment optionality. They have the ability to invest in asset classes like private equity hedge fund and so forth where they may have to trade off some liquidity for a period of time. Those of us who are lower on the spectrum may not be able to endure that in a down market. Those who have more wealth can — can oftentimes weather that storm more. So, the process is the same, but you get more flexibility as your wealth grows. (COMMERCIAL BREAK) RITHOLTZ: We’re going to talk more of about alternative investments in a little bit. I want to stick with a couple of interesting things I read in some Northern Trust research. One of the things that I kind of knew, but I didn’t realize it was this intense was the number of clients you see relocating to new states. It’s been a record volume. Some of that is pandemic related, some of it predates the pandemic. How does that challenge the planning process? How different is it from state-to-state when it comes to things like tax planning? You mentioned trust. You mentioned philanthropic issues. What happens when somebody picks up from one state and relocates to another state? FRADKIN: Yeah, it’s an interesting question. Look, clients relocating has always been with us. If you look at Northern Trust history, we are headquartered in Chicago in the middle of the United States. It’s cold here in the winter, lovely city, but it does get rather cold at wintertime. And often times, as people age and, you know, their kids finish school and so forth, they opt for better environments in the wintertime, so they may want to be in Florida or Arizona or Texas or California. So, one phenomenon we’ve always seen is migration from state-to-state. That phenomenon is also impacted by state tax rates, by state tax considerations. And so, both, because of the pandemic and for tax reasons and lifestyle reasons, were continuing to see movement across state lines. And so, you know, I think the — the message to urban planners is taxes do matter to people. It’s not necessarily the only factor, but even affluent people will think through where do they want to be, where do they want to live, what environment to they want to be in, and what’s the tax impact for their clients. And that phenomenon is — is alive and well. It’s always been there, but it — it does seem to be important as different states consider different policies, if you will. People — residents make their choices, and so it’s — it’s — it’s a phenomenon that’s very much at the front of mind for many of our clients. RITHOLTZ: Interesting. You mentioned taxes. There was a new administration came to town this year, and the expectations are there will be some sort of change in tax policy, potentially including increases in capital gains and increases in estate taxes and, in some cases, fairly substantial increases. How do you plan around that? And since nothing is known for certain in advance what an administration is — is going to do, how do you make decisions in — in the face of that uncertainty? FRADKIN: Yeah, I think our starting point on behalf of our clients is to prepare rather than predict. So, let me give you an example that — that you referred to. The newly proposed tax law change would change the lifetime gift and estate tax exemption amount from $11.7 million down to $5 million. And what this means for people that built up substantial wealth is that if the proposal goes forward as — as offered, you have until the end of this year if you want to make a gift to your heirs of — if you can afford to and if you want to, make a gift of $11.7 million. And again, I can’t tell you whether this will happen. But if we just think about the financial impact here, if you have enough capacity to do that and you choose to do it, you can take $11.7 million out of your estate today, get it to your kids, grandkids, whoever it happens to be tax-free as opposed to, on January 1st, if the law goes forward only as — as offered, you can only do $5 million. And what that means is the difference between — sorry to get, you know, numbers all over — but the difference between 11.7 and five, which is $6.7 million will be taxed, you know, when you die at a — at a high rate. And so we have literally thousands of clients all across the country and each one we’re working with individually to evaluate what’s their financial circumstance, what do they want to do, do they want to make the gift. And by the way, this — this — this tax law change may or may not happen, so people have to make a choice without knowing for sure whether it’s going to happen. I think the bottom line though is people are looking at this carefully. They’re studying it and they’re trying to prepare and make judgments about what might happen and what’s best for their individual circumstance. But tax law changes matter and — and we are in the business of helping our clients figure out what’s the best choice for them with the information that we have. RITHOLTZ: Quite, quite interesting. So, we talked a little bit about alternatives earlier. Let’s address that a bit. There seems to be a growing appetite for all manner of — of alternative investments given that stocks and bonds are all a little bit pricey. Let’s start with private equity. What — what sort of demand is there from your clients for private equity. And — and how do you guys respond to the question of potentially better returns in exchange for far less liquidity? FRADKIN: Sure. Look, investment has become much more granular over the decades and again, just to be facetious, you know, large-cap stocks versus high quality bonds, you know, 40 years ago. Today, clients think in terms of small-cap, mid-cap, large-cap, value, international, emerging markets, private equity, and thousands of flavors of private equity; hedge fund the same thing. So, in the quest for optimizing returns, clients and their professional money managers, Northern Trust included, have searched for different asset classes to combine together to give people the best chance to — to achieve their objectives. Private equity clearly has been in the aggregate — there are winners and losers in private equity, but has been a asset class that has done well for many. There are tradeoffs with private equity, particularly in terms of liquidity. But I would say amongst our clientele, the appetite for private equity and private equity, as a more normalized asset class, continues to grow. It’s not the right asset class for every client, but for clients who have the capacity, the risk tolerance and so forth, it — it definitely can play an important role in a client’s portfolio. And increasingly, we’re seeing more use of private equity today than we did say 10 years ago. RITHOLTZ: What about venture capital or hedge funds, two totally different entities from both each other in private equity, what’s the demand like for those products? FRADKIN: Demand exists for venture capital and for hedge funds as well. Again, the devil is in the detail, not all hedge funds are created equally. The — the — the fees that they charge, the performance that they’ve delivered can differ substantially, but there is again this same notion of I want to diversify my portfolio. I want a — a range of options and so-called alternative investments. Whether you call it private equity, venture capital, hedge funds seem to continue to be growing in appeal to our clientele. RITHOLTZ: What about crypto and things like blockchain and Ethereum? There seems to be a lot of real interest in the space. Are — are you finding your client bases crypto-curious? FRADKIN: I would say the demand for crypto is more muted amongst our clientele than some of what you read in the public press. And that doesn’t mean we have examples of clients who have invested in crypto and done exceptionally well in a right time. But I would say, in general, if I had to caricature it, I would say that crypto is still an evolving asset class that is misunderstood by many. And I think most are treating it carefully. And the ones that are making crypto investments are viewing it more as a — more as a roll of the dice than a rational analytical view of what crypto is trading at today and what it’s going to trade it tomorrow. They view it as a bit of a roll the dice. They may jump in a little bit, but they understand that what goes up can also go down. So, I would say amongst our clientele overall, crypto is still not widely in use. RITHOLTZ: So, we mentioned briefly the market is certainly pricier than it was five or 10 years ago. How do you manage around stocks and bonds neither of which are inexpensive? FRADKIN: Yeah, look, I think for many of our clients, the market does go up, the market got does go down. And one of the great features of our — the goals-driven methodology that we use for clients is that we build a portfolio such that after a lot of analytical work to evaluate their goals and so forth that enables them to endure and not have to sell in a down market. We — we create something that’s called a portfolio reserve. I would liken it to the moat around your castle. Some people like a wide deep moat, some people need a narrower and less deep mode, but think of that as a high-quality fixed income. If the stock market goes down, your — your bonds are still fine. You can still pay your mortgage. Life is good. You can wait until the market goes up or — or returns to normal. So, the one thing we know on behalf of our clients is markets go up and down, and so you have to plan and prepare for that. And so, it’s very difficult to know. You know, again using the COVID-19 example, I think they’re a lot of people who might have argued the markets are going to crash, you know, everyone’s working from home and we can’t get the essentials, and people don’t want to go to the grocery store, and yet the market went up dramatically. So, we try and take a long-stewarded view and help our clients plan and prepare themselves so that when the market does go down, they can get through and — and not have to take adverse steps and sell in dire circumstance. And that’s been very helpful for our clients. RITHOLTZ: So, in terms of forward return expectations, does that — and historically low-bond yields, high equity prices tend to suggest low returns going forward, does that work its way into the planning process or is that really more of an academic theory? FRADKIN: No, it absolutely works its way into the planning process because our starting point is what needs does a client have over the near-term for financial resources. We — we got to make sure they can buy their groceries, and pay their mortgage, and we have to deploy assets against those goals. But once, in working with a client, we figured out the right mix of assets to — to enable them to — to afford those goals over a reasonable period of time, we then have to deploy the rest of the portfolio toward so-called risk assets, equities, private equity, hedge funds, venture — whatever the asset class. And in so doing, we have to bring our judgment about risk and return expectations for each of those asset classes. So, our view of asset classes and what they’re likely to bring over the relatively short-term is still an important part of the process. RITHOLTZ: So, what do you tell investors who say, “You know, I’m really not happy with my muni bond portfolio. It’s barely thrown off two or 2.5 percent.” Investors are always seen to be looking for more yield. How do you respond to that group of clients? FRADKIN: Yeah, I think it — my — our response is really you have to remember what you’re trying to do with that muni bond portfolio. No one is saying it’s a great high returning asset class, but that’s not its role. Its role is to be — I’m making this up, Barry, but generally, the role of that muni bond portfolio is to provide you with certainty, security, confidence, and not have to worry about the other part of your portfolio, let’s just call that equities gyrating up and down. So, of course, people want their muni bonds or their high-quality fixed income to return as much as it can, and it’s our job to try and help people achieve that. But I think you always have to come back to what role is this trying to play. And for most clients, it’s trying to play a role of stability, and reliability, and consistency, and that’s the paramount feature. And in providing that consistency and — and stability and predictability, they give up a little bit of return on that asset class, but they’re trying to get that elsewhere with their equities, private equity, and so forth. So, you had — you had discussed previously, hey, you know, it’s up to us to make the most of a low rate environment. What does that mean? Get — how does one make the most of a low rate environment? FRADKIN: Well, I think, you know, low — low rates create — low interest rates create challenges and opportunities. Maybe two simple ways to think about it are, one, on the challenge side, if you’re living on a fixed income as assets reprice to — and you’re reliant on bonds — your bonds to provide income, the lower rates make the yield on those bonds lower, and so that’s bad from, you know, how much cash flow I have to — to fill my needs. The flipside to that is that when rates are very low, if you want to, if it’s appropriate, if it’s thoughtfully done, you can use credit rather than liquidating stocks to — you know, if you want to buy a new toy, so to speak, a boat, whatever it happens to be, one way to do that is to sell stocks in your portfolio and buy the — you know, whatever it is you want to buy. Another way is to let those stocks keep working on your behalf and, because rates are so low, take advantage of credit. Take a loan, buy that boat and — or whatever it happens to be and pay it back over time. So low interest rates, you know, how can have different conflicting phenomenon, opportunities on the credit side and headwinds on the bond investment site. RITHOLTZ: So — so how do you incorporate all this inflation chatter to — to your planning? We’ve started to see rates tick up the 10-year as — as recording this just about 1.5 percent. And I know there’s an irony in saying that rates are all the way up to 1.5 percent, which historically is incredibly low. How do you figure inflation into your modeling and — and thinking about the future? FRADKIN: Yeah, well, we use multi-scenario modeling. The — the reality is no one knows and so you have to, you know, the — the prognosticators will — will have a view. Some — some believe inflation is here and is going to continue. Others argue it’s so-called transitory. And the truth is we don’t know. We’ll — we’ll find that out tomorrow, so to speak. And so as we work through planning with our clients, we generally are running multiple scenarios, low inflation, medium inflation, high inflation. And we’re trying — as we — as we help clients make decisions, we’re trying to make the best judgment we can at a given point in time. But that’s why you — you really have to — be you have to plan for multiple scenarios and bring agility to your process because we don’t know whether the stock market is going up or down. We don’t know whether inflation will be higher or lower. We have a view. We can have probabilities. But as we’ve seen, whether it was with 2008 or COVID, we — everyone can be wrong. And so, you have to plan and adapt and leave yourself a buffer for when you are wrong, and hopefully it’s not — not catastrophic. RITHOLTZ: So, I know I only have you for a little bit of time. Let me jump to my favorite questions that I ask all of my guests, starting with tell us what you’re streaming these days, what’s keeping you entertained at home, either on Netflix or Amazon Prime or — or wherever. FRADKIN: Well, I’ve — I’ve been working hard so I — I can’t say I’ve — I’ve made great use of Netflix. But what I have just started and this will show you, Barry, how far behind I am is I’ve just started Ted Lasso. So I’m behind the rest of the world, but that’s what I’m on right now. RITHOLTZ: All right. Well, well, you’ll — I could tell you this much, you will enjoy it and — and enjoy catching up with us. What about mentors? Who helped to shape your career? FRADKIN: You know, I’ve had a lot of mentors at Northern Trust over the years, people who were senior to me and people who weren’t, but I learned from everyone. I think when I think about mentors, for me, it’s less about people with whom I work and maybe it’s my interest in history. But I try and learn from people who have overcome insurmountable odds, the Mahatma Gandhis, the Martin Luther Kings, the Winston Churchills, the Vaclav Havels, the Abraham Lincoln. And there’s so much wisdom that I see in people like that because they really faced incredible circumstances and worked through them generally to good outcomes. And so there — those great thinkers are probably the people I’ve learned the most from as I wouldn’t call them mentors to me, but I’ve certainly read about all of them and — and learned a lot from each of them. RITHOLTZ: Let’s talk about books. What are you reading right now and what — what are some of your favorites? FRADKIN: You know, I think in keeping with that theme of mentors over periods of time that interest me, I’ve really enjoyed “The Splendid and the Vile” by Eric Larson, which is about Churchill and the blitz of World War II. And — and again, it — it helps you — it helps me to see just how dire the circumstances were and what he and others had to navigate through. The other book that I’ve dusted off recently, I read some time ago, but I think in view of the pandemic, it seemed interesting to me was “The Hot Zone” by Richard Preston, which has nothing to do with the pandemic, but there are parallels to what we’re dealing with, and it was sort of a gripping — a gripping book if you have time for a good read. RITHOLTZ: Sounds interesting. What sort of advice would you give to a recent college grad who is interested in a career in either investment management or finance? FRADKIN: Yeah, I think, Barry, I’d offer a — a — a couple of themes on this. And I — I don’t know that I narrowed these themes to an interest in investments or finance, although I think they do overlap. But I’d start by saying, it probably be easiest place to get my view there would be to go to YouTube and I — I gave a commencement address at the University of Illinois Chicago and tried to formulate those themes for — for young people. But a — but a few that come to mind at least through my lens are comfort is the enemy of accomplishment. If you want to be the best you can be, you can never be satisfied with where you are. You’ve got to push, push, push and make yourself better each and every day in everything you touch. I think a couple of the other themes that would come to me would be in — in the same vein, we see this in Northern Trust all the time. Excellence is not a part-time job. For people who want to be excellent, who want to do the best job for our clients and our shareholders, you can’t be excellent only when it’s convenient, only when you want to do it or only when you feel like it. You’ve — you’ve got to — excellence is an all-in phenomenon. And then probably the — the — the last thing that comes to my mind is persevere beyond your accomplishments. It’s not what you did yesterday, it’s — you can be proud of what you’ve accomplished. But again, you want to be better going forward. And so be proud of who you are, be proud of your grades, and your — your school, and your degrees, and all that sort of stuff, but those are what you did, you know, two years ago, five years ago, 10 years ago whatever it happens to be, keep pushing forward to be the best you can be. So, persevere beyond your accomplishments. RITHOLTZ: And our final question, what do you know about the world of investing today you wish you knew 35 years ago when you were first starting with Northern Trust? FRADKIN: That is a long list, Barry, but I think what I would say is you don’t have to be right on everything and sometimes being right is more about luck and timing than it is about specific analytical acumen. Uninspiring choices in a bull market can turn out just fine, and well-reasoned ideas in a down market can turn out to be not so good. So, get the direction right more often than not and you’ll be just fine. RITHOLTZ: Really good advice. Thank you, Steve, for being so generous with your time. We’ve been speaking with Steve Fradkin. He is the President of Northern Trust Wealth Management. If you enjoy this conversation, well, be sure and check out any of the other 388 prior discussions we’ve had over the past seven years. You can find those wherever you normally find your favorite podcast, iTunes, Spotify, wherever. We love your comments, feedback, and suggestions. Write to us at You can sign up for my daily suggested reading list at Check out my regular column at Follow me on Twitter @ritholtz. I would be remiss if I did not thank the crack that helps put these conversations together each week. Paris Wald is my Producer. Michael Batnick is my Head of Research. Atika Valbrun is our Project Manager. I’m Barry Ritholtz. You’ve been listening to Masters in Business on Bloomberg Radio.   ~~~   The post Transcript: Steve Fradkin appeared first on The Big Picture......»»

Category: blogSource: TheBigPictureNov 29th, 2021

The Euro"s Death Wish

The Euro's Death Wish Authored by Alasdair Macleod via, Last week’s Goldmoney article explained the Fed’s increasing commitment to dollar hyperinflation. This week’s article examines the additional issues facing the euro and the Eurozone. More nakedly than is evidenced by other major central banks, the ECB through its system of satellite national central banks is now almost solely committed to financing national government debts and smothering over the consequences. The result is a commercial banking system both highly leveraged and burdened with overvalued government debt secured only by an implied ECB guarantee. The failings of this statist control system have been covered up by a pass-the-parcel any collateral goes €10 trillion plus repo market, which with the TARGET2 settlement system has concealed the progressive accumulation of private sector bad debts ever since the first Eurozone crisis hit Spain in 2012. These distortions can only continue so long as interest rates are suppressed beneath the zero bound. But rising interest rates globally are now a certainty — only officially unrecognised by central bankers — so there can only be two major consequences. First, the inevitable Eurozone economic recession (now being given an extra push through renewed covid restrictions) will send debt-burdened government deficits which are already high soaring, requiring an accelerated pace of inflationary financing by the ECB. And second, the collapse of the bloated repo market, which is to be avoided at all costs, will almost certainly be triggered. This article attempts to clarify these issues. It is hardly surprising that for the ECB raising interest rates is not an option. Therefore, the recent weakness of the euro on the foreign exchanges marks only the start of a threat to the euro system, the outcome of which will be decided by the markets, not the ECB. Introduction The euro, as it is said of the camel, was designed by a committee. Unlike the ship of the desert the euro and its institutions will not survive — we can say that with increasing certainty considering current developments. Instead of evolving as demanded by its users, the euro has become even more of a state control mechanism than the other major currencies, with the exception, perhaps, of China’s renminbi. But for all its faults, the Chinese state at least pays attention to the economic demands of its citizens to guide it in its management of the currency. The commissars in Brussels along with national politicians seem to be blind to the social and economic consequences of drifting into totalitarianism, where people are forced into new lockdowns and in some cases are being forced into mandatory covid vaccinations. The ECB in Frankfurt has also ignored the economic consequences of its actions and has just two priorities intact from its inception: to finance member governments by inflationary means and to suppress or ignore all evidence of the consequences. The ECB’s founding was not auspicious. Before monetary union socialistic France relied on inflationary financing of government spending while Germany did not. The French state was interventionist while Germany fostered its mittelstand with sound money. The compromise was that the ECB would be in Frankfurt (the locational credibility argument won the day) while its first true president, after Wim Duisenberg oversaw its establishment and cut short his presidency, would be French: Jean-Claude Trichet. Membership qualifications for the Eurozone were set out in the Maastricht treaty, and then promptly ignored to let in Italy. They were ignored again to let in Greece, which in terms of ease of doing business ranked lower than both Jamaica and Columbia at the time. And now the Maastricht rules are ignored by everyone. Following the establishment of the ECB the EU made no attempt to tackle the divergence between fiscally responsible Germany with similarly conservative northern states, and the spendthrift southern PIGS. Indeed, many claimed a virtue in that Germany’s savings could be deployed for the benefit of investment in less advanced member nations, a belief insufficiently addressed by the Germans at the time. The ECB presided over the rapidly expanding balance sheets of the major banks which in the early days of the euro made them fortunes arbitraging between Germany’s and the PIGs’ converging bond yields. The ECB was seemingly oblivious to the rapid balance sheet expansion with which came risks spiralling out of control. To be fair, the ECB was not the only major central bank unaware of what was happening on the banking scene ahead of the great financial crisis, but that does not absolve it from responsibility. The ECB and its banking regulator (the European Banking Authority — EBA) has done nothing since the Lehman failure to reduce banking risk. Figure 1 shows current leverages for the Eurozone’s global systemically important banks, the G-SIBs. Doubtless, there are other lesser Eurozone banks with even higher balance sheet ratios, the failure of any of which threatens the Eurosystem itself. Even these numbers don’t tell the whole story. Most of the credit expansion has been into government debt aided and abetted by Basel regulations, which rank government debt as the least risky balance sheet asset, irrespective whether it is German or Italian. Throughout the PIGS, private sector bad debts have been rated as “performing” by national regulators so that they can be used as collateral against loans and repurchase agreements, depositing them into the amorphous TARGET2 settlement system and upon other unwary counterparties. Figure 2 shows the growth of M1 narrow money, which has admittedly not been as dramatic as in the US dollar’s M1. But the translation of bank lending into circulating currency in the Eurozone is by way of government borrowing without stimulation cheques. It is still progressing, Cantillon-like, through the monetary statistics. And they will almost certainly increase substantially further on the back of the ongoing covid pandemic, as state spending rises, tax revenues fall, and budget deficits soar. Bear in mind that the new covid lockdowns currently being implemented will knock the recent anaemic recovery firmly on the head and drive the Eurozone into a new slump. There can be no doubt that M1 for the euro area is set to increase significantly from here, particularly since the ECB is now nakedly a machine for inflationary financing. In the US’s case, rising interest rates, which the Fed is keen to avoid, will undermine the US stock market with knock-on economic effects. In the Eurozone, rising interest rates will undermine spendthrift governments and the entire commercial banking system. Government debt creation out of control The table below shows government spending for leading Eurozone states as a proportion of their GDP last year, ranked from highest government spending to GDP to lowest (column 1). The US is included for comparison. Some of the increase in government spending relative to their economies was due to significant falls in GDP, and some of it due to increased spending. The current year has seen a recovery in GDP, which will have not yet led to a general improvement in tax revenues, beyond sales taxes. And now, much of Europe faces new covid restrictions and lockdowns which are emasculating any hopes of stabilising government debt levels. The final column in the table adjusts government debt to show it relative to the tax base, which is the productive private sector upon which all government spending, including borrowing costs and much of inflationary financing, depends. This is a more important measure than the commonly quoted debt to GDP ratios in the second column. The sensitivity to and importance of maintaining tax income becomes readily apparent and informs us that government debt to private sector GDP is potentially catastrophic. As well as the private sectors’ own tax burden, through their taxes and currency debasement they are having to support far larger obligations than generally realised. Productive citizens who don’t feel they are on a treadmill going ever faster for no purpose are lacking awareness. These are the dynamics of national debt traps which only miss one element to trigger them: rising interest rates. Instead, they are being heavily suppressed by the ECB’s deposit rate of minus 0.5%. The market is so distorted that the nominal yield on France’s 5-year bond is minus 0.45%. In other words, a nation with a national debt that is so high as to be impossible to stabilise without the necessary political will to do so is being paid to borrow. Greece’s 5-year bond yields a paltry 0.48% and Italy’s 0.25%. Welcome to the mad, mad world of Eurozone government finances. The ECB’s policy failure It is therefore unsurprising that the ECB is resisting interest rate increases despite producer and consumer price inflation taking off. Consumer price inflation across the Eurozone is most recently recorded at 4.1%, making the real yield on Germany’s 5-year bond minus 4.67%. But Germany’s producer prices for October rose 18.4% compared with a year ago. There can be no doubt that producer prices will feed into consumer prices, and that rising consumer prices have much further to go, fuelled by the acceleration of currency debasement in recent years. Therefore, in real terms, not only are negative rates already increasing, but they will go even further into record territory due to rising producer and consumer prices. It is also the consequence of all major central banks’ accelerated expansion of their base currencies, particularly since March 2020. Unless it abandons the euro to its fate on the foreign exchanges altogether, the ECB will be forced to raise its deposit rate very soon, to offset the euro’s depreciation. And given the sheer scale of previous monetary expansion, which is driving its loss of purchasing power, euro interest rates will have to rise considerably to have any stabilising effect. But even if they increased only into modestly positive territory, the ECB would have to quicken the pace of its monetary creation just to keep Eurozone member governments afloat. The foreign exchanges will quickly recognise the situation, punishing the euro if the ECB fails to raise rates and punishing it if it does. But it won’t be limited to cross rates against other currencies, which to varying degrees face similar dilemmas, but measured against prices for commodities and essential products. Arguably, the euro’s rerating on the foreign exchanges has already commenced. The ECB is being forced into an impossible situation of its own making. Bond yields have started to rise or become less negative, threatening to bankrupt the whole Eurozone network as the trend continues, and inflicting mark-to-market losses on highly leveraged commercial banks invested in government bonds. Furthermore, the Euro system’s network of national central banks is like a basket of rotten apples. It is the consequence not just of a flawed system, but of policies first introduced to rescue Spain from soaring bond yields in 2012. That was when Mario Draghi, the ECB’s President at the time said he was ready to do whatever it takes to save the euro, adding, “Believe me, it will be enough”. It was then and its demise was deferred. The threat of intervention was enough to drive Spanish bond yields down (currently minus 0.24% on the 5-year bond!) and is probably behind the complacent thinking in the ECB to this day. But as the other bookend to Draghi’s promise to deploy bond purchasing programmes, Lagarde’s current intervention policy is of necessity far larger and more destabilising. And then there is the market problem: the ECB now acts as if it can ignore it for ever. It wasn’t always like this. The euro started with the promise of being a far more stable currency replacement for national currencies, particularly the Italian lira, the Spanish peseta, the French franc, and the Greek drachma. But the first president of the ECB, Wim Duisenberg, resigned halfway during his term to make way for Jean-Claude Trichet, who was a French statist from the École Nationale d’Administration and a career civil servant. His was a political appointment, promoted by the French on a mixture of nationalism and a determination to neutralise the sound money advocates in Germany. To be fair to Trichet, he resisted some of the more overt pressures for inflationism. But then things had not yet started to go wrong on his watch. Following Trichet, the ECB has pursued increasingly inflationist policies. Unlike the Bundesbank which closely monitored the money supply and paid attention to little else, the ECB adopted a wide range of economic indicators, allowing it to shift its focus from money to employment, confidence polls, long-term interest rates, output measures and others, allowing a fully flexible attitude to money. The ECB is now intensely political, masquerading as an independent monetary institution. But there is no question that it is subservient to Brussels and whose primary purpose is to ensure Eurozone governments’ profligate spending is always financed; “whatever it takes”. The private sector is now a distant irrelevance, only an alternative source of government revenue to inflation, the delegated responsibility of compliant national central banks, who take their orders from the economically remote ECB. It is an arrangement that will eventually collapse through currency debasement and economic breakdown. Prices rising to multiples of the official CPI target and the necessary abandonment by the ECB of the euro in the foreign exchanges in favour of interest rate suppression now threaten the ability of the ECB to finance in perpetuity increasing government deficits. The ECB, TARGET2 and the repo market Figure 3 shows how the Eurozone’s central bank balance sheets have grown since the great financial crisis. The growth has virtually matched that of the Fed, increasing to $9.7 trillion equivalent against the Fed’s $8.5 trillion, but from a base about $700bn higher. While they are reflected in central bank assets, TARGET2 imbalances are an additional complication, which are shown in the Osnabrück University chart reproduced in Figure 4. Points to note are that Germany is owed €1,067bn. The ECB collectively owes the national central banks (NCBs) €364bn. Italy owes €519bn, Spain €487bn and Portugal €82bn. The effect of the ECB deficit, which arises from bond purchases conducted on its behalf by the national central banks, is to artificially reduce the TARGET2 balances of debtors in the system to the extent the ECB has bought their government bonds and not paid the relevant national central bank for them. The combined debts of Italy and Spain to the other national central banks is about €1 trillion. In theory, these imbalances should not exist. The fact that they do and that from 2015 they have been increasing is due partly to accumulating bad debts, particularly in Portugal, Italy, Greece, and Spain. Local regulators are incentivised to declare non-performing bank loans as performing, so that they can be used as collateral for repurchase agreements with the local central bank and other counterparties. This has the effect of reducing non-performing loans at the national level, encouraging the view that there is no bad debt problem. But much of it has merely been removed from national banking systems and lost in both the euro system and the wider repo market. Demand for collateral against which to obtain liquidity has led to significant monetary expansion, with the repo market acting not as a marginal liquidity management tool as is the case in other banking systems, but as an accumulating supply of raw money. This is shown in Figure 4, which is the result of an ICMA survey of 58 leading institutions in the euro system. The total for this form of short-term financing grew to €8.31 trillion in outstanding contracts by December 2019. The collateral includes everything from government bonds and bills to pre-packaged commercial bank debt. According to the ICMA survey, double counting, whereby repos are offset by reverse repos, is minimal. This is important when one considers that a reverse repo is the other side of a repo, so that with repos being additional to the reverse repos recorded, the sum of the two is a valid measure of the size of the market outstanding. The value of repos transacted with central banks as part of official monetary policy operations were not included in the survey and continue to be “very substantial”. But repos with central banks in the ordinary course of financing are included. Today, even excluding central bank repos connected with monetary policy operations, this figure probably exceeds €10 trillion, allowing for the underlying growth in this market and when one includes participants beyond the 58 dealers in the survey. An interesting driver of this market is negative interest rates, which means that the repayment of the cash side of a repo (and of a reverse repo) can be less than its initial payment. By tapping into central bank cash through a repo it gives a commercial bank a guaranteed return. This must be one reason that the repo market in euros has grown to be considerably larger than it is in the US. This consideration raises the question as to the consequences of the ECB’s deposit rate being forced back into positive territory. It is likely to substantially reduce a source of balance sheet funding for commercial banks as repos from national central banks no longer offer negative rate funding. They would then be forced to sell balance sheet assets, which would drive all negative bond yields into positive territory, and higher. Furthermore, the contraction of bank credit implied by the withdrawal of repo finance will almost certainly have the knock-on effect of triggering a widespread banking liquidity crisis in a banking cohort with such high balance sheet gearing. There is a further issue over collateral quality. While the US Fed only accepts very high-quality securities as repo collateral, with the Eurozone’s national banks and the ECB almost anything is accepted — it had to be when Greece and other PIGS were bailed out. High quality debt represents most of the repo collateral and commercial banks can take it back onto their balance sheets. But the hidden bailouts of Italian banks by taking dodgy loans off their books could not continue to this day without them being posted as repo collateral rolled into the TARGET2 system and into the wider commercial repo network. The result is that the repos that will not be renewed by commercial counterparties are those whose collateral is bad or doubtful. We have no knowledge how much is involved. But given the incentive for national regulators to have deemed them creditworthy so that they could act as repo collateral, the amounts will be considerable. Having accepted this dodgy collateral, national central banks will be unable to reject them for fear of triggering a banking crisis in their own jurisdictions. Furthermore, they are likely to be forced to accept additional repo collateral rejected by commercial counterparties. In short, in the bloated repo market there are the makings of the next Eurozone banking crisis. The numbers are far larger than the central banking system’s capital. And the tide will rapidly ebb on them with rising interest rates. Inflation and interest rate outlook Starting with input prices, the commodity tracker in Figure 6 illustrates the rise in commodity and energy prices in euros, ever since the US Fed went “all in” in early 2020. To these inputs we can add soaring shipping costs, logistical disruption, and labour shortages — in effect all the problems seen in other jurisdictions. Additionally, this article demonstrates that not only is the ECB determined not to raise interest rates, but it simply cannot afford to. Being on the edge of a combined government funding crisis and with a possible collapse in the repo market taking out the banking system, the ECB is paralyzed with fear. That being so, we can expect further weakness in the euro exchange rate. And the commodity tracker in Figure 6 shows that when commodity prices break out above their current consolidation phase, they will likely push alarmingly higher in euros at least. The ECB’s dilemma over choosing inflationary financing or saving the currency is about to get considerably worse. And for probable confirmation of mounting fear over the situation in Frankfurt, look no further than the resignation of the President of the Bundesbank, who has asked the Federal President to dismiss him early for personal reasons. It was all very polite, but a high-flying, sound money man such as Jens Weidmann is unlikely to just want to spend more time with his family. That he can no longer act as a restraint on the ECB’s inflationism is clear, and more than any outsider he will be acutely aware of the coming crisis. Let us hope that Weidmann will be available to pick up the pieces and reintroduce a gold-backed mark.   Tyler Durden Sun, 11/28/2021 - 07:00.....»»

Category: blogSource: zerohedgeNov 28th, 2021

Why Bitcoin Is Generational Wealth

Why Bitcoin Is Generational Wealth Authored by 'NAMCIOS' via, Bitcoin truly enables people to plan for the future well beyond their own life, a luxury and necessity many throughout history did not have... The short film "Bitcoin Is Generational Wealth" by Matt Hornick and Tomer Strolight premiered on November 1, 2021, to shed light on the true value proposition of Bitcoin. While many projects in the world today seek to enrich their founding members and provide palpable profits in U.S. dollars for anyone who joins, the world's most secure and robust monetary network aims to propel humanity forward based on the fundamental rights to property and freedom. As people around the world watched the film, many different reactions emerged. Bitcoiners, aware of the goal for which Bitcoin was brought to the world in 2009 as a direct response to the bailouts of central banks to financial institutions the year before, got emotive when seeing the future reality that proper sound money could enable. "The film stirred many emotions within the community, Twitter exploded with feedback and people sharing that they had been moved to tears," Daniel Prince, host of the “Once BITten” podcast, said. "Hope was the main emotion shared in our home, a feeling so devoid in that place we call “normie” land." Driven by the desire to change the world, Bitcoin evangelists already preach that hopeful reality today; however, skeptics often fall for fallacious narratives instead and dismiss the nascent monetary network for some characteristics inherent to its early monetization stage. "Few understand the gravity of Bitcoin and the problems that it solves," Christian Keroles, managing director at Bitcoin Magazine, commented after watching the film. Robert Breedlove, host of the "What is Money?" show, echoed Keroles' comments by remarking that the film posed "a trenchant critique on the prevailing fiat currency paradigm and a hopeful look into a more harmonious future for humanity through the monetization of Bitcoin." In contrast, people who don't understand the Bitcoin revolution, and thus don't hold any bitcoin, experienced a mix of awe and confusion as the film progressed to show what the 22nd century could look like if humanity adopted bitcoin as its money. An extensive gap between the reality of the here and now and that of the depicted future led many to wonder how Bitcoin could bridge that difference. "Bitcoin is Generational Wealth" portrays different epochs of humanity, starting from the war and hunger dominant in 1948, just a few years after the end of World War II, when a significant portion of human society had endured lengthy conflict and extensive loss. People then had to rebuild everything from scratch while passing warnings to future generations of what tyrants and the fall of individual rights could lead to. However, they didn't have the means to defend themselves from similar occurrences in the future –– they could only hope such chaos wouldn't be repeated. Fast-forward 50 years to 2008, and society had reconstructed itself. Information flowed globally, and trading networks evolved to encompass nearly every edge of the planet while entrepreneurship flourished. However, the subprime mortgage crisis ensued, wreaking havoc on businesses across the U.S. and leaving millions of people without a job. However, the Federal Reserve Board rescued the most prominent players, bailing them out with soft money freshly printed through cheap debt. The principle of fairness had been thrown out of the window, and amid chaos, Bitcoin was born while the system got addicted to easy wealth. At a time of unequal treatment by the government and its monetary policies, Bitcoin promised the establishment of an incorruptible financial system in which users wouldn't be favored or discriminated against based on their credentials, status, power, or wealth. All participants are equal in the Bitcoin network, and anyone who participates can store or transfer value without needing permission. Compared to the then 37-year-old petrodollar system, which firmly applied double standards based on a political agenda and still does, the new system envisioned by Bitcoin challenged many established beliefs. The film moves to 2021, the year this article is being written, a time that proved Bitcoin's value proposition to be even more relevant. Mandates and decrees enforced by authorities suppressed the freedom of many, leading to fear, hysteria, and division. A war over property and money began, and soft fiat currencies started to debase quickly. Society divided between those who believed in easy rewards and those who fought for freedom and honest work. The former proved very seductive, and leaders enacted laws to increase the money printing and make empty promises that things would get better if people complied. Despite the barriers, Bitcoin began to flourish even more as El Salvador became the first country in the world to make BTC a legal tender. The antifragility of Bitcoin would be demonstrated through the protection of wealth, property, and freedom. The shift Bitcoin enables society to make, and the point nocoiners don't yet grasp relates to incentives. The fiat system is based on the premise that high time preference decisions are conducive to economic growth. As people spend more, the economy grows further, and more money is created, and more money is needed in the now-more-productive economy. Bitcoin challenges that status quo by reintroducing the values of hard, honest work and corresponding rewards. The analogy made from the network's consensus protocol, proof-of-work (PoW), is that participants are incentivized to behave honestly through economic incentives and game theory dynamics. By standing by honest work, compensation follows, and every participant benefits. This dynamic isn't valid with the current fiat system because the closer one is to the money printer, the more they benefit. Therefore, rewards are based on each participant's status and position in the system, rather than their proven work. Furthermore, by reestablishing incentives, Bitcoin allows people to save and invest for the future –– a stance that contrasts the "spend" mentality that reigns in the fiat currency system. Bitcoin is generational wealth because it allows individuals, families, companies, and governments to have a low-time preference and to think long term, resting assured that their money will preserve their purchasing power and enable more significant, multigenerational investments to be made. Time preference is central because it underpins all decisions in society –– from choosing what you want to eat for breakfast to the more complex investment in a new house. With distorted incentives, society fluctuates without constancy, forever seeking out the most gratifying purchase now instead of focusing on the long term. Many of the changes this simple shift would enable are depicted in the film, including agriculture, food, enterprises, education, and basic needs such as water, bureaucracy, and energy. A prosperous society focuses on the small actions that can be done now to bring about a better future instead of focusing on what they can do now for instant gratification. Since most of a society's decisions are based on monetary trade-offs, money is central to establishing the proper incentives, and people act accordingly. By restoring sound money and ending the addictive, easy money culture, Bitcoin enables humanity to march together to achieve a second renaissance and achieve hope, productivity, creativity, and optimism. "The world is building wealth that is no longer measured in the quantity of currency, since the amount of currency is hardly changing. What has wealth become? It is now the sustainable, expanding, uncorrupted productivity of all humanity, enjoyed by all. It is measured in the quality of life of all mankind," Strolight narrated in the film. Ultimately, by restoring proper incentives and freeing society from worrying about outperforming the inflation rate through paper investments, that's what Bitcoin enables. Tyler Durden Sat, 11/27/2021 - 07:00.....»»

Category: blogSource: zerohedgeNov 27th, 2021

Black Friday Turns Red On "Terrible News" - Global Markets Crater On "Nu Variant" Panic

Black Friday Turns Red On "Terrible News" - Global Markets Crater On "Nu Variant" Panic The Friday after thanksgiving is called black Friday because that's when retailers finally turn profitable for the year. Not so much for market, however, because this morning it's red as far as the eye can see. The culprit: the same one we discussed late last night - the emergence of a new coronavirus strain detected in South Africa, known as B.1.1.529, which reportedly carries an "extremely high number" of mutations and is “clearly very different” from previous incarnations, which may drive further waves of disease by evading the body’s defenses according to South African scientists, and soon, Anthony Fauci. British authorities think it is the most significant variant to date and have hurried to impose travel restrictions on southern Africa, as did Japan, the Czech Republic and Italy on Friday. The European Union also said it aimed to halt air travel from the region. "Markets have been quite complacent about the pandemic for a while, partly because economies have been able to withstand the impact of selective lockdown measures. But we can see from the new emergency brakes on air travel that there will be ramifications for the price of oil," said Chris Scicluna, head of economic research at Daiwa. As a result, what was initially just a 1% drop in US index futures, has since escalated to a plunge of as much as 2% with eminis dropping the most since September, at one point dropping below 4,600 after closing on Wednesday above 4,700 as a post-Thanksgiving selloff spread across global markets amid mounting concerns the new B.1.1.529 coronavirus variant - which today will be officially called by the Greek lettter Nu - could derail the global economic recovery.  Russell 2000 contracts sank as much as 5.4%. Technology shares may be caught in the net too as Nasdaq 100 futures slid. The VIX increased as much as 9.4 vols to 28, it's biggest jump since January. It was last seen up 7.4 points, or the biggest increase since February. Adding to the pain, there is nothing on today's macro calendar and the US market closes early which will reduce already dismal liquidity even more, exacerbating some of the moves throughout the session. Headlines are likely to center on various nations preventing travel from South Africa whilst potentially imposing more stringent COVID measures domestically, as well as which countries "find" the Nu variant. Amid the panicked flight to safety, 10Y TSY yields tumbled as traders slashed bets on monetary tightening by the Federal Reserve (just hours after Goldman predicted that the Fed would double the pace of its taper and hike 3 times in 2022, oops) ... ... as did oil amid fears new covid lockdowns will lead to a collapse in crude demand (they will also certainly force OPEC+ to put on pause their plans to keep hiking output by 400K every month). Paradoxically, even cryptos are tumbling, which is surprising since even the dumbest algos should realize by now that a new covid outbreak means more dovish central banks, no tightening, and if nothing else, more QE and more liquidity which is precisely what cryptos need to break out to new all time highs. Cruise ship operator Carnival slumped 9.1% in premarket trading and Boeing slid 5.8% as travel companies tumbled worldwide. Stay-at-home stocks such as Zoom Video rallied.  Didi Global shares fell after Chinese regulators reportedly asked the ride-hailing giant to delist from U.S. bourses. Here are some of the other big premarket movers: Airlines and other travel stocks slumped in premarket trading on growing concern about a new Covid-19 variant identified in southern Africa. The European Union is proposing to halt air travel from several countries in the area and the U.K. will temporarily ban flights from the region. United Airlines (UAL US) fell 8.9%, Delta Air (DAL US) -7.9%, American Airlines (AAL US) -6.7%; cruiseline-operator Carnival (CCL US) -12%; hotelier Marriott (MAR US) -6.1%; lodging company Airbnb (ABNB US) -6.9%. Stay-at-home stocks that benefit from higher demand in lockdowns rose in premarket, with Zoom Video (ZM US) gaining 8.5% and fitness equipment group Peloton (PTON US) +4.7%. Vaccine stocks surged in premarket, while Pfizer and BioNTech got an added boost after their coronavirus shot won European Union backing for expanded use in children. Moderna (MRNA US) rose 8.8%, Novavax (NVAX US) +6.2%, Pfizer (PFE US) +5.1%, BioNTech (BNTX US) +6.4%. Small biotech stocks gained in premarket as investors sought havens. Ocugen (OCGN US) added 22%, Vir Biotechnology (VIR US) +7.8%, Sorrento Therapeutics (SRNE US) +5%. Cryptocurrency-exposed stocks fell as Bitcoin dropped as investors dumped risk assets. Marathon Digital (MARA US) declined 9%, Riot Blockchain (RIOT US) -8.8%, Coinbase (COIN US) -4.6%. Didi Global (DIDI US) declined 6% in premarket after Chinese regulators were said to have asked the ride-hailing giant to delist from U.S. bourses. Selecta Biosciences (SELB US) dropped 13% in Wednesday’s postmarket ahead of Thursday’s Thanksgiving closure, after saying the U.S. FDA placed a clinical hold on a trial. Quotient Technology (QUOT US) gained 3.9% in Wednesday’s postmarket on news that a board member bought $150,000 of shares. What happens next will matter and so, all eyes are on the opening bell for the U.S. markets, set to return from the holiday for a shortened trading session. Tumbling futures and a soaring VIX signaled that the rout in Asia and Europe won’t spare New York equities, while lack of liquidity will only make the pain worse. The Japanese yen emerged as the main haven currency of the day, with the dollar languishing. “Every trader in New York will be rushing to the office now,” said Salm-Salm & Partner portfolio manager Frederik Hildner, adding that news of the new variant could mean the end of the inflation and tapering debate. The worsening pandemic poses a dilemma for central banks that are preparing to tighten monetary policy to curb elevated price pressures, according to Ipek Ozkardeskaya, senior analyst at Swissquote. “It’s terrible news,” Ipek Ozkardeskaya, a senior analyst at Swissquote, said in emailed comments. “The new Covid variant could hit the economic recovery, but this time, the central banks won’t have enough margin to act. They can’t fight inflation and boost growth at the same time. They have to choose.” “We now have a new Covid variant that’s ‘very’ different from the ones we knew so far, a rising inflation, and a market bubble,” she said.  “The only encouraging news is the easing oil prices, which could tame the inflationary pressures and give more time to the central banks before pulling back support.” In the meantime, the World Health Organization and scientists in South Africa were said to be working “at lightning speed” to ascertain how quickly the B.1.1.529 variant can spread and whether it’s resistant to vaccines. The new threat adds to the wall of worry investors are already contending with in the form of elevated inflation, monetary tightening and slowing growth. In Europe, the Stoxx 600 index headed for the biggest drop in 13 months plunging 2.7%; travel and banking industries led the Stoxx Europe 600 Index down as much as 3.7%, the biggest intraday drop since June 2020. Airbus slumped 8.6% in Paris and British Airways owner IAG tumbled 12% in London, while food-delivery stocks gained.  Here are some of the biggest European movers today: Stay-at-home stocks and Covid testing firms such as TeamViewer and DiaSorin are among the biggest gainers as worries over a new Covid variant send the Stoxx 600 tumbling on lockdown fears TeamViewer and DiaSorin rise as much as 6% and 7%, respectively On the down side, travel and leisure stocks plunge, with the likes of IAG, Lufthansa and Carnival posting double- digit falls IAG drops as much as 21% Software AG shares rise as much as 9.5% after Bloomberg reported that the firm is exploring strategic options, including a potential sale, with Morgan Stanley saying the company’s biggest headwinds are behind it. Evolution gains as much as 4.6%, recouping part of Thursday’s 16% plunge, with Bank of America saying the share price’s “crazy time” amounts to a good buying opportunity. Skistar rises as much as 3.7%, bucking steep declines for travel and leisure stocks, after Handelsbanken upgraded the stock, saying bookings for the Scandinavian ski resort operator are “set to surge.” Telecom Italia climbs as much as 2.8% following a Bloomberg report that private equity firms KKR and CVC are considering teaming up on a bid for the company. ING Groep falls as much as 11% after Goldman Sachs analyst Jean-Francois Neuez cut his recommendation to neutral from buy. Getlink drops as much as 6% as French fishermen start protests aimed at stepping up pressure on the U.K. in a post-Brexit fishing dispute. Earlier in the session, MSCI's index of Asian shares outside Japan fell 2.2%, its sharpest drop since August. Casino and beverage shares were hammered in Hong Kong, while travel stocks dropped in Sydney and Tokyo. Japan's Nikkei skidded 2.5% and S&P 500 futures were last down 1.8%. Giles Coghlan, chief currency analyst at HYCM, a brokerage, said the closure of the U.S. market for the Thanksgiving holiday on Thursday had exacerbated moves. "We need to see how transmissible this variant is, is it able to evade the vaccines - this is crucial," Coghlan said. "I expect this story to drag on for a few days until scientists have a better understanding of it." Indian stocks plunged as the detection of a new coronavirus strain rattled investor sentiment globally, raising concerns over a likely setback to the nascent economic recovery.  The S&P BSE Sensex lost 2.9%, the most since mid-April, to 57,107.15 in Mumbai, taking its loss this week to 4.2%, the biggest weekly drop since January. The NSE Nifty 50 Index declined by a similar magnitude on Friday. Reliance Industries was the biggest drag on both measures and declined 3.2%.  “There is fear of this new variant spreading to other countries which might again derail the global economy,” said Hemang Jani, head of equity strategy at Motilal Oswal Financial Services Ltd.   Of the 30 shares in the Sensex index, 26 fell and 4 gained. All but one of 19 sub-indexes compiled by BSE Ltd. retreated, led by a index of realty companies. The S&P BSE Healthcare index was the only sub-index to gain, surging 1.2%. While researchers are yet to determine whether the new virus variant is more transmissible or lethal than previous ones, authorities around the world have been quick to act. The European Union, U.K., Israel, and Singapore placed emergency curbs on passengers from South Africa and the surrounding region. Travel stocks were among the hardest hit. InterGlobe Aviation Ltd. fell 8.9%, Spicejet Ltd. slipped 6.7% and Indian Hotels Co. Ltd. plunged 11.2%, the most since March 2020.  “Nervousness on the new variant of coronavirus and expectations of the U.S. Fed increasing the pace of tapering have led to recent market weakness,” Amit Gupta, fund manager for portfolio management services at ICICI Securities Ltd. said. “This trend may take some time to recover as the WHO meeting on the new mutant variant impact and hospitalization rates in US and Europe will be watched by the market very closely.” Crude oil to emerging markets completed this picture of mayhem. In rates, fixed income was firmly bid as Treasuries extended their advance led by the belly of the curve, outperforming bunds, while money markets pared rate-hike bets amid fears that a new coronavirus strain may spread globally, slowing economic growth. Cash Treasuries outperformed, richening 12-14bps across the short end, with Thursday’s closure exacerbating the optics. As shown above, 10Y Treasury yields shed as much as 10 basis points while the Japanese yen jumped the most since investors’ March 2020 rush for safety. Yields across the curve are lower by more than 8bp at long end, 13bp-15bp out to the 7-year point, moves that if sustained would be the largest since at least March 2020 and in some cases since 2009. Short-term interest rate futures downgraded the odds of Fed rate increases. Gilts richened 10-11bps across the curve, outperforming bunds by 4-5bps. Peripheral and semi-core spreads widen. In FX, JPY and CHF top the G-10 scoreboard with havens typically bid. In FX, the Bloomberg Dollar Spot Index was little changed after earlier touching a fresh cycle high, and the greenback was mixed versus its Group-of-10 peers as the yen and the Swiss franc led gains while the Canadian dollar and Norwegian krone were the worst performers as commodity prices plunged. Traders pushed back the timing of a 25-basis-point rate increase by the Federal Reserve to July from June, with only one further hike expected for the remainder of 2022. It’s a similar story in the U.K. where the Bank of England is now expected to tighten policy in February instead of next month. Wagers that the ECB will raise its deposit rate by the end of next year have also been slashed, with only a six basis-point increase priced in, half of that seen earlier this week. The European Union is proposing to follow the U.K. in halting air travel from southern Africa after the new Covid-19 variant was identified there. The yen is at the epicenter of skyrocketing currency volatility as the new virus variant shakes markets. The cost of hedging against swings in the Japanese currency over the next week, which captures the release of the next U.S. payrolls report, is the most expensive in more than a year. In commodities, crude futures are hit hard. WTI drops over 7% before finding support near $73, Brent drops over 5% before recovering near $78. Spot gold grinds higher, adding $21 to trade near $1,809/oz. Base metals are sharply offered with much of the complex off as much as 3%. Looking at the otherwise quiet day ahead, data releases include French and Italian consumer confidence for November, as well as the Euro Area M3 money supply for October. Otherwise, central bank speakers include ECB President Lagarde, Vice President de Guindos, and the ECB’s Visco, Schnabel, Centeno, Panetta and Lane, and BoE chief economist Pill. Market Snapshot S&P 500 futures down 1.9% to 4,607.50 STOXX Europe 600 down 2.8% to 468.04 MXAP down 1.8% to 193.33 MXAPJ down 2.2% to 628.97 Nikkei down 2.5% to 28,751.62 Topix down 2.0% to 1,984.98 Hang Seng Index down 2.7% to 24,080.52 Shanghai Composite down 0.6% to 3,564.09 Sensex down 2.7% to 57,234.83 Australia S&P/ASX 200 down 1.7% to 7,279.35 Kospi down 1.5% to 2,936.44 Brent Futures down 5.8% to $77.46/bbl Gold spot up 0.9% to $1,805.13 U.S. Dollar Index down 0.33% to 96.46 German 10Y yield little changed at -0.31% Euro up 0.4% to $1.1259 Top Overnight News from Bloomberg The European Union is proposing to halt air travel from southern Africa over growing concern about a new Covid-19 variant that’s spreading there, as the U.K. said it will also temporarily ban flights from the region Those close to the Kremlin say the Russian president doesn’t want to start another war in Ukraine. Still, he must show he’s ready to fight if necessary in order to stop what he sees as an existential security threat: the creeping expansion of the North Atlantic Treaty Organization in a country that for centuries had been part of Russia Bitcoin tumbled 20% from record highs notched earlier this month as a new variant of the coronavirus spurred traders to dump risk assets across the globe Germany’s Greens tapped their two co- leaders to run the foreign ministry and take charge of an influential portfolio overseeing economy and climate protection in the country’s next government under Social Democrat Olaf Scholz A more detailed breakdown of global markets courtesy of Newsquawk Asian equity markets declined and US equity futures were also on the backfoot on reopen from the prior day’s Thanksgiving lull with markets spooked by new COVID variant concerns related to the B.1.1.529 variant in South Africa that was first detected in Botswana. The new variant showed a high number of mutations and was said to be the most evolved strain ever which spurred fears it could be worse than Delta and is prompting both the UK and Israel to halt flights from several African nations. ASX 200 (-1.7%) was negative with heavy losses in energy and broad underperformance in cyclicals leading the downturn across all sectors, while the much better than expected Australian Retail Sales data was largely ignored. Nikkei 225 (-2.5%) underperformed and gave up the 29k status as selling was exacerbated by detrimental currency inflows and with SoftBank shares among the worst hit on reports that China is said to have asked Didi to delist from US exchanges on security fears, which doesn't bode well for SoftBank given that its Vision Fund is the top shareholder in the Chinese ride hailing group with a stake of more than 20%. Hang Seng (-2.5%) and Shanghai Comp. (-0.7%) conformed to the risk aversion with the mood not helped by ongoing geopolitical concerns after a Chinese Defense Ministry spokesperson noted they are ready to crush Taiwan independence bid "at any time”, while China also said it opposes US sanctions on its companies and will take all necessary measures to firmly defend the rights of Chinese companies. Beijing interference further contributed to the headwinds amid the request by China for Didi to delist from US which reports stated regulators could backtrack on and with Tencent subdued after some Chinese state-run companies restricted the use of Tencent's messaging app. Top Asian News Stocks in Asia Set for Worst Day Since March on Virus Woes Mizuho CEO Steps Down After Regulator Hit on System Issues Meituan 3Q Revenue Meets Estimates Japan’s Kishida Delivers $316 billion Extra Budget for Recovery European equities are trading markedly lower (Stoxx 600 -2.9%) with losses in the Stoxx 600 extending to 3.8% WTD. Sentiment throughout the week has been hampered by various lockdown measures imposed across the region with the latest leg lower accelerated by new COVID variant concerns related to the B.1.1.529 variant in South Africa. The new variant has shown a high number of mutations and is said to be the most evolved strain so far. This has spurred fears it could be worse than Delta and has prompted multiple nations to halt flights from several African nations.The handover from the overnight session was an equally downbeat one with the Nikkei 225 (-2.5%) dealt a hammer blow by the risk environment and unfavourable currency flows. Stateside, futures are lower across the board with the RTY the clear laggard with losses of 4.2% compared to the ES -1.8%, whilst the tech-heavy NQ is faring better than peers but ultimately still lower on the session to the tune of 1.6%. Note, early closures in the US and subsequent liquidity conditions could exacerbate some of the moves throughout the session. With the macro calendar light, focus for the session is likely to centre on various nations preventing travel from South Africa whilst potentially imposing more stringent COVID measures domestically. Any further clarity on the spread of the variant and its potential to evade vaccines will be of great interest to the market and likely be the main driving force of price action today. Sectors in Europe are lower across the board with the Stoxx 600 Banking (-5.1%) sector bottom of the pile amid the declines seen in global bond yields as markets scale back expectations of central bank tightening (e.g. pricing now assigns a 63% chance of a 15bps hike by the BoE next month vs. 93% a week ago). Oil & Gas names (-4.8%) are suffering on account of the declines in the crude space with WTI crude in freefall with losses of 6.7% given the potential impact of travel restrictions on demand. Travel restrictions on South Africa (from UK, Israel, EU et al) and the potential for further announcements has crushed the Travel & Leisure sector (-5.7%) with airline names dealt a hammer blow; IAG (-13.5%), easyJet (-11%), Deutsche Lufthansa (-12%), Air France (-9.5%). Elsewhere, there are a whole raft of other laggards which are very much in-fitting with the March 2020 playbook but there are simply too many to list for the purpose of this report. Defensives and Tech are faring better than peers but ultimately still lower on the session to the tune of 1% and 1.9% respectively. Finally, for anyone wanting some positivity from today’s session, the potential for further lockdowns has proved to be beneficial for the likes of HelloFresh (+3.2%), Ocado (+2.1%) and Delivery Hero (+1.9%). Top European News Airlines Skid on South Africa Travel Bans Tied to Variant German Coalition Proposes a Combustion-Car Ban Without Saying So Putin Pushes Confrontation With NATO as Hardliners Prevail Siemens Is Said to Kick Off Sale of Postal Logistics Business In FX, the index has been under pressure in the risk-averse environment amid a slump in yields and gains in its basket components – namely the JPY, CHF, EUR (see below) – and with liquidity also thinned by Thanksgiving. From a technical perspective, the index has declined from its 96.787 overnight high, through the 96.500 mark, to a low of 96.332 – with the weekly trough at 96.035. Ahead, the US calendar is once again light, with the US also poised for an early Thanksgiving closure; thus, impulses will likely be derived from the macro environment. JPY, CHF, EUR - Haven FX JPY and CHF are the clear outperformers as a function of risk-related inflows. USD/JPY has retreated from a 115.37 peak and fell through its 21 DMA (114.15) to a base around 113.66 - with the current weekly low around 113.64. USD/CHF retreated from 0.9360 to 0.9260 – with the 50 and 100 DMAs seen at 0.9234 and 0.9219, respectively, ahead of 0.9200. EUR/USD meanwhile gains on what is seemingly an unwind of the carry trade amid a spike in volatility. EUR/USD found support near 1.1200 before rebounding to a current 1.1288 peak. AUD, NZD, CAD, GBP - The non-US Dollar risk currencies bear the brunt of the latest market downturn, with losses across industrial commodities not helping. The Loonie has taken the spot as the biggest G10 loser as hefty COVID-induced losses in the oil complex keep the currency suppressed. USD/CAD trades towards the top of a current 1.2647-2774 range. AUD is also weighed on by softer base metal prices – AUD/USD fell from a 0.7200 overnight high to a current low at 0.7110. On that note, Westpac sees AUD/USD pushed down to 0.7000 by Jun 2022 (prev. 0.7700) amid rate differentials with the US; Westpac made significant changes to its FOMC policy forecast and now expect consecutive increases in the fed funds rate in Jun, Sept, and Dec 2022. NZD/USD is slightly more cushioned amid smaller exposure to commodities, and as the AUD/NZD cross takes aim at 1.0450 to the downside. GBP, meanwhile, was initially among the losers amid its high-beta status but thereafter nursed losses in a move that coincided with EUR/GBP rejecting an upside breach of its 21 DMA at 0.8475. EM - The ZAR is the standout laggard given the new South African COVID variant - B.1.1.529 COVID-19 variant (expected to be named Nu) – which is said to be the most evolved strain so far and thus prompted several countries to halt travel to the country of origin. USD/ZAR currently trades within a 15.9375-16.3630 intraday band. Meanwhile, the downturn oil sees USD/RUB north of 75.00 and closer to 76.00 from a 74.2690 base. The Lira also feels some contagion despite the lower oil prices (Turkey being a large net oil importer) – USD/TRY is back on a 12.00 handle and within 11.92-1226 parameters at the time of writing. In commodities, the crude complex has been hit by compounding COVID fears which in turn triggered various travel restrictions and subsequently took its toll on global crude demand prospects. The new and more evolved South African variant prompted the UK, Singapore, and Israel to expand their travel red lists to include some African nations (Israel reported its first case of the new COVID-19 variant known as B.1.1.529). Japan also imposed tighter border restrictions. China’s Shanghai city see flights impacted by its own outbreak. Europe also tackles its surge in daily cases - German Green Party's Baerbock (incoming Foreign Minister) does not rule out a German lockdown, according to Spiegel. EU Commission President von der Leyen is also to propose activation of the emergency air brake, to halt travel from southern Africa due to the B.1.1.529 COVID-19 variant. Losses in oil have exacerbated - with WTI Jan and Brent Feb now under USD 74/bbl (vs high 78.65/bbl) and USD 77/bbl (vs high 80.42/bbl), -6.0% and -5.0% respectively. This comes ahead of the OPEC+ confab next week, whereby OPEC watchers have suggested that oil prices will be a large contributor to the final decision. It is difficult to see how OPEC+ will increase output to the levels the US et al. will be content with, with the latest COVID downturn building the case for a pause in planned output hikes. Elsewhere, haven demand sees spot gold extend on gains above USD 1,800/oz after topping the 100 DMA (1,792.95/oz), 200 DMA (1,791.38/oz), 50 DMA (1,790.13/oz) overnight. Base metals are softer across the board amid the risk aversion. LME copper posts losses of around 3% at the time of writing, as prices threaten a more convincing downside breach of USD 9,500/t. US Event Calendar Nothing major scheduled DB's Jim Reid concludes the overnight wrap Things have escalated on the covid front quite rapidly over the last 12 hours. Yesterday new covid variant B.1.1.529 was slowly starting to gather increasing attention but overnight it has begun to dominate markets and has caused a notable flight to quality with 10 year USTs -8bps lower. It was originally identified in Botswana and is starting to spread rapidly in Africa. The South African Health Minister has said it is "of serious concern". Almost 100 cases have already been identified in South Africa and the UK moved to put the country back (along with 5 other African nations) on a reinstated red travel list last night with others following this morning. The variant is said to be the most heavily mutated version yet and the WHO will meet today to decide if it is a variant of interest or a variant of concern. So a lot of eyes will be on how severe it is and whether it completely evades vaccines. At this stage very little is known. Mutations are often less severe so we shouldn’t jump to conclusions but there is clearly a lot of concern about this one. Also South Africa is one of the world leaders in sequencing so we are more likely to see this sort of news originate from there than many countries. Suffice to say at this stage no one in markets will have any idea which way this will go. Overnight in Asia all benchmarks are trading lower on the news with the Shanghai Composite (-0.50%), CSI (-0.64%), KOSPI (-1.27%), Hang Seng (-2.13%) and the Nikkei (-2.90%) all lower. Airlines and other travel stocks have obviously fallen heavily. Hong Kong has detected two confirmed cases of the new variant just as Hong Kong and China were considering quarantine-free travel. S&P 500 (-0.93%) and DAX (-1.82%) futures are also much weaker. Elsewhere, in Japan, CPI rose +0.5% year-on-year (+0.4% consensus and +0.1% previously), on the back of 16-month high fuel prices. With the US out on holiday for Thanksgiving, there wasn’t much going on yesterday after a very quiet day in markets. The variant news was only slowly creeping into the news flow so it hardly impacted trading. But in keeping with the theme of recent days, both inflation and the latest covid wave in Europe remained very much in the picture as jitters continue to increase that we could see further lockdowns as we move towards Christmas. Starting with the headline moves, European equities did actually show signs of stabilising yesterday, with the STOXX 600 up +0.42% thanks to a broad-based advance across the continent. In fact that’s actually the index’s best daily performance in over three weeks, although that’s not reflecting any particular strength, but instead the fact the index inched steadily but persistently towards a record high before selling off again a week ago. Other indices moved higher across the continent too, with the FTSE 100 (+0.33%), the CAC 40 (+0.48%) and the DAX (+0.25%) all posting similar advances. These will all likely reverse this morning. One piece of news we did get came from the ECB, who released the account of their monetary policy meeting for October. Something the minutes stressed was the importance that the Governing Council maintain optionality in their policy settings, with one part acknowledging the growing upside risks to inflation, but also saying “it was deemed important for the Governing Council to avoid an overreaction as well as unwarranted inaction, and to keep sufficient optionality in calibrating its monetary policy measures to address all inflation scenarios that might unfold.” Against this backdrop, 10yr bond yields moved lower across multiple countries, with those on bunds (-2.3ps), OATs (-2.3bps) and BTPs (-1.9bps) all declining. There was also a flattening in all 3 yield curves as well, with the 2s10s slope in Germany (-3.0bps), France (-3.7bps) and Italy (-2.8bps) shifting lower. And the moves also coincided with a continued widening in peripheral spreads, with both the Spanish and the Greek spreads over 10yr bund yields widening to their biggest levels in over a year. Of course, one of the biggest concerns in Europe right now remains the pandemic, and yesterday saw a number of fresh measures announced as policymakers seek to get a grip on the latest wave. In France, health minister Veran announced various measures, including the expansion of the booster rollout to all adults, and a reduction in the length of time between the initial vaccination and the booster shot to 5 months from 6. Meanwhile in the Czech Republic, the government declared a state of emergency and approved tighter social distancing measures, including the closure of restaurants and bars at 10pm. And in Finland, the government have said that bars and restaurants not using Covid certificates will not be able to serve alcohol after 5pm. All this came as the European Medicines Agency recommended that the Pfizer vaccine be approved for children aged 5-11, which follows the decision to approve the vaccine in the US. Their recommendation will now go to the European Commission for a final decision. There wasn’t much in the way of data at all yesterday, though German GDP growth in Q3 was revised down to show a +1.7% expansion (vs. +1.8% previous estimate). Looking at the details, private consumption was the only driver of growth (+6.2%), with government consumption (-2.2%), machinery and equipment (-3.7%) and construction (-2.3%) all declining over the quarter. To the day ahead now, and data releases include French and Italian consumer confidence for November, as well as the Euro Area M3 money supply for October. Otherwise, central bank speakers include ECB President Lagarde, Vice President de Guindos, and the ECB’s Visco, Schnabel, Centeno, Panetta and Lane, and BoE chief economist Pill. Tyler Durden Fri, 11/26/2021 - 08:12.....»»

Category: blogSource: zerohedgeNov 26th, 2021

What Americans Say About Rising Prices This Thanksgiving

What Americans Say About Rising Prices This Thanksgiving By Cara Ding, Steven Kovac, Jackson Elliott, Michael Sakal, Allan Stein and Jannis Falkenstern of Epoch Times On the verge of celebrating Thanksgiving with her family, Melissa Ngo wasn’t happy after her grocery shopping trip. The high price of gasoline has cut into her family’s budget for everything, she said. She’s now having to shop at three different grocery stores—Giant Eagle, Marc’s, and Aldi—to find the lowest prices. “It’s everything,” said Ngo, a resident of Lakewood, Ohio, whose husband works as a dye-maker in Cleveland. “Everything has gone up, not just gas. The main thing I’ve noticed at the grocery store that has gone up in price [is] U.S. meat. It’s about double from last year. “We’re a one-worker family, and we’re always having to juggle. Now, we’re juggling more.” She blames the situation Americans have been facing for more than a year on such things as the CCP (Chinese Communist Party) virus pandemic, supply chain issues, and even the president she voted for.  Melissa Ngo, of Lakewood, Ohio, loads groceries into her car at the Giant Eagle grocery store in Lakewood on Nov. 23, 2021. Ngo said she’s paying nearly double for everything compared to 2020, especially meat. She and her husband are on a much tighter budget and “always juggling” to make things work on the home front. (Michael Sakal/The Epoch Times) As a resident of the west Cleveland suburb and Democratic stronghold, Ngo is quick to admit that she’s sorry she voted for President Joe Biden in the 2020 election. She usually votes Democrat. She said she may not vote in the next election. For Allen van Houten and Kathy Ellison of Lakewood, things have always been tight. Going into the 2021 holiday season, their budget is tighter still. Kathy Ellison and Allen Van Houten of Lakewood load up their car with groceries at the Giant Eagle grocery store in Lakewood on Nov. 23, 2021. (Michael Sakal/The Epoch Times) Van Houten, an Army and Navy veteran on disability, and Ellison, who works as a cook at a local restaurant, had just finished shopping at the Giant Eagle. Because of the skyrocketing price of gasoline and the higher food prices, they hardly go “anywhere” anymore, they said. They’re doing without as they prepare to spend Thanksgiving together. “We’re penny-pinching a lot more from last year,” Ellison said. “Now, we’re always penny-pinching. “Working a 40-hour workweek doesn’t keep your head above water anymore. Everything has gotten higher in price—food, gas, and utilities. And it’s not getting any better.” Van Houten noted that the couple have been depending on each other to get through such a difficult time. “If we didn’t have each other, we couldn’t survive,” he said. In addition to purchasing a smaller turkey this year, they’ve eliminated deviled eggs and potatoes from their Thanksgiving meal. “We’re going to three different grocery stores because we’re having trouble finding stuff,” Ellison told The Epoch Times. “We’re looking at pies at Giant Eagle that used to be on sale for $3.99. Now, they’re $5.99. We’d like to get a Dutch Apple pie, but those are $13.99. Sometimes, the supplier takes advantage of these situations, too.” The couple blames the situation on the high prices of gas and food, the workforce shortage, and the government. Van Houten and Ellison said they don’t vote. “The government is going to do whatever they want anyway,” Van Houten said. Kathy, also of Lakewood, who didn’t want to give her last name, was more sympathetic toward those facing hard times going into Thanksgiving. She had just loaded a cart full of groceries into her car outside of the Giant Eagle. Although she has seen at least a 20-percent increase in her grocery bill from 2020, she said her family won’t have to cut back. “We’ve been lucky. We’ve been blessed and have been able to work and stay comfortable through all of this,” Kathy told The Epoch Times. Although she said she’s happy with Biden, since she “didn’t like Donald Trump,” she noted that she feels as though the president could be doing more to help ease the situation. “I’m not happy with everything Joe Biden has done,” Kathy said. “The U.S. is not tapping into its resources, and we’re having to rely on foreign countries too much for certain goods. “I don’t want to have to pay more for everything. Our salaries are not commensurate with inflation. With all the high prices, it does make me and my husband want to give more to charity to help others who are struggling.”  Click on image to enlarge. (Illustration by The Epoch Times) In Florida, two large grocery chains—Publix and Winn-Dixie—are limiting certain holiday foods during Thanksgiving week. Publix Director of Communications Maria Brous released a statement saying that “caps” are being placed on certain food items because of “supply chain issues” and increased demand. Last week, the Lakeland company, which has 1,280 stores across the southeastern United States, placed the restrictions in anticipation of the demand and supply chain crisis, according to Brous. Another grocery outlet, Winn-Dixie, has placed a cap of one turkey per customer. Southeastern Grocers, a Jacksonville, Florida, company, owns Winn-Dixie, as well as Fresco y Mas and Harveys Supermarket. Florida Gov. Ron DeSantis weighed in on the rising cost of food and said he’s concerned about “inflationary pressures,” for which he blames the Biden administration. “Inflation that you’re seeing—the White House said it wasn’t real. It’s real,” DeSantis said on Nov. 22. “This is going to be the most expensive Thanksgiving we’ve seen in quite some time. Prices have increased by 20 percent from last year.” Since 1986, the American Farm Bureau Federation (AFBF) has conducted a Thanksgiving meal survey. The 2021 survey found that a meal for 10 people was expected to cost $53.31–up 14 percent from the 2020 average. The federation checked prices between Oct. 26 and Nov. 8 and noted that stores began selling whole frozen turkeys at a lower price two weeks later. As the meat protein most associated with Thanksgiving, the turkey is going to cost consumers 24 percent more than it did in 2020. The AFBF estimates that a 16-pound turkey will cost $23.99, or roughly $1.50 per pound more than 2020. The survey also found that the costs of other holiday goods were up as well, including dinner rolls—a 15 percent increase—while a 30-ounce can of pumpkin pie mix is up by 7 percent. “Several factors contributed to the increase in average cost of this year’s Thanksgiving dinner,” senior economist Veronica Nigh said in a statement on the AFBF website. “These include dramatic disruptions to the U.S. economy and supply chains over the last 20 months; inflationary pressure throughout the economy; difficulty in predicting demand during the COVID-19 pandemic and high global demand for food, particularly meat.  “The trend of consumers cooking and eating at home more often, due to the pandemic, led to increased supermarket demand and higher retail food prices in 2020 and 2021, compared to pre-pandemic prices in 2019.” Outside of the Winn-Dixie in Punta Gorda, Florida, Diane Crowi said food prices are definitely going up. “Our kids are all grown up, and they live out of the area, so we don’t celebrate like we used to. But, yes, things are more expensive this year than last year,” Crowi said. “We’re retired—I mean, we have Thanksgiving, just on a smaller scale. You just have to absorb the costs.” Along with increasing food costs, the price of gasoline has significantly risen as well, she said. “Gas prices are ridiculous,” Crowi said. “We just have to shift things around to afford what we have on our fixed income. We just cut down on our trips. We don’t drive as much to save fuel. “If I have to blame anyone, it would be our president—but I’m a Trump fan, so …” Winn-Dixie shopper Crystal Hunsicker of Punta Gorda said Thanksgiving is “definitely more expensive this year than last year.” Crystal Hunsicker of Punta Gorda, Fla. loads groceries into her car on Nov. 23, 2021. (Jann Falkenstern/The Epoch Times) “It affects us, but what are you going to do?” Hunsicker said. “You just deal with it. “Yes, gas is expensive, and we were energy independent before Biden took office. It takes $100 just to fill up my tank. There’s nothing I can do to save any money on fuel. I have to work, so I have to have gas.” Hunsicker said she voted for Trump in 2020 and identifies as a Republican. “I blame Biden for all of this. Trump’s policies were working, and [Biden] gets into office and destroys everything Trump put into place.” Charnita West, a single mom, looked cold in the parking lot of the Food City grocery store in Rossville, Georgia, on Nov. 23. In 2021, feeding her three children a Thanksgiving dinner has been more expensive than usual, she said. Crystal Hunsicker of Punta Gorda, Fla. loads groceries into her car on Nov. 23, 2021. (Jann Falkenstern/The Epoch Times) Her shopping wasn’t over with, either. The previous night, she had spent three hours at Walmart looking for some items, but couldn’t find everything that she needed. “I can’t even find ham. It took a lot of digging to find ham,” West told The Epoch Times. For West, spending $80 on groceries is a lot, and rising gas and food prices have hurt her family, she said. West said she’s heard that food inflation was caused by the Biden administration, but she admitted that she knows little about politics. She’s currently working on getting her high school diploma. “I don’t pay much attention to presidential stuff,” she said. “I’m just trying to do better or get my daughters a better life.” Another Thanksgiving shopper, Don Weathers, said that prices on everything have risen. Don Weathers shops for Thanksgiving dinner at the Food City grocery store in Rossville, Ga., on Nov. 23, 2021. (Jackson Elliott-The Epoch Times) “I don’t know what it is,” he said. “The beef has gone up. Turkeys and ham, pork, and everything else.” Weathers said the situation has affected his family little because his children are adults, but he feels concerned about others. “I fear for the other people,” he told The Epoch Times. “They’ve got children and are trying to raise them.” Weathers, a Republican who voted for Trump in 2020, said he didn’t want to say whether Trump or Biden was responsible for the inflation. Once a Democrat, he said he left the party because it offered handouts in an irresponsible way. “The Democratic Party is not what it was 20 years ago,” he said. Political independent Edward Garrett agreed with Weathers and West about the rising prices that were changing his budget. “Everything impacts the budget,” he said. “You just got to make it happen. You got to do what you got to do. Just squeeze and tighten what you can.” Edward Garrett searches for groceries for Thanksgiving dinner at the Food City grocery store in Rossville, Ga., on Nov. 23, 2021. (Jackson Elliott-The Epoch Times) Garrett blamed the Trump administration for the inflation issues. He said the effects of a president’s policies usually hit months after the person leaves office. “It is what it is,” he told The Epoch Times. “You’ve got to take the bitter with the sweet.” Long-time grocer Jeff Durecka, who owns a couple of supermarkets known as Jeff’s Marketplace in the “Thumb Area” of Michigan, said the supply chain issues aren’t affecting him much. “If we are short on a certain brand, we have substitutes,” Durecka, a Democrat and a strong supporter of Joe Biden in 2020. “It’s not affecting us much. As you can see, we are pretty well stocked for Thanksgiving. “Wholesale prices are going up because of the cost of fuel. It takes fuel to get product to the warehouses and then to the stores. There’s really nothing we can do about it.” Durecka speculated that the rise in food and fuel prices may have something to do with the different administration in Washington. Shopper Dean Rydock of Port Sanilac, Michigan, had no doubt that Biden was to blame. Dean Rydock of Port Sanilac, Michigan goes shopping at Jeff’s Marketplace in Lexington, Mich., on Nov 23, 2021.(Steven Kovac/The Epoch Times) “Everything Trump did made our living easier and better,” he said. “Biden is acting like Trump’s policies are the cause of all this and is doing whatever he can to counteract them. Food and gas prices are way up. It looks to me like decisions are being made to deliberately bring our economy down, so we will all eventually look to the government for help.” Rydock, a conservative Republican, “most definitely voted for the non-politician Trump and his pro-American agenda.” “I’m driving 100 miles to have Thanksgiving with my daughter,” he said. “The high price of gasoline is starting to pinch. And we really have to mind our heating expenses with propane going up. I’m starting to burn wood, and even that is getting costly.” Shopper Susie Lentz, a retired resident living in the village of Lexington, Michigan, is a regular customer at Jeff’s. Susie Lentz of Lexington, Michigan had no trouble getting everything she needed for Thanksgiving dinner at Jeff’s Marketplace in Lexington on Nov. 23, 2021. (Steven Kovac/The Epoch Times) “Food is definitely more expensive than last year,” she said. “I suppose the pandemic has a lot to do with it. Less stuff being shipped. But I am finding everything I want for Thanksgiving.” Lentz, a self-described independent voter, said that if she were still working and having to drive more, the high gas prices would be “putting a dent” in her budget. “I think the current political policies are affecting the economy in a negative way,” she told The Epoch Times. When asked whether Jeff’s Marketplace had enough meat and turkeys for the Thanksgiving holiday, butcher Jed Matthews said: “The only thing that has been hard to get is turkey gizzards sold separately. People love to add them to their stuffing.” Manager Jed Matthews says the only thing short in his department this Thanksgiving was “turkey gizzards sold separately” at Jeff’s Marketplace in Lexington, Mich., on Nov. 23, 2021. (Steven Kovac/The Epoch Times) The Epoch Times also spoke with a number of shoppers at Local Market in the South Shore neighborhood on the South Side of Chicago. The neighborhood is predominately African American and has a median household income that is almost half of the city average. Ruth Shannon said that she used to help local nonprofit New Life Center give away turkeys during the Thanksgiving holiday every year, but not this time. The center decided to cancel the giveaway in 2021 because of the high prices, she said. Shannon said she used to spend less than $100 on gas every month. Now, as prices rise, she spends around $200. “I know where I go. I’m more strategic with how I travel for sure,” she told The Epoch Times. Shannon said she thinks that inflation is the unintended consequence of massive government spending during the pandemic. “It was a lot of money over a fairly short period of time. They could have stretched it out,” she said. “Lawmakers have to be more intentional about the policies they create.” A lot of people in her neighborhood received stimulus checks during the pandemic, but they didn’t know how to spend the money in the right way, according to Shannon. Ruth Shannon of Chicago says prices for Thanksgiving day dinner ingredients are up this year as she stands outside of the Local Market in Chicago on Nov. 23. (Cara Ding/The Epoch Times) “It is one thing to have money. It’s a whole other thing to know what to do with it,” she said. “Everybody was happy when they got the stimulus checks. Now, the money’s gone and prices are up. What do they do?” Shannon hasn’t voted for most of her life. Her community has remained the same whether a Democrat or Republican was in office, she said. “I do whatever I can to volunteer in the community,” she said. “That is my voting.” Beverly, who declined to give her last name, was another shopper at Local Market. She said the rising food prices have further limited her grocery shopping because she lives on fixed government aid. She lost her daycare job at the start of the pandemic. She has since gone on food stamps and unemployment aid. Because the gas prices are much higher in Illinois, she drives to Indiana whenever she needs to fill up. A few other shoppers told The Epoch Times that they, too, drive to Indiana for gas. And across the United States, gas and diesel prices continue to be on the rise. According to the Energy Information Administration, the cost of a gallon of regular gasoline on the East Coast was $3.39 on Nov. 22—up by about $1.29 from the same time in 2020. In the Midwest, the average cost of gas at the pumps was $3.19, an increase of $1.28. On the West Coast, however, gas is currently at $4.19, an increase of $1.42 compared to 2020. Tyler Durden Thu, 11/25/2021 - 18:09.....»»

Category: blogSource: zerohedgeNov 25th, 2021

How To Talk To Millennials About Investing On Thanksgiving

How To Talk To Millennials About Investing On Thanksgiving By Jessica Rabe of DataTrek Research Whenever I attend family events, at least one person asks me an investment question given what I do for a living. Thanksgiving should be no different and I’m sure the same goes for many of you. So today I thought I’d help bridge the gap between Baby Boomers and my own Millennial cohort by explaining how I’d field potential investment inquiries from younger adults : #1: “I’ve made a lot of money in digital currencies, what should I do now?” My answer here would revolve around risk management. It’s easy to develop a higher risk tolerance after reaping huge gains from an investment. Here’s an example I’d give: Any sports fan has likely seen this scenario play out: one team is up big, so they grow more comfortable making risky plays. The other team exploits this sloppiness and quickly ties the score. The team that lost their advantage panics, contributing to further sloppiness as they try to regain their lead before the game ends. The same situation often happens when investing. Most investments made in popular digital currencies since the pandemic started are deeply in the money. This can give people a false sense of security, which fuels subsequent risky investments and even pushes prices higher in the near-term. The trouble is once these prices correct, investors tend to make poor decisions such as holding on too long on the way down and then implementing dicey strategies as they try to recover their losses. Millennials need to understand that this newly earned money in digital currencies is still “theirs” and that future investment decisions should be made independent of their prior experience. And just like athletes need to remain patient and use their teammates productively until the right opportunity presents itself, millennials should diversify their investments in not just digital currencies, but also the stock market. #2: “Why should I invest my money in stocks and how should I go about it?” I run across many peers who are either intimated about investing in capital markets or are wary about it out of mistrust from growing up during the Financial Crisis. On the former, I’d leverage Nick’s advice from many prior reports: “don’t make things harder than they have to be.” Young adults need to understand that investing in equities is necessary for capital growth, especially to overcome inflation which is now an actual threat. But they don’t need to worry about individual stocks. Start simple and small with a low cost, diversified fund such as an ETF that tracks the S&P 500. There’s a reason no one pays a premium to buy individual songs on iTunes anymore, but rather subscribes to music streaming services like Spotify. These platforms come with many songs subscribers will never listen to, but they still offer cheap access to a slew of hits that leaves listeners with a good user experience. I would try to keep them focused on their long-term goals and appeal to their most recent experience. Millennials have now lived through 3 major market dislocations, yet the S&P 500 is currently trading at record highs. If anything, the latest crisis showed they offer opportunities for attractive investment entry points. The next crisis will eventually come just like the past three, so don’t get caught up in daily volatility, but rather invest for the long term and ride the waves. #3: “I only want to invest in companies I believe in.” Many of my peers feel an ethical responsibility when allocating their capital, in line with the rising popularity of environmental, social and governance investing. They can also get emotionally attached to an investment idea because it supports a cause they back, such as legal marijuana or space exploration. That’s totally fine, but I also try to make sure they understand two things: 1) Feel free to invest in whatever you believe in, but just know that they may not be money-making ideas. That means you will need to both save more and invest in other areas more aggressively in order to reach your financial goals. 2) Be careful when investing in theme-related funds; analyze their actual holdings. For example, many ESG products invest in energy companies and most are heavily concentrated in tech. Additionally, not all marijuana or space-related ETFs are invested in “pure-plays”, or stocks directly tied to those topics. Some marijuana ETFs include cigarette companies, and a lot of space ETFs hold large defense contractors and conglomerates. To end, I’ll finish with a question I often receive from Baby Boomers looking to help their kids or family friends embarking on their Wall Street careers: “How did you get your start in finance?” Here’s a brief synopsis along with some advice: You don’t have to graduate from Harvard or have family in the business, but you need to figure out how to set yourself apart. In my case, I graduated high school in 3 years and college in 2.5 years. During that time, I also took on unique internships that gave me a well-rounded resume, including with my US Congressman’s campaign advisor, EMC’s Big Data Research and Development Center in Rio de Janeiro, and a PM at a Registered Investment Advisory firm. I co-authored my first investment book published by Wiley Finance at age 20 about a new asset class called liquid alternatives. I wrote it soon after college with my first boss who owns the RIA I interned and then worked at, and had the idea from assisting him with consulting studies for the mutual fund industry. While working for the RIA, I also published articles on financial sites. My Dad forwarded them to his friends who work on Wall Street, and one of them showed my work to the Chief Market Strategist (Nick) at the NYC brokerage that would soon hire me. His research associates were leaving for grad school and a new job, so Nick interviewed me and I started that same week. Nick and I made up the market strategy team for 3 years, and then when the brokerage we worked at was sold we started DataTrek Research just over 4 years ago. That’s in a nutshell how I began working on Wall Street at age 19. The upshot: success in any career, or investing for that matter, comes down to process. To me, that’s setting goals and making a daily commitment to hard work in order to achieve them Tyler Durden Thu, 11/25/2021 - 09:00.....»»

Category: blogSource: zerohedgeNov 25th, 2021

With Inflation So High, The Elites Have Some Suggestions For How You Can Save Money This Thanksgiving...

With Inflation So High, The Elites Have Some Suggestions For How You Can Save Money This Thanksgiving... Authored by Michael Snyder via The Economic Collapse blog, Normally, inflation is not a major theme on Thanksgiving.  Unfortunately, these are not normal times.  Thanks to Joe Biden and our other crooked politicians in Washington, we are facing an inflation crisis that is unlike anything that we have experienced since the 1970s.  Earlier this week, I discussed a new poll which showed that 88 percent of Americans are deeply concerned about inflation, and a different poll found that 67 percent of Americans disapprove of the way that Biden is handling rising prices.  Now Thanksgiving is nearly upon us, and most Americans are finding that their grocery dollars are not stretching as far as they once did. This is being hailed as “the most expensive Thanksgiving ever”, but don’t worry, because the elite are offering some suggestions for how you can save some money. For example, NBC News is telling us to “consider not buying a turkey” in order to save some cash. If that wasn’t offensive enough, they are also saying that “some people think turkey is overrated” and that an “Italian feast” might be a better alternative… “I know that is the staple of the Thanksgiving meal. However, some people think turkey is overrated, and so it tends to be the most expensive thing on the table. Maybe you do an Italian feast instead.” I love Italian food, but Americans have eaten turkey on Thanksgiving for generations. Sadly, many Americans won’t be having turkey this year because it has just gotten too expensive. Of course NBC has an answer for that too.  They are suggesting that if you tell those you have invited that there won’t be any turkey on the table “some guests may drop off the list, and that’s a way to cut costs too.” Seriously? That is what they actually think ordinary Americans should do? It just makes me sick how the elite talk down to us like this. The Federal Reserve Bank of St. Louis is being even more offensive.  A few days ago, they encouraged Americans to consider a “soybean-based dinner” because turkey is so much more expensive… “A Thanksgiving dinner serving of poultry costs $1.42. A soybean-based dinner serving with the same amount of calories costs 66 cents and provides almost twice as much protein” Yuck. Just yuck. Over the years, I have tried “alternative” soybean-based products from time to time, and to be frank all of them were disgusting. And I find it to be highly offensive for the people that actually created this inflation crisis to be pushing Americans toward less expensive and more “eco-friendly” alternatives. We wouldn’t be in this mess if the Federal Reserve had not created trillions upon trillions of dollars out of thin air over the past couple of years. And we wouldn’t be in this mess if NBC News and other media outlets had not endlessly promoted the corrupt politicians in Washington that just keep borrowing and spending money as if the future will never come. We didn’t get here by accident. What we are now experiencing is a perfect example of cause and effect.  Our insane leaders flooded the system with new money, and now a typical Thanksgiving dinner is 14 percent more expensive than it was last year… The cost of providing a traditional Thanksgiving turkey dinner to 10 people in 2021 is 14% higher than a year ago, according to the American Farm Bureau Federation’s annual survey. Thankfully, your income has gone up 14 percent over the past year as well, right? Sadly, most of you will not be able to answer that question affirmatively. The cost of turkey is rising at a particularly blazing pace.  At this point, the average price of a 16 pound turkey is $4.60 higher than it was at this time in 2020… Ranking the data this way lets us see that the increase in the cost of turkey is responsible for most of the year-over-year increase. Rising by $4.60 from 2020’s $19.39 to 2021’s $23.99 for a 16-pound bird, turkey alone accounts for nearly 72% of the year-over-year increase in the total cost for the meal. But at least soybean-based dinners are still affordable. Of maybe you could even eat bugs this year. The global elite would really love that. In addition to changing the menu, the elite are also giving us pointers for how to minimize the spread of COVID during our Thanksgiving celebrations. According to the New York Times, children should wear masks, eat as quickly as they can, and stay as far away from the adults as possible… I’m glad to hear that the children and all guests are vaccinated. As the kids will not be fully vaccinated until two weeks after their second shot, I think some care is warranted, especially because some attendees are 65 and older and thus at greater risk of more serious breakthrough infections. You could have the kids wear masks, eat quickly and stay away from the older adults when eating. So I guess that hugging grandma and grandpa is out of the question. These control freaks really do want to micromanage all of our lives, and those that obediently do whatever they say without thinking are part of the problem. The truth is that the vast majority of the “experts” that they put on television to tell us how to live our lives really aren’t “experts” at all. It is all a big con game, and it amazes me that there are still so many people out there that fall for it. Once you get a look behind the curtain and you realize what a giant fraud their entire system is, there is no going back. Unfortunately, much of the population is still under their spell, and so we need to work really hard to wake people up while there is still time to do so. Look, I really do hope that all of you have a wonderful Thanksgiving. Eat lots of turkey, enjoy your family and friends, and try to smile. We should find joy in these moments while we still can, because soon everything will change. *  *  * It is finally here! Michael’s new book entitled “7 Year Apocalypse” is now available in paperback and for the Kindle on Amazon. Tyler Durden Wed, 11/24/2021 - 22:30.....»»

Category: blogSource: zerohedgeNov 24th, 2021

Why Bitcoin Is The Best Weapon Society Has Against Inflation And Wealth Inequality

Why Bitcoin Is The Best Weapon Society Has Against Inflation And Wealth Inequality Authored by Martin Leo Rivers via, For bitcoin enthusiasts, one of the most compelling things about the cryptocurrency is its ability to side-step fiat monetary systems that dilute the value of cash holdings through inflation. That isn’t anywhere near as complicated as it sounds. Put very simply, central banks grease the wheels of their economies by continually printing new money. A higher money supply makes it easier for companies to spend and service their debt. But there’s a catch: for every new dollar you add to the spending pool, the buying power of each individual dollar falls proportionally. Again this is simpler than it sounds: changing the money supply doesn’t magically create wealth or value. If your economy is a nursery and your money supply is crayons, then doubling the number of crayons in the room doesn’t make the kids any richer. They all have twice as many crayons as they had before, so they all double the number they offer when bartering for toys, books and so on. In real terms, nothing has changed because the new supply of money is being evenly shared between everyone in the nursery. Where things get more complicated – and where bitcoiners have rightly identified a need for a different, fairer system – is what happens when supply and distribution aren’t evenly matched? Central bankers claim this isn’t a concern, because they contend that all the cash ultimately trickles down to the man on the street – be it through stimulus checks or higher wages or fatter pension funds or whatever other pathway they conjure up. In practice, of course, we know that simply doesn’t reflect reality. In the real world, billionaires have, by far, been the biggest winners from covid-era money printing. They’ve taken their higher money supply (including vast sums of borrowed money, which is cheaper and easier to obtain when interest rates are low) and they’ve pumped it into inflation-beating asset classes such as the stock market, real estate, collectibles and so on. The middle classes have done the same, but on a smaller scale: building their savings during covid lockdowns and then allocating a healthy chunk of those funds to assets that have appreciated in value nicely. Now consider the poor and the working classes. What little bonus cash they’ve received during the pandemic has either been spent on survival or stagnated. Unable to get on the property ladder, they can neither benefit from rising house prices nor start building equity by replacing rent (money that goes into someone else’s pot) with mortgage payments (money that goes into their own). Stock markets may, technically, be within their reach, but at a profound handicap due to high transaction fees and a limited understanding of investment strategies (the kind of knowhow that rich people simply pay someone else to worry about). This imbalance results in one thing: inequality. If you’re rich, you can take a higher money supply and use it to your advantage. If you’re poor, you really can’t. You’re stuck with whatever cash holdings you have in the new economy. And, as we know, the value of those holdings is actively being diluted through inflation. The more money is printed, the poorer you get. Interest rates, of course, could save the day – if central banks wanted them to. When the interest rate rises above the inflation rate, any of us can grow the value of our cash simply by dumping it in a savings account. But policymakers don’t want this, because just about the only thing holding up the global economy right now is easy access to debt. As soon as the interest rate paid by borrowers increases, the shaky foundations of our covid-era economic recovery will collapse. Businesses and homeowners who binged on cheap loans will suddenly be unable to make repayments. Waves of bankruptcies and foreclosures will cripple the global economy. Small wonder that central bankers – none of whom are working class, by the way – prefer the easy option of hammering poor people. “This might not be perfect,” they rationalize, “but everything seems to be stable and everyone I know is doing rather well!” That, in a nutshell, tells you why central banks are the biggest driver of wealth inequality. So, what to do? Well, as long as central bankers and politicians are in the driving seat, there’s really no way of changing the direction of this economic journey. Those in power will always promote policies that advance their own personal interests, and they will do whatever is necessary to delay a global economic crash – even one that would, in the long-run, probably be good for society as it would precipitate structural reforms to the current, broken system. If there is a solution, it would have to be an alternative monetary system that’s resilient to both inflation and central bank manipulation. No prizes for stating the obvious there: civilization has aspired to have such a system for millennia. Trouble is, it’s never been that easy to build a monetary network that’s backed by no-one and yet protects the interests of everyone so convincingly that ordinary people will trust it with their life savings. Never, that is, until 2009, when the launch of the bitcoin monetary network gave the world its first taste of decentralized blockchain technology. The boring bit Convincing readers about the technical benefits of blockchain is a bit like convincing overweight people about the health benefits of dieting. The proof is in the pudding, as it were. And the average person on the street has no more inclination to become an expert in food science – the ‘how’ or ‘why’ a given diet is effective – than they do computer programming. That said, you can’t understand the genius behind bitcoin without having at least a basic grasp of the revolutionary nature of blockchain technology – so here goes. Trust is everything. I’ve already alluded to the fact that creating a monetary system from scratch is virtually impossible because money has no value unless enough people believe it has value. The easiest way to foster that belief is to get a government to pledge to uphold – or back – its value (think of that “promise to pay the bearer on demand” you see on banknotes). Another, more tenuous way is to come up with a universally appealing asset that has a fixed supply. Gold ticks this box nicely: it’s aesthetically attractive; it can’t be forged because of its unique density; and it can’t be manufactured by anyone, so there’ll only ever be as much gold on the planet as the planet already holds (shiny asteroids notwithstanding). Then again, gold is a pain in the ass. It’s heavy, so it’s a burden to carry and transfer. It’s not easily divisible, so it’s hard to pay precise amounts with it. Not many people do their weekly shop with gold. But what if you could create a digital version of gold that weighs nothing, moves at the speed of light, and is divisible to the tiniest fraction of value. Sounds great. Also impossible. Until 2009. If you only understand one thing about what blockchain technology does, let it be this: for the first time in history, blockchains give us genuinely immutable data. That means the information contained within them cannot be changed. Ever. How they achieve this takes time to understand: it’s to do with the decentralized nature of the ledger, which lists all the transactions ever made on the blockchain and is secured by 1) the number of copies in existence (full nodes, all of which are cross-checked against each other); 2) the process through which new data is written (cryptographic encryption); and 3) the energy consumption of the network (the hashrate, which makes it impossible to overpower – or change the course of – the encryption process). I might have lost you there. But the end result isn’t difficult to grasp. Once you have immutable data, you have the ability to create autonomous digital money. By ensuring that bitcoin’s transaction history can never be altered, mankind has created a digital asset that satisfies five of the criteria for money: it’s durable, portable, scarce, divisible and fungible (interchangeable). The final criteria – acceptability, or the willingness of people to conceive of bitcoin as real money – will be determined not by its technical traits but by humanity’s attitude towards it. In an increasingly digital age, the outlook is favorable. Bitcoin’s detractors – and there are many; typically old, middle class people who’ve become very rich from the status quo – cite a different definition of money: that it must be embraced by society as a medium of exchange; a unit of account; and a store of value. Bitcoin fails on all fronts, they say, as too few people use it on a daily basis, and the price is too volatile to measure or store value. Maybe so, today. But it’s also attained a market cap of $1 trillion in just 12 years. Is that not rather swift progress? And what of the dollar and the other fiat currencies? Are they convenient mediums of exchange across international borders? Do they give us stable, predictable prices year after year? Most important of all, are they a store of value in an era of high inflation? If you’ve ever complained about the rising cost of living, you already know the answer. Tyler Durden Mon, 11/22/2021 - 15:05.....»»

Category: blogSource: zerohedgeNov 22nd, 2021

Transcript: Edwin Conway

   The transcript from this week’s, MiB: Edwin Conway, BlackRock Alternative Investors, is below. You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS:… Read More The post Transcript: Edwin Conway appeared first on The Big Picture.    The transcript from this week’s, MiB: Edwin Conway, BlackRock Alternative Investors, is below. You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: This week on the podcast, man, I have an extra special guest. Edwin Conway runs all of alternatives for BlackRocks. His title is Global Head of Alternative Investors and he covers everything from structured credit to real estate hedge funds to you name it. The group runs over $300 billion and he has been a driving force into making this a substantial portion of Blackrock’s $9 trillion in total assets. The opportunity set that exists for alternatives even for a firm like Blackrock that specializes in public markets is potentially huge and Blackrock wants a big piece of it. I found this conversation to be absolutely fascinating and I think you will also. So with no further ado, my conversation with Blackrock’s Head of Alternatives, Edwin Conway. MALE VOICEOVER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio. RITHOLTZ: My extra special guest this week is Edwin Conway. He is the Global Head of Blackrock’s Alternative Investors which runs about $300 billion in assets. He is a team of over 1,100 professionals to help him manage those assets. Blackrock’s Global alternatives include businesses that cover real estate infrastructure, hedge funds private equity, and credit. He is a senior managing director for BlackRock. Edwin Conway, welcome to Bloomberg. EDWIN CONWAY, GLOBAL HEAD OF ALTERNATIVE INVESTORS, BLACKROCK: Barry, thank you for having me. RITHOLTZ: So, you’ve been in the financial services industry for a long time. You were at Credit Suisse and Blackstone and now you’re at BlackRock. Tell us what the process was like breaking into the industry? CONWAY: It’s an interesting on, Barry. I grew up in a very small town in the middle of Ireland. And the breakthrough to the industry was one of more coincident as opposed to purpose. I enjoyed the game of rugby for many years and through an introduction while at the University, in University College Dublin in Ireland, had a chance to play rugby at a quite a – quite a decent level and get to know people that were across the industry. It was really through and internship and the suggestion, I’ve given my focus on business and financing things that the financial services sector may be a great place to traverse and get to know. And literally through rugby connections, been part of a good school, I had an opportunity to really understand what the service sector, in many respects, could provide to clients and became absolutely intrigued with it. And what – was it my primary ambition in life to be in the financial services sector? I can definitively say no, but through the circumstance of a game that I love to play and be part of, I was introduced to, through an internship, and actually fell in love with it. RITHOLTZ: Quite interesting. And alternative investments at Blackrock almost seems like a contradiction in terms. Most of us tend to think of Blackrock as the giant $9 trillion public markets firm best known for ETFs and indices. Alternatives seems to be one of the fastest-growing groups within the firm. This was $50 billion just a few years ago, it’s now over 300 billion. How has this become such a fast-growing part of BlackRock? CONWAY: When you look at the various facets which you introduced at the start, Barry, we’ve actually been an alternatives – will be of 30 years now. Now, the scale, as you know, which you can operate on the beta side of business, far surpasses that on the alpha side. For us, throughout the years, this was very much about how can we deliver investment excellence to our clients and performance? Therefore, going an opportunity somewhere else to explore an alpha opportunity in alternatives. And I think being so connected to our clients understanding, that this pivots was absolutely taking place at only 30 years ago but in a very pronounced way today, you know, we continue to invest in this business to support those ambitions. They’re clearly seeing this as the world of going through a tremendous amount of transformation and with some of the challenges, quite frankly, in the traditional asset classes, being able to leverage at BlackRock, the Blackrock muscle to really explore these alpha opportunities across the various alternative asset classes that in our mind wasn’t imperative. And the imperative, really, is from the firm’s perspective and if you look at our purpose, it’s to serve the client. So the need was coming from them. The necessity to have alternatives and their whole portfolio was very – was very much growing in prominence. And it’s taken us 30 years to build this journey and I think, Barry, quite frankly, we’re far from being done. As you look at the industry, the demand is going to continue to grow. So, I think you could expect to see from us a continued investment in the space because we don’t believe you can live without alternatives in today’s world. RITHOLTZ: That’s really – that’s really interesting. So let’s dive a little deeper into the product strategy for alternatives which you are responsible for at BlackRock. Our audiences is filled with potential investors. Tell them a little bit about what that strategy is. CONWAY: So we’re – I think as you mentioned, we’re in excess of 300 billion today and when we started this business, it was less about building a moat around private equity or real estate. I think Larry Fink’s and Rob Kapito’s vision was how do we build a platform to allow us to be relevant to our clients across the various alternative asset classes but also within the – within the confines of what they are permitted to do on a year-by-year basis. So, to always be relevant irrespective of where they are in their journey from respect of liabilities, demand for liquidity, demand for returns, so we took a different approach. I think, Barry, to most, it was around how do we scale into the business across, like you said, real estate equity and debt, infrastructure equity and debt. I mean, we think of that as the real assets platform of our business. Then you take our private equity capabilities both in primary investing, secondary et cetera, and then you have private credits and a very significant hedge fund platforms. So we think all of these have a real role and depending on clients liquidities and risk appetite, our goal was, to over the years, really build in to this to allow ourselves for this challenging needs that our clients have. I think as an industry, right, and over the many years alternatives have been in existence, this is been about return enhancement initially. I think, fundamentally, the changes around the receptivity to the role of alternatives in a client’s portfolio has really changed. So, we’ve watched it, Barry, from this is we’re in the pursuit of a very total return or absolute return type of an objective to now resilience in our portfolio, yield an income. And so things that probably weren’t perceived as valuable in the past because the traditional asset classes were playing a more profound role, alternatives have stepped up in – in many respects in the need to provide more than just total return. So, we’re taking the approach of how do you have a more holistic approach to this? How do we really build a global multi-alternatives capability and try to partner and I think that’s the important work for us. Try to partner with our clients in a way that we can deliver that outperformance but delivered in a way that probably our clients haven’t been used to in this industry before. Because unfortunately, as we know, it has had its challenges with regard to secrecy, transparency, and so many other aspects. We need to help the industry mature. And really that was our ambition. Put our client’s needs first, build around that and really be relevant in all aspects of what we’re doing or trying to accomplish on behalf of the people that they support and represent. RITHOLTZ: So, we’ll talk a little bit about transparency and secrecy and those sorts of things later. But right now, I have to ask what I guess is kind of an obvious question. This growth that you’ve achieved within Blackrock for nonpublic asset allocation within a portfolio, what is this coming at expense of? Are these dollars that are being moved from public assets into private assets or you just competing with other private investors? CONWAY: It’s really both. What – what you are seeing from our clients – if I take a step back, today, the institutional client community and you think about the – the retirement conundrum we’re all facing around the world. It’s such an awful challenge when you think how ill-prepared people are for that eventual stepping back from the workplace and then you know longevity is your friend, but can also be a very, very difficult thing to obviously live with if you’re not prepared for retirement. The typical pension plan today are allocating about 25 percent to 28 percent in alternatives. Predominantly private market. What they’re telling us is that’s increasing quite substantially going forward. But you know, the funding for that alpha pursue for that diversification and that yield is coming from fixed-income assets. It’s coming from equity assets. So there’s a real rebalancing that’s been taking place over the past number of years. And quite frankly, the evolution, and I think the innovation that’s taken place particularly in the past 10 years, alternatives has been really profound. So the days where you just invest in any global funds still exist. But now you can concentrate your efforts on sector exposure, industry exposures, geographic exposures, and I think the – the menu of things our clients can now have access to has just been so greatly enhanced at and the benefit is that but I think in some – in some respects, Barry, the next question is with all of those choices, how do you build the right portfolio for our client’s needs knowing that each one of our client’s needs are different? So, I would say it absolutely coming from the public side. We’re very thankful. Those that had a multiyear journey with us in the public side are now allocating capital to is now the private side to because I do think the – the industry given that change, given that it evolution and given the complexity of these private assets, our clients are looking to, quite frankly, do more with fewer managers because of the complexion of the industry and complexity that comes with it. RITHOLTZ: Quite – quite interesting. (UNKNOWN): And attention RIA’s. 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I think what we’ve all realized is that at times when volatility introduces itself which is frequent even independent of what’s been done from a fiscal and monetary standpoint, that these Alpha speaking strategies on the traditional side still make a lot of sense. And so, as we think about what – what’s happening here, the transition of assets from both passive and active strategies to alternative, it – it’s really to create better balance. It’s not that there’s – there’s a lack of relevance anymore in the public side. It’s just quite frankly the growth of the private asset base has grown so substantially. I moved, Barry, to the U.S. in 1998. And it’s interesting, when you look back at 1998 to today, you start to recognize the equity markets and what was available to invest in. The number of investable opportunities has shrunk by 40 plus percent which that compression is extraordinarily high. But yet you’ve seen, obviously, the equity markets grow in stature and significance and prominence but you’re having more concentration risk with some of the big public entities. The converse is true, though on the – on the private side. There’s this explosion of enterprise and innovation, employment creation, and then I believe opportunities has been real. So, I look at the public side, the investable universe is measured in the thousands and the private side is measured in the millions. RITHOLTZ: Wow. CONWAY: And I think part of the – part of the part of the thing our clients are not struggling with but what we’re really recognizing with – with enterprises staying private for longer, if not forever, and with his growth of the opportunities that open debt and equity in the private market side, you really can’t forgo this opportunity. It has to be part of your going forward concerns and asset allocation. And I think this is why we’re seeing that transformation. And it’s not because equities on fixed income just aren’t relevant anymore. They’re very relevant but they’re relevant now in a total portfolio or a whole portfolio context beside alternatives. RITHOLTZ: So, let’s discuss this opportunity set of alternatives where you guys at Blackrock scene demand what sectors and from what sorts of clients? Is this demand increasing? CONWAY: We’re very fortunate, Barry. Today, there isn’t a single piece of our business within – within Blackrock alternatives that isn’t growing. And quite frankly too, it’s really up to us to deliver on the investment objectives that are set forth for those clients. I think in the back of strong absolute and relative performance, thankfully, our clients look to us to – to help them as – as they think about what they’re doing and as they’re exploring more in the alternatives areas. So, as you know, certainly, the private equity and real estate allocations are quite mature in many of our client’s portfolios but they’ve been around for many decades. I think that the areas where we’re seeing – that’s called an outside demand and opportunity set, just but virtue of the small allocations on a relative basis that exist today is really around infrastructure, Barry, and its around private credits. So, to caveat that, I think all of the areas are certainly growing, and thankfully, for us that’s true. We’re looking at clients who we believe are underinvested, we believe they’re underinvested in those asset classes infrastructure both debt and equity and in private credit. And as you think about why that is, the attributes that they bring to our client is really important and in a world where your correlation and understanding those correlations is important that these are definitely diversifying assets. In a world where you’re seeing trillions of dollars, quite frankly, you’re providing little to no or even there’s negative yield. Those short falls are real and people need yield than need income. These assets tend to provide that. So the diversification, it comes from these assets. The yield can come from these assets and because of the immaturity of the asset classes, independence of the capital is flowing in, we still consider them relatively white space. You’re not crowded out. There’s much room for development in the market and with our client’s portfolios. And to us, that’s exciting because it presents opportunities. So, at the highest level, they’re the areas where I believe are most underdeveloped in our clients. RITHOLTZ: So let’s talk about both of those areas. We’ll talk about structured credit in a few minutes. I think everybody kind of understands what – what that is. What – when you see infrastructure as a sector, how does that show up as an investment are – and obviously, I have infrastructure on the brink because we’re recording this not too long after the giant infrastructure bill has been passed, tell us a little bit about what alternative investments in infrastructure looks like? CONWAY: Yes. It’s really in its infancy and what the underlying investments look like. I think traditionally, you would consider it as – and part of the bill that has just been announced, roads, bridges, airports. Some of these hard assets, some of the core infrastructure investments that have been around for actually some time. The interesting thing is the industry has evolved so much and put the need for infrastructure. It’s so great across both developed and emerging economies. It’s become something that if done the right way, the attributes we just spoke of can really have a very strong effect on our client’s portfolios. So, beyond the core that we just mentioned, well, we’ve seen a tremendous demand as a result of this energy transition. You’re really seeing a spike in activity and the necessity transition industry to cleaner technologies, a movement, not away completely from fossil fuel but integrating new types of clean energy. And as a result, you’ve seen a lot of demand on a global basis for wind and solar. And quite frankly, that’s why even us at BlackRock, albeit, 10-12 years ago, we really established a capability there to help with that transition to think about how do we use these technologies, solar panels, wind farms, to generate clean forms of energy for utilities where in some cases they’re mandated to procure this type of this type of – this type of power. And when you think about pre-contracting with utilities for long duration, that to me spells, Barry, good risk mitigation and management and ability to get access to clean forms of energy that throw off yield that can be very complementary to your traditional asset classes but for very long periods of time. And so, the benefits for us of these – these assets is that they are long in duration, they are yield enhancing, they’re definitely diversifying. And so, for us, where – we’ve got about, let’s call this 280 assets around the world that we’re managing that literally generate this – this clean electricity. I think to give the relevance of how much, I believe today, it’s enough to power the country of Spain. RITHOLTZ: Wow. CONWAY: And that’s really that’s really changing. So you’re seeing governments – so from a policy standpoint, you’re seeing governments really embracing new forms of energy, transitioning out of bunker fuels, for example, you know, burning diesels which really spew omissions into the – into the into the environment. But it’s really around modernizing for the future. So, developed and emerging economies alike, want to retain capital. They want to attract new capital and by having the proper infrastructure to support industry, it’s a really, really important thing. Now, on the back of that too, one things we’ve learned from COVID is that the necessity to really bring e-commerce into how you conduct your business is so important and I think from the theme of digitalization within infrastructure to is a huge part. So, it’s not just the energy transition that you’re seeing, it’s not just roads and bridges, but by allowing businesses to connect to a global consumer, allowing children be educated from home, allowing experiences that expand geographies and boundaries in a digital form is so important not just for commerce but in so many other aspects. And so, you think about cable, fiber optics, if you think about all the other things even outside of power, that enable us to conduct commerce to educate, there are many examples where, Barry, you can build resilience into your portfolio because that need is not measured in years. Actually, the shortfall of capital is measured in the trillions so which means this is – this is a multi-decade opportunity set from our vantage point and one of which our clients should really avail of. RITHOLTZ: Quite interesting. And I mentioned in passing, structured credit, tell us a little bit about what that opportunity looks like. I think of this as a space that is too big for local banks but too small for Wall Street to finance. Is that an oversimplification? What is going on in that space. CONWAY: I probably couldn’t have set it better, Barry. It’s – if we go back to just the even the investable universe, in the tens of thousands of companies, just if we take North America that are private, that have great leadership that really have strategic vision under – at the – in some cases, at the start of their growth lifecycles are even if they maintain, they have a very credible and viable business for the future they still need capital. And you’re absolutely right. With the retreat of the banks from the space to various regulations that have come after the global financial crisis, you’re seeing the asset managers in many respects working behalf of our clients both wealth and institutional becoming the new lenders of choice. And – and when we – when we think about that opportunity set, that is really understanding the client’s desire for risk or something maybe in a lower risk side from middle-market lending or midmarket enterprises where you can support that organization through its growth cycle all the way to some higher-yielding, obviously, with more risk assets on the opportunistic or even the special situations side. But it – it expands many things. And going back of the commentary around the evolution of the space, private credit today and what you can do has changed so profoundly, it expands the liquidity spectrum, it expands the risk spectrum. And the great news is, with the number of companies both here and abroad, the opportunities that is – it’s being enriched every single day. And were certainly seeing, particularly going back to the question are some of these assets coming from the traditional side, the public side. When we think of private credit, you are seeing private credit now been incorporated in fixed-income allocations. This is a – it’s a yelling asset. This is – these are debt instruments, these are structures that we’re creating. We’re trying to flexible and dynamic with these clients. But it really is an area where we think – it really is still at its – at its infancy relevant to where it can potentially be. RITHOLTZ: That’s really quite – quite interesting. (UNKNOWN): It’s Rob Riggle. I’m hosting Season 2 of the iHeart radio podcast, Veterans You Should Know. You may know me as the comedic actor from my work in the Hangover, Stepbrothers or 21 Jump Street. But before Hollywood, I was a United States Marine Corps officer for 23 years. For this Veterans Day, I’ll be sitting down with those who proudly served in the Armed Forces to hear about the lessons they’ve learned, the obstacles they’ve overcome, and the life-changing impact of their service. Through this four-part series, we’ll hear the inspiring journeys of these veterans and how they took those values during their time of service and apply them to transition out of the military and into civilian life. Listen to Veterans You Should Know on the iHeart radio app, Apple Podcast or wherever you get your podcast. RITHOLTZ: Let’s stick with that concept of money rotating away from fixed income. I have to imagine clients are starved for yields. So what are the popular substitutes for this? Is it primarily structured credit? Is it real estate? How do you respond to an institution that says, hey, I’m not getting any sort of realistic coupon on my bonds, I need a substitute? CONWAY: Yes. It’s all of those in many respects. And I think to the role, even around now a time where people have questions around inflation, how do substitute this yield efficiency or certainly make up for that shortfall, how do you think about a world where increasingly seeing inflation, not of the transitory thing it feels certainly quasi-permanent. These are a lot of questions we’re getting. And certainly, real estate is an is important part of how they think about inflation protection, how client think about yield, but quite frankly too, we’ve – we’ve gone through something none of us really had thought about a global pandemic. And as I think about real estate, just how you allocate to the sector, what was very heavily influenced with retail assets, high street, our shopping behaviors and habits have changed. We all occupied offices for obviously many, many years pre the pandemic. The shape of how we operate and how we do that has changed. So, I think some of the underlying investment – investments have changed where you’ve seen heavily weighted towards office space to leisure, travel in the past. Actually, now using a rotation in some respects out of those, just given some of the uncertainties around what the future holds as we come – come through a really difficult time. But the great thing about this sector is between senior living, between student housing, between logistics and so many other parts, there are ways in real estate to capture where there’s – where there’s demand. So still a robust opportunity set and it – and we do think it can absolutely be yield enhancing. We mentioned infrastructure. Even if you think about – and we mention OECD and non-OECD, emerging and developed, when I think about Asia, in particular, just as a subset of the world in which we’re living in, that is a $2.6 trillion alternative market today growing at a 15 percent CAGR. And quite frankly, the old-growth is driven by the large economic growth in the region. So, even from a regional perspective, if we pivot, it houses 57 percent of the world’s population and yet delivers 47 percent of the world’s economic growth. So, think of that and then with regard to infrastructure and goes back to that, this is truly a global phenomenon. So if we just even take that sector, Barry, you’ll realize that the way to maintain that type of growth, to attract capital, to keep capital, it really requires an investment of significant amount of money to be able to sustain that. And when you have 42 million people in a APAC migrating to cities in the year going back to digitalization, that’s an important thing. So, when I say we’re so much at the infancy in infrastructure, I really mean it. It can be water, it can be sewer systems, it can be digital, it can be roads, there’s so much to this. And then even down to the regional perspective, it’s a – it’s a need that doesn’t just exist in the U.S. So, for these assets, this tend to be long in duration. There’s both equity and debt. And on the debt side, quite frankly, very few outside of our insurance clients and their general account are taking advantage of the debt opportunity. And – and as we both know, to finance these projects that are becoming more plentiful every single day, across the world, including like, I said, in APAC in scale, there’s an opportunity in both sides. And I think that’s where the acid mix change happen. It’s recognizing that the attributes of these assets can have a role, the attributes of these assets can potentially replace some of these traditional assets and I think you’re going to see it grow. So, infrastructure to us, it’s really equity and debt. And then on the credit side, like I mentioned, again, too, it’s a very, very big and growing market. And certainly, the biggest area today from our vantage point is middle-market lending from a scale opportunity standpoint. So, we think much more to come in all of those spaces. RITHOLTZ: Really interesting. And let’s just stay with the concept of public versus private. That line is kind of getting blurred and the secondary markets is liquidity coming to, for lack of a better phrase, pre-public equities, tells little bit about that space. Is that an area that is ripe for growth for BlackRock? CONWAY: Yes. We absolutely think it is and you’re absolutely correct. The secondary market is – has grown quite substantial. If you even look at just the private equity secondary market and what will transact this year, I think it will be potentially in excess of 100 billion. And that’s what were clear, not to mention what will be visible and what will be analyzed. And that speaks to me what’s really happening and the innovation that we mentioned earlier. It’s no longer about just primary exposure. It’s secondary exposure. When we see all sort of interest and co-investment opportunities as well, I think the available sources of alpha and the flexibility you can now have, albeit if directed and advised, I believe the right way, Barry, can be very helpful and in the portfolio. So, your pre-IPO, it is a big part of actually what we do and we think about growth equity. There is – it’s a significant amount of capital following that space. Now, from our vantage point, as one of the largest investors in the public equity market and now obviously one of the largest investors and they in the private side, the bridge between – between private to public – there’s a real need. IPOs are not going away. And I think smart, informed capital to help with this journey, this journey is really – is really a necessity and a need. RITHOLTZ: So let’s talk a little bit about this recent restructuring. You are first named Global Head of Blackrock Alternative Investors in April 2019, the entire alternatives business was restructured, tell us a little bit about how that restructuring is going? CONWAY: Continues to go really well, Barry. When you look at the flow of acid from our clients, I think, hopefully, that’s speaks to the performance we’ve been generating. I joined the firm, as you know, albeit, 11 years ago and being very close to the alternative franchise as a critical thing for me and running the institutional platform. To me, when you watched this migration of asset towards alternatives, it was obviously very evident for decades now that this is a critical leg of the stool as our clients are thinking about their portfolios. We’re continuing to innovate. We’re continuing to invest, and thankfully, we’re continuing to deliver strong performance. We’re growing at about high double digits on an annual basis but we’re trying to purposeful too around where that growth is coming from. I think the reality is when you look at the competitive universe, I think the last number I saw, it was about 38,000 alternative asset managers out there today, obviously, coming from hedge funds all the way to private credits and private equity. So, competition is real and I do think the outcomes for our clients are starting to really grow. Unfortunately, some – in some cases, obviously, very good, and in some cases, actually not great. So our focus, Barry, is really much on how can we deliver performance, how can we be a partner? And I think we been rewarded with a trust and the faith our clients have in us because they’re seeing something different, I think, from us. Now, the scale of the business that you mentioned earlier really gives us tentacles into the market that I believe allows us to access what I think is the new alpha which is in many respects, given the heft of competition sourcing and originating new investments is certainly harder but for us, sitting in or having alternative team, sitting in 50 offices around the world, really investing in the markets because that – the market they grew up with and have relationships within, I think this network value that we have is something that’s quite special. And I think in the world that’s becoming increasingly competitive, we’re going to continue to use and harness that network value to pursue opportunities. And thankfully, as a result of the partnership we’ve been pursuing with her clients, like, we’ve – we’re certainly looking for opportunities and investments in our funds. But because of the brand, I think because of the successes, opportunities seeks us as much as we seek opportunity and that has been something that we look at an ongoing basis and feel very privileged to actually have that inbound flow as well. RITHOLTZ: Really quite interesting. There was a quote of yours I found while doing some prep for this conversation that I have to have you expand on. Quote, “The relationship between Blackrock’s alternative capabilities and wealth firms marked a large opportunity for growth in the coming years.” This was back in 2019. So, the first part of the question is, was your expectations correct? Did you – did you see the sort of growth you were hoping for? And more broadly, how large of an opportunity is alternatives, not just for BlackRock but for the entire investment industry? CONWAY: Yes. It’s been very much an institutional opportunity set up until now. And there’s so much to be done, still, to really democratize alternatives and we certainly joke around making alternatives less alternative. Actually, even the nomenclature we use and how we describe it doesn’t kind of make sense anymore. It’s such a core – an important allocation to our clients, Barry, that just calling it alternative seems wrong. Just about the institutional clients. It ranges, I think, as I mentioned on our – some of our more conservative clients which would be pension plans which really have liquidity needs on a monthly basis because of the liabilities they have to think about. At about 25 plus percent in private markets, to endowments, foundations, family offices, going to 50 percent plus. So, it’s a really important part and has been for now many years the institutional client ph communities outcomes. I think the thing that we, as an industry, have to change is alternatives has to be for the many, not for the few. And quite frankly, it’s been for the few. And as we talked about some of the attributes and the important attributes of these asset classes to think that those who have been less fortunate in their careers can’t access, things they can enrich their future retirement outcomes, to me, is a failing. And we have to address that. That comes from regulation changes, it comes from structuring of new products, it comes from education and it comes from this knowledge transmission where clients in the wealth segment can understand the role of alternatives and the context of what can do as they invest in equities and fixed income too. And we think that’s a big shortfall. So, the journey today, just to give you a sense, as we look at her clients in Europe on the wealth side, on average, as you look from what we would call the credited investors all the way through to more ultra-high-net worth individuals, their allocation to alternatives, we believe, stands at around two to three percent of their total portfolio. In the U.S., we believe it stands at three to five. So, most of those intermediaries, we speak to our partners who were more supporting and serving the wealth channel. They have certainly an ambition to help their clients grow that to 20 percent and potentially beyond that. So, when I look at that gap of let’s call it two to three to 20 percent in a market that just given the explosion in wealth around the world, I think the last numbers I saw, this is a $65 trillion market. RITHOLTZ: Wow. CONWAY: That speaks to the shortfall relative to the ambition. And how’s it been going? We have a number of things and capabilities we’ve set up to allow for this market to experience, hopefully, private equity, hedge funds, credit, and an infrastructure in ways they haven’t in the past. We’ve done this in the U.S., we’re doing it now in Europe, but I will say, Barry, this is still very much at the start of the journey. Wealth is a really important part of our future given our business, quite, frankly is 90 plus percent institutional today, but we’re looking to change that by, hopefully, democratizing these asset classes and making it so much more accessible in that of the past. RITHOLTZ: So, we hinted at this before but I’m going to ask the question outright, how significant is interest rates to client’s risk appetites, how much of the current low rate environment are driving people to move chunks of their assets from fixed income to alternatives? CONWAY: It’s really significant, Barry. I think the transition of these portfolios is quite profound, So you – and I think the unfortunate thing in some respects as this transition happens that you’re introducing new variables and new risks. The reason I say it’s unfortunate and that I think as an industry, this goes back to the education around the assets you own, understanding the role, understanding the various outcomes. I think it’s so incredibly important and that this the time where complete transparency is needed. And quite frankly, we’re investing capital that’s not ours. As an industry, we’re investing our client’s assets and they need to know exactly the underlying investments. And in good and bad times, how would those assets behave? So certainly, interest rates are driving a flow of capital away from these traditional assets, fixed-income, and absolutely in towards real estate, infrastructure, private creditors, et cetera, in the pursuit of this – this yield. But I do – I do think one of the things that’s critically important for the institutional channel, not just the wealth which are newer entrants is this transmission of education, of data because that’s how I think you build a better balanced portfolio and that’s a – that’s a real conundrum, I think, that the industry is facing and certainly your clients too. RITHOLTZ: Quite interesting. So let’s talk a little bit about the differences between investing in the private side versus the public markets, the most obvious one has to be the illiquidity. When you buy stocks or bonds, you get a print every microsecond, every tick, but most of these investments are only marked quarterly or annually, what does this illiquidity do when you’re interacting with clients? How do you – how do you discuss this with them in and how do perceive some of the challenges of illiquid investments? CONWAY: Over the – over the past number of decades, I think our clients have largely held too much liquidity in their portfolios. Like, so what we are finding is the ability to take on illiquidity risk. And obviously, in pursuit of that premium above, the traditional markets, I mean, I think the sentiment they are is it an absolute right one. That transition towards private market exposure, we think is an important one just given the return objectives, the majority of our clients’ need but then also again, most importantly now, with geo policy, with uncertainty, with interest rate uncertainty, inflation uncertainty, I mean, the – going back to the resilience point, the characteristics now by introducing these assets into the mix is important. And I think that’s – that point is maybe what I’ll expand on. As were talking to clients, using the Aladdin systems, and as you know, we bought eFront technologies, albeit a couple of years ago, by allowing, I think, great data and technology to help our clients understand these assets and the context of how they should own them relative to other liquidity needs, their risk tolerances, and the return expectations are really trying to use tech and data to provide a better understanding and comprehension of the outcomes. And as we continue to introduce these concepts and these approaches, by the way, that there is, as you know, so used to in the traditional side, it – it gives them more comfort around what they should and can expect. And that, to me, is a really important part of what we’re doing. So, we’ve released recently new technology to the wealth sector because, quite frankly, we mentioned it before, the 60-40 portfolio is a thing of the past. And that introduction of about 20 percent into alternatives, we applaud our partners who are – who are suggesting that to their clients. We think it’s something they have to do. What we’re doing to support that is really bringing thought leadership, education, but also portfolio construction techniques and data to bear in that conversation. And this goes back to – it’s no longer an alternative, right? This is a core allocation so the comprehension of what it is you own, the behavior of the asset in good and bad times is so necessary. And that’s become a very big thing with regard to our activities, Barry, because your clients are looking to understand better when you’re talking about assets that are very complex in their nature. RITHOLTZ: So, 60-40 is now 50-30-20, something along those lines? CONWAY: Yes. RITHOLTZ: Really, really intriguing. So, what are clients really looking for these days? We talked about yield. Are they also looking for downside protection on the equity side or inflation hedges you hinted at? How broad are the demands of clients in the alternative space? CONWAY: Yes. It ranges the gamut. And even – we didn’t speak to even hedge funds, we’ve had differing levels of interest in the hedge fund world for years and I, quite frankly, think some degree of disappointment too, Barry, with regard to the alpha, the returns that were produced relevant to the cost. RITHOLTZ: It’s a tough space to say the very least exactly. CONWAY: Exactly right. But when you start to see volatility introducing itself, you can really see where skill plays a critical factor. So, we are absolutely seeing, in the hedge fund, a resurgence of interest and demand by virtue of those who really have honed in on their scale, who have demonstrated an up-and-down markets and ability to protect and preserve capital, but importantly, in a low uncorrelated way build attractive risk-adjusted returns. We’re starting to see more activity there again too. I think with an alternatives, you’ve really seen a predominant demand coming from privates. These private markets, like a set of growths so extraordinarily fast and the opportunities that is rich, the reality too on the public side which is where our hedge funds operate, they continue to, in large part, do a really good job. The issue with our industry now with these 38,000 managers is how do you distill all the information? How do you think about your needs as a client and pick a manager who can deliver the outcomes? And just to give you a sense, the difference now between a top-performing private equity manager, a top quartile versus the bottom quartile, the difference can be measured in tens of percent. RITHOLTZ: Wow. CONWAY: Whereas if you look at the public equity side, for example, a large cap manager, top quartile versus bottom quartile is measured in hundreds of basis points. So, there is definitely a world that has started where the outcomes our clients will experience can be great as they pursue yield, as they pursue diversification, inflation protection, et cetera. I think the caveat that I would say is outcomes can vary greatly. So manager underwriting and the importance of it now, I think, really is this something to pay attention to because if you do have that bottom performing at the bottom quartile manager, it will affect your outcomes, obviously. And that’s what we collectively have to face. RITHOLTZ: So, let’s talk a little bit about real estate. There are a couple of different areas of investment on the private side. Rent to own was a very large one and we’ve seen some lesser by the flip algo-driven approaches. Tell us what Blackrock is doing in the real estate space and how many different approaches are you bringing to bear on this? CONWAY: Yes, we think it’s both equity and debt. Again, no different to the infrastructure side, these projects need to be financed. But on the – as you think about the sectors in which you can avail of the opportunity, you’ve no doubt heard a lot and I mentioned earlier this demand for logistics facilities. The explosion of shopping online and having, until we obviously have the supply chain disruption, an ability to have nearly immediate satisfaction because the delivery of the good to your home has become so readily available. It’s a very different consumer experience. So the explosion and the need for logistics facilities to support this type of behavior of the consumer is really an area that will continue to be of great interest too. And then you think about the transformation of business and you think about the aging world. Unfortunately, you can look at various economies where our populations are decreasing. And quite frankly, we’re getting older. And so, were you’re thinking of the context of that senior living facilities, it becomes a really important part, not just as part of the healthcare solution that come with it, but also from living as well. So, single-family, multifamily, opportunities continue to be something that the world looks at because there is really the shortfall of available properties for people to live in. And as the communities evolve to support the growing age of the population, tremendous opportunity there too. But we won’t give up on office space. It really isn’t going away. Now, if you even think about our younger generation here in BlackRock, they love being in New York, they love being in London, they love being in Hong Kong. So, the shape and the footprint may change slightly. But the necessity to be in the major financial centers, it still exists. But how we weighed the risks has definitely changed, certainly, for the – for the short-term and medium-term future. But real estate continues to be, Barry, a critical part of how we express our thought around the investment opportunity set. But clients largely do this themselves too. The direct investing from the clients is quite significant because they too see this as still as a rich investment ground, albeit, one that has changed quite a bit as a result of COVID. RITHOLTZ: Well, I’m fascinated by the real estate issue especially having seen some massive construction take place in cities pre-pandemic, look over in Manhattan at Hudson Yards and look at what’s taking place in London, not just the center of London but all – but all around it and I’m forced to admit the future is going to look somewhat different than the past with some hybrid combination of collaborative work in the office and remote work from home when it’s convenient, that sort of suggests that we now have an excess of capacity in office space. Do you see it that way or is this just something that we’re going to grow into and just the nature of working in offices is changing but offices are not going away? CONWAY: Yes. I do think there’s – it’s a very valid point and that in certain cities, you will see access, in others we just don’t, Barry. And quite frankly, as a firm, too, as you know, we have adopted flexibility with our teams that were very fortunate. The technologies in which we created at BlackRock has just become such an amazing enabler, not just to help us as we mention manage the portfolios, help us a better portfolio construction, understand risks, but also to communicate with our clients. I think we’ve all witnessed and experienced a way to have connectivity that allows them to believe that commerce can exist beyond the boundaries of one building. However, I do look at our property portfolios and even the things that we’re doing. Rent collections still being extraordinarily high, occupancy now getting back up to pre-pandemic levels, not in all cities, but in many of the major ones that have reopened. And certainly, the demand for people to just socialize, that the demand for human connectivity is really high. It’s palpable, right? We see it here too. The smiles on people’s faces, they’re back in the office, conversing together, innovating together. When people were feeling unsafe, unquestionably, I think the question marks around the role of office space was really brought to bear. But as were coming through this, as you’ve seen vaccine rates change, as you’ve seen the infection rates fall, as you’ve seen confidence grow, the return to work is really happening and return to work to office work is really happening, albeit, now with degrees of flexibility. So, going back to the – I do believe in certain areas. You’re seeing a surplus. But in many areas you’re absolutely seeing a deficit and the reason I say that, Barry, is we are seeing occupancy in certain building at such a high level. And frankly, the demand for more space being so high, it’s uneven and this goes back to then where do you invest our client’s capital, making sense of those trends, predicting where you will see resilience versus stress and building that into the portfolio of consequences as you – as you better risk manage and mitigate. RITHOLTZ: Very interesting. And so, we are seeing this transition across a lot of different segments of investing, are you seeing any products that were or – or investing styles that was once thought of as primarily institutional that are sort of working their way towards the retail side of things? Meaning going from institutional to accredited to mom-and-pop investors? CONWAY: Well, certainly, in the past, private equity was really an asset class for institutional investors. And I think that’s – that has changed in a very profound way. I mentioned earlier are the regulation has become a more adaptive, but we also have heard, in many respects, in providing this access. And I think the perception of owning and be part of this illiquid investment opportunity set was hard to stomach because many didn’t understand the attributes and what it could bring and I think we’ve been trying to solve for that and what you’re seeing now with – with regulators, understanding that the difference between if we take it quite simply as DD versus DC, the differences between the options you as a participant in a retirement plan are so vastly different that – and I think there’s a broad recognition now that there needs to be more equity with regard to what happens there. And private equity been a really established part of the alternatives marketplace was once, I think, really believed to be an institutional asset class, but albeit now has become much more accessible to wealth. We’ve seen it by structuring activities in Europe working with the regulators. Now, we’re able to provide private equity exposure to clients across the continent and really getting access to what was historically very much an institutional asset class. And I do think the receptivity is extraordinarily high just throughout people’s careers, they have seen wealth been created as a result of engineering a great outcome with great management teams integrate business. And I do believe the receptivity towards private equity is high as an example. In the U.S., too, working with the various intermediaries and being able to wrap now private equity in a ’40 Act fund, for example, is possible. And by being able to deliver that to the many as opposed to the few, we think has been a very good success story. And I think, obviously, appreciated by our clients as well. So, I would look at that were seeing across private equity as well as private credit and quite frankly infrastructure accuracy. You’re seeing now regulation that’s becoming more appreciative of these asset classes, you’re seeing a more – a greater level of openness and willingness to allow for these assets to be part of many people’s experiences across their investment portfolio. And now, with innovation around structures, as an industry, were able to wrap these investments in a way that our clients can really access them. So, think across the board, it probably speaks the innovation that’s happening but I do think that accessibility has changed in a very significant way. But you’ve really seen it happen in private equity first and now that’s expanding across these various other asset classes. RITHOLTZ: Quite intriguing. I know I only have you for a relatively limited period of time, so let’s jump to our favorite questions that we ask all of our guests. Starting with tell us what you’ve been streaming these days. Give us your favorite Netflix or Amazon Prime shows. CONWAY: That is an interesting question, Barry. I don’t a hell of a lot of TV, I got to tell you. I am – I keep busy with three wonderful children and a beautiful wife and between the sports activities. When I do watch TV, I have to tell you I’m addicted to sports and having – I may have mentioned earlier, growing up playing rugby which is not the most common sport in the U.S., I stream nonstop the Six Nations that happens in Europe where Ireland is one of those six nations that compete against each other on an annual basis. Right now, they’re playing a lot of sites that are touring for the southern hemisphere. And to me, the free times I have is either enjoying golf or really enjoying rugby because I think it’s an extraordinary sport. Obviously, very physical, but very enjoyable to watch. And that, that truly is my passion outside of family. RITHOLTZ: Interesting stuff. Tell us a bit about your mentors, who helped to shape your early career? CONWAY: Well, it even goes back to some of the aspects of sports. Playing on a team and being on a field where you’re working together, there’s a strategy involved with that. Now, I used to really appreciate how we approach playing in the All-Ireland League. How we thought about our opponents, how we thought about the structure, how we thought about each individual with on the rugby field and the team having a role. They’re all different but your role. And actually, even starting from an early age, Barry, thinking about, I don’t know, it’s sports but how to build a great team with those various skills, perspective, that can be a really, really powerful combination when done well. And certainly, from an early age, that allowed me to appreciate that – actually, in the work environment, it’s not too different. You surround yourself with just really great people that have high integrity that are empathetic and have a degree of humility that when working together, good things can happen. And I will say, it really started at sports. But I think of today and even in BlackRock, how Larry Fink thinks about the world and I think Larry, truly, is a visionary. And then Rob Kapito who really helps lead the charge across our various businesses. Speaking and conversing with them on a daily basis, getting their perspectives, trying to get inside your head and thinking about the world from their vantage point. To me, it’s a huge thing about my ongoing personal career and development and I really enjoy those moments because I think what you recognize is independent of how much you think you know, there’s so much more to know. And this journey is an ever evolving one where you have to appreciate that you’ll never know everything and you need to be a student every single day. So, I’d probably cite those, Barry, as certainly the two most important mentors in my life today, professionally and personally quite frankly. RITHOLTZ: Really. Very interesting. Let’s talk about what you’re reading these days. Tell us about some of your favorite books and what you’re reading currently? CONWAY: Barry, what I love to read, I love to read history, believe it or not. From a very small country that seems to have exported many, many people, love to understand the history of Ireland. So, there’s so many books. And having three children that have been born in the U.S. and my wife is a New Yorker, trying to help them understand some of their history and what made them what they are. I love delving into Irish history and how the country had moments of greatness and moments of tremendous struggle. Outside of that, I really don’t enjoy science fiction or any of these books. I love reading, you name any paper and any magazine on a daily basis. Unfortunately, I wake at about 4:30, 5 o’clock every day. I spent my first two hours of the day just consuming as much information as possible. I enjoy it. But it’s all – it’s really investment-related magazines, not books. It’s every paper that you could possibly imagine, Barry, and I just – I have a great appreciation for certainly trying to be a student of the world because that’s what we’re operating in an I find it just a very interesting avenue to get an appreciation to for the, not just the opportunities, but the challenges we’re collectively facing as a society but also as a business. RITHOLTZ: I’m with you on that mass consumption of investing-related news. It sounds like you and I have the same a morning routine. Let’s talk about of what sort of advice you would give to a recent college graduate who was interested in a career of alternative investments? CONWAY: Well, the industry has – it’s just gone through such extraordinary growth and the difference, when I’ve started versus today, the career opportunity set has changed so much. And I think I try to remind anyone of our analysts who come into each one of our annual classes, right, as we bring in the new recruits. I think about how talented they are for us, Barry, and how privileged we all are to be in this industry and work for the clients that we do. It’s just such an honor to do that. But I kind of – I try to remind them of that. At the end of the day, whether you’re supporting an institution, that institution is the face of many people in the background and alternatives has really now become such an important part of their experience and we talked about earlier just this challenge of retirement, if we do a good job, these institutions that support the many, they can have, hopefully, a retirement that involves dignity and they can have an ability to do things they so wanted to do as they work so hard over their lives. Getting that that personal connection and allowing for those newbies to understand that that’s the effect that you can have, an alternatives whether it’s private equity, real estate, infrastructure, private credit, hedge funds, all of these now, with the scale at which they’re operating at can allow for a great career. But my advice to them is always don’t forget your career is supporting other people. And that comes directly to how we intersect with wealth channel, it comes indirectly as a result of the institutions. And it’s such a privilege to do that. I didn’t envision when I grew up, as I mentioned, my first job, milking cows and back in a small town in the middle of Ireland that I would be one day leading an alternatives business within BlackRock. I see that as a great privilege. So, for those who are joining afresh, hopefully, try to remind them that it is for all of us and show up with empathy, dignity, compassion, and do the best you can, and hopefully, these people be sure will serve them well. RITHOLTZ: And our final question, what you know about the world of alternative investing today you wish you knew 25 years or so ago when you were first getting started? CONWAY: I think if we had invested much more heavily as an industry in technology, we would not be in the position we are today. And I say that, Barry, from a number of aspects. I mentioned in this shortfall of information our clients are dealing with today. They’re making choices to divest from one asset class to invest in another. To do that and do that effectively, they need great transparency, they needed real-time in many respects, it can’t be just a quarterly line basis. And if we had been better prepared as an industry to provide the technology and the data to help our clients really appreciate what it is they own, how we’re managing the assets on their behalf, I think they would be so much better served. I think we’re very fortunate at this firm to have built a business on the back of technology for albeit 30 plus years and were investing over $1 billion a year in technology as I’m sure you know. But we need to see more of that in the industry. So, the client experience is so important, stop, let’s demystify alternatives. It’s not that alternative. Let’s provide education and data and it’s become so large relative to other asset classes, the need to support, to educate, and transmit information, not data, information, so our client understand it, is at a paramount now. And I think it certainly as an industry, things have to change there. If I knew how big the growth would have been and how prominent these asset classes were becoming, I would oppose so much harder on that front 30 years ago. RITHOLTZ: Thank you, Edwin, for being so generous with your time. We’ve been speaking with Edwin Conway. He is the head of Blackrock Investor Alternatives Group. If you enjoy this conversation, please check out all of our prior discussions. You can find those at iTunes, Spotify, wherever you get your podcast at. We love your comments, feedback and suggestions. Write to us at MIB You can sign up for my daily reads at Check out my weekly column at Follow me on Twitter, @ritholtz. I would be remiss if I did not thank the crack team that helps put these conversations together each week. Mohammed ph is my audio engineer. Paris Wald is my producer, Michael Batnick is my head of research, Atika Valbrun is our project manager. I’m Barry Ritholtz, you’ve been listening to Masters in Business on Bloomberg Radio.   ~~~   The post Transcript: Edwin Conway appeared first on The Big Picture......»»

Category: blogSource: TheBigPictureNov 22nd, 2021

SCOTT GALLOWAY: Higher education in the US has become un-American

Kids are still getting into college but are shuffled down to lower-tier schools that charge a top-tier price for a credential worth far less. Galloway says the rising costs of higher education is disastrous for lower- and middle-income Americans.Eva-Katalin/Getty Images Scott Galloway is a bestselling author and professor of marketing at NYU Stern. The following is a recent blog post, republished with permission, that originally ran on his blog, "No Mercy / No Malice." In it, Galloway discussed how inflation impacts access to colleges and universities.  In 1980 a gallon of gasoline cost $1.19. Today it's $3.41, a 2.7% annual increase. But undergraduate tuition has risen nearly three times as fast: 6.7% a year at public colleges, for an increase of nearly 1,400%. The greatest assault on middle-class America's prosperity may be the relentless, four-decade-long inflation in higher education. Student loan debt ($1.7 trillion) is now greater than credit card debt. And that doesn't account for the busted 401(k)s, second mortgages, and general financial oppression me and my colleagues have levied on lower- and middle-income households. The number of Americans who have more than $100,000 in student debt is greater than the population of Utah.(Note: Huge thanks to College101 and Stig Leschlyf for much of the data in this piece.)Scott GallowayThis sustained inflation has been devastating for lower- and middle-income households.Scott GallowayAnd this ability to raise prices faster than inflation is really impressive given the industry is one of the most heavily subsidized in the US. Scott GallowayHow did we get here?Higher education's ability to soak America is a function of limiting the supply of freshman seats at our best universities in concert with the continued fetishization of their brands. We can scale Salesforce, Facebook, and Google by 25% to 60% per annum, but we can't seem to bust above 1% per year at our great public universities. The top 200 schools in America educate only 10% of college attendees. And these universities raise prices in perfect lockstep, miraculously, resulting in millions of kids who get arbitraged to mediocre universities but pay an elite price. It's a cartel, enforced by the accreditation organizations, institutions who are as corrupt as the NCAA … minus the charm. Accreditation has teeth because it determines access to federally guaranteed student loans. And in the last 20 years, these organizations have blessed only 159 new institutions — most of them small and specialized schools — which have collectively grown total enrollment by less than 0.15% per year. The result is an ossified industry near void of real innovation, as … why would we?RejectionismAcceptance rates have plummeted, turning senior spring from a time of optimism and opportunity to one of anguish and sacrifice. Kids are still getting into college (total enrollment has kept pace with the growth in graduating seniors) but more and more are shuffled down to lower-tier schools that charge a top-tier price for a credential worth far less.College deans boast about low admissions rates. But if you accept five of every 100 applications, that's not a 5% admission rate. It's a 95% rejection rate.This is un-American. Despite well-publicized stories of billionaire college dropouts, a college education remains the most powerful tool for upward mobility. In my age cohort, it's common to hear people say of their alma mater, "I never would have gotten in today." Many of the same deans and administrators crowing over their sky-high rejection rates are enjoying lofty six-figure salaries, at 60, from institutions that would reject them if they were 18 today. They're immigrants who, on the day they're sworn in as citizens, vote to militarize the border.Just as we're beginning to sentence the insurrectionists, who didn't believe in democracy and wished to take power by force and deceit, we must also register the threat to America of rejectionists. These are institutions and people that unwittingly sequester upward mobility to the rich and freakishly remarkable … at 17. Elite school alumni who wish to pull up the ladder to prosperity behind them. Higher education decries insurrectionism, but it's ground zero for rejectionism.Rejectionism is cloaked in progressive policies. It's true that the student body at these institutions is more diverse than it was 40 years ago. And that's great. But it's not an excuse for maintaining a rejectionist posture. The mission is to expand opportunity, not reallocate elites. Bigotry is prejudice against a person or people on the basis of their membership of a particular group. Haven't we in higher education become bigoted against unremarkable kids from lower- and middle-income households?BloatToo much money has gone to the establishment of colleges' administrative super state. Virtually every other industry has leveraged technology and volume to create leverage (i.e., decreased the burden of overhead costs).Administration should not grow 1:1 with faculty or 3:1 with students. The Yale Daily News recently reported that, "the number of managerial and professional staff that Yale employs has risen three times faster than the undergraduate student body." Longtime professors described how burdensome and inefficient they found the swelled ranks of administrative functionaries. Elite schools are rife with recently created centers and departments that are noble in mission but have no measurable output. Many provide a way station or rest home for formerly important people or faculty who aren't pulling their weight.There are, to be fair, good reasons for increases in administration in targeted areas that need to be addressed. The greatest need is in mental health: 47% of college students are depressed, up from 23% in 2007; and only 40% of those depressed have received mental health treatment. Between 2007 and 2017, suicidal ideation among college students nearly doubled. Today, roughly 1 in 10 college students report that they've attempted suicide. Black college students are almost twice as likely to attempt suicide as their white peers. Trans students are three times as likely as their cisgender peers. But unchecked bureaucratic power is cancer even with the best intentions. Especially with the best intentions. Nobody wants to criticize a "center for diversity" or "sustainability." But to the extent exorbitant tuition is the product of an increased budget to build stronger support systems for a more diverse body of students, it isn't working.Scott GallowayAnd that's a kind interpretation, because student-directed programs are not where all the flab is to be found. At the Ivies, student services expenses as a share of total expenses have actually gone down since 2000 (from 4.8% to 4.4%). The real bloat at these schools is the inward-looking bureaucracy. Academic administration, executive management, business operations, and the like. Across the Ivy League, the share of total expenses allocated to institutional and academic support has gone from 19% in 2000 to 24% in 2020.At four-year colleges nationwide, it's bloat and more bloat. Between 2010 and 2018, spending on administration far outpaced instructional outlays. And there's one more place the bloat is endemic. Senior leadership salaries.Some examples: In 2018, after being ousted, USC President Max Nikias received a $7.7 million payout. He was one of a dozen university presidents to make more than $2 million that year. Even presidents of relatively unknown schools, including Bryant and Johnson & Wales, enjoy multimillion-dollar salaries. Many public college leaders register enormous paydays: Last year the president of the University of Kentucky made $1.7 million, the presidents of Texas A&M and the University of Florida each made $1.6 million, and another 13 clocked more than a million. Nearly all of the 100 highest-paid civil servants in Massachusetts are employed by (wait for it) the University of Massachusetts.Faculty and leadership should be paid well. But my boss at NYU, President Andrew Hamilton, makes over $2 million dollars per year. He donates $75,000 of it to a scholarship fund. In case you're wondering, I've returned all my NYU compensation for the past decade (#virtuesignalling). This isn't an option for most faculty.  Should Andy be making 16 times the average salary of an NYC school principal? The fiduciary boards of these institutions will claim they're victims of supply/demand and the market. Bullshit. We'd have a line out the door of applicants who would take a modest salary of … a million a year. Anyone who would take the job of university president for $2 million per year, but would turn it down for $1 million probably shouldn't be a university president. That $1 million per year could fund 12 undergrads' full-ride scholarships, or increase the number of freshman seats.What can be done?Private company leadership needs to increase the number of entry-level jobs based on a skills assessment, vs. certification (see above: fetishization of elite colleges). Develop relationships with local public institutions, including two-year schools, that charge modest tuition: That's where you'll find the unremarkables with the potential to become remarkable.State governments also have leverage. We need a Grand Bargain. In a time of scarcity, be bold. Offer to increase state system budgets, but demand that the enrollment grow faster than revenue, not the other way around. Every state should be aiming to increase undergraduate seats by 50% in the next decade.The FTC/DOJ should evaluate the accreditation cartel and the dollar-for-dollar price increases taken by supposedly competing universities over the past 40 years for compliance with antitrust law.Schools of all types should embrace distance learning and other technological tools. These are force multipliers, allowing the institutions to serve more students without building more ivy-covered temples to bloat.Nonprofit should mean public service, not a dragon's hoard of endowment riches. Schools with multibillion-dollar endowments should increase their class sizes or be taxed on endowment gains.The accreditation system should be revamped to encourage the founding of strong, public-service-minded, nonprofit institutions, not protect the incumbents.Dramatically increase student loan forgiveness programs. Canceling all student debt is a bad idea, rife with inequity and moral hazard. But our human capital is over-encumbered by debt incurred under false pretenses.Crimp the firehose of student loan money by putting schools on the hook for a portion of the bad debt; encourage Pell Grant acceptance; and invest in financial literacy for 18-year-olds being asked to make one of the most consequential financial decisions of their lives.74The best things in my life — kids who made headslist this semester, a supportive mate, and financial security that (generally) enables me to do whatever I want, whenever I want — are a function of one thing: 74. Specifically, in the eighties, UCLA had an acceptance rate of 74%. I (no joke) had to apply twice. I was the first person on either side of my family to graduate from high school, must less get to attend amazing institutions for undergraduate and graduate degrees. The cost? $7,000 (total) in tuition for a BA and an MBA.In addition, I was presented this opportunity as a function of being good, not great … much less remarkable. Higher ed catalyzed an upward spiral of prosperity for me and my family that's been good for the commonwealth — we love America and are good citizens.Today the acceptance rate at UCLA is 12%. Since I graduated, the number of graduating high school seniors in California has grown nearly twice as fast as the number of undergraduate seats at UCLA. To its credit, the UC system has announced plans to add 20,000 more seats to the system by 2030.At night, alone with the dogs, I hear voices. (No shit.) Not strange voices like the dogs telling me to head to Kroger's in my underwear. But the voices of millions of kids who have one question: "Boss, you got yours, where is mine? When do I get my shot?"  America is not about making the children of rich people and the remarkable billionaires, but giving everyone a shot at being a millionaire and/or making a contribution.  American higher ed has become un-American. We need to fall back in love with the unremarkables, and return to America.Life is so rich,ScottP.S. Making predictions can be dangerous. It might put you in the Twitter crosshairs of Elon Musk. Yet I carry on. Join my free Predictions livestream on December 7. You probably won't regret it.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderNov 19th, 2021

With buy now, pay later, millennials are most likely to feel the brunt of a post-holiday "financial hangover," expert says

A credit analyst says younger generations are more susceptible to overspending during the holidays, but it's also possible to "splurge strategically." Brothers91/Getty Images Millennials and Gen Z may not be as cautious with their finances going into the holiday season, report says. Younger shoppers are opting for buy now, pay later payment plans for their holiday shopping. A credit expert shares how to avoid incurring large expenses and debt with strategic planning. As pandemic stresses continue to subside, shoppers are ready to do some holiday spending — even if that means taking a significant hit to their bank accounts. A report from shows that millennial shoppers are more willing to go into debt to this holiday season than any other generation. The findings come amid a particularly strained holiday season, as supply shortages and shipping delays limit the amount of time available to make major purchases and inflation raises the cost of goods and services across the retail market.According to the report, 56% of millennials who celebrate the winter holidays are willing to go into the red while shopping for gifts. Additionally, 18% of surveyed millennials said they are likely to spend more this year than last year, compared to Gen Z and baby boomers, at 16% and 10%, respectively. "Each generation has their own financial background and their own financial struggles," Ana Staples, a credit analyst and co-author of the report, told Insider. "It's kind of a trend with millennials, that they're willing to go into debt for things."Staples said much of this behavior is a result of being "desensitized to feeling uncomfortable financially" as a result of experiencing two major economic recessions, an unsteady labor market, and high rates of student debt.Some millennial shoppers are planning to resort to buy now, pay later (BNPL) services to ease the immediate burden of holiday shopping. Services like Klarna, Affirm, and Afterpay, which have all ramped up their marketing efforts ahead of the holidays, have become more popular with younger generations that often prefer to pay in installments and are more comfortable using payment alternatives.While Staples said BNPL can be a good financial tool if used responsibly, she cautioned of its dangers. "Just like any kind of debt, it requires caution and a realistic repayment plan for the buyer to avoid unpleasant financial consequences."And though 25 to 40-year-olds are more likely to accept instant gratification in the moment and pay for it later, they are also good at saving. According to the report, 44% of millennial respondents said they are likely to actively search for deals and coupons for holiday shopping. Some noted willingness to employ budgeting tactics, like putting a price limit on gift exchanges, making homemade gifts, and buying used items.Meanwhile, one out of four millennials indicated they are not interested in looking for opportunities to save money this holiday season, and these costs can add up.According to the survey, millennials are hypothetically willing to spend around $262 on spouses or significant others, and $326 per child. For a family of four — two millennial parents and two children under 18 — holiday gifts can creep up to more than $1,100.Despite the possible pitfalls that younger spenders may face, Staples said it's possible to proceed with caution by engaging in "strategic splurging" that circumvents a "financial hangover" in the new year. Determining whether a purchase is necessary at a given moment is key, she said, and having doubts is a sign that it should be delayed or skipped altogether. Setting up a holiday budget, continuing to look for deals, and comparing prices will all go a long way toward saving money, she added.Those who decide to incur debt should do so with a 0% APR credit card to avoid interest and have more monthly payment flexibility, she said. "I just really encourage being careful with your spending during this holiday season and having a good replacement plan, if you do end up going into debt," Staples said.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderNov 18th, 2021

$300 Oil? "Frankly, It Could Go Much Higher"

$300 Oil? "Frankly, It Could Go Much Higher" Submitted by QTR's Fringe Finance This is Part 1 of an exclusive interview with Doomberg, the collective that runs the Doomberg Substack. During this interview series, we discuss oil, Bitcoin, the coming Fed chair swap, fiscal policy, politics, uranium and more. Doomberg publishes skeptical analyses through the hard money/Austrian lens and its objective is to be funny without being silly, to teach without being self-indulgent, and to provoke without being polarizing. They publish 10-12 pieces a month, which you can read for free here. Q: Hi, Doomberg. Thanks for joining me. I love reading your blog. Can you briefly describe why you proposed oil could go to $300? Was it a joke or serious? A: Our piece on oil was quite serious. Policy makers in the U.S. are running an unprecedented experiment and actively working to reduce supply – although the administration may be changing its tune on that recently. At the same time, demand for fossil fuels is growing beyond pre-Covid levels. If you study the capital expenditures of the oil majors in the recent past, you’ll find they’ve cut back substantially. Major oil and gas projects take time to permit, build, and operate. Much of this hesitancy to invest flows from disappointing returns on equity from previous investments, but the move to defund the fossil fuel industry adds further pressure. We arrived at our $300 price target by comparing the amount of gold it takes to buy a barrel of oil. Back at the previous all-time high for oil, gold was much weaker in dollar terms. Simply replicating the oil-as-priced-in-gold from the last peak gets you to $300. Frankly, it could go much higher. The price inelasticity of demand for oil is substantial. What are your thoughts on commodities as a whole? You talk about uranium and oil — any other commodities you think will never see 2020 lows again? If so or not, why? One hesitates to use words like “never,” but we believe the same forces driving energy higher will put substantial pressure on other commodities in the near term. Fertilizer prices are at an all-time high and for good reason – fertilizer producers are getting crushed on input costs (natural gas) while China and Russia are limiting phosphate exports. It is difficult to imagine how this doesn’t leak into all manner of agricultural commodities soon. However, unlike with oil, agricultural supply can toggle quickly back and forth as market signals dictate. Farmers can choose not to plant because fertilizer prices are too high, but they can turn around and respond to higher grain prices the next planting season. Also, there’s no government pressure to reduce agricultural supply – at least not directly. Governments may not understand how their energy policies crimp farmers, but once they do, they’ll be quick to provide support. We are bullish gold and silver because we believe inflation is unlikely to be transitory, but we view those commodities as separate from the others and much more difficult to forecast. We generally go with Peter Hickey’s opinion on gold. You’re bullish on uranium. What’s the best case? The setup for uranium seems almost too good to be true, which is often a dangerous belief. With Sprott and other copycat funds soaking up supply from the spot market while countries around the world begin to recognize that nuclear is our best option for substantially reducing CO2 emissions, it is hard not to be bullish on uranium. Having said that, every player in the market today now knows the thesis, and uranium is still in the mid-$40 per pound range. We would not be surprised if uranium eventually doubles or triples from here, but that does not mean it will be a straight line up. What’s your timeline for uranium? Is it possible it’s overextended right now? What keeps you optimistic long-term? We view uranium as a set-it-and-forget-it trade which will play out over the next 12-18 months (Disclosure: we are long $SRUUF in decent size). We remain optimistic long-term because of the asymmetry involved. We are also comforted by the supply curve for the industry. Prices need to be substantially higher to trigger the production of new supply. In the mid-$40 per pound range, we won’t see major mines reopening anytime soon. Sprott seems determined to keep going, as evidenced by their recent deal to take over the $URNM ETF.  Finally, the recent announcement by China on its plans for new nuclear power plants represents a staggering amount of incremental demand if these plans are implemented. What’s all your fuss about coking coal about? What’s your argument and where can we read more? Our piece on coking coal wasn’t really about coking coal, it was about the profound lack of basic knowledge by key leaders and influencers of how our economy actually works. Coking Coal Has a Branding Problem should be read in conjunction with a prior piece we published called Where Stuff Comes From. Few people understand how stuff gets made in the real world (i.e., in the physical economy). The stuff needed for modern life is based on carbon and we source that carbon from oil and gas, both directly (the carbon atoms come from those starting materials) and indirectly (the energy needed to transform carbon into various useful things is mostly derived from fossil fuels as well). There are sound ways to execute a transition of the economy to one with far fewer CO2 emissions – we just seemed focused on choosing all the dumb ones. Part 2 of this interview will be posted here.  -- Zerohedge readers get 10% off a subscription to my blog for life by using this link. -- DISCLAIMER:  I am long XOM, CCJ, URA, URNM, oil and uranium. I may add any name mentioned in this article and sell any name mentioned in this piece at any time. It should be assumed Doomberg has positions in any security or commodity mentioned in this article. None of this is a solicitation to buy or sell securities. Doomberg has contributed to my podcast but this interview was not part of any sponsorship or ad deal or contract, it was initiated by me because I enjoy the blog’s content and wanted to ask questions that I believed my readers would benefit from. It is only a look into our personal opinions and portfolios. These positions can change immediately as soon as I publish this, with or without notice. You are on your own. Do not make decisions based on my blog. I exist on the fringe. MORE DISCLAIMER:   The publisher does not guarantee the accuracy or completeness of the information provided in this page. These are not the opinions of any of my employers, partners, or associates. I get shit wrong a lot. If I am here listing things I got right or things I think will happen in the future, note that there are likely twice as many things I got wrong over the same period of time. I’m not a financial advisor, I hold no licenses or registrations and am not qualified to give advice on anything, let alone finance or medicine. Talk to your doctor, talk to your financial advisor or your therapist. Leave me a alone and do your research elsewhere. If you can find somewhere to rate this Substack one star, please do so as to save future readers from the misery of my often wholly incorrect prognostications. Tyler Durden Fri, 11/12/2021 - 11:49.....»»

Category: blogSource: zerohedgeNov 12th, 2021

A New Era Of Stagflation?

A New Era Of Stagflation? Authored by David Goldman via The American Institute for Economic Research, The US inflation rate as measured by the Consumer Price Index reached its highest level in forty years during October 2021. Consumers face widespread shortages of items whose availability Americans used to take for granted, from autos to smartphones. The cost of housing is rising at the fastest rate on record. Wages are rising fast but unable to keep up with the cost of living, and service businesses can’t find workers. What is happening to the US economy, and what caused it? The reality is, the United States is midway through a massive social experiment that has no historical precedent. Since the start of the COVID-19 pandemic, the federal government has injected $5.8 trillion of spending power into the US economy. That’s about two-fifths of the consumption component of GDP. That has produced a burst of consumer spending, but also the highest inflation in forty years, along with chronic shortages of key commodities, supply chain disruptions, and a bulge in the trade deficit. Despite the gigantic stimulus, the economy is slowing, although under these extraordinary circumstances, the usual tools of forecasting are ineffective. Rarely have economic forecasts diverged as widely as they do now, at the beginning of the fourth quarter of 2021. The chart below compares the St. Louis Federal Reserve’s “Nowcast” for third quarter GDP growth to the Atlanta Fed’s “Nowcast” estimate. Both are based on models that translate current economic data releases into a GDP forecast, yet they show strikingly divergent results. The Atlanta Fed model shows third-quarter GDP growth at just 1.2 percent. A similar model at the St. Louis Federal Reserve Bank puts growth at 6.3 percent, close to the consensus forecast. “Nowcast” for Third Quarter 2021 GDP Growth, Atlanta vs. St. Louis Federal Reserve We do not know whether the stimulus will produce continued economic growth with high inflation—perhaps very high inflation—or lead to stagflation, that is, cutbacks in production as well as consumption caused by inflation. The short-term behavior of GDP is determined by consumer saving and spending, according to the standard models. The volatility of the personal savings rate, though, exploded during the past year as consumers pondered whether to save or to spend. Volatility as in the chart below is calculated as the two-year standard deviation of the monthly personal savings rate (personal savings as a percentage of income) divided by the two-year average. The extreme instability of the savings rate of the past two years has no precedent during the past sixty years. This instability turns forecasting short-term economic behavior into a mystical exercise. Personal Savings Rate vs. Volatility of Personal Savings Rate The stimulus had the double effect of boosting consumption and discouraging employment. The highest proportion in history of the National Federation of Independent Business survey reports that workers are hard to find (left-hand scale and blue line in the chart below), while the percentage of the noninstitutional adult population in the workforce dropped sharply and has not recovered (right-hand scale and orange line in the graph). Firms Can’t Find Workers as Labor Force Participation Drops American households and businesses face a degree of uncertainty unlike anything they have seen since the oil shock of the 1970s. The Federal Reserve set the overnight interest rate at zero, which implies a short-term real rate of negative 5 percent to 6 percent after inflation. The intent of negative real rates is to force investment out of savings and into risk assets, including stocks as well as houses. That has happened, with a vengeance, with the fastest home price increases in US history. Housing prices have risen 20 percent in the past year, the most on record, and rents have risen between 7 percent (Zillow) and 15 percent ( according to private surveys. Because current market prices for houses and rentals work their way into the Consumer Price Index with a lag, the housing inflation of the past year portends another 5 percent-6 percent increase in the Consumer Price Index, by my back-of-the-envelope calculation. Housing Price Inflation How will consumers respond? In the very short term, inflation prompts consumers to spend money faster in order to acquire goods today at lower prices than they expected to pay tomorrow. But real wages are falling (by 1.9 percent year-on-year according to the Bureau of Labor Statistics), and inflation typically prompts consumers to increase savings to compensate for lost wealth. Businesses cannot raise prices fast enough to keep up with rising input costs. The widely-followed Philadelphia Federal Reserve survey of manufacturers shows that more respondents report higher input costs than higher prices received. Prices Paid vs. Price Received for Manufactures: Philadelphia Fed Survey A widening gap between prices paid and prices received often precedes recessions, as in 1973, 1979, 2000, and 2008. This gap does not always predict recessions (it did not in 1993 and 1987, for example). But it strongly suggests that corporate profit margins are under pressure. In some cases, including the US automotive industry, manufacturers have been able to increase profit margins substantially, because a scarcity of cars allowed dealers to eliminate incentives. Overall, the present inflation is likely to constrain production. A remarkable development in response to the massive demand stimulus is the jump in American imports from China. The US in September 2021 imported more than $50 billion worth of goods from China, or an annual rate of $600 billion—nearly 30 percent of America’s total manufacturing GDP. That represents an increase of 31 percent from the level of January 2018, when President Trump first imposed tariffs on Chinese imports. Chinese Exports to the United States America’s supply chains could not meet the surge in demand created by the stimulus, so American consumers bought more from the world’s largest manufacturer, namely China. The problem lies in chronic underinvestment in US manufacturing. A rough gauge of the state of US manufacturing investment is the level of orders at US companies for industrial machinery. After inflation, this measure stands at the same level as 1992, or half the 1999 peak. Industrial Machinery Orders to US Manufacturers In theory, China could continue exporting to the United States, and continue to lend the United States the money to pay for its goods, for an indefinite period. But China’s supply chains are under pressure, and rising raw materials costs as well as energy prices constrain its ability to produce as well. Prices for China’s manufactured imports are rising, apart from the tariff effect, and that portends more inflation in the United States. The most likely outcome in my view is that the biggest US consumer stimulus in history will produce sustained inflation in excess of 5 percent a year. Falling real wages and shrinking profit margins will continue to depress output, and the US economy will enter a period of stagflation something like the late 1970s. At some point, the United States Treasury will find itself unable to borrow the equivalent of 10 percent of GDP per year, at least not at negative real interest rates. As long as investors are willing to pay the Treasury to hold their money for them, the US government can sustain arbitrarily large deficits. That is the brunt of so-called Modern Monetary Theory. But the Herb Stein principle applies: Whatever can’t go on forever, won’t. The creditors of the United States will not accept negative returns on an ever-expanding mountain of US debt indefinitely. At some point, perhaps not long from now, the US will face sharply higher interest rates and the type of budgetary constraints that were typical of profligate Third World borrowers. Tyler Durden Thu, 11/11/2021 - 13:30.....»»

Category: blogSource: zerohedgeNov 11th, 2021

America"s Woke Colleges Can"t Be Salvaged. We Need New Ones

America's Woke Colleges Can't Be Salvaged. We Need New Ones Authored by Niall Ferguson, op-ed via, I'm Helping to Start a New College Because Higher Ed Is Broken If you enjoyed Netflix’s “The Chair” - a lighthearted depiction of a crisis-prone English Department at an imaginary Ivy League college - you are clearly not in higher education. Something is rotten in the state of academia and it’s no laughing matter.   Grade inflation. Spiraling costs. Corruption and racial discrimination in admissions. Junk content (“Grievance Studies”) published in risible journals. Above all, the erosion of academic freedom and the ascendancy of an illiberal “successor ideology” known to its critics as wokeism, which manifests itself as career-ending “cancelations” and speaker disinvitations, but less visibly generates a pervasive climate of anxiety and self-censorship. Some say that universities are so rotten that the institution itself should simply be abandoned and replaced with an online alternative — a metaversity perhaps, to go with the metaverse. I disagree. I have long been skeptical that online courses and content can be anything other than supplementary to the traditional real-time, real-space college experience. However, having taught at several, including Cambridge, Oxford, New York University and Harvard, I have also come to doubt that the existing universities can be swiftly cured of their current pathologies. That is why this week I am one of a group of people announcing the founding of a new university — indeed, a new kind of university: the University of Austin. The founders of this university are a diverse group in terms of our backgrounds and our experiences (though doubtless not diverse enough for some). Our political views also differ. To quote our founding president, Pano Kanelos, “What unites us is a common dismay at the state of modern academia and a belief that it is time for something new.” There is no need to imagine a mythical golden age. The original universities were religious institutions, as committed to orthodoxy and as hostile to heresy as today’s woke seminaries. In the wake of the Reformation and the Scientific Revolution, scholars gradually became less like clergymen; but until the 20th century their students were essentially gentlemen, who owed their admission as much to inherited status as to intellectual ability. Many of the great intellectual breakthroughs of the Enlightenment were achieved off campus. Only from the 19th century did academia become truly secularized and professional, with the decline of religious requirements, the rise to pre-eminence of the natural sciences, the spread of the German system of academic promotion (from doctorate up in steps to full professorship), and the proliferation of scholarly journals based on peer-review. Yet the same German universities that led the world in so many fields around 1900 became enthusiastic helpmeets of the Nazis in ways that revealed the perils of an amoral scholarship decoupled from Christian ethics and too closely connected to the state. Even the institutions with the most sustained records of excellence — Oxford and Cambridge — have had prolonged periods of torpor. F.M. Cornford could mock the inherent conservatism of Oxbridge politics in his “Microcosmographia Academica” in 1908. When Malcolm Bradbury wrote his satirical novel “The History Man” in 1975, universities everywhere were still predominantly white, male and middle class. The process whereby a college education became more widely available — to women, to the working class, to racial minorities — has been slow and remains incomplete. Meanwhile, there have been complaints about the adverse consequences of this process in American universities since Allan Bloom’s “Closing of the American Mind,” which was published back in 1987. Nevertheless, much had been achieved by the later years of the 20th century. There was a general agreement that the central purpose of a university was the pursuit of truth — think only of Harvard’s stark Latin motto: Veritas — and that the crucial means to that end were freedom of conscience, thought, speech and publication. There was supposed to be no discrimination in admissions, examinations and academic appointments, other than on the basis of intellectual merit. That was crucial to enabling Jews and other minority groups to take full advantage of their intellectual potential. It was understood that professors were awarded tenure principally to preserve academic freedom so that they might “dare to think” — Immanuel Kant’s other great imperative, Sapere aude! — without fear of being fired. The benefits of all this defy quantification. A huge proportion of the major scientific breakthroughs of the past century were made by men and women whose academic jobs gave them economic security and a supportive community in which to do their best work. Would the democracies have won the world wars and the Cold War without the contributions of their universities? It seems doubtful. Think only of Bletchley Park and the Manhattan Project. Sure, the Ivy League’s best and brightest also gave us the Vietnam War. But remember, too, that there were more university-based computers on the Arpanet — the original internet — than any other kind. No Stanford, no Silicon Valley. Those of us who were fortunate to be undergraduates in the 1980s remember the exhilarating combination of intellectual freedom and ambition to which all this gave rise. Yet, in the past decade, exhilaration has been replaced by suffocation, to the point that I feel genuinely sorry for today’s undergraduates. In Heterodox Academy’s 2020 Campus Expression Survey, 62% of sampled college students agreed that the climate on their campus prevented them from saying things they believed, up from 55% in 2019, while 41% were reluctant to discuss politics in a classroom, up from 32% in 2019. Some 60% of students said they were reluctant to speak up in class because they were concerned other students would criticize their views as being offensive. Such anxieties are far from groundless. According to a nationwide survey of a thousand undergraduates by the Challey Institute for Global Innovation, 85% of self-described liberal students would report a professor to the university if the professor said something that they found offensive, while 76% would report another student. In a study published in March entitled “Academic Freedom in Crisis: Punishment, Political Discrimination and Self-Censorship,” the Centre for the Study of Partisanship and Ideology showed that academic freedom is under attack not only in the U.S., but also in the U.K. and Canada. Three-quarters of conservative American and British academics in the social sciences and humanities said there is a hostile climate for their beliefs in their department. This compares to just 5% among left-wing faculty in the U.S. Again, one can understand why. Younger academics are especially likely to support dismissal of a colleague who has made some heretical utterance, with 40% of American social sciences and humanities professors under the age of 40 supporting at least one of four hypothetical dismissal campaigns. Ph.D. students are even more intolerant than other young academics: 55% of American Ph.D. students under 40 supported at least one hypothetical dismissal campaign. “High-profile deplatformings and dismissals” get the attention, the authors of the report conclude, but “far more pervasive threats to academic freedom stem … from fears of a) cancellation — threats to one’s job or reputation — and b) political discrimination.” These are not unfounded fears. The number of scholars targeted for their speech has risen dramatically since 2015, according to research by the Foundation for Individual Rights in Education. FIRE has logged 426 incidents since 2015. Just under three-quarters of them resulted in some kind of sanction — including an investigation alone or voluntary resignation — against the scholar. Such efforts to restrict free speech usually originate with “progressive” student groups, but often find support from left-leaning faculty members and are encouraged by college administrators, who tend (as Sam Abrams of Sarah Lawrence College demonstrated, and as his own subsequent experience confirmed) to be even further to the left than professors. There are also attacks on academic freedom from the right, which FIRE challenges. With a growing number of Republicans calling for bans on critical race theory, I fear the illiberalism is metastasizing. Trigger warnings. Safe spaces. Preferred pronouns. Checked privileges. Microaggressions. Antiracism. All these terms are routinely deployed on campuses throughout the English-speaking world as part of a sustained campaign to impose ideological conformity in the name of diversity. As a result, it often feels as if there is less free speech and free thought in the American university today than in almost any other institution in the U.S. To the historian’s eyes, there is something unpleasantly familiar about the patterns of behavior that have, in a matter of a few years, become normal on many campuses. The chanting of slogans. The brandishing of placards. The letters informing on colleagues and classmates. The denunciations of professors to the authorities. The lack of due process. The cancelations. The rehabilitations following abject confessions. The officiousness of unaccountable bureaucrats. Any student of the totalitarian regimes of the mid-20th century recognizes all this with astonishment. It turns out that it can happen in a free society, too, if institutions and individuals who claim to be liberal choose to behave in an entirely illiberal fashion.  How to explain this rapid descent of academia from a culture of free inquiry and debate into a kind of Totalitarianism Lite? In their book “The Coddling of the American Mind,” the social psychiatrist Jonathan Haidt and FIRE president Greg Lukianoff lay much of the blame on a culture of parenting and early education that encourages students to believe that “what doesn’t kill you makes you weaker,” that you should “always trust your feelings,” and that “life is a battle between good people and evil people.” However, I believe the core problems are the pathological structures and perverse incentives of the modern university. It is not the case, as many Americans believe, that U.S. colleges have always been left-leaning and that today’s are no different from those of the 1960s. As Stanley Rothman, Robert Lichter and Neil Nevitte showed in a 2005 study, while 39% of the professoriate on average described themselves as left-wing in 1984, the proportion had risen to 72% by 1999, by which time being a conservative had become a measurable career handicap. Mitchell Langbert’s analysis of tenure-track, Ph.D.-holding professors from 51 of the 66 top-ranked liberal arts colleges in 2017 found that those with known political affiliations were overwhelmingly Democratic. Nearly two-fifths of the colleges in Langbert’s sample were Republican-free. The mean Democratic-to-Republican ratio across the sample was 10.4:1, or 12.7:1 if the two military academies, West Point and Annapolis, were excluded. For history departments, the ratio was 17.4:1; for English 48.3:1. No ratio is calculable for anthropology, as the number of Republican professors was zero. In 2020, Langbert and Sean Stevens  found an even bigger skew to the left when they considered political donations to parties by professors. The ratio of dollars contributed to Democratic versus Republican candidates and committees was 21:1. Commentators who argue that the pendulum will magically swing back betray a lack of understanding about the academic hiring and promotion process. With political discrimination against conservatives now overt, most departments are likely to move further to the left over time as the last remaining conservatives retire. Yet the leftward march of the professoriate is only one of the structural flaws that characterize today’s university. If you think the faculty are politically skewed, take a look at academic administrators. A shocking insight into the way some activist-administrators seek to bully students into ideological conformity was provided by Trent Colbert, a Yale Law School student who invited his fellow members of the Native American Law Students Association to “a Constitution Day bash” at the “NALSA Trap House,” a term that used to mean a crack den but now is just a mildly risque way of describing a party. Diversity director Yaseen Eldik’s thinly veiled threats to Colbert if he didn’t sign a groveling apology — “I worry about this leaning over your reputation as a person, not just here but when you leave” — were too much even for an editorial board member at the Washington Post. Democracy may die in darkness; academic freedom dies in wokeness. Moreover, the sheer number of the administrators is a problem in itself. In 1970, U.S. colleges employed more professors than administrators. Between then and 2010, however, the number of full-time professors or “full-time equivalents” increased by slightly more than 50%, in line with student enrollments. The number of administrators and administrative staffers rose by 85% and 240%, respectively. The ever-growing army of coordinators for Title IX — the federal law prohibiting sex-based discrimination — is one manifestation of the bureaucratic bloat, which since the 1990s has helped propel tuition costs far ahead of inflation. The third structural problem is weak leadership. Time and again — most recently at the Massachusetts Institute of Technology, where a lecture by the University of Chicago geophysicist Dorian Abbot was abruptly canceled because he had been critical of affirmative action — academic leaders have yielded to noisy mobs baying for disinvitations. There are notable exceptions, such as Robert Zimmer, who as president of the University of Chicago between 2006 and 2021 made a stand for academic freedom. But the number of other colleges to have adopted the Chicago statement, a pledge crafted by the school’s Committee on Freedom of Expression, remains just 55, out of nearly 2,500 institutions offering four-year undergraduate programs. Finally, there is the problem of the donors — most but not all alumni — and trustees, many of whom have been astonishingly oblivious of the problems described above. In 2019, donors gave nearly $50 billion to colleges. Eight donors gave $100 million or more. People generally do not make that kind of money without being hard-nosed in their business dealings. Yet the capitalist class appears strangely unaware of the anticapitalist uses to which its money is often put. A phenomenon I find deeply puzzling is the lack of due diligence associated with much academic philanthropy, despite numerous cases when the intentions of benefactors have deliberately been subverted. All this would be bad enough if it meant only that U.S. universities are no longer conducive to free inquiry and promotion based on merit, without which scientific advances are certain to be impeded and educational standards to fall. But academic illiberalism is not confined to college campuses. As students collect their degrees and enter the workforce, they inevitably carry some of what they have learned at college with them. Multiple manifestations of “woke” thinking and behavior at newspapers, publishing houses, technology companies and other corporations have confirmed Andrew Sullivan’s 2018 observation, “We all live on campus now.” When a problem becomes this widespread, the traditional American solution is to create new institutions. As we have seen, universities are relatively long-lived compared to companies and even nations. But not all great universities are ancient. Of today’s top 25 universities, according to the global rankings compiled by the London Times Higher Education Supplement, four were founded in the 20th century. Fully 14 were 19th-century foundations; four date back to the 18th century. Only Oxford (which can trace its origins to 1096) and Cambridge (1209) are medieval in origin.  As might be inferred from the large number (10) of today’s leading institutions founded in the U.S. between 1855 and 1900, new universities tend to be established when wealthy elites grow impatient with the existing ones and see no way of reforming them. The puzzle is why, despite the resurgence of inequality in the U.S. since the 1990s and the more or less simultaneous decline in standards at the existing universities, so few new ones have been created. Only a handful have been set up this century: University of California Merced (2005), Ave Maria University (2003) and Soka University of America (2001). Just five U.S. colleges founded in the past 50 years make it into the Times’s top 25 “Young Universities”: University of Alabama at Birmingham (founded 1969), University of Texas at Dallas (1969), George Mason (1957), University of Texas at San Antonio (1969) and Florida International (1969). Each is (or originated as) part of a state university system. In short, the beneficiaries of today’s gilded age seem altogether more tolerant of academic degeneration than their 19th-century predecessors. For whatever reason, many prefer to give their money to established universities, no matter how antithetical those institutions’ values have become to their own. This makes no sense, even if the principal motivation is to buy Ivy League spots for their offspring. Why would you pay to have your children indoctrinated with ideas you despise? So what should the university of the future look like? Clearly, there is no point in simply copying and pasting Harvard, Yale or Princeton and expecting a different outcome. Even if such an approach were affordable, it would be the wrong one. To begin with, a new institution can’t compete with the established brands when it comes to undergraduate programs. Young Americans and their counterparts elsewhere go to college as much for the high-prestige credentials and the peer networks as for the education. That’s why a new university can’t start by offering bachelors’ degrees. The University of Austin will therefore begin modestly, with a summer school offering “Forbidden Courses” — the kind of content and instruction no longer available at most established campuses, addressing the kind of provocative questions that often lead to cancelation or self-censorship. The next step will be a one-year master’s program in Entrepreneurship and Leadership. The primary purpose of conventional business programs is to credential large cohorts of passive learners with a lowest-common-denominator curriculum. The University of Austin’s program will aim to teach students classical principles of the market economy and then embed them in a network of successful technologists, entrepreneurs, venture capitalists and public-policy reformers. It will offer an introduction to the world of American technology similar to the introduction to the Chinese economy offered by the highly successful Schwarzman Scholars program, combining both academic pedagogy and practical experience. Later, there will be parallel programs in Politics and Applied History and in Education and Public Service. Only after these initial programs have been set up will we start offering a four-year liberal arts degree.  The first two years of study will consist of an intensive liberal arts curriculum, including the study of philosophy, literature, history, politics, economics, mathematics, the sciences and the fine arts. There will be Oxbridge-style instruction, with small tutorials and college-wide lectures, providing an in-depth and personalized learning experience with interdisciplinary breadth.   After two years of a comprehensive and rigorous liberal arts education, undergraduates will join one of four academic centers as junior fellows, pursuing disciplinary coursework, conducting hands-on research and gaining experience as interns. The initial centers will include one for entrepreneurship and leadership, one for politics and applied history, one for education and public service, and one for technology, engineering and mathematics. To those who argue that we could more easily do all this with some kind of internet platform, I would say that online learning is no substitute for learning on a campus, for reasons rooted in evolutionary psychology. We simply learn much better in relatively small groups in real time and space, not least because a good deal of what students learn in a well-functioning university comes from their informal discussions in the absence of professors. This explains the persistence of the university over a millennium, despite successive revolutions in information technology. To those who wonder how a new institution can avoid being captured by the illiberal-liberal establishment that now dominates higher education, I would answer that the governance structure of the institution will be designed to prevent that. The Chicago principles of freedom of expression will be enshrined in the founding charter. The founders will form a corporation or board of trustees that will be sovereign. Not only will the corporation appoint the president of the college; it will also have a final say over all appointments or promotions. There will be one unusual obligation on faculty members, besides the standard ones to teach and carry out research: to conduct the admissions process by means of an examination that they will set and grade. Admission will be based primarily on performance on the exam. That will avoid the corrupt rackets run by so many elite admissions offices today. As for our choice of location in the Texas capital, I would say that proximity to a highly regarded public university — albeit one where even the idea of establishing an institute to study liberty is now controversial — will ensure that the University of Austin has to compete at the highest level from the outset. My fellow founders and I have no illusions about the difficulty of the task ahead. We fully expect condemnation from the educational establishment and its media apologists. We shall regard all such attacks as vindication — the flak will be a sign that we are above the target. In our minds, there can be no more urgent task for a society than to ensure the health of its system of higher education. The American system today is broken in ways that pose a profound threat to the future strength and stability of the U.S. It is time to start fixing it. But the opportunity to do so in the classic American way — by creating something new, actually building rather than “building back” — is an inspiring and exciting one. To quote Haidt and Lukianoff: “A school that makes freedom of inquiry an essential part of its identity, selects students who show special promise as seekers of truth, orients and prepares those students for productive disagreement … would be inspiring to join, a joy to attend, and a blessing to society.” That is not the kind of institution satirized in “The Chair.” It is precisely the kind of institution we need today. *  *  * Niall Ferguson is the Milbank Family Senior Fellow at the Hoover Institution at Stanford University and a Bloomberg Opinion columnist. He was previously a professor of history at Harvard, New York University and Oxford. He is the founder and managing director of Greenmantle LLC, a New York-based advisory firm. His latest book is "Doom: The Politics of Catastrophe." Tyler Durden Wed, 11/10/2021 - 22:05.....»»

Category: smallbizSource: nytNov 10th, 2021

Citadel"s Ken Griffin Sees Ethereum Surpassing And Replacing Bitcoin

Citadel's Ken Griffin Sees Ethereum Surpassing And Replacing Bitcoin Back in May, when Goldman Sachs initiated coverage of crypto, it was mostly favorably inclined toward bitcoin which it nonetheless called a "one trick pony" and saw limited upside, but it was ethereum that stole Goldman's heart. The reason: while Goldman said that bitcoin is mostly a store of value and nothing else, it said that over time, "the decentralized nature of the network will diminish concerns about storing personal data on the blockchain." As a result, "a blockchain platform like Ethereum could potentially become a large market for vendors of trusted information, like Amazon is for consumer goods today." And just to clarify what it means, the bank explained: Ethereum can also be used to store almost any information securely and privately on a decentralized ledger. And this information can be tokenized and traded. This means that the Ethereum platform has the potential to become a large market for trusted information. We are seeing glimpses of that today with the sale of digital art and collectibles online through the use of NFTs. But this is a tiny peek at its actual practical uses. For example, individuals can store and sell their medical data through Ethereum to pharma research companies. A digital profile on Ethereum could contain personal data including asset ownership, medical history and even IP rights. Ethereum also has the benefit of running on a decentralized global server base rather than a centralized one like Amazon or Microsoft, possibly providing a solution to concerns about sharing personal data. No surprise then that last weekend, the bank forecast that ether could hit $8,000 by year end, as a result of the token's remarkable correlation with 2 year inflation swaps which, as everyone knows, are only going up and to the right. It's not just Goldman that has a preference for ethereum over bitcoin. Earlier today, comments from one of the most powerful people in all of finance, Citadel CEO Ken Griffin, about Ethereum’s dominance over Bitcoin are attracting even more attention to the second-largest cryptocurrency, which is outperforming many others this year by wide margins. Griffin, who like Jamie Dimon was a noted crypto skeptic in the past, said Wednesday at a conference that the crypto space could be disrupted by Ethereum’s blockchain. "We’re going to see Bitcoin be replaced conceptually by the Ethereum’s blockchain", he said at the DealBook conference. “Replaced conceptually by the next generation of cryptocurrencies that will have the benefits of higher transaction speeds, lower cost per transaction. Perhaps people will start to think about how to deal with security and fraud prevention better.” In the coming year, Ethereum is set for a historic transformation to Ehtereum 2.0, shifting from a Proof-of-work concept to a Proof-of-stake, whose energy consumption transaction speeds and costs will be a fraction of the current ones, while also getting the blessings of the ESG community in the process. Heading into the Ethereum 2.0 transition, pundits expect the price of the token to soar. Griffin added he isn’t worried he missed out on crypto. “The train is, in some sense, still in the station,” he said. A year-long rally in Ether, which sent the coin up more than 550% for 2021, trouncing Bitcoin’s performance by more than 400 percentage points, gathered momentum toward the end of the summer after a major protocol upgrade which reduced supply increases.  “People are moving money into other cryptos now -- not just Bitcoin,” said FTX US President Brett Harrison. “That is definitely following this trend of thinking about the future application development happening using crypto.” Meanwhile, on Tuesday the largest U.S. cryptocurrency exchange, Coinbase, said that during the third quarter, Ether constituted 22% of transaction revenue, outstripping Bitcoin for the first time in trading volumes as well. “We’re definitely seeing a lot of bullish Ethereum flows,” Juthica Chou, head of OTC options trading at Kraken, said on Bloomberg’s “QuickTake Stock” broadcast. “Ethereum captures the tailwinds of Bitcoin -- on top of that, they had the protocol upgrade in August, which burns Ether.” At the conference, Griffin commented further on cryptocurrencies, saying his firm doesn’t trade crypto because of regulatory uncertainties. “I wish all this passion and energy that went to crypto was directed towards making the United States stronger,” said Griffin. “Let’s face it -- it’s a Jihadist call that we don’t believe in the dollar. I mean, what a crazy concept that is,” he said, reiterating similar comments he had made about crypto just a few weeks back. “When you have to value cryptocurrencies, what is the basis that you use for valuation?” Griffin asked. “It really comes down to: Will someone pay me more for it tomorrow?” Actually that's not only simplistic, it's wrong: what it really comes down to is will central banks print more fiat tomorrow than today. The answer is clearly yes, and until that changes - and it won't - someone will always pay more for cryptos tomorrow than they are worth today. Some other things Griffin discussed: Griffin said inflation and rising prices were no longer something that could be ignored. “The theory that this is transitory is starting to get long in the tooth,” he said. That is also affecting the stock markets, which by Mr. Griffin’s reckoning have become “frothy,” primed to overreact, particularly in stocks like Tesla that have experienced high volatility. The financier defended payment for order flow, in which market makers — such as Citadel Securities — pay online brokerages like Robinhood for the right to process their customers’ trades. While the practice has been criticized for potentially leading to conflicts of interest, Griffin said that it had helped lead to lower trading costs for individual traders and that he opposed potential new regulations. “Are we going to go back to re-regulated markets and taking back the competition that has allowed Americans to save so much money when trading?” Doing so, he argued, would be “a tragedy.” Griffin, a billionaire, opposed raising taxes, saying it would discourage innovation in America, citing Tesla’s Elon Musk as an example. “We don’t want tax policy to drive great entrepreneurs like Elon out of their seats,” he said. The hedge fund manager said his remarks likely would lead to hate mail in his inbox and on Twitter. Tyler Durden Wed, 11/10/2021 - 19:22.....»»

Category: blogSource: zerohedgeNov 10th, 2021

David Berman And Berna Barshay On Retailers

Whitney Tilson’s email to investors discussing David Berman and Berna Barshay on retailers; Americans are flush with cash and jobs. they also think the economy is awful; don’t let your political views affect your investment or vaccination decisions; his reply to a reader about Aaron Rodgers. Q3 2021 hedge fund letters, conferences and more David […] Whitney Tilson’s email to investors discussing David Berman and Berna Barshay on retailers; Americans are flush with cash and jobs. they also think the economy is awful; don’t let your political views affect your investment or vaccination decisions; his reply to a reader about Aaron Rodgers. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Walter Schloss Series in PDF Get the entire 10-part series on Walter Schloss in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more David Berman And Berna Barshay On Retailers 1) My friend David Berman of Durban Capital, who I quoted in my e-mail a week ago, is (along with my colleague Berna Barshay) one of the smartest retail sector analysts I know. He was on CNBC on Monday. Here's the four-minute video and his summary: U.S. consumer spending is on fire, according to my proprietary data. The sales growth rate has tripled from pre-pandemic (up 29% over two years), inflation is heading higher, and I expect stronger earnings and higher bond yields. Retailers are flush with cash and have never seen better times. I'm expecting a strong holiday season, high margins with less on sale, offset somewhat by higher wages and freight and shipping costs. Berna is also bullish on retailers and wrote about two of her favorites, Five Below Inc (NASDAQ:FIVE) and Foot Locker, Inc. (NYSE:FL), in her Empire Financial Daily from a week ago. Americans Are Flush With Cash and Jobs 2) David and Berna are no doubt correct that the retail sector is white-hot, as is the overall economy, thanks to U.S. households being in a better financial position than they've been in for years. This year alone, employment has risen by more than five million jobs, and a record number of Americans say this is a good time to find a quality job. This New York Times article has some additional bullish data points: Workers have seized the upper hand in the labor market, attaining the largest raises in decades and quitting their jobs at record rates. The unemployment rate is 4.6% and has been falling rapidly. Cumulatively, Americans are sitting on piles of cash; they have accumulated $2.3 trillion more in savings in the last 19 months than would have been expected in the pre-pandemic path. The median household's checking account balance was 50% higher in July of this year than in 2019, according to the JPMorgan Chase Institute. Yet, interestingly, when surveyed, Americans say that the economy is in terrible shape. The same article, Americans Are Flush With Cash and Jobs. They Also Think the Economy Is Awful, notes: Yet, workers' assessment of the economy is scathing. In a Gallup poll in October, 68% of respondents said they thought economic conditions were getting worse. The share who thought things were getting better was lower than in April 2009, when the global financial crisis was still underway. Reasonable people can disagree about the current state of the economy and, even more so, what it's likely to do in the future. But, when thinking about these important issues, it's critical to set aside your emotions and political views. For example, if you're a Republican, you probably think President Joe Biden is a disaster and, because of this, may believe that we're heading into a period of economic (and stock market) decline. But if you are therefore selling stocks, then I think you're likely making as big of a mistake as Democrats did under President Donald Trump, who thought he was a disaster and dumped their stocks. It's remarkable how much people's politics affect their economic views. For instance, in October 2016, just before that year's presidential election, the University of Michigan's Index of Consumer Sentiment and Component by Political Party was much higher for Democrats (102.1) than for Republicans (74.4). It undoubtedly reflected the assumption of a Democrat in the White House and the widespread expectation that this would continue when former Secretary of State Hillary Clinton defeated Trump. But when Trump pulled the upset, the numbers more than reversed. The next time the survey broke out results by political party, just after Trump took office in February 2017, consumer sentiment among Democrats had crashed to 77.5, while it soared to 115.7 among Republicans. Similarly, just before the last election in October 2020, consumer sentiment was 72.4 for Democrats and 98 for Republicans. But by February 2021, the numbers had again reversed to 92.4 and 63.6, respectively. Here's a chart showing this post-election shift, published in New York Times' columnist Paul Krugman's recent November 9 newsletter. Of course, most people's political views don't just affect their consumer sentiment but also their investing-related analyses and decision-making. But this is extremely destructive to your long-term returns, so don't let this happen to you! Don't Let Your Political Views Affect Your Investment Or Vaccination Decisions 3) One way I try to reality-test my thinking is to check a New Zealand-based prediction and betting site, PredictIt, which allows people to bet real money on political and economic outcomes. I've found PredictIt's markets to be extremely accurate over time, even though many are small and thinly traded (the site only allows each user to bet a maximum of $850 per market). In my October 26 e-mail, the example I used was the Biden administration's reconciliation bill (also known as Build Back Better). At that time, the PredictIt market showed that there was "about a 21% chance that Democrats fail to pass the bill or that it's smaller than $1.5 trillion..." Interestingly, since then, the odds spiked to 51% (presumably because progressives traded away their biggest negotiating chit when they agreed to vote for the infrastructure bill), as you can see in this 30-day price/odds chart: If you own a stock because you think it will benefit from the passage of this bill, the odds have shifted materially against you in the past 10 days. It's important to recognize this and adjust your investment accordingly, irrespective of whether you want the bill to pass or not. Here's another PredictIt market I follow because it has enormous implications for investors: What will be the balance of power in Congress after the 2022 election? The latest odds show a 66% chance that Republicans take back both the House and Senate: Reply To A Reader About Aaron Rodgers 4) It's even more important not to let your politics influence your medical decisions because the negative outcomes are much worse than losing money: illness, hospitalization, long-term lingering symptoms, and even death. Yet, that's what's happening to an even more extreme degree when it comes to Americans' choices about the COVID-19 vaccines. They were developed in record time thanks in large part to President Trump's Operation Warp Speed. But in one of the most bizarre and tragic reversals I've ever seen, it's his supporters who are disproportionately refusing to get vaccinated. As you can see in this recent survey, 90% of Democrats have already received one dose, and only 2% say they will definitely not get vaccinated, versus 61% and 31%, respectively, for Republicans: I continue to closely follow the pandemic and send periodic updates to my coronavirus e-mail list (which you can sign up for by sending a blank e-mail to: In yesterday's e-mail, I addressed the questions one of my readers raised: "Hi Whitney, In an attempt to precede your future e-mail reaction to [the] Aaron Rodgers interview, I wanted to raise a few issues that you have yet to address in your COVID-19 vaccine e-mails. "1. Natural immunity – many studies have shown that natural immunity far exceeds vaccine-related immunity given its reaction to all parts of the virus rather than only the spike protein which can mutate. "2. Ivermectin – even if you think there is no research-based support of benefit, there is no harm in taking this very cheap drug which has safely been used all over the world. Also, why has there been scant research on Ivermectin? Could it be that Big Pharma controls today's MDs, politics, and the media? "3. Hypocritical – why the same people who championed our medical workers, police, and firefighters who had to brave COVID-19 to save lives before the vaccine are now perfectly OK with firing them from their job if they choose to make a personal choice based on their own health circumstances. "Aaron Rodgers raised many great points that many who are outspoken about the vaccine are unwilling to discuss publicly. Why is that?" – Andrew S. You can read my reply here. Every time I write about the vaccines and encourage people to get vaccinated (my free book offer is still open!), I get plenty of flak from angry readers. So why do I keep returning to this topic? Because I get far more e-mails like these (all just in the past few days): "Appreciate you speaking up on the vaccine. Such a simple thing to do to get our nation past this epidemic. The craziness around this issue is hard to fathom and highlights the destructive qualities of social media." – Chris M. "I'm 59 but had not gotten my booster poke, despite traveling quite a bit and interacting with elderly parents. I was concerned that I might be taking the opportunity away from someone whose needs were greater than my own. But after reading your thoughts/information on the issue, I stopped off at our County Fairgrounds and got the Moderna (MRNA) booster. No lines. Plenty of vaccines. Caring staff. Thanks for the encouragement! Now, if only my adult son would get vaccinated I don't have the right words for him." – Jenn D. "I was planning to hold out to get the vaccine initially, but you convinced me otherwise. I would send you a photo getting my booster, but you have me so pro-vaccination that I got it a while ago" – Nick V. "Your e-mail convinced me to take the booster shot. Thanks." – Shekhar A. "Thanks for reminding me – Moderna booster shot today!" – David S. "I got my booster yesterday based on your recommendation." – Jaison B. Thanks for encouraging me to get my booster COVID-19 Vaccine and I have attached a photo of it here in this e-mail. I am looking forward to receiving the PDF of your new book, The Art of Playing Defense. I know I will benefit greatly from reading it!! I value that you are continuing to closely follow the COVID-19 pandemic and are sending periodic e-mail updates. Many thanks for your encouragement and generosity." – Rosemary I. "I'm so proud of you for doing this as we need everyone that can to get the vaccine. And I think your email stated it nicely." – Linda W. "Your recent email about the booster made it very easy for me to get mine (discussion, links to CVS, etc.). My wife and I even took your advice and got the Moderna booster after initially taking Pfizer (PFE). I have intended to buy the book anyway but thought I might start reading this weekend. Thank you for all that you do." – Gerard B. Best regards, Whitney P.S. I welcome your feedback at Updated on Nov 10, 2021, 5:16 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkNov 10th, 2021

Millennials own nothing because the economy screwed us over for 25 years - but older generations still try and blame it on our work ethic

Older generations don't understand just how much harder it is for millennials and younger generations to build wealth. Millennials have been screwed over by the economy. Allison Nicole Leung/Insider Intelligence My parents don't understand why I don't own a house, a car, or a retirement savings account. My generation has fewer job opportunities, more student debt, and outrageous housing prices. It's far worse for us than it was for previous generations. Ingrid Cruz is a freelance writer based in Mississippi. This is an opinion column. The thoughts expressed are those of the author. A few months ago my parents chastised me for not really owning anything. I have few savings, don't own a house, investments, or even a 401K due to financial pressures prior to the pandemic, some of which only worsened last year. This is a struggle many millennials face, but I, a first-generation immigrant, often feel guilty and unworthy knowing my net worth is in the negative. As a child, my mother wanted me to go into a respectable, high-paying, stable profession, such as a lawyer, accountant, or perhaps a high-ranking corporate position. She always expected me to buy a home, get married by a certain age, and eventually take care of her as she got older. Instead, I am a writer on a freelance income with student loan debt that will wreck my finances once repayment provisions begin again in 2022. It's hard to make my parents understand that the United States they dreamt of and brought me to in 1989 has drastically changed. The economy is stacked against millennials According to a CNBC report, millennials owned only 5.19% of the United States' total wealth in 2020 - four times less than what boomers owned at the same age. We are a generation that saw income inequality increase just as the Great Recession caused hiring freezes, decreased our odds of finding a good job, and student loan debt skyrocketed. The Bureau of Labor Statistics states that high student loan debt caused millennials to delay major life decisions. Fewer earnings meant delaying marriage, home and car purchases, and not being able to move out of our parents' homes - or having to move back in during a crisis. In drastic situations, fewer earnings also leads people to delay medical care and avoid scheduling routine physical checkups, leaving issues undiagnosed. Navigating the maze of health insurance costs and policies in the United States is also difficult, and takes a toll on our finances. Even for a healthy person, the price of having a child at a hospital can be prohibitive and childcare, care for aging parents, and other line items necessary to sustain a healthy family are frequently financially debilitating. The Great Recession also affected housing, creating shortages that were driving up rent even before the pandemic. Stagnating and low wages are only part of the problem: Even with higher wages, many millennials live paycheck to paycheck because of the many debts they've had to take on in order to get by. The rising costs of living we are currently experiencing, and will be sure to continue experiencing without intervention from the federal and state government, are only going to make it more challenging for millennials, Gen Z, and future generations to build wealth unless we work to ensure pay equity and reasonable costs of living. Rent control, controls on house-flipping that artificially increases the cost of land and rent, and even climate justice that would prevent devastating fires would give millennials peace of mind when it comes to securing housing. Most personal finance advice doesn't apply for our generation Though well-intentioned, many articles on saving money or generating wealth aren't helpful to working-class, marginalized, or economically hard-hit people who have little access to wealth and social capital to begin with. Such finance articles often assume that people who want to save money can afford to spend money at coffee shops, subscriptions, gyms, or can afford online shopping to start with. There's no way to save $4 per day on a cup of coffee if you're not in the position to do so in the first place. Many millennials, especially immigrants and refugees, grew up with the idea that we'd not only come to this country to live a better life, but to own nicer things. In family structures where scarcity was often a factor in everyday life, one of the few ways we can prove our parents' investments and sacrifices were worth it is to achieve an extraordinary amount of financial success.Some people have done so, but they're the exception rather than the rule. Learning financial literacy is a challenge for people who grew up with survival as their main goal. Fact is, it's harder for millennials to move up in their social and income status than previous generations. According to a 2019 analysis by Stanford University, there are also racial homeownership gaps among millennials because every gain from the reforms meant to help people of color own homes after the Civil Rights Movement has been lost.Though many millennials are able to secure wages that are higher than the federal minimum wage, $7.25 per hour is 31% less than the minimum wage in 1968, once inflation is accounted for. As millennials, we're constantly at the whim of market forces that throw us into disarray, with little or no safety nets, and we regularly have to fight against misconceptions about our work ethic or ambitions. But that can change.Success does not equal owning something First, we can stop tying our success and sense of accomplishments to owning things. It's okay to grieve the opportunities and wages we've lost while recognizing that we have done our best. We were taught we lived in a world of promise just as the opportunities conferred to past generations began to disappear. Then, we had a pandemic to consider. Millennials can also talk to the elders in our lives and explain our side of this. The systemic obstacles and injustices we've faced in our quest to make a living are real and different from what our parents faced. Our cost of living, healthcare, childcare, and education expenses are exorbitant, and they weren't this high for previous generations. This may not change the minds of our elders, but it can give us something to consider.We can keep voting, educating, and organizing for our rights, and people of all generations can work to understand how decisions made in the past created the systems, inequities, and issues millennials and the next few generations must grapple with. On top of everything I've mentioned, we also have climate change to deal with - all of which will impact our finances and mental health. The constant need to continue changing minds and ensuring the next generations don't go through what we go through can be exhausting, but chasing after it is well worth it.Finally, we can surround ourselves with like-minded individuals who understand us and can provide moral support and remember to rest whenever we can. Our world and its prospects are exhausting. We needn't feel guilty about finding a few moments of peace and quiet. Read the original article on Business Insider.....»»

Category: dealsSource: nytNov 7th, 2021