Gave: The End Of The Unipolar Era

Gave: The End Of The Unipolar Era Authored by Louis-Vincent Gave via Gavekal Research, Investors today must deal with the effects of not one, but two wars, as my Gavekal-IS colleague Didier Darcet pointed out in April (see Tick,Tock Tick,Tock). The first is the one we can see playing out each day on our television screens, with all the tanks, deaths and human suffering. The second is a financial war, with the unprecedented weaponization of the Western banking system and Western currencies aimed at bringing Russia to its financial knees (see CYA As A Guiding Principle (2022)). To the surprise of most people in the West, resistance against both of these war efforts has proved far stronger than expected. Almost 11 weeks into the war on the ground in Ukraine, Russian troops still seem to be taking heavy losses for relatively small territorial gains. And a little over six weeks after US president Joe Biden boasted that the ruble had been “reduced to rubble” by Western sanctions, the Russian currency is close to a two-year high against the US dollar and near a post-Covid high against the euro. At this point, both the euro and the yen appear to be bigger casualties of the Ukraine war than the ruble. The US boast that the ruble had been “reduced to rubble” is looking premature  In this paper, I shall review the implications of this stronger-than-expected resistance - both on the battlefield and in the financial markets - and attempt to draw some salient conclusions for investors. The evolution of warfare In October 1893, some 6,000 highly-disciplined warriors of King Lobengula’s Ndebele army launched a night-time attack on a camp occupied by 700 British South Africa Company police near the Shangani river in what is now Zimbabwe. It was a massacre. The BSAC “police” killed more than 1,500 Ndebele for the loss of just four of their own men. A week later, they did it again, killing some 3,000 Ndebele warriors for just one policeman dead. These one-sided victories were not won by courage or superior discipline, but because the British were armed with five machine guns and the Ndebele had none. As Hillaire Belloc wrote in The Modern Traveller: “Whatever happens, we have got / The Maxim gun, and they have not”. The technological superiority of the machine gun allowed Britain, and France, Germany and Belgium, to subjugate almost all of Africa, even though outnumbered by the Zulu, Dervish, Herero, Masai and even Boer forces they opposed. All were rendered helpless by the machine gun’s firepower. I revisit this ancient history to illustrate how military technology is a lynchpin of the geopolitical balance. Dominance of military technology is also a key factor underpinning the strength and resilience of a reserve currency. Today, one of the main reasons why Taiwan, South Korea, Japan, Saudi Arabia, the United Arab Emirates and others keep so much of their reserves in US dollars is that the US is widely regarded as being a generation (if not more) ahead of the competition in the design and production of smart bombs, anti-missile systems, fighter jets and naval frigates. In short, the superiority of US weaponry has been one of the principal factors underpinning the US dollar’s status as the world’s reserve currency. However, recent events raise important questions about whether the US can retain this superiority. In September 2019, drones allegedly deployed by Yemeni Houthi forces took out the Saudi Aramco oil processing facilities at Abqaiq. Between late September and early November 2020, Armenia and Azerbaijan fought a war over the Nagorno-Karabakh region. The conflict ended in near-total victory for the Azeris. This result stunned the military world. Observers had assumed that Armenia, with a bigger army, larger air force, more up-to-date anti-aircraft and anti-missile systems, and a history of Russian support, would easily triumph. But all Armenia’s expensively-acquired military “advantages” were quickly taken out in the early days of the fighting by Azerbaijan using Turkish-made drones costing no more than US$1mn each. On successive occasions between March 2021 and March 2022, Houthi drones attacked Saudi Arabian oil facilities, notably the giant terminal at Ras Tanura on the Persian Gulf. In December 2021, Turkish-made drones allowed the Ethiopian government to tip the balance in a civil war that until then had been going badly for government forces. In January 2022, Houthi drones hit oil facilities in the UAE.  Now, imagine being Saudi Arabia or the UAE. Over the years you have spent tens, if not hundreds, of billions of US dollars purchasing anti-missile and anti-aircraft systems from the US. Now, you see relatively cheap drones penetrating these defense systems like a hot knife through butter. This has to be frustrating. What is the point of spending up to US$340mn on an F-35c (and US$2mn on pilot training), or US$200mn on an anti-aircraft system, if these can be taken out by drones at a fraction of the cost? This evolution in warfare may help to explain the impressive resilience of the Ukrainian army in the face of Russia’s onslaught. When the Russian troops marched into Ukraine, consensus opinion was that the Ukrainian forces would crumble before the Russian military juggernaut. It is always hard to know what is happening on the ground amid the fog of war. But judging by the number of tanks destroyed, warships sunk and the apparent failure of the Russian air force to establish control over Ukraine’s skies, it seems the invasion of Ukraine is proving far more costly in terms of blood and treasure than Russian president Vladimir Putin had imagined. Could this be because Putin failed to factor the impact of drones into his military outlook? It may be premature to jump to that conclusion. But judging from afar, it appears inexpensive Turkish drones have helped level the battlefield in the Ukrainian-Russian David versus Goliath confrontation— the biggest and bloodiest on European soil since World War II. This helps to explain why the US military assistance package for Ukraine Biden announced this month included 700 Switchblade drones. These are surprisingly cheap—the Switchblade 300 reportedly carries a price tag as low as US$6,000—yet highly effective. In essence, they are single-use kamikaze drones. Apparently, they fly faster than the Turkish Bayraktar TB2 drones that the Ukrainians, like the Azeris before them, have used to such devastating effect. This suggests the Switchblades should be able to evade the air defenses that Russia has attempted to maintain over its troops. The US military deployed Switchblades sparingly in Afghanistan, so it is hard to know whether these will perform as billed in combat conditions. But before this shipment to Ukraine, only the UK was permitted to purchase Switchblades. This implies that the Pentagon considers the Switchblade a valuable and potent weapon. David Petraeus, the former Central Intelligence Agency director who, as a four star general, commanded the US campaigns in both Iraq and Afghanistan, singled out the weapon in a recent interview with historian Niall Ferguson: “I’ll mention one item in particular: the Switchblade drone. It’s a loitering munition that takes a one-way trip. The light version can loiter for 15 to 20 minutes. Heavy version, 30 to 40 minutes with a range of at least 40 km. The operator selects a target, it locks on and it follows. Then it strikes when the operator gives that order. This is extraordinarily effective because you can’t hear it on the ground. The first time the enemy knows it’s there is when it blows up. If we can get enough of those into Ukraine, they could be a true game-changer.” However, I digress. Returning to the discussion about why drones might matter for financial markets: 1) If ever-cheaper and more readily available drones are going to revolutionize war, much as the Maxim gun did 140 years ago, then it is questionable whether it still makes sense to invest in tanks, airplanes, anti-aircraft and anti-missile systems. If it does not, what does this mean for the value of the large, listed death-merchants? Cheap drones are bad news for the stocks of defense giants Historically, buying the merchants of death after a big rally in oil made sense, if only because so much of the world’s high-end weapon consumption occurs in the Middle East. But in the world of tomorrow, will Middle Eastern oil kingdoms still line up to buy multibillion US dollar systems from Raytheon, Boeing, Lockheed and the like, if those systems are vulnerable to attacks from relatively cheap drones? 2) Talking of Middle Eastern regimes, the deal prevailing in the Middle East for the past five decades has been that oil would be priced in US dollars, and that the oil-exporting regimes in Saudi Arabia, the UAE or Kuwait would use these US dollars to buy US-made weapons (and US treasuries). With this bargain, the US implicitly guaranteed the survival of the Gulf Arab regimes. Fast forward to 2022, and following the invasion of Ukraine, countries such as Saudi Arabia and the UAE have failed to condemn Russia. What’s more, Saudi Arabia let it be known that it might start to accept payment for its oil in renminbi. Perhaps this makes sense if Saudi Arabia feels it no longer needs US$340mn F-35s, but instead more US$1mn Turkish-made drones? 3) If, as the Azeri-Armenian and the Ukrainian-Russian wars suggest, drones have radically leveled the battlefield in war, this profound development has a multitude of implications. Does it undermine the long-held superiority of vastly expensive armament systems, tilting the balance in favor of much cheaper and much more widely-available weapons? If so, does this mean another pillar supporting the US dollar’s reserve currency status is crumbling in front of our eyes? In a world where military might is no longer the monopoly of a single superpower, or the duopoly of two, does the world become, de facto, multipolar? In such a world, would there still be a compelling reason for trade between Indonesia and Malaysia to be settled in US dollars, rather than in their own currencies? Wouldn’t trade between China and South Korea now be settled in renminbi and won? Drone tactics are a radically different form of warfare, and they are evolving fast. So, it would be premature to offer any definitive conclusions about the extent to which drones will dominate warfare in the future. However, their recent use in Ukraine (and Yemen, Azerbaijan and Ethiopia) means that investors have to be open to the idea that drones will change the battlefield of the future. Because if they are going to change the battlefield of the future, then they will also change the economic and financial realities of today. In this sense, drones might well be the modern-day equivalent of aircraft carriers. In World War II, aircraft carriers made big-gun battleships and other traditional naval warships obsolete, or at least highly vulnerable. Two early Pacific battles proved the point. The Battle of the Coral Sea in May 1942, generally considered by historians to have been a draw, was the first naval engagement ever fought in which the opposing fleets never made visual contact with each other. Carrier-based aircraft drove the action. A month later, the far more consequential Battle of Midway established the new reality beyond all doubt. The Imperial Japanese Navy was ambushed northwest of Hawaii and lost the bulk of its carrier force in a single action. It would be on the defensive for the rest of the war. With hindsight, Midway marked the start of US dominance over the world’s oceans. In short order, this translated into US dominance over global trade. But with the nature of warfare again changing, is this dominance of the oceans and of other battlefields guaranteed to last? Investors need to consider the uncomfortable possibility that it might not. The dramatic shift in the global financial landscape We are all the offspring of our own experiences. One important formative event in my own modest career was the Asian financial crisis of 1997-98. Witnessing how quickly things could unravel left a deep mark. I highlight this because I am not alone in having lived through the shock of 1997-98. Pretty much every emerging market policymaker aged 50-75 (which is most of them) went through a similar trauma. Seeing your country’s entire middle class wiped out in the space of a few weeks—which is what happened in Thailand, Indonesia, Russia, Argentina and others in the period from 1997 to 2000—is bound to leave a few scars. Among emerging market policymakers these scars took the form of a deepseated conviction of “never again” (see Our Brave New World). To ensure their countries’ middle classes were never again wiped out, they adopted a straightforward set of policy prescriptions that in the early 2000s Gavekal dubbed the The Circle Of Manipulation. It went something like this: 1) To avoid a future crisis, your central bank needs to maintain a healthy safety cushion of hard currency bonds, mostly US treasuries and bunds.   2) The more you become integrated with the global economy, the larger this cushion should be. 3) To build up this safety cushion, you need to run consistent and large current account surpluses. 4) To run consistent large current account surpluses, you need to maintain an undervalued currency. Among the results of these policy prescriptions were charts looking like this: By all previous standards, this was an odd state of affairs: an economic arrangement under which poorer countries with high savings rates and vast infrastructure investment needs ended up subsidizing consumption in rich countries with low savings rates and ever-accelerating twin deficits. To cut a long story short, for the last 25 years, we have lived in a world in which undervalued currencies in emerging markets allowed Western consumers to buy attractively priced goods and services imported from developing countries. Meanwhile, the individuals, companies and governments in the emerging markets which earned capital from these sales largely recycled their earned capital into Western assets—because Western assets were perceived to be “safe.” But this perception of safety may now be changing in front of our eyes. Consider the following changes: 1) Developed economy government bonds have proved anything but safe. As stresses of increasing severity have affected the world economy over the last 12 months, investors in local currency Indonesian and Brazilian government bonds and in gold have generated positive returns of between 3% and 4% in US dollar terms. Chinese government bonds are up by just over 1.5%. Meanwhile, Indian and South African government bonds have lost -4%. These performances contrast with US treasuries, which have lost -9%, and the train wrecks suffered by investors in eurozone bonds and Japanese government bonds, which are down anywhere between -17% and -23%. Of these, which can be considered the safest? 2) The confiscation of Russia’s reserves. I will not repeat here arguments I have made at length elsewhere (see What Freezing Russia’s Reserves Means). But in a nutshell, the decision to freeze Russia’s central bank reserves has been the most important financial development since US president Richard Nixon closed the gold window in 1971. From now on, any country that is not an outright US ally—China, Malaysia, South Africa and others—and even some historical friends—Saudi Arabia? The UAE? India?—will think twice before reflexively accumulating US treasuries from fear they may get canceled. Over the course of a weekend, with no discussion in the US Congress, and no discussion with the Federal Reserve, the US administration unilaterally turned the US treasury market on its head. From that moment on, the whole nature of a US treasury security would depend entirely on who owned it. 3) Running roughshod over property rights. It is hard to pin down what the West’s single most important comparative advantage might be. Having the world’s strongest military? Being the seat of almost all the world’s greatest universities? Issuance of the world’s reserve currencies? The list goes on. But surely somewhere near the top of the list should be the sanctity of property rights, guaranteed by rock-solid “rule of law.” The main reason Chinese tycoons for years purchased Vancouver real estate, the Emirati central bank bought US treasuries and Saudi princes parked their wealth in Zurich was the knowledge that, whatever happened, and wherever you came from, you were guaranteed property rights, and a fair trial to ascertain those rights, in any courtroom in New York, London, Zurich or Paris. Better still, since the implementation over the last 850 years in the West of habeas corpus and various bills of rights, you have been able to have confidence that you would be judged as an individual. One of the fundamental tenets of Western democracies’ legal systems is that there is no such thing as a collective crime—or collective punishment. You can only be held responsible and punished for what you have done as an individual. Unless - all of a sudden - you are a Russian oligarch. This is a dramatic development, if only because every Chinese tycoon, Saudi prince, or emerging market billionaire will now wonder whether he will be next to get canceled. If the wealth of Russian oligarchs can be confiscated so abruptly, then why not the assets of Saudi princes? Stretching this a little further, maybe it shouldn’t just be Saudi princes or Chinese billionaires who should be worried. If wealth can be seized without any trial, but simply because of guilt by association, maybe in the not-too distant future Western governments could confiscate the wealth of anyone who mined coal or pumped oil out of the ground. Don’t they have blood on their hands for causing tomorrow’s climate crisis? And while we are about it, perhaps we should also confiscate the wealth of social media barons for failing to prevent a mental health crisis among our youth? 4) Russia’s counter-attacks. Older readers may remember how in the days that preceded the Lehman bust, US Treasury secretary Hank Paulson walked around proclaiming that he had “a big bazooka,” and that if the market pushed too hard, he would fire this bazooka and blow shortsellers out of the water. Unfortunately, with Lehman it became obvious to all and sundry that Paulson’s bazooka was firing blanks. Today’s situation is similar. In the wake of the Russian invasion of Ukraine, the US decided to go for full weaponization of the US dollar, proclaiming the ruble had been turned to rubble. Last week, the ruble hit two-year highs against both the US dollar and euro. Biden’s financial bazooka seems to have been no more potent than Paulson’s. Why? Because Russia decided to fight back, requiring buyers from “unfriendly” countries to pay for their purchases of Russian commodities in rubles. And in effect, the only way unfriendly customers can acquire rubles is by offering gold to the Russian central bank (see The Clash Of Empires Intensifies). This has created a sudden and profound shift in the global trading and financial architecture. For decades, global trade was simple. If Russia produced commodities that China needed, then China first had to earn US dollars by selling goods and services to the US consumer. Only in this way could it acquire the US dollars it needed to purchase commodities from Russia. But what happens now that China or India can purchase their commodities from Russia or Iran for renminbi or Indian rupees? Obviously, their need to earn and save US dollars is no longer so acute. Conclusion Warfare is changing and the financial system has been weaponized like never before. However, the weaponization of the financial system has so far failed to deliver the intended results. At this point, investors can adopt one of two stances. The first might be described as “nothing to see here; move along.” The second is to accept that the world is changing rapidly, and that these changes will have deep and lasting impacts on financial markets. Different war, different world, different consequences For now, there are some clear takeaways. 1) The Ukraine war may be telling us that modern history’s unipolar age is now well and truly over. As big as the Russian army is, and as powerful as the US Treasury might be, the current crisis has demonstrated that neither is powerful enough to impose its will on its perceived enemies. This includes even relatively weak enemies; Ukraine’s army was hardly thought of as formidable, while Russia was supposed to be a financial pygmy. 2) This is a very important message. In an age of drones and parallel financial arrangements, there is no longer such a thing as absolute power—nor even the perception of absolute power. The pot has been called, each player has had to show his cards, and all are sitting with busted flushes! The fact that military and financial dominance may be harder to assert in the future opens the door to a much more multipolar world. 3) For 25 years, emerging market workers have subsidized consumption in developed markets, as emerging market policymakers kept their currencies undervalued and recycled their current account surpluses into “hard” currencies. If this arrangement now comes to an end, then the developed market consumer will struggle while the emerging market consumer will thrive. 4) Much consumption in emerging markets tends to occur at the “low end” of the product chain. This plays into a theme I have been harping on about for the last year: that investors should focus on companies that deliver products that consumers “need to have” rather than products that are “nice to have.” 5) Over the last two years, US treasuries and German bunds have failed in their job of providing the antifragile element in portfolios. There are few reasons to think that this failure is about to reverse any time soon. Today, investors need to look elsewhere for antifragile attributes. Precious metals, emerging market government bonds, high-yield energy assets and foodstuffs are all leading candidates. 6) High-end residential real estate in Western economies will lose the emerging market money-recycling bid and will struggle. 7) New safe destinations for emerging markets’ excess capital will emerge. Obvious candidates include Dubai, Singapore, Mauritius, and perhaps even Hong Kong (should China eventually decide to follow the rest of the world and to live with Covid). It is hard to be too bullish on these destinations. They are so small that even a marginal, influx of financial and human capital will have a disproportionate impact. The world’s unipolar era is over. Few portfolios reflect this reality - and definitely not the indexed portfolios that are today massively overweight an overvalued US and a desperately ill-omened Europe. Tyler Durden Sun, 05/22/2022 - 23:50.....»»

Category: blogSource: ZEROHEDGE43 min. ago Related News

Record Rate Cut Shows Beijing Pursues Shock-and-Awe

Record Rate Cut Shows Beijing Pursues Shock-and-Awe By Ye Xie, Bloomberg markets live commentator and analyst The record reduction in China’s key interest rate on Friday was a rare positive policy surprise from Beijing since the Omicron variant of Covid began to wreak havoc on the economy in the past two months. It’s a clear policy U-turn that aims to offset some of the self-imposed constraints, such as housing restrictions, to boost business and household confidence. If so, more policy easing for the housing market and more fiscal spending are likely to come. China’s banks lowered the five-year loan prime rate (LPR), which is tied to the mortgage rate, by a record 15 bps on Friday, triple the amount that economists had forecast. It was the second policy move in a week that was aimed at propping up the ailing property market, after the People’s Bank of China cut the floor of the mortgage rate a week earlier. Until now, Beijing’s plan to save the economy had been conservative, focusing on liquidity injections and tax reductions. That had fallen short of what’s required to offset the destruction caused by Covid restrictions and the property slump. Take the housing sector: New home sales for the top 100 developers tumbled 59% in April from a year earlier. Goldman Sachs on Friday raised the default forecast for high-yield property developers’ bonds to 32% from 19%. The efforts to lower mortgage rates show a clear sense of urgency to turn around the housing market. As Zhaopeng Xing, senior China strategist at ANZ Bank, said: “The cut signals that the leadership has ended discussion over the property sector and decided to rescue it as soon as possible.” Source: Huatai Securities There are a few reasons to believe that the impact of the LPR cut alone will be limited. As Nomura’s Lu Ting pointed out, mortgage rates had already started to decline, even before recent policy moves. That did little to arrest the sales decline, in part because Covid restrictions limited mobility, jobs, income and confidence of residents. In addition, when consumer leverage is already high, the willingness and ability to borrow remains in question. In fact, property stocks fell Friday, even as the benchmark CSI 300 rallied. What’s clear, then, is more policy follow-ups are likely needed to boost income, save jobs and lift confidence. Here’s is a laundry list from Citigroup on what Beijing could do to revive the housing and the broader economy: Ease restrictions on presale deposits, maybe even tinker with the “three red lines” on funding curbs to improve cash flow for developers Advance part of the 2023 special local-government bond quota to support investment Consumer subsidies or vouchers funded by the central government Special Treasuries to cover Covid expenses, as was done in 2020 (1 trillion yuan) General budget revision to expand stimulus as in 2016 (for tax reform), 2008 (Sichuan earthquake) and 1998 (Asian financial crisis) Bloomberg Economics now forecasts China’s growth will trail the U.S. for the first time since 1976, when Chairman Mao died.  President Xi reportedly aims to avoid such a scenario in a year when he is expected to retain power for a third term. The rate cut on Friday may be the beginning of a shock-and-awe attack to get ahead of sagging expectations. Tyler Durden Sun, 05/22/2022 - 23:25.....»»

Category: blogSource: ZEROHEDGE1 hr. 42 min. ago Related News

Everything You Want To Know About Monkeypox, But Were Afraid To Ask

Everything You Want To Know About Monkeypox, But Were Afraid To Ask With the COVID-19 pandemic still fresh in the minds of the people around the world, it comes as no surprise that recent outbreaks of another virus are grabbing headlines. Monkeypox outbreaks have now been reported in multiple countries, and it has scientists paying close attention. For everyone else, numerous questions come to the surface: How serious is this virus? How contagious is it? Could Monkeypox develop into a new pandemic? Below, Visual Capitalist's Nick Routely and Mark Belan answer these questions and more. What is Monkeypox? Monkeypox is a virus in the Orthopoxvirus genus which also includes variola virus (which causes smallpox) and cowpox virus. The primary symptoms include fever, swollen lymph nodes, and a distinctive bumpy rash. There are two major strains of the virus that pose very different risks: Congo Basin strain: 1 in 10 people infected with this strain have died West African strain: Approximately 1 in 100 people infected with this strain died At the moment, health authorities in the UK have indicated they’re seeing the milder strain in patients there. Where did Monkeypox Originate From? The virus was originally discovered in the Democratic Republic of Congo in monkeys kept for research purposes (hence the name). Eventually, the virus made the jump to humans more than a decade after its discovery in 1958. It is widely assumed that vaccination against another similar virus, smallpox, helped keep monkeypox outbreaks from occurring in human populations. Ironically, the successful eradication of smallpox, and eventual winding down of that vaccine program, has opened the door to a new viral threat. There is now a growing population of people who no longer have immunity against the virus. Now that travel restrictions are lifting in many parts of the world, viruses are now able to hop between nations again. As of the publishing of this article, a handful of cases have now been reported in the U.S., Canada, the UK, and a number of European countries. On the upside, contact tracing has helped authorities piece together the transmission of the virus. While cases are rare in Europe and North America, it is considered endemic in parts of West Africa. For example, the World Health Organization reports that Nigeria has experienced over 550 reported monkeypox cases from 2017 to today. The current UK outbreak originated from an individual who returned from a trip to Nigeria. Could Monkeypox become a new pandemic? Monkeypox, which primary spreads through animal-to-human interaction, is not known to spread easily between humans. Most individuals infected with monkeypox pass the virus to between zero and one person, so outbreaks typically fizzle out. For this reason, the fact that outbreaks are occurring in several countries simultaneously is concerning for health authorities and organizations that monitor viral transmission. Experts are entertaining the possibility that the virus’ rate of transmission has increased. Images of people covered in monkeypox legions are shocking, and people are understandably concerned by this virus, but the good news is that members of the general public have little to fear at this stage. I think the risk to the general public at this point, from the information we have, is very, very low. –TOM INGLESBY, DIRECTOR, JOHNS HOPKINS CENTER FOR HEALTH SECURITY Finally, as Infectious Disease expert Muge Cevik notes in a detailed Twitter thread, as the monkeypox virus (MPX) outbreak continues, a lot of data emerging in real-time & being rapidly disseminated (as well as misinformation). Confirmed and suspected cases of #MonkeyPox now reached 200 among 14 countries with 20 confirmed cases in the UK. Source: BNO The main concern is that there are non-travel associated cases in Europe, meaning there is likely unnoticed community transmission. This is the biggest outbreak outside of Africa, and there will be more cases to come. The concern is not necessarily a global pandemic like what we’ve seen w/ coronaviruses or influenza. But a growing & large MPX epidemic is a concern especially if PH measures are delayed. So, the most important thing is to inform our communities & healthcare workers about the clinical presentation, incubation period, so that people can be diagnosed at an earlier possibility, isolated and contacts are protected. This is the range of skin lesions. In conclusion, monkeypox is not really a rare disease & is a public health concern. According to prelim evidence there is no indication that current outbreak is due to a new MPX variant & epidemiological data suggest that it’s been introduced to male-to-male sexual networks, likely sometime in late-April. We have observed MXP outbreaks in many countries mainly in Africa, this is the first time that we are observing wide transmission in Europe. MPX remains an under-recognized and underreported emerging disease. Good clinical management can limit disease severity or death. We are in an unknown territory as individuals who have prior smallpox vaccination do have some degree of protection against monkeypox, but we don’t really know the degree of protection it provides to individuals who had vaccination 50, 60 years prior. Tyler Durden Sun, 05/22/2022 - 22:35.....»»

Category: blogSource: ZEROHEDGE2 hr. 14 min. ago Related News

Gen. Milley Warns West Point Graduates On Likelihood Of War With Russia And China

Gen. Milley Warns West Point Graduates On Likelihood Of War With Russia And China Authored by Frank Fang via The Epoch Times (emphasis ours), The top U.S. general told the ​​U.S. Military Academy West Point’s class of 2022 that the nature of war is changing and the current rules-based international order is being threatened by Russia and China. “Right now, at this very moment, a fundamental change is happening in the very character of war,” Chairman of the Joint Chiefs of Staff Gen. Mark Milley said on May 21. “We are facing, right now, two global powers: China and Russia, each with significant military capabilities, and both fully intend to change the current rules-based order.” Mark A. Milley, chairman of the Joint Chiefs of Staff, arrives for the 2022 West Point Commencement Ceremony at West Point Military Academy in West Point, N.Y., on May 21, 2022. (Michael M. Santiago/Getty Images) He made the remarks during a speech to the graduating cadets at a commencement ceremony in West Point, New York. “The world you’re being commissioned into has the potential for significant international conflict between great powers,” Milley said. “And that potential is increasing, not decreasing.” He reminded the cadets that Russia’s invasion of Ukraine was a lesson that “aggression left unanswered only emboldens the aggressor.” As for China, Milley pointed out that the communist regime has a “revisionist foreign policy,” and now boasts an “increasing capable military.” Details of China’s growing military capabilities were disclosed by the Office of the Director of National Intelligence in its annual threat assessment report (pdf) released in March. One area of concern is China’s ongoing construction of hundreds of new intercontinental ballistic missile silos. Another concern centers around China’s push to develop space capabilities in order to “erode the U.S. military’s information advantage.” The report states that the communist regime is “fielding new destructive and nondestructive ground- and space-based antisatellite weapons.” Adm. John Aquilino, commander of U.S. Indo–Pacific Command, in his prepared statement (pdf) for a congressional hearing on May 17, warned about the threat posed by China’s expansion and modernization of its air force, navy, and rocket force. For instance, China is expected to increase its battle force ships to 420 by 2025, even though the communist regime currently already boasts the largest navy in the world, according to Aquilino. China’s new generation of mobile missiles, some of which rely on hypersonic glide vehicles, is designed to evade U.S missile defenses, he added. Mark A. Milley, chairman of the Joint Chiefs of Staff, shakes the hands of West Point graduates as they receive their diplomas during the 2022 West Point Commencement Ceremony at West Point Military Academy in West Point, N.Y., on May 21, 2022. (Michael M. Santiago/Getty Images) Technology Milley said the character of war has also changed in the kinds of weapons being used. “The maturity of various technologies that either exist today or are in the advanced stages of development, when combined, are likely to change the character of war just by themselves,” Milley said. “You’ll be fighting with robotic tanks, ships, and airplanes,” he added. “We’ve witnessed a revolution in lethality and precision munitions. What was once the exclusive province of the U.S. military is now available to most nation states with the money and will to acquire them.” According to Milley, the mother of all technologies is artificial intelligence (AI), which is resulting in “the most profound change ever in human history.” In recent years, the Chinese Communist Party (CCP) has repeatedly identified AI as one of the top priorities for its national development. It was one of the key industries outlined in China’s industrial road map known as “Made in China 2025.” Two years later, Beijing rolled out the “New Generation Artificial Intelligence Development,” that sets out strategic goals by 2020, 2025, and 2030. According to a Congressional Research Service report (pdf) published in April, Beijing is developing AI tools for cyber operations and advancing AI in various types of air, land, sea, and undersea autonomous military vehicles. “China is actively pursuing swarm technologies, which could be used to overwhelm adversary missile defense interceptors,” the report added. Swarm intelligence is having machines communicate and work together to achieve a certain objective. A People’s Liberation Army air force WZ-7 high-altitude reconnaissance drone is seen a day before the 13th China International Aviation and Aerospace Exhibition in Zhuhai in southern China’s Guangdong province on Sept. 27, 2021. (Noel Celis/AFP via Getty Images) Future Milley reminded the cadets that the United States is losing ground militarily. “Whatever overmatch we, the United States, enjoyed militarily for the last 70 years is closing quickly,” he said. “And the United States will be, in fact, we already are challenged in every domain of warfare in space and cyber, maritime, air, and, of course, land.” The cadets should be prepared for a future that is different from the past, Milley emphasized. “So in short, the next 20 or 25 years, is not going to be like the last 20 or 25,” he said. “Globally, there’s an increase in nationalism and authoritarian governments, regional arms races and unresolved territorial claims, ethnic and sectarian disputes, and an attempt by some countries to return to an 18th-century concept of balance of power politics with spheres of influence,” Milley added, without naming any country. The CCP is expanding its sphere of influence, particularly over developing countries, through its infrastructure and investment scheme known as the Belt and Road Initiative. At the same time, the communist regime is aiming to take over Taiwan—a de facto independent entity that Beijing considers a part of its territory—in order to expand its sphere of influence in East Asia and the western Pacific. Tyler Durden Sun, 05/22/2022 - 23:00.....»»

Category: blogSource: ZEROHEDGE2 hr. 14 min. ago Related News

Gun-Parts Dealer Sues ATF Over "Secret And Unannounced Policy Changes"

Gun-Parts Dealer Sues ATF Over 'Secret And Unannounced Policy Changes' Authored by Ken Silva via The Epoch Times (emphasis ours), Pennsylvania firearms product dealer JSD Supply filed for a temporary restraining order against the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) on May 19, asking a federal judge to block “secret and unannounced policy changes” that restrict the sale of gun parts. A "ghost gun" is displayed before the start of an event about gun-related violence in the Rose Garden of the White House in Washington on April 11, 2022. (Drew Angerer/Getty Images) The dispute stems from the ATF ordering JSD Supply to stop dealing “80 percent receivers”—a colloquial term used within the firearms industry for incomplete and unfinished firearm frames or receivers. “Those engaged in the business of selling these complete kits, as your company does, are in fact engaged in the business of dealing firearms,” the ATF’s May 9 order said, referencing the company’s “JSD 80% Lower Receivers, Jigs, and Gun Parts Kits.” While the ATF has a history of approving the sale of 80 percent receivers—as documented in JSD Supply’s motion for a restraining order—the two parties apparently disagree about what exactly the company is selling. In response to an email inquiry for this article, ATF Special Agent Robert Cucinotta declined to comment but referenced The Epoch Times to the Biden administration’s April 11 order to crack down on “ghost guns.” “This final rule bans the business of manufacturing the most accessible ghost guns, such as unserialized ‘buy build shoot’ kits that individuals can buy online or at a store without a background check and can readily assemble into a working firearm in as little as 30 minutes with equipment they have at home,” the order said. “This rule clarifies that these kits qualify as ‘firearms’ under the Gun Control Act.” However, JSD Supply contends that the ATF’s May 9 cease-and-desist order has nothing to do with the White House ghost gun rule, which doesn’t go into effect until August. To the company’s point, ATF said in its cease-and-desist order that JSD Supply’s 80 percent receivers “have always been firearms pursuant to the [Gun Control Act] … notwithstanding the recently announced regulations.” Instead, JSD Supply contends that the ATF’s cease-and-desist order resulted from “secret and unannounced policy changes” from years ago. According to JSD Supply, in 2018, the ATF began to “implement a series of secret and unannounced policy changes regarding the sale of ‘80% frames and receivers,’ the tools used to manufacture them, and the firearm parts used in the assembly process.” Internal ATF records obtained by JSD Supply via the Freedom of Information Act (FOIA) show the bureau refusing to categorize a gun kit as “not a firearm” in 2018—evidence that the policy shift occurred behind closed doors around that time, JSD Supply’s attorney, Stephen Stamboulieh, told The Epoch Times. According to Stamboulieh and his client, gun product dealers weren’t made aware of the secret change until the ATF raided a manufacturer in late 2020. “Suddenly, without warning, in December of 2020, ATF paid a visit to the nation’s largest manufacturer of 80% frames and receivers, Polymer80, Inc.,” JSD Supply’s motion said. “Each time since then, ATF has moved the goalposts by changing its policy. The industry—including plaintiff—has attempted in good faith to adapt to and comply with ATF’s demands, despite the lack of any legal authority for ATF’s position.” To support its theory about moving the goalposts, JSD Supply noted that the ATF did not seize from Polymer80 some of the same 80 percent receivers that are subject to the bureau’s cease-and-desist order. JSD Supply also argued that it was being singled out by the ATF when numerous other retailers offer the same products. “Indeed, there are dozens, if not hundreds (or possibly thousands) of other companies across the country and internet which offer for sale ‘all the component parts’ necessary for a customer to manufacture a complete firearm,” JSD Supply said quoting from the ATF’s order. “This raises the obvious question as to why ATF made the decision to target Plaintiff with a cease-and-desist order, effectively shutting down its business, for doing nothing more than following standard industry practice.” JSD Supply said the ATF has not clarified how the company can comply with its policy on 80 percent receivers, which is why a restraining order is necessary. “If ATF had wanted to change (again) its secret, unsupported policy on 80% frames and receivers, the agency had the option of issuing an open letter to all manufacturers and retailers of 80% receivers and firearm parts, giving notice to all of the change,” the company said. “Defendants’ vague C&D order, without any statutory authority, has forced plaintiff to immediately suspend all retail sales of its entire product line, causing immediate and substantial financial losses, violating the Fifth Amendment, and infringing on the Second Amendment rights of Plaintiff and its customers. Accordingly, Plaintiff is seeking emergency relief, in the form of a temporary restraining order.” A hearing date has yet to be set for the matter. Tyler Durden Sun, 05/22/2022 - 22:10.....»»

Category: blogSource: ZEROHEDGE2 hr. 42 min. ago Related News

2022 Has Been The Worst Year Ever For Hedge Funds, Who Are Now Massively Shorting To Chase Stocks Lower

2022 Has Been The Worst Year Ever For Hedge Funds, Who Are Now Massively Shorting To Chase Stocks Lower Some were stunned to see stocks surge in the last hour of trading on Friday in the illiquid vacuum that saw the S&P earlier tumble into a bear market, sliding more than 21% from its January all time high (a level that equates with 3,855 in the e-mini) briefly before bouncing back above 3900, and rejecting the third attempt to enter a bear market in the past week. We were not, and the reason why is that as has been the case every time a short base builds up, there was a sharp short squeeze. And how did we know that enough of a short pile up had been built up to be toppled by even the smallest spike higher? Why the latest Goldman Prime Brokerage data (full report available to zh pro subscribers). Here are the highlights: US equities on the GS Prime book were net sold for the first time in 4 days driven by short sales and to a lesser extent long sales (2.5 to 1). Wednesday's net selling on the Prime book, driven by short sales, was relatively modest (1-Year Z score -1.4) compared to the sharp market losses (SPX -4%, largest drop in nearly 2 years), suggesting that hedge funds collectively were not the main driver of the price declines; and also suggesting that they had been already substantially short heading into the -4% abyss. At the same time, quantitative measures tracked by Goldman Research indicates retail investors have become sellers in the past few months, reversing ~26% of the cumulative positions net bought in SPX stocks since Jan ’19 (link ). Looking at the composition of trades, Goldman Prime finds that both single stocks and macro products (Index and ETF combined) were net sold and made up 67% and 33% of the $ net selling, driven by short sales. Furthermore, single stocks saw the largest $ net selling in the past month (1-Year Z score -1.4). 9 of 11 sectors were net sold led in $ terms by Info Tech, Comm Svcs, Industrials, Health Care, and Materials. Which is not to say that hedge funds refuse to take profits: indeed, Consumer Discretionary and Consumer Staples - the worst performing sectors on Wednesday  - were both modestly net bought on the Prime book, driven by long buys and short covers, respectively. On the other hand, long-suffering Info Tech stocks were net sold for a second straight day – following 5 straight days of net buying from 5/10 to 5/16 – and saw the largest $ net selling in the past month (1-Yearr Z score -1.2), driven by short sales and to a lesser extent long sales (3.2 to 1) But the easiest way to visualize the growing bearish sentiment is by looking at the red line in the top left chart (US equities trading flows) , which is now at the lowest level (most shorts) in 2022: Ok, so we now that hedge funds have been piling up shorts (not to mention puts), which also explains the lack of a violent VIX surge or a capitulation lower in stocks. What may be just as notable is that despite the rise in short positions, both gross and net hedge funds exposures have collapsed. Indeed, the latest Goldman PB data reflects some of the largest reduction of leverage on record (more in the full latest Goldman prime broker weekly note available to pro subscribers).  According to Goldman's Tony Pasquariello, the huge underperformance of implied volatility traces back to this point (which, he calls an "immense oddity" - over the past 15 years, there have been 36 daily selloffs of 4% or more, and the VIX was never as low as it was on Wednesday). Finally, here are the five top highlights from the latest quarterly Hegde Fund Tracker report from Goldman (also available to professional zero hedge subs in the usual place): PERFORMANCE: Both alpha and beta have posed large headwinds to hedge fund returns so far in 2022. The worst start to a year for the S&P 500 since 1932 has created a challenging beta environment. In terms of alpha, Goldman's Hedge Fund VIP basket of the most popular long positions (GSTHHVIP) has lagged the S&P 500 by 28 pp since early 2021, its worst stretch on record. Funds have fared better with shorts; the most concentrated short positions are down 31% YTD, lagging both the S&P 500 and VIPs. Nonetheless, the median S&P 500 stock still carries short interest equivalent to just 1.5% of market cap, a 25-year low. LEVERAGE AND FLOWS: As noted above, the decline in hedge fund net leverage that began in 2021 has accelerated in recent months. Exposure data calculated by Goldman Sachs Prime Services show net leverage in the 30th percentile vs. the past 5 years compared with record highs in spring 2021. Despite recent selling pressures, equity allocations across a number of investor groups - most notably households - still appear elevated, suggesting the potential for more selling pressure if the macro outlook does not become more friendly for equities. HEDGE FUND VIPS: Despite the sell-off in technology stocks, FAAMG remains atop Goldman's list of the most popular hedge fund long positions. MSFT maintains its position as #1. The VIP list contains the 50 stocks that appear most often among the top 10 holdings of fundamental hedge funds. Four new Energy stocks entered the basket (CHK, VAL, OXY, and LNG) and the sector now has a 10% weight. The basket has outperformed the S&P 500 in 58% of quarters since 2001 with an average quarterly excess return of 40 bp. 16 new constituents: ANTM, APO, ATVI, CHK, CHNG, CRWD, EQT, FIVN, GPN, HUM, MRVL, OXY, PLAN, T, VAL, Z. GROWTH STOCKS: Hedge funds continued to reduce exposures to Growth sector and stocks. Rising real interest rates and  declining leverage have weighed in particular on the valuations of long-duration stocks with extremely high multiples. SECTORS: Hedge funds added to Industrials and Materials while cutting exposures to former favorite Growth sectors. Fund tilts to Information Technology and Consumer Discretionary are now at the lowest levels in at least a decade. “Big Tech” drove much of the reduction in positions across Tech and Discretionary, with funds incrementally rotating away from AAPL, AMZN, and TSLA. Putting it all together, Goldman's Ben Snider summarizes that "a plummeting equity market and the even worse performance of the most popular long positions have led to the worst start of a year  on record for hedge fund returns. HFR data show the average equity hedge has returned -9% YTD and GS Prime Services estimates an asset-weighted decline of -17%. As a result of these struggles, in recent months hedge funds have accelerated the reduction in leverage and rotation away from Growth stocks they began several quarters ago" while at the same time piling up shorts.  However, as Goldman notes, this adjustment has not been quick enough and despite four Energy stocks entering Goldman's Hedge Fund VIP list of the most popular long positions (CHK, VAL, OXY, and LNG), Tech still represents over a third of the basket’s 50 constituents. The five FAAMG companies remain at the top of the list. The basket has declined by -27% YTD vs. -18% for the S&P 500 after underperforming the S&P 500 by 17 pp in 2021. During this period, hedge fund VIPs have effectively given back all the excess return they had generated since 2014. Concluding, Goldman writes that the sharp recent reduction in hedge fund length and rotation in long portfolios reflects a broader asset reallocation taking place across the market. In recent years, low interest rates have supported the investment philosophy that There Is No Alternative to equities (“TINA”). Long-duration Growth stocks have benefited most as both institutional and household investors lifted their equity exposures. Today, in contrast, positive real interest rates, growing recession fears, and declining equity prices have signaled to investors that There Are Reasonable Alternatives to stocks (“TARA”). Investors have been reallocating accordingly. This ongoing adjustment is reflected in household and institutional flows away from equities broadly and from Growth stocks in particular. For hedge funds, this has exacerbated the vicious cycle of falling share prices, declining leverage, and poor liquidity that has created such a challenging market environment this year. All reports mentioned above are available to zero hedge professional subs. Tyler Durden Sun, 05/22/2022 - 20:05.....»»

Category: blogSource: ZEROHEDGE3 hr. 13 min. ago Related News

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

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

Category: blogSource: ZEROHEDGE3 hr. 13 min. ago Related News

Turkey"s Chief Statistician Quits For "Health Reasons" After Inflation Hits 70%

Turkey's Chief Statistician Quits For "Health Reasons" After Inflation Hits 70% Three months after Turkey's president Erdogan fired his statistics chief as inflation hit a mere 36%, now that inflation has almost doubled since then, the latest official in charge of compiling Turkish inflation statistics has decided to do the smart thing and step down on his own, becoming the latest prominent departure at an institution that’s facing harsh criticism over the reliability of its economic data. On Friday, the Turkish Statistical Institute said Cem Bas resigned as head of the department of price statistics for "health reasons." Furkan Metin, who previously oversaw the digital transformation and projects department at the agency known as TurkStat, has replaced Bas, who’ll remain on staff in a lower-profile role. The personnel change, first reported by Bloomberg, adds to a period of ongoing turmoil at TurkStat, whose president was replaced in January less than a year after his appointment. Turkish inflation data has been in the spotlight at a time when consumer prices are exploding at the fastest pace since the turn of the century, a key concern for President Recep Tayyip Erdogan’s government just over a year before elections. Furthermore, according to Bloomberg, concerns have swirled among researchers over what they call a divergence between the agency’s price statistics and the surge in the cost of living felt by wage earners. While TurkStat reported an annual inflation of 70% in April, ENAGroup, an independent group of scholars who’ve put together an alternative consumer price index, put the figure at as high as 157%. While both numbers are ridiculous, what is even more ridiculous is that until recently the central bank was cutting rates to avoid angering the president whose "Erdoganomics" theory of upside down economics recommends cutting rates when inflation rises, effectively setting the country on a path to suicide, something the Turkish lira has clearly grasped, as it has resumed plunging after cratering in 2021 and only a massive intervention by the central bank preventing an all-out economic collapse. The government is meanwhile seeking to pass legislation that would bar independent researchers from publishing their own data without seeking approval from TurkStat and potentially face a jail term if they violate the law. That should answer any questions whether the government or the shadow stat inflation data is the correct one. Tyler Durden Sun, 05/22/2022 - 20:55.....»»

Category: blogSource: ZEROHEDGE4 hr. 13 min. ago Related News

Bloated Inventories Hit Walmart, Target And Other Retailers" Profits, Trucking Demand

Bloated Inventories Hit Walmart, Target And Other Retailers' Profits, Trucking Demand By Mark Solomon of FreightWaves There’s little in retailing that Walmart and Target aren’t prepared to handle. So it was jarring that over a 24-hour period the two scions of the trade posted weak first-quarter profits that appeared to blindside management at both. Part of the bottom-line blowup was due to fuel, which soared to record highs following Russia’s Feb. 24 invasion of Ukraine. Part of it was due to margin pressures caused by an unfavorable sales mix as consumers shifted their buying from higher-margin goods like electronics to less profitable items like groceries. An extension of that was an overshoot of inventory-stocking activity, which came back to bite the retailers after waning concerns over the COVID-19 pandemic pushed more consumer buying toward services and “experiences” and away from goods. There’s little that retailers can do about fuel prices. It can be argued they should have expected the pandemic-driven buying spree from March 2020 until the end of 2021 to peter out and that they should have planned their inventory strategies accordingly. Yet demand forecasting has always been a tough nut to crack, and the market is where it is. Inventory build may also have been the result of supply chain delays at the start of the year that resulted in some late deliveries of impaired freight. Inventory levels as of March, when compared to activity in March 2019 after inventories stabilized following a major pull-forward in 2018 ahead of the Trump administration’s China tariffs, produce a mixed bag of results. Unsurprisingly given the current dearth of motor vehicles, the ratio of vehicle and parts inventories to sales has fallen considerably, according to federal government data analyzed by Michigan State University. Apparel inventories to sales also declined over those periods, as did e-commerce.  However, furniture, home furnishings and appliances, building materials and garden equipment, and a category known as “other general merchandise,” which includes Walmart and Target, among others, reported higher inventory-to-sales ratios, according to government data analyzed by Michigan State.  For the latter sectors, the change has happened fast, according to Jason Miller, logistics professor at MSU’s Eli Broad College of Business. As of November, inventory-to-sales ratios were at pre-COVID levels, Miller said. They have since exploded upward. Miller said he expects a “cooldown” in retailer order volumes, even if inflation-adjusted sales stay constant, as retailers look to reduce their existing stock. He also expects retailers to launch major discounting programs to expedite the inventory burn. Fewer orders within certain categories bodes ill for carriers whose networks are strongly tied to inbound lanes to retailers’ distribution centers, Miller said. In a Friday note, Bascome Majors, analyst for Susquehanna Investment Group, said that the spread between year-over-year sales and inventories — a rough barometer of the impact of higher sales on restocking activity — turned positive in spring 2020 and accelerated in favorable territory for four consecutive quarters. Gradually, however, the spread has turned negative, according to Majors. In this year’s first quarter, inventory growth exceeded sales growth by 200 basis points. The recent surge in inflation, Majors wrote, has severely distorted inventory and sales trends. Freight recession priced in? For some, high inventory levels are an expected occurrence and should be welcomed. In a Tuesday note, Amit Mehrotra, transport analyst at Deutsche Bank, said rising buffer stock is part of retailers’ desire to have goods available when consumers scan the shelves. Mehrotra added, however, that the data points translate into a likely slowdown in freight flows in the coming months and quarters.  He said that a recession is already priced into most transportation equities, noting that the shares of most trucking companies are higher over the past 30 days while the broader market is about 7% lower. In an unusual world, Walmart, Target and other retailers are likely to turn to the one area where they’ve traditionally found leverage: their shipping bill. During the quarter, Target faced freight and transportation costs that were hundreds of millions of dollars above already-elevated expectations, COO John Mulligan said on the company’s Wednesday analyst call. It was essentially the same story at Walmart. Retailers’ efforts to rein in transportation costs will translate into an unprecedented third and even fourth round of truckload contract negotiations, with users getting more aggressive in their bids to extract greater cost savings, according to industry experts.  The discussions could get contentious. In a LinkedIn post on Friday, Jason Ickert, president of trucking firm Sonwil Logistics, said a large shipper that Ickert wouldn’t identify suggested on a conference call this week with truckload carriers that they were “artificially propping up their rates” above accepted market levels. The shipper “stated clearly” that the carriers were expected to adjust their rates during what would be an “unprecedented and unplanned” third round of request for proposals, Ickert wrote. A potential shift to intermodal Pressures to drive down transport expenses will also trigger increased interest in intermodal, whose all-in costs are cheaper relative to contract truckload than at any time since 2018. Intermodal rates have risen at a slower pace than truckload contract rates, a turnabout from the 2019 freight recession when higher intermodal rates allowed over-the-road transport to gain market share. The shift to intermodal, if it happens, would benefit the railroads and intermodal marketers like J.B. Hunt Transport Services, Hub Group and Schneider. However, experts caution that intermodal capacity remains constrained, as does warehouse space needed to store the stuff.  “Walmart, Target and other retailers will soak up every drop of intermodal capacity that Hunt, Hub, Schneider and the rails deliver in 2022 and probably in 2023,” said Majors of Susquehanna Investment Group. The elevated level of activity, he said, should occur even if retailers are working through a multiquarter process of de-stocking. Tyler Durden Sun, 05/22/2022 - 20:30.....»»

Category: blogSource: ZEROHEDGE4 hr. 41 min. ago Related News

How Did Mueller"s $40 Million Trump-Russia Investigation "Miss" Hillary"s Hoax?

How Did Mueller's $40 Million Trump-Russia Investigation 'Miss' Hillary's Hoax? Authored by Sundance via The Last Refuge (emphasis ours), One of the public revelations created by the trial of Clinton lawyer Michael Sussmann is that Hillary Clinton’s campaign, Hillary Clinton’s lawyers, and Hillary Clinton’s contracted opposition research firm, Fusion GPS, manufactured the Trump-Russia collusion hoax.  How did Robert Muller not find this? The Clinton hoax is the key takeaway within the testimony of Clinton campaign manager Robby Mook, during the Sussman trial.  Of course, every intellectually honest person who watched events unfold already knew that.  However, the DC politicians, institutions of the DOJ and FBI, and the entire corporate media world have been pretending not to know the truth for almost six years.  Now they are in a pretending pickle. Mr. Mook was legally forced to put the truth into the official record, ironically because the Clinton lawyers needed him to in order to save themselves.  A stunned Jonathan Turley writes about the revelation HERE.  Meanwhile the journalists who received Pulitzer Prizes, for pushing the manufactured Clinton lies that Mook now admits, must avoid any mention of the testimony in order to maintain their ‘pretending not to know things‘ position. Special Prosecutor John Durham found the truth behind the creation of the Trump-Russia hoax, and through the trial of Sussmann is now diligently passing out the bitter pill ‘I toldyaso’s’ to the small group of rebellious researchers who found this exact trail of evidence years ago. The Clinton campaign lying is politics.  The Clinton campaign selling lies to the media is slimy, but nonetheless politics.  The media pushing those lies only showcases how corrupt they are in supporting their political allies.  However, the Clinton campaign selling those lies to the FBI is a bit more problematic; thus, the trial of Sussmann. Having said all that; while also accepting this grand game of pretense; there’s an 800lb gorilla in the room that no one seems bothered by. How did Robert Mueller and Andrew Weissmann spend 2 years investigating Trump-Russia; with a team of 19 lawyers, $40 million in resources, 40 FBI agents, 2,800 subpoenas, 500 search warrants and 500 witnesses; and not find out that Hillary Clinton created the hoax they were investigating? (Source) The question is, of course, infuriatingly rhetorical.  The 2017, 2018 and 2019 special counsel probe, led by the nameplate of Robert Mueller, was a DC cover-up operation for FBI and DOJ misconduct.  The best defense is a good offense, so they attacked President Trump by maintaining the hoax. Media people often forget, or perhaps -again- need to pretend not to know; however, the exact same group of FBI and DOJ staff level investigative officials that originated the Trump investigation in 2016, transferred into the Robert Mueller investigation in May 2017.   It was the same people, doing the same investigation, under a different title. The Mueller team originally consisted of the same FBI officials who received the Alfa-Bank hoax material from Michael Sussmann. Andrew Weissmann and a group of 19 lawyers joined the effort and pulled in more resources. Yet if we are to believe the current narrative, you would have to believe those same investigators never talked to any Clinton campaign people, or Fusion GPS, or Rodney Joffe, or Marc Elias, or Michael Sussmann?… but wait, I mean, they did.. talk to Sussmann… because….. that’s what this trial is about…. *  *  *[ZH: and as the Wall Street Journal notes:] “Most of the press will ignore this news, but the Russia-Trump narrative that Mrs. Clinton sanctioned did enormous harm to the country,” the WSJ Editorial board wrote. “It disgraced the FBI, humiliated the press, and sent the country on a three-year investigation to nowhere. Vladimir Putin never came close to doing as much disinformation damage.” Tyler Durden Sun, 05/22/2022 - 19:40.....»»

Category: blogSource: ZEROHEDGE5 hr. 26 min. ago Related News

Hedge Fund CIO: If We Can"t Bounce After Being Down 7 Weeks In A Row, Something Is Seriously Wrong

Hedge Fund CIO: If We Can't Bounce After Being Down 7 Weeks In A Row, Something Is Seriously Wrong By Eric Peters, CIO of One River Asset Management “Biggie’s bearish and annoying, ignored,” bellowed Biggie Too, 3rd person. “That’s how the crowd treats Biggie when these cycles get started, when stocks are still at their highs and Biggie turns bearish,” said the chief global strategist for one of Wall Street’s too-big-to-fail affairs, one of only a few such cats to call this market right. “Biggie’s bearish and they congratulate, kiss Biggie’s ring -- that’s step Number Two,” barked Biggie, slipping into a slow groove, hands in the air holding two fingers up. “Step Number Three -- Biggie stays bearish, and the crowd hates Biggie,” said Too, sharing Biggie’s Three-Step Market Manual. “If we can’t bounce after being down seven weeks in a row, something’s seriously wrong with this market. But you gotta get to Number Three before the big bottom is in. And Biggie’s still stuck somewhere in step Number Two – getting lotta praise, no haters, no hate mail. Not yet.” Overall: “Achieving price stability, restoring price stability, is an unconditional need,” said Jerome Powell. “Something we have to do because really the economy doesn't work for workers or for businesses or for anybody without price stability. It’s the bedrock of the economy really,” added the Fed Chairman. “If that involves moving past broadly understood levels of ‘neutral’ we won't hesitate to do that,” he said, calm, threatening. “We will go until we feel we are at a place where we can say ‘yes, financial conditions are at an appropriate place, we see inflation coming down.’” It’s been decades since a Fed Chairman told investors to sell rallies until inflation cools or something breaks. US equities closed the week lower again, a historic run, but devoid of panic. It’s a market re-price, not a fracture, a break, at least not yet. “It’s in everyone’s interest for both the US and EU to make investments in a coordinated way that deepens the entire ecosystem of the semiconductor supply chain,” said US Commerce Secretary Raimondo, unveiling initiatives in high-tech, AI, industrial standards, and global food security. “It will be good for both industry and national security,” she added, as the US and Europe retreat to a fractured world of trading blocs, security alliances. Echoes of Europe’s disastrous dependency on Russian energy exports are found in the West’s reliance on Taiwanese semiconductors and Chinese technology, rare earths. “We intend to exclude Huawei and ZTE from our 5G networks,” said Canada’s Industry Minister Francois-Philippe Champagne, joining the rest of the Five Eyes intelligence sharing network. “Providers who already have this equipment installed will be required to cease its use and remove it under the plans we’re announcing today.” Beijing banned senior officials from owning overseas assets or stakes in foreign entities, whether directly or through spouses, children. Xi naturally wants to insulate his politicians from Western influence/sanctions in a conflict. The most consequential redrawing of global relations since WWII has begun. So far it has produced a re-price, not a market fracture. At least not yet. Tyler Durden Sun, 05/22/2022 - 18:50.....»»

Category: blogSource: ZEROHEDGE5 hr. 42 min. ago Related News

Rockstar Energy Creator Buys Fortress-Style Mansion In Utah For $39.6 Million

Rockstar Energy Creator Buys Fortress-Style Mansion In Utah For $39.6 Million The creator of Rockstar Energy Drink, billionaire Russell Weiner, purchased the most expensive house in Utah history that looks like a fortress. According to WSJ, sitting on 5 acres nestled in a mountainous region in Park City, Utah, the 17,500 square feet mansion with six bedrooms cost a whopping $39.6 million.  In December, the home was listed for $42 million and went under contract in April. Weiner's purchase appears to be politically motivated. He said Utah is "a pro-family and pro-business state" and expects it to "keep attracting people, especially as people run from high tax states." Weiner added: "Real-estate values will only continue to rise in Utah because of demand."  He launched Rockstar energy drinks in 2001 and has gained a .3% market share of the US non-alcoholic beverage market. Weiner's politically motivated move comes as no surprise, considering he's the son of former conservative radio talk show host Michael Savage.  The mansion's amenities include an indoor/outdoor pool, bowling alley, indoor sports court, golf simulator, and movie theater.  Beating former chief executive of Nikola Motors Trevor Milton's $32.5 million ranch, Weiner now has bragging rights to the most expensive house in the state.  What makes Weiner's fortress-style mansion unique is the watchtower. Preparing for the apocalypse much?  Tyler Durden Sun, 05/22/2022 - 19:15.....»»

Category: blogSource: ZEROHEDGE5 hr. 42 min. ago Related News

Mercedes Sells World"s Most Expensive Car For $142 Million To Start ESG Fund

Mercedes Sells World's Most Expensive Car For $142 Million To Start ESG Fund Here are the highlights of Mercedes-Benz's record-breaking auction of the world's most expensive car.  *The 1955 Mercedes-Benz 300 SLR Uhlenhaut Coupé has been sold at auction for a record price of €135 million ($142 million) to a private collector *An icon of the automotive world, the car is one of just two prototypes built and named after its creator and chief engineer, Rudolf Uhlenhaut  *The car has been owned by Mercedes-Benz since its creation in 1955 and its selling price exceeds the previous record price for a car by more than €90,000,000 ($95 million) and places the car in the top 10 most valuable items ever sold at auction in any collecting category * * * Mercedes-Benz teamed up with auction house RM Sotheby's to sell one of the greatest treasures of motoring history, a 1955 Mercedes-Benz 300 SLR Uhlenhaut Coupé, one of only two produced and was never privately owned, locked away in a Mercedes vault for decades.  Sotheby's held the secret auction in Germany on May 5 and set the record for the most expensive car ever sold, blowing past 1950-60s Ferrari GTOs.  A press release by the auction house said the 300 SLR Uhlenhaut Coupé sold for three times the value of a Ferrari 250 GTO that sold at Monterey in 2018. It sold for a whopping €135 million ($142 million).  The sale of the 300 SLR Uhlenhaut Coupé took place on May 5 at an auction held at the Mercedes­Benz Museum in Stuttgart, with RM Sotheby's working in close cooperation with Mercedes-Benz throughout the entire process to ensure the sale was concluded to the highest possible standard. Among the invitees were selected Mercedes customers and international collectors of cars and art who share the corporate values of Mercedes-Benz. -- Sotheby's Mercedes is expected to set up an ESG fund with the proceeds of the sale.  The winning bid on the car was an incredible €135,000,000, making it the most valuable car ever sold and a price which exceeds the existing record by more the €90,000,000. In what felt like a surreal experience, the bidding opened at a price higher than the selling price of the 1962 Ferrari 250 GTO sold by RM Sotheby's in 2018, the car which previously ranked as the most valuable ever sold at auction. The 300 SLR now sits in the top ten most valuable items ever sold at auction. The proceeds will be used to establish a worldwide "Mercedes-Benz Fund" that will provide educational and research scholarships in the areas of environmental science and decarbonization for young people. -- Sotheby's Views of the private auction.  Don't confuse the SLR with the 300SL (only worth $7.5M even in alloy-body form). The other SLR violently crashed at the 1955 24 Hours of Le Mans, making the sports car super rare.  Marcus Breitschwerdt, Head of Mercedes-Benz Heritage, said the private buyer of the 300 SLR Uhlenhaut Coupé agreed to keep it on display at the Mercedes-Benz Museum in Stuttgart for public display on special occasions.  Who would've thought Mercedes would sell one of their most prized sports cars in history to start an ESG fund...  Tyler Durden Sun, 05/22/2022 - 08:45.....»»

Category: blogSource: ZEROHEDGE15 hr. 58 min. ago Related News

"Extremely Tense" Beer Bottle Shortage Emerges Ahead Of Germany"s Oktoberfest

"Extremely Tense" Beer Bottle Shortage Emerges Ahead Of Germany's Oktoberfest The world's largest beer festival, "Oktoberfest," situated in Munich, Germany, is four months away, and the country's energy crisis has sparked a beer bottle shortage.  Germany is Europe's largest manufacturing hub and faces exorbitantly high energy costs, rapid inflation, and a breakdown in supply chains, pressuring energy-intensive glass manufacturers. This economic backdrop alone could unleash stagflation.  Holger Eichele of the German Brewers' Federation told the German newspaper Bild the beer bottle shortage would impact small- and medium-sized breweries the hardest. He described the situation as "extremely tense" as the rising cost of production and logistics problems plague breweries.  "If you don't have long-term contracts, you currently have to pay 80% more for new glass bottles than you did a year ago. Some breweries are threatened with idling, they may soon be without bottles," Eichele warned.  Bild found the shortage of glass bottles is due to the soaring cost of fossil fuels, such as natural gas and diesel.  "The current energy price crisis poses major challenges for the energy-intensive glass industry. Energy costs have risen by up to 500% compared to the previous year ... These costs alone account for up to 20% of the operating costs in the glass industry," a spokeswoman for the Federal Glass Industry Association said.  A spokesperson for the century-old Radeberger brewery, located four hours northeast of Oktoberfest, said the beverage and brewing industry is strained and will worsen through summer. It remains to be seen how a beer bottle shortage affects Oktoberfest, scheduled for late September.  Tyler Durden Sun, 05/22/2022 - 07:35.....»»

Category: blogSource: ZEROHEDGE16 hr. 58 min. ago Related News

Central Bankers" Narratives Are Falling Apart

Central Bankers' Narratives Are Falling Apart Authored by Alasdair Macleod via, Central bankers’ narratives are falling apart. And faced with unpopularity over rising prices, politicians are beginning to question central bank independence. Driven by the groupthink coordinated in the regular meetings at the Bank for International Settlements, they became collectively blind to the policy errors of their own making. On several occasions I have written about the fallacies behind interest rate policies. I have written about the lost link between the quantity of currency and credit in circulation and the general level of prices. I have written about the effect of changing preferences between money and goods and the effect on prices. This article gets to the heart of why central banks’ monetary policy was originally flawed. The fundamental error is to regard economic cycles as originating in the private sector when they are the consequence of fluctuations in credit, to which we can add the supposed benefits of continual price inflation. Introduction Many investors swear by cycles. Unfortunately, there is little to link these supposed cycles to economic theory, other than the link between the business cycle and the cycle of bank credit. The American economist Irving Fisher got close to it with his debt-deflation theory by attributing the collapse of bank credit to the 1930s’ depression. Fisher’s was a well-argued case by the father of modern monetarism. But any further research by mainstream economists was brushed aside by the Keynesian revolution which simply argued that recessions, depressions, or slumps were evidence of the failings of free markets requiring state intervention. Neither Fisher nor Keynes appeared to be aware of the work being done by economists of the Austrian school, principally that of von Mises and Hayek. Fisher was on the American scene probably too early to have benefited from their findings, and Keynes was, well, Keynes the statist who in common with other statists in general placed little premium on the importance of time and its effects on human behaviour. It makes sense, therefore, to build on the Austrian case, and to make the following points at the outset: It is incorrectly assumed that business cycles arise out of free markets. Instead, they are the consequence of the expansion and contraction of unsound money and credit created by the banks and the banking system. The inflation of bank credit transfers wealth from savers and those on fixed incomes to the banking sector’s favoured customers. It has become a major cause of increasing disparities between the wealthy and the poor. The credit cycle is a repetitive boom-and-bust phenomenon, which historically has been roughly ten years in duration. The bust phase is the market’s way of eliminating unsustainable debt, created through credit expansion. If the bust is not allowed to proceed, trouble accumulates for the next credit cycle. Today, economic distortions from previous credit cycles have accumulated to the point where only a small rise in interest rates will be enough to trigger the next crisis. Consequently, central banks have very little room for manoeuvre in dealing with current and future price inflation. International coordination of monetary policies has increased the potential scale of the next credit crisis, and not contained it as the central banks mistakenly believe. The unwinding of the massive credit expansion in the Eurozone following the creation of the euro is an additional risk to the global economy. Comparable excesses in the Japanese monetary system pose a similar threat. Central banks will always fail in using monetary policy as a management tool for the economy. They act for the state, and not for the productive, non-financial private sector. Modern monetary assumptions The original Keynesian policy behind monetary and fiscal stimulation was to help an economy recover from a recession by encouraging extra consumption through bank credit expansion and government deficits funded by inflationary means. Originally, Keynes did not recommend a policy of continual monetary expansion, because he presumed that a recession was the result of a temporary failure of markets which could be remedied by the application of deficit spending by the state. The error was to fail to understand that the cycle is of credit itself, the consequence being the imposition of boom and bust on what would otherwise be a non-cyclical economy, where the random action by businesses in a sound money environment allowed for an evolutionary process delivering economic progress. It was this environment which Schumpeter described as creative destruction. In a sound money regime, businesses deploy the various forms of capital at their disposal in the most productive, profitable way in a competitive environment. Competition and failure of malinvestment provide the best returns for consumers, delivering on their desires and demands. Any business not understanding that the customer is king deserves to fail. The belief in monetary and fiscal stimulation wrongly assumes, among other things, that there are no intertemporal effects. As long ago as 1730, Richard Cantillon described how the introduction of new money into an economy affected prices. He noted that when new money entered circulation, it raised the prices of the goods first purchased. Subsequent acquirers of the new money raised the prices of the goods they demanded, and so on. In this manner, the new money is gradually distributed, raising prices as it is spent, until it is fully absorbed in the economy. Consequently, maximum benefit of the purchasing power of the new money accrues to the first receivers of it, in his time being the gold and silver imported by Spain from the Americas. But today it is principally the banks that create unbacked credit out of thin air, and their preferred customers who benefit most from the expansion of bank credit. The losers are those last to receive it, typically the low-paid, the retired, the unbanked and the poor, who find that their earnings and savings buy less in consequence. There is, in effect, a wealth transfer from the poorest in society to the banks and their favoured customers. Modern central banks seem totally oblivious of this effect, and the Bank of England has even gone to some trouble to dissuade us of it, by quoting marginal changes in the Gini coefficient, which as an average tells us nothing about how individuals, or groups of individuals are affected by monetary debasement. At the very least, we should question central banking’s monetary policies on grounds of both efficacy and the morality, which by debauching the currency, transfers wealth from savers to profligate borrowers —including the government. By pursuing the same monetary policies, all the major central banks are tarred with this bush of ignorance, and they are all trapped in the firm clutch of groupthink gobbledegook. The workings of a credit cycle To understand the relationship between the cycle of credit and the consequences for economic activity, A description of a typical credit cycle is necessary, though it should be noted that individual cycles can vary significantly in the detail. We shall take the credit crisis as our starting point in this repeating cycle. Typically, a credit crisis occurs after the central bank has raised interest rates and tightened lending conditions to curb price inflation, always the predictable result of earlier monetary expansion. This is graphically illustrated in Figure 1. The severity of the crisis is set by the amount of excessive private sector debt financed by bank credit relative to the overall economy. Furthermore, the severity is increasingly exacerbated by the international integration of monetary policies. While the 2007-2008 crises in the UK, the Eurozone and Japan were to varying degrees home-grown, the excessive speculation in the American residential property market, facilitated additionally by off-balance sheet securitisation invested in by the global banking network led to the crisis in each of the other major jurisdictions being more severe than it might otherwise have been. By acting as lender of last resort to the commercial banks, the central bank tries post-crisis to stabilise the economy. By encouraging a revival in bank lending, it seeks to stimulate the economy into recovery by reducing interest rates. However, it inevitably takes some time before businesses, mindful of the crisis just past, have the confidence to invest in production. They will only respond to signals from consumers when they in turn become less cautious in their spending. Banks, who at this stage will be equally cautious over their lending, will prefer to invest in short-maturity government bonds to minimise balance sheet risk. A period then follows during which interest rates remain suppressed by the central bank below their natural rate. During this period, the central bank will monitor unemployment, surveys of business confidence, and measures of price inflation for signs of economic recovery. In the absence of bank credit expansion, the central bank is trying to stimulate the economy, principally by suppressing interest rates and more recently by quantitative easing. Eventually, suppressed interest rates begin to stimulate corporate activity, as entrepreneurs utilise a low cost of capital to acquire weaker rivals, and redeploy underutilised assets in target companies. They improve their earnings by buying in their own shares, often funded by cheapened bank credit, as well as by undertaking other financial engineering actions. Larger businesses, in which the banks have confidence, are favoured in these activities compared with SMEs, who find it generally difficult to obtain finance in the early stages of the recovery phase. To that extent, the manipulation of money and credit by central banks ends up discriminating against entrepreneurial smaller companies, delaying the recovery in employment. Consumption eventually picks up, fuelled by credit from banks and other lending institutions, which will be gradually regaining their appetite for risk. The interest cost on consumer loans for big-ticket items, such as cars and household goods, is often lowered under competitive pressures, stimulating credit-fuelled consumer demand. The first to benefit from this credit expansion tend to be the better-off creditworthy consumers, and large corporations, which are the early receivers of expanding bank credit. The central bank could be expected to raise interest rates to slow credit growth if it was effectively managing credit. However, the fall in unemployment always lags in the cycle and is likely to be above the desired target level. And price inflation will almost certainly be below target, encouraging the central bank to continue suppressing interest rates. Bear in mind the Cantillon effect: it takes time for expanding bank credit to raise prices throughout the country, time which contributes to the cyclical effect. Even if the central bank has raised interest rates by this stage, it is inevitably by too little. By now, commercial banks will begin competing for loan business from large credit-worthy corporations, cutting their margins to gain market share. So, even if the central bank has increased interest rates modestly, at first the higher cost of borrowing fails to be passed on by commercial banks. With non-financial business confidence spreading outwards from financial centres, bank lending increases further, and more and more businesses start to expand their production, based upon their return-on-equity calculations prevailing at artificially low interest rates and input prices, which are yet to reflect the increase in credit. There’s a gathering momentum to benefit from the new mood. But future price inflation for business inputs is usually underestimated. Business plans based on false information begin to be implemented, growing financial speculation is supported by freely available credit, and the conditions are in place for another crisis to develop. Since tax revenues lag in any economic recovery, government finances have yet to benefit suvstantially from an increase in tax revenues. Budget deficits not wholly financed by bond issues subscribed to by the domestic public and by non-bank corporations represents an additional monetary stimulus, fuelling the credit cycle even more at a time when credit expansion should be at least moderated. For the planners at the central banks, the economy has now stabilised, and closely followed statistics begin to show signs of recovery. At this stage of the credit cycle, the effects of earlier monetary inflation start to be reflected more widely in rising prices. This delay between credit expansion and the effect on prices is due to the Cantillon effect, and only now it is beginning to be reflected in the calculation of the broad-based consumer price indices. Therefore, prices begin to rise persistently at a higher rate than that targeted by monetary policy, and the central bank has no option but to raise interest rates and restrain demand for credit. But with prices still rising from credit expansion still in the pipeline, moderate interest rate increases have little or no effect. Consequently, they continue to be raised to the point where earlier borrowing, encouraged by cheap and easy money, begins to become uneconomic. A rise in unemployment, and potentially falling prices then becomes a growing threat. As financial intermediaries in a developing debt crisis, the banks are suddenly exposed to extensive losses of their own capital. Bankers’ greed turns to a fear of being over-leveraged for the developing business conditions. They are quick to reduce their risk-exposure by liquidating loans where they can, irrespective of their soundness, putting increasing quantities of loan collateral up for sale. Asset inflation quickly reverses, with all marketable securities falling sharply in value. The onset of the financial crisis is always swift and catches the central bank unawares. When the crisis occurs, banks with too little capital for the size of their balance sheets risk collapsing. Businesses with unproductive debt and reliant on further credit go to the wall. The crisis is cathartic and a necessary cleaning of the excesses entirely due to the human desire of bankers and their shareholders to maximise profits through balance sheet leverage. At least, that’s what should happen. Instead, a modern central bank moves to contain the crisis by committing to underwrite the banking system to stem a potential downward spiral of collateral sales, and to ensure an increase in unemployment is contained. Consequently, many earlier malinvestments will survive. Over several cycles, the debt associated with past uncleared malinvestments accumulates, making each successive crisis greater in magnitude. 2007-2008 was worse than the fall-out from the dot-com bubble in 2000, which in turn was worse than previous crises. And for this reason, the current credit crisis promises to be even greater than the last. Credit cycles are increasingly a global affair. Unfortunately, all central banks share the same misconception, that they are managing a business cycle that emanates from private sector business errors and not from their licenced banks and own policy failures. Central banks through the forum of the Bank for International Settlements or G7, G10, and G20 meetings are fully committed to coordinating monetary policies on a global basis. The consequence is credit crises are potentially greater as a result. Remember that G20 was set up after the Lehman crisis to reinforce coordination of monetary and financial policies, promoting destructive groupthink even more. Not only does the onset of a credit crisis in any one country become potentially exogenous to it, but the failure of any one of the major central banks to contain its crisis is certain to undermine everyone else. Systemic risk, the risk that banking systems will fail, is now truly global and has worsened. The introduction of the new euro distorted credit cycles for Eurozone members, and today has become a significant additional financial and systemic threat to the global banking system. After the euro was introduced, the cost of borrowing dropped substantially for many high-risk member states. Unsurprisingly, governments in these states seized the opportunity to increase their debt-financed spending. The most extreme examples were Greece, followed by Italy, Spain, and Portugal —collectively the PIGS. Consequently, the political pressures to suppress euro interest rates are overwhelming, lest these state actors’ finances collapse. Eurozone commercial banks became exceptionally highly geared with asset to equity leverage more than twenty times on average for the global systemically important banks. Credit cycles for these countries have been made considerably more dangerous by bank leverage, non-performing debt, and the TARGET2 settlement system which has become dangerously unbalanced. The task facing the ECB today to stop the banking system from descending into a credit contraction crisis is almost impossible as a result. The unwinding of malinvestments and associated debt has been successfully deferred so far, but the Eurozone remains a major and increasing source of systemic risk and a credible trigger for the next global crisis. The seeds were sown for the next credit crisis in the last When new money is fully absorbed in an economy, prices can be said to have adjusted to accommodate it. The apparent stimulation from the extra money will have reversed itself, wealth having been transferred from the late receivers to the initial beneficiaries, leaving a higher stock of currency and credit and increased prices. This always assumes there has been no change in the public’s general level of preference for holding money relative to holding goods. Changes in this preference level can have a profound effect on prices. At one extreme, a general dislike of holding any money at all will render it valueless, while a strong preference for it will drive down prices of goods and services in what economists lazily call deflation. This is what happened in 1980-81, when Paul Volcker at the Federal Reserve Board raised the Fed’s fund rate to over 19% to put an end to a developing hyperinflation of prices. It is what happened more recently in 2007/08 when the great financial crisis broke, forcing the Fed to flood financial markets with unlimited credit to stop prices falling, and to rescue the financial system from collapse. The state-induced interest rate cycle, which lags the credit cycle for the reasons described above, always results in interest rates being raised high enough to undermine economic activity. The two examples quoted in the previous paragraph were extremes, but every credit cycle ends with rates being raised by the central bank by enough to trigger a crisis. The chart above of America’s Fed funds rate is repeated from earlier in this article for ease of reference. The interest rate peaks joined by the dotted line marked the turns of the US credit cycle in January 1989, mid-2000, early 2007, and mid-2019 respectively. These points also marked the beginning of the recession in the early nineties, the post-dotcom bubble collapse, the US housing market crisis, and the repo crisis in September 2019. The average period between these peaks was exactly ten years, echoing a similar periodicity observed in Britain’s nineteenth century. The threat to the US economy and its banking system has grown with every crisis. Successive interest peaks marked an increase in severity for succeeding credit crises, and it is notable that the level of interest rates required to trigger a crisis has continually declined. Extending this trend suggests that a Fed Funds Rate of no more than 2% today will be the trigger for a new momentum in the current financial crisis. The reason this must be so is the continuing accumulation of dollar-denominated private-sector debt. And this time, prices are fuelled by record increases in the quantity of outstanding currency and credit. Conclusions The driver behind the boom-and-bust cycle of business activity is credit itself. It therefore stands to reason that the greater the level of monetary intervention, the more uncontrollable the outcome becomes. This is confirmed by both reasoned theory and empirical evidence. It is equally clear that by seeking to manage the credit cycle, central banks themselves have become the primary cause of economic instability. They exhibit institutional groupthink in the implementation of their credit policies. Therefore, the underlying attempt to boost consumption by encouraging continual price inflation to alter the allocation of resources from deferred consumption to current consumption, is overly simplistic, and ignores the negative consequences. Any economist who argues in favour of an inflation target, such as that commonly set by central banks at 2%, fails to appreciate that monetary inflation transfers wealth from most people, who are truly the engine of production and spending. By impoverishing society inflationary policies are counterproductive. Neo-Keynesian economists also fail to understand that prices of goods and services in the main do not act like those of speculative investments. People will buy an asset if the price is rising because they see a bandwagon effect. They do not normally buy goods and services because they see a trend of rising prices. Instead, they seek out value, as any observer of the falling prices of electrical and electronic products can testify. We have seen that for policymakers the room for manoeuvre on interest rates has become increasingly limited over successive credit cycles. Furthermore, the continuing accumulation of private sector debt has reduced the height of interest rates that would trigger a financial and systemic crisis. In any event, a renewed global crisis could be triggered by the Fed if it raises the funds rate to as little as 2%. This can be expected with a high degree of confidence; unless, that is, a systemic crisis originates from elsewhere —the euro system and Japan are already seeing the euro and yen respectively in the early stages of a currency collapse. It is bound to lead to increased interest rates in the euro and yen, destabilising their respective banking systems. The likelihood of their failure appears to be increasing by the day, a situation that becomes obvious when one accepts that the problem is wholly financial, the result of irresponsible credit and currency expansion in the past. An economy that works best is one where sound money permits an increase in purchasing power of that money over time, reflecting the full benefits to consumers of improvements in production and technology. In such an economy, Schumpeter’s process of “creative destruction” takes place on a random basis. Instead, consumers and businesses are corralled into acing herd-like, financed by the cyclical ebb and flow of bank credit. The creation of the credit cycle forces us all into a form of destructive behaviour that otherwise would not occur. Tyler Durden Sun, 05/22/2022 - 08:10.....»»

Category: blogSource: ZEROHEDGE16 hr. 58 min. ago Related News

Swiss Watch Shortage Spreads From Rolex To Cartier And Tudor

Swiss Watch Shortage Spreads From Rolex To Cartier And Tudor A top retailer of Swiss luxury watches warns robust demand and the lack of supply have sparked a perfect storm of global Rolex shortages that has spread to other leading brands, including Cartier and Tudor.  CEO Hugh Brian Duffy of Watches of Switzerland Group Plc, with a network of 171 retail stores between the UK and the US, told Bloomberg on Thursday morning that sales of Rolex, Patek Philippe, and Audemars Piguet had only "modest" increases in the retailer's 2022 fiscal year, primarily because of limited supply. He said this drove demand for other high-end brands.  "We more than doubled our increases with them," Duffy said, citing Rolex sister brand Tudor, independent Breitling, LVMH's Tag Heuer, Swatch Group's Omega, and Richemont's Cartier.  He said the Rolex shortage had increased so much demand for certain Cartier and Tudor models, that now those are experiencing supply issues.  "We can't get enough Santos," he said, referring to the Cartier aviator watch, adding Tudor's chronograph models are in short supply. Sales of Swiss watches went through the roof during the pandemic as classic high-end timepieces were in high demand as central banks worldwide pumped trillions of dollars into the financial system. Hot money had to end up somewhere, and some wound up in Rolexes and other luxury Swiss brands.  Duffy concluded the interview by saying retail demand for Rolex, Patek Philippe, and Audemars Piguet watches outweighs supply: "Demand is just off the scale for those brands. We would love to have more of them."  And when does this Swiss watch bubble end? Will it be when central banks spark the next global recession from aggressive monetary tightening?  Tyler Durden Sat, 05/21/2022 - 08:45.....»»

Category: blogSource: ZEROHEDGEMay 21st, 2022Related News

Australians Vote In Hotly Contested Federal Election

Australians Vote In Hotly Contested Federal Election Authored by Aldgra Fredly via The Epoch Times, Australian voters cast ballots on Saturday to decide the next prime minister, as well as senators and members of Parliament, after a six-week election campaign that often centred on the economy and national security. Electoral Commissioner Tom Rogers said Friday that 7,000 polling stations have opened as planned, despite a 15 percent turnover of its 105,000 workforces across Australia in the past week. “While this is extraordinary, it is a pandemic election,” Rogers said in a statement, thanking those who stepped up to fill positions at polling places identified as not opening due to staff shortages. The first polling stations will close on the country’s east coast at 6 p.m. local time (08:00 GMT). The west coast is two hours behind. Nearly half of Australia’s 17 million electors have voted early or applied for postal votes despite loosened coronavirus restrictions. Those who tested positive for the COVID-19 will be able to access telephone voting. Voting is compulsory for adult citizens in Australia, and failing to provide a valid reason for not voting results in a fine, which can progress to court. The fine for first-time offenders is $20, and it climbs to $50 for subsequent offences, according to the electoral commission. Incumbent Prime Minister Scott Morrison’s centre-right Liberal-National coalition is vying for a fourth three-year term, having held 76 of the 151 seats in the outgoing parliament. Opposition leader Anthony Albanese’s centre-left Labor Party is considered by most trusted polls as the favourite to win. (L-R) Australian Prime Minister Scott Morrison, federal opposition leader Anthony Albanese. (Martin Ollman/Getty Images, AAP Image/Lukas Coch) One possible outcome of the upcoming federal election on May 21 is a hung Parliament where no political party can achieve a majority to govern outright (a party must win 76 seats). Instead, party leaders will be forced to negotiate a coalition with another minor party or independent to cross the benchmark to win government. A hung Parliament has only occurred once in Australia since World War II. In 2010, both the Liberal-National coalition and Labor landed 72 seats, four votes short of a majority government. It took another 17 days before Labor leader Julia Gillard won enough support from four crossbenchers (minor party or independent MPs) after striking deals with them. Morrison’s election campaign has focused on his party’s economic management, urging voters to support a government that delivered “a strong economy” over “a weaker one that only makes your life harder.” He promised to lower taxes and put downward pressure on interest rates and costs of living if his government was re-elected. Albanese pushed for Labor policies that would make child care more affordable for low-and middle-income families and improve nursing home care for the elderly, pledging to “always look after the vulnerable and the disadvantaged.” Labor also criticized the Morrison government’s foreign policy credentials following the Solomon Islands-China bilateral security pact, calling the deal Australia’s worst foreign policy failure in the Pacific since World War II. At the same time, the Coalition at times aggressively called into question Labor’s record with the Chinese communist regime, pointing to Chinese state-run media reports in alleging that the Labor leader was Beijing’s preferred prime minister. In the lead up to the election, Australia’s domestic spy agency also revealed they had disrupted a plot by Beijing to install candidates in the election who they deemed as friendly and pliable. “It’s odd the Labor Party wouldn’t say China is interfering—somehow they’re saying it’s Australia’s fault,” Morrison was quoted as saying by Sky News Australia on April 20. “What I don’t understand is when something of this significance takes place, why would you take China’s side?” Albanese then accused Morrison of making an “outrageous slur.” According to a leaked draft of the Solomons-China agreement, Beijing would be able to send police, troops, and naval ships to “protect the safety of Chinese personnel and major projects in the Solomon Islands.” Many feared that China would use the accord to establish a military base 1,700 kilometres off the Australian coast and destabilise the Indo-Pacific, although Solomon Islands Prime Minister Manasseh Sogavare had said that this would not be the case. Tyler Durden Sat, 05/21/2022 - 08:24.....»»

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Thanos Was Wrong: From Currency Resets To Limiting Infinite Growth

Thanos Was Wrong: From Currency Resets To Limiting Infinite Growth Authored by Tom Luongo via Gold, Goats, 'n Guns blog, A couple of weeks ago, RT ran a story purporting to explain the mystery behind the rise in exchange rate of the Russian ruble. It touched on a concept I’ve talked about vis a vis Russia for years: the disparity between nominal GDP which yields a number roughly the size of Canada and Purchasing Power Parity (PPP) GDP which puts Russia on par with Germany. While everything quoted here I feel is worth considering seriously, that GDP disparity that is what is important. … the West had defaulted on its obligations to Russia when it froze the assets of the country’s central bank. “This is the abolition (something like cancel culture) of the rules of international financial relations based on global total return swaps, redistribution of risk, guarantees of property rights and distribution of seigniorage.” It was these rules that determined the old ruble exchange rate and the approaches to its establishment that we are accustomed to, the expert said, adding that those rules “no longer apply.” Kopylov explained that the strengthening of the ruble is due to the fact that it is now based purely on exports and imports, and its value is determined by its purchasing power parity (PPP). The International Monetary Fund (IMF) estimated the Russian currency’s PPP at the end of 2021 at 29.127 rubles per one dollar. According to the Big Mac Index, that rate stood at 23.24 rubles to the dollar. I have pointed out for years that all discussions of the Russian economy in terms of nominal GDP are bogus.  Nominal GDP is spending within the Russian economy converted through the RUB/USD exchange rate. But that metric is irrelevant.  It doesn’t say anything about what that spending buys the average Russian. GDP is a stupid metric.  It should be called GNS, Gross National Spending. It is a dumb way to measure the ‘output’ of a society.  It’s at best a very gross approximation but it is, again, just aggregated spending. This is the fundamental fallacy of Keynesian demand-side economics and all theories about which economies are expanding or contracting based on spending are literally bogus. But we have all been trained to believe in GDP as some all-powerful measure of growth and power.  It’s not anything of the sort.  When you have the ability to print money at will to bid up the cost of the goods purchased with that money, how is that telling you anything about the health of the country, the people… or frankly anything at all? What it’s telling you is that spent money, but did you take that money from the pool of real savings and deploy it into sustainable economic projects? Or did you print the money out of thin air, issue debt that borrows against the future labor of the country’s citizens (or their kids…. or their grandkids) and pay someone to fulfill a ‘shovel-ready’ job of digging a hole and filling it back in? GDP, in statistical terms, is NOT an independent variable because of this. It’s value is dependent completely on the people controlling the inputs to it.  Therefore, as data, it is worthless.  As a scientist, I would throw it out of any discussion because it can’t be controlled for.   This is why the discrepancy between the ruble’s purchasing power internally is so much higher than its purchasing power externally.  Pre-war the ruble traded at 75 or so versus the dollar. But it’s PPP value was less than 30?  This means Russian GDP is at least (by this flawed metric) 2.5 higher than the nominal value. This is how the Russian economy in PPP terms is actually larger than Germany’s. But even then, PPP GDP is still a terminally flawed metric as a measure of output. It gets us closer to fair comparisons between country’s but it still says nothing about the economic value of the things the country spent their money on. The funny thing is Russia’s economy shouldn’t be larger than Germany’s in real terms, since most of Russia’s output is base commodities, which have the lowest value-added component of any good in a market.  The whole point of a sophisticated division of labor and economic system is to build up value through each stage in the production chain. Cars, for example, should have more ‘value’ associated with them than the iron ore that went into making the frame. This tells you how out of whack the world is in terms of the diversion of capital to unsustainable activity it actually is if a commodity producer is leading a manufacturing giant in wealth generation.  This is exactly why the currency shift from debt-based to commodity-based money is going to be so painful. And why the debt issuers are willing to risk nuclear war over it occurring. To them this is the end state of their power.   From Finite World to Infinite Growth In a recent article on this blog, I did a quick and dirty takedown of the globalist talking point about infinite growth in a finite world. That gaslighting was at the core of the conflict in the big story of the Marvel Cinematic Universe of films, which centered on Thanos coming to bring balance by destroying half of the life in the Universe. Davos has gaslit two entire generations of westerners in the Malthusian talking point that you can’t have infinite growth in a finite world. All of their economic dogma is predicated on this. It doesn’t matter that this talking point is predicated on an inane premise, truth is, after all treason, at this point in the economic and cultural cycle. But, to try and explain quickly for the slow-witted. GDP growth is not necessarily real growth. It’s just spending. It says nothing for the quality of the spending or whether, in real terms, the people spending the money are materially better off than they were at a previous point in time. What isn’t measured by GDP is VALUE. Value is what we crave, the ability to plan further into the future, using our ingenuity to find better mousetraps to build and more efficient, and yes sustainable, ways of deploying scarce capital and time. When you have a monetary system and regulatory regime designed to thwart that to stop growth then you have the world we live in today. That infinite growth is a subjective, not objective, measure…. not in GDP terms but in the ‘alleviation of human misery’ terms. Davos absolutely doesn’t want this because a world where everyone gets maximal value for their time is a world without our need for them. But in order for us to have a discussion about this, I need to lay out some base assumptions. First, that we have owners who agree with Julian Huxley that growth will lead to destruction of the planet, therefore we should not have any more meaningful growth. Second, only those who are currently with power have the will, intelligence and expertise to guide us to this next phase of humanity’s existence. In service of these controlling ideas: They have erected systems and barricades to real growth for decades in real terms, i.e. energy usage per unit ‘wealth’ … some call this EROEI = Energy Returned over Energy Invested.   They have stymied more efficient use of human capital by running us around in mazes which are dead ends — Light Water Nuclear Reactors vs. oil, replacing both with Solar, Wind, Electric Vehicles, etc. They foment wars to divert capital to useless weapons rather than applying it things which make our lives better, more predictable.  They specifically divert spending (GDP) to humans building systems which increase chaos and unpredictability rather than decrease it. They empower and expand bureaucracy to keep otherwise ‘useless people’ employed with meaningless jobs They have supported cultural degradation which undermined the nuclear family and local culture by promoting women into the workforce, divorcing them from their core strength as mothers and caregivers and putting them effectively on welfare, UBI. These are all the basic distractions which force us to waste most of our productive time running around on a hamster wheel of arbitrary obstacles in order to eke out some small measure of comfort. The basic reason for Human Action, as defined by Mises, is to alleviate future uncertainty.  Man acts purposefully towards that end, otherwise he wouldn’t act or he would act differently.   That said, we can have our rationality diverted to purposes which do not serve our better interests because of the perverse incentives placed in front of us through artificial barriers to capital formation.   Therefore, if we were acting with purpose towards our most efficient and creative ends to a more predictable future, infinite GDP growth would be a no-brainer. This isn’t to say infinite GDP growth is infinite resource utilization.   Because as you travel up the production chain to higher order goods, you produce more value relative to the input commodities… if you didn’t, then you wouldn’t do it. You would do something that did. What’s more valuable a tree growing on your property or the lumber you turn it into and then use to build a shelter? For an even more idiotic example, is there really $10,000 difference between a BMW 230i starting at $37.5k and a Ford Mustang in terms of raw input commodities, especially when, in the real world we’re talking more like $15,000?  No.  Both are roughly 3500 lbs of aluminum, steel, leather and plastic. So, where’s the value difference?  In the materials?  Again, not really.  It’s in the intellectual property of the engineering, the final driving experience and the perception of value by the consumer.   But in terms of them being a tool for potential wealth creation, the two care are, really fungible.  They can transport up to 3 people (realistically) and a little bit of cargo somewhere to do whatever it is that they do. Is that reflected in the purchasing price of these cars?  No.  Not at all.  But, if we sell more BMW’s as a percentage of Mustangs sold, are we expected to impute a higher capability of sustaining wealth production because of higher overall spending as measured by GDP? Sadly yes. And that’s where the disconnect is.   This is why, fundamentally, GDP is a poor measure of ‘growth.’   That said, absent the diversion of capital to the unsustainable as practiced by Davos you can have constant ‘growth’ in value terms. It is better stated that ‘growth’ is the alleviation of human suffering and/or uncertainty, which is what value is.   This is true because if we’re driving costs down to utilize natural resources ever more efficiently thanks to proper pricing of the money used to procure the input commodities, then we can move more of our spending out of base commodities into higher order goods with higher returns of perceived value. Moreover, the Malthusian/Huxleyian argument presupposes somehow that the Universe isn’t governed by the Laws of Conservation. Iron isn’t destroyed when a car is trashed, we just store it in a junkyard. The same goes for landfills and plastic. The problem we have today is that we act within a system which skims all the wealth created by our actions to the betterment of the people who produce nothing at all. All they produce is money and bad ideas, the former of which is based on your future labor and the latter sustained by it. Then they dupe you into selling your future labor back to you at a vig while trying to take all the intellectual property rights for your innovation and skill. We call these people Venture Capitalists. No wonder the Marxists see this system as exploitative. It is! But it’s also not the only way things can and/or should be organized. This isn’t a fault of capitalism and property but of our not properly pricing the cost of the State and all of its enforcement of our ‘rights.’ This is what leads to the concentration of power in the hands of rent-seeking douchebags and vandals. Sustainable growth where all factors of production are properly priced up the value-adding chain is the first step. That will lead to the rewards being shared more equitably by all involved. That model is not only possible, it’s the only system that is inevitable. Davos decided if we were not controlled and forced onto low-margin hamster wheels we would strip-mine the planet and destroy it.  That’s why it needs to be controlled and real growth curtailed.   What we have now is a system of maximal wastage of natural resources with minimal returns: cheap money begetting conspicuous consumption of resources while erecting barriers to new, competitive technologies at the expense of the producers of those input commodities. Thanos in the Marvel films makes the same mistake Davos and Huxley made, deciding in their hubris and arrogance that because they couldn’t see a solution to a problem they’d defined, that solution did not exist. This justified their acquisition of power unlimited to re-make the world in their image. The truly despicable nature of the Marvel films is that they spend so much time trying to make Thanos’ quest a noble one, a sympathetic one, rather than the rantings of a small-minded homunculus. I wonder who ordered that rewrite of the script to Infinity War? The Return of the Commodity King This is why the ruble is so undervalued, up until recently commodities had been driven below their cost of production through the corruption of all of us into the land of cheap money. It is why now, with the changes coming to the monetary architecture of the world, the ruble’s real purchasing power will finally be expressed, forcing commodity inflation in real terms on those whose currencies are overvalued. Gresham’s Law has never been wrong. Overvalued money circulates to procure unearned goods in the real world. Undervalued money is hoarded because savings is the pre-requisite of capital deployment. We are at the end of the cycle where the pile of real wealth has built up for decades unable to express itself while the ultimate psy-op fuels the biggest Ponzi scheme in history. When the confidence in the overvalued money (debt) falls, inflation rises rapidly as people demand goods and eschew money.  This will raise the prospect of the undervalued money (commodities) entering into circulation as its true value is finally expressed in the market. At that point you will then see what the real growth rate of the world is.  Gary North used to say that prior to the early 1800’s the real rate at which wealth compounded was ~1% annually.  Then something changed and it doubled to 2% and that scared the bejeesus out of the elites because too many people were getting rich too quickly to need them to look out for their interests.   Now you know why the Club of Rome began in the 1850’s, why central banking was so bitterly fought over here in the US then. It’s why Marx’s insane ideas were adopted by those with generational power.  It was to STOP our growth as a species, not keep it from destroying the planet, but their system of unearned privilege. *  *  * Join my Patreon if you like earning things Tyler Durden Sat, 05/21/2022 - 07:00.....»»

Category: blogSource: ZEROHEDGEMay 21st, 2022Related News

"Who Will Be This Recession"s Lehman?": Wall Street"s Most Accurate Analyst Says "3600 Is The New Bull Case"

"Who Will Be This Recession's Lehman?": Wall Street's Most Accurate Analyst Says "3600 Is The New Bull Case" Two weeks ago, just when everyone thought that he couldn't turn any more bearish, BofA's chief investment strategist Michael Hartnett, Wall Street's biggest bear who is by extension has also emerged as the most accurate sellside analyst (the average S&P price target of his peers was around 5,000 when he first correctly warned a recession and bear market were coming), stunned everyone when he told readers that according to his calculations, the bear market we are in now - and which is official as of today - would end in October with the S&P sliding to 3,000. Fast forward to today, when in his latest must-read Flow Show note, Hartnett takes a well-deserved victory lap having steamrolled such "strategist" competitors as Marko Kolanovic and David Kostin, and writes that the heard on the street phrase this week is that "3,600 is the new bull case." While there is nothing materially new in Hartnett's latest weekly Flow Show note, the BofA Chief Investment Strategist as always recap the "biggest picture" best, by once again emphasizing the three shocks of 2022 which for now at least define "the story" of 2022, to wit: the story of 2022 is "inflation shock = rates shock = recession shock"; the larger story of the 2020s is regime change - higher inflation, higher rates, higher volatility, & lower asset valuations, driven by trends in society (inequality), politics (populism/progressivism), geopolitics (war), environment (net-zero), economy (de-globalization), demographics (China population decline), all inflationary, all favor cash, commodities, real assets, volatility, small cap, all damage bonds, credit, private equity, tech stocks. Hartnett then takes us through the usual weekly fund flows, where we find widespread redemptions across every asset class:starting with $1.4bn from gold, through $5.2bn from equities, another $7.6bn from cash, and ending with $12.3bn from bonds. That said, the pain for credit is far greater than stocks - for every $100 of inflow to IG/HY/EM debt since Apr'20, $27 has been redeemed; for every $100 of inflow to global equities since Jan'21, only $4 has been redeemed. In this context, and in light of the relentless selling, it is not surprising that last week saw that largest EM debt outflow since Mar’20 ($6.1bn), largest HY bond outflow in 14 weeks ($4.3bn), largest bank loan outflow since Mar’20 ($1.6bn); outflows tech & financials, largest outflow from energy since Sep’16 ($1.7bn), largest outflow from materials since Oct’14 ($2.0bn) and so on. Does that mean that capitulation is here? Alas, for the second week in a row, the answer is no. As Hartnett shows in the "Capitulation watch" table below, while FMS cash/macro + breadth = capitulation & BofA Bull & Bear.....»»

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Finland & Sweden Seek To Calm Russia By Ruling Out NATO Bases & Nuke-Hosting

Finland & Sweden Seek To Calm Russia By Ruling Out NATO Bases & Nuke-Hosting Finnish Prime Minister Sanna Marin said Thursday that Helsinki is opposed to NATO deploying nuclear weapons or establishing bases inside Finland if it joins the military alliance. Marin said she didn’t think there was much interest in NATO for nuclear deployments or permanent bases inside Finland. "Nor do I think there is any interest in deploying nuclear weapons or opening NATO bases in Finland," she emphasized. Swedish Prime Minister Magdalena Andersson has also said Sweden doesn’t plan on hosting NATO nuclear weapons or bases. Nuclear submarine operating in Arctic waters, file image While the US, Britain, and France are the only NATO members with their own nuclear stockpiles, US nuclear weapons are deployed in other NATO states under a nuclear-sharing agreement. Under the agreement, there are US nuclear weapons in Belgium, Germany, Italy, the Netherlands, and Turkey. Russian President Vladimir Putin has warned that Moscow will respond to the expansion of NATO military infrastructure inside Sweden or Finland. Top Kremlin officials have recently warned of a nuclear build-up in the Baltics if Finland is admitted into NATO, as Newsweek reports: Russia has stated that if Sweden and Finland join NATO, it would move nuclear weapons closer to the two countries. "There can be no more talk of any nuclear–free status for the Baltic [region]," said Dmitry Medvedev, deputy chairman of Russia's Security Council. Kremlin spokesman Dmitry Peskov added that Putin had already ordered the military to boost its forces opposite Europe. While the two nations have no interest in nuclear weapons or bases, NATO could still send troops and other military equipment to the countries on a rotational basis. Reported locations of some of NATO's nuclear stockpile under US sharing agreement, via Daily Mail Finland and Sweden formally applied to join NATO on Wednesday, but Turkey blocked the alliance from holding talks on their membership. Ankara is opposed to the Nordic countries joining due to their alleged support for the PKK and the export controls they imposed on Turkey. Finnish President Sauli Niinisto said Thursday that he’s working on getting Turkey to change its position. * * * A briefing by the global monitor Arms Control Center includes the following estimates on NATO nukes: How Many? The United States and its NATO allies do not disclose exact figures for its European-deployed stockpiles. In 2021, it is estimated that there are 100 U.S.-owned nuclear weapons stored in five NATO member states across six bases: Kleine Brogel in Belgium, Büchel Air Base in Germany, Aviano and Ghedi Air Bases in Italy, Volkel Air Base in the Netherlands, and Incirlik in Turkey. The weapons are not armed or deployed on aircraft; they are instead kept in WS3 underground vaults in national airbases, and the Permissive Action Link (PAL) codes used to arm them remain in American hands. To be used, the bombs would be loaded onto dual-capable NATO-designated fighters. Each country is in the process of modernizing its nuclear-capable fighters to either the F-35A, the F-18 Super Hornet, or the Eurofighter Typhoon. Tyler Durden Sat, 05/21/2022 - 07:35.....»»

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