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11 Reasons Why This Was Joe Biden"s Worst Week Ever

11 Reasons Why This Was Joe Biden's Worst Week Ever Authored by Michael Snyder via The Economic Collapse blog, Joe Biden has had a lot of bad weeks over the last 12 months, but this week has got to take the cake.  In fact, it is hard to remember the last time that any president had a week that was this bad.  But this wasn’t supposed to happen.  Democrats were promising a return to “normalcy” after the Trump years, but instead virtually everything seems to be going wrong.  No matter where you are on the political spectrum, you should be able to admit that Joe Biden’s presidency is not going very well at all.  At this point, even many Democrats are using the word “failure” to describe Biden, and this is fueling rumors that Hillary Clinton may run again in 2024. Yes, Biden’s presidency has been such a complete and utter disaster that the absolutely unthinkable could actually become a reality. Just when you think that things can’t get any worse, somehow they do.  The following are 11 reasons why this was Joe Biden’s worst week ever… #1 The OSHA Mandate On Thursday, we learned that the U.S. Supreme Court had voted 6 to 3 to strike down Biden’s cherished OSHA vaccine mandate… President Biden urged businesses to bring in vaccine mandates on their own and pushed states to ‘do the right thing’ after the Supreme Court voted 6-3 to block his sweeping rules on private companies in a crushing blow to his pandemic response. The high court did however allow a vaccine mandate for employees at health care facilities receiving federal dollars to go into effect. The OSHA mandate would have covered approximately 80 million American workers, and countless workers all over the country that would have lost their jobs under this mandate are greatly celebrating right now. #2 The Filibuster Biden was desperately hoping that all of the Democrats in the U.S. Senate would agree to kill the filibuster so that he could get the “voting rights bill” through Congress, but Senator Kyrsten Sinema just made it exceedingly clear that she is not willing to do that… First, Arizona Sen. Kyrsten Sinema, a fellow Democrat, announced that although she supports the voting rights bill, she’s not willing to do what it would take to make it happen. The filibuster. I’m talking about killing the filibuster. This came only two days after the president made such an impassioned speech in support of knocking off the filibuster that Republicans essentially called it offensive. And even one Democratic senator said Biden, who pledged a year ago to unite Americans, went too far in the speech. When she was elected, I never imagined that the day would come when I would be thankful for Kyrsten Sinema. But today I am definitely very thankful that she has taken this stand. #3 Inflation This week, it was announced that the inflation rate had hit a 40 year high, and Americans are blaming Biden for this. And as I pointed out in an article that I posted on Wednesday, if inflation was still calculated the way that it was back in 1980, the official rate of inflation in this country would be above 15 percent at this point. #4 Shortages In December, Joe Biden told the nation that the supply chain crisis was over. Of course that was not true, and now store shelves are so empty that “BareShelvesBiden” has been trending on social media throughout this entire week. #5 Joe Biden’s Approval Rating At the beginning of his presidency, Biden actually had very strong approval ratings, but now they just continue to sink lower and lower. As I pointed out yesterday, the seven most recent Quinnipiac polls show a very clear trend… President Biden’s overall approval rating in the last seven Quinnipiac polls: 49%, 46%, 42%, 38%, 37%, 36%, 33%. [ZH: The dead-cat-bounce in Biden's approval is over...] #6 Fauci’s Approval Rating Dr. Fauci was Biden’s handpicked choice to lead the U.S. out of this pandemic, but he has been steadily losing the trust of the American people. According to a NewsNation poll that was just conducted, only 31 percent of all Americans still believe what he is telling us about the pandemic. #7 Omicron During the presidential campaign, Joe Biden repeatedly promised that he would “shut down the virus”, but in recent days the number of COVID cases has soared to all-time record highs in the United States.  At this point things are so bad that even Biden administration officials are admitting that essential services are in danger of totally breaking down… Acting Food and Drug Administration Commissioner Dr. Janet Woodcock gave U.S. lawmakers an ominous warning this week: The nation needs to ensure police, hospital and transportation services don’t break down as the unprecedented wave of omicron infections across the country forces people to call out sick. “It’s hard to process what’s actually happening right now, which is most people are going to get Covid,” Woodcock testified before the Senate health committee on Tuesday. “What we need to do is make sure the hospitals can still function, transportation, other essential services are not disrupted while this happens.” #8 The Lack Of COVID Tests Even CNN and MSNBC have been roasting Biden this week for not having enough COVID tests for the American people. Now the Biden administration is telling us that millions of new tests are on the way, but by the time they arrive the Omicron wave may be over. #9 Russia Foreign policy takes a great deal of finesse, and that is something that Biden’s team is sorely lacking. When I first started warning that Biden was surrounded by the worst foreign policy team in U.S. history, a lot of people thought that I was exaggerating. But now the truth is becoming very clear, and a potential war with Russia that nobody wants is closer than ever… Talks to find a diplomatic solution to the worsening situation between Russia and Ukraine are on the brink of collapse after Thursday’s meeting as a key US ambassador warned ‘the drumbeat of war is sounding loud.’ Secretary of State Antony Blinken hit the airwaves on Thursday morning where he also weighed in on the crisis, claiming the ‘jury is still out’ on whether Russian President Vladimir Putin’s aggressive military buildup on Ukraine’s border will end with an invasion. #10 Kamala Harris Is even Kamala Harris turning against Biden? This week, a reporter asked Harris if the Democrats would have the same presidential ticket in 2024. Normally, that would be a really easy question for any vice-president to answer. But instead of answering “of course”, this is how Harris responded… REPORTER: “Are we going to see the same Democrat ticket in 2024?” HARRIS: “[long pause] I’m sorry but we are thinking about today” Wow. I think that this is another very clear sign that there is far more going on behind the scenes than we are being told. #11 Hillary Clinton Biden is such a failure that some Democrats are already suggesting that Hillary Clinton should be the Democratic nominee in 2024. Seriously. On Wednesday, a pro-Hillary piece authored by two key Democratic operatives named Douglas E. Schoen and Andrew Stein appeared in the Wall Street Journal.  In their article, they listed a number of different reasons why they believe that Hillary would be a good choice for the next election cycle… ‘Several circumstances – President Biden’s low approval rating, doubts over his capacity to run for re-election at 82, Vice President Harris’s unpopularity, and the absence of another strong Democrat to lead the ticket in 2024 – have created a leadership vacuum in the party, which Mrs. Clinton viably could fill,’ they write. So could we actually see a rematch between Hillary Clinton and Donald Trump? Of course we still have three more years of the Biden/Harris administration to get through first, and that won’t be pleasant. Decades of very foolish decisions set the stage for where we are today, and now Biden and his minions have us steamrolling down a highway that doesn’t lead anywhere good. By the time we get to 2024, this country could be completely unrecognizable. Biden’s first year has been absolutely terrible, and the next three years are likely to be even worse. But there is no “exit button” on this ride, and so we are all going to have to endure whatever is coming next. *  *  * It is finally here! Michael’s new book entitled “7 Year Apocalypse” is now available in paperback and for the Kindle on Amazon. Tyler Durden Fri, 01/14/2022 - 16:20.....»»

Category: blogSource: zerohedgeJan 14th, 2022

Bull of the Day: Marriott International (MAR)

US travel and tourism spending is projected to surge to $1.1 trillion, 11.3% above pre-pandemic levels Marriott International MAR reported impressive Q1 2022 results last week, with earnings and revenues surpassing the Zacks Consensus Estimates.This is an important company to look at for two big reasons right now...1) According to research from the World Travel & Tourism Council (WTTC) and Oxford Economics in February, its latest economic modeling projected that U.S. Travel & Tourism could rebound strongly this year, reaching almost $2 trillion in U.S. GDP contribution and exceeding pre-pandemic levels by 6.2%.Specifically, the report highlighted that U.S. domestic Travel & Tourism spending is forecast to reach more than $1.1 trillion for the year, surpassing pre-pandemic levels by 11.3%. Ironically, this $1.1T number is the value that was lost in 2020.2) Despite raging inflation ravaging the stock market and threatening recession, this steady earner could be the safe harbor in a storm. Let's look at the fundamentals and make that determination.Marriott Quarter DiscussionThe bottom line outpaced the consensus mark for the seventh straight quarter, while the top line beat the same for the fourth consecutive quarter. Following the results, the company’s shares are up 2.9% in the pre-market trading session.During the quarter, the company witnessed solid demand in the United States, Canada, the Middle East and Africa region. Marriott benefited from robust leisure demand and improvements in business and cross-border travel.Although the Omicron variant had affected business transient demand in January, demand is stated to have picked up in March. With global trends improving, the company expects the recovery momentum to continue in the upcoming periods as well.At the end of Q1 2022, Marriott's development pipeline totaled nearly 2,878 hotels, with approximately 489,000 rooms. Nearly 201,400 rooms were under construction.Impressively, during the quarter the company added 75 new properties (11,799 rooms) to its worldwide lodging portfolio.Earnings & Revenue DetailsIn the quarter under review, Marriott’s adjusted earnings per share (EPS) were $1.25, surpassing the Zacks Consensus Estimate of 95 cents. In the prior-year quarter, the company had reported adjusted earnings of 10 cents per shareQuarterly revenues of $4,199 million surpassed the consensus mark of $4,172 million. The top line surged 81.3% on a year-over-year basis. During the quarter, revenues from Base management and Franchise fee came in at $213 million and $500 million compared with $106 million and $306 million reported in the prior-year quarter.RevPAR & MarginsIn the quarter under review, RevPAR for worldwide comparable system-wide properties fell 19.4% (in constant dollars) compared with 2019 levels. The downside was primarily driven by a fall in occupancy (13.6% from 2019 levels). However, the average daily rate (ADR) increased 0.8% from 2019 levels.RevPAR, or revenue per available room, is a performance metric in the hotel industry that is calculated by dividing a hotel's total guestroom revenue by the room count and the number of days in the period being measured.Comparable system-wide RevPAR in Asia Pacific (excluding China) fell 48.4% (in constant dollars) from 2019 levels. Occupancy and ADR declined 26.1% and 18.6%, respectively, from 2019 levels. Comparable system-wide RevPAR in Greater China fell 41.9% from 2019 levels.On a constant-dollar basis, international comparable system-wide RevPAR fell 31.7% compared with 2019 levels. Occupancy and ADR declined 19.8% and 2.4%, respectively, from 2019 levels. Comparable system-wide RevPAR in Europe and the Caribbean & Latin America declined 37.9% and 13.5%, respectively, from 2019 levels.Total expenses during the quarter increased 63.1% year over year to $ 3,641 million, primarily owing to a rise in Reimbursed expenses.During the first quarter, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to $759 million compared with $296 million reported in the prior-year quarter.After this strong report card and outlook, analyst consensus numbers climbed on the top and bottom lines with revenues for this year projected to hit nearly $20 billion, representing 43% annual growth. And EPS launched up to $5.90, for an 85% expected advance.Stagflation Spiral?Given these strong numbers and a stock trading at a discount to its fundamental value, I think the case can be made for buying MAR near $160. But let's look at the brewing crisis that has flared up since the optimistic forecasts of a big travel and tourism rebound were made early this year.Here's what I wrote to my members last week...TAZR TradersTonight we'll look at the market's greatest fear: a stagflationary shock where credit contracts sharply and recession becomes a self-fulfilling prophecy.As I discussed on April 27, Tech Stocks Are Acting Like a Recession Has Started.Wednesday, Jeffrey Rosenberg of BlackRock published a lengthy research note titled "A Stagflationary Shock" which depicts an even grimmer picture that prompts me to raise my recession probability to 35%.This view is simply based on the self-fulfilling dynamic of contractions. Fear begets fear, which lead to contractions in investment and spending, and we're seeing it flare up in credit spreads and Bitcoin too.This becomes one of the worst environments for stocks as they are sold wholesale to get capital out of the way -- even if the recession probability never rises above 40%.Here were Rosenberg's Key Points...1. A stagflationary shockThe Russian invasion of Ukraine may spell higher prices and lower growth for the global economy—increasing downside risks to markets and heightening central bank policy uncertainty.2. The vaccination for inflation?Central banks have prescribed a regiment of rate increases and the end of QE to stop the spread of inflation, but the dosage may not be adequate to protect against its many variants.3. Expanding return sourcesRising political tensions make the Fed’s fight with inflation even more tenuous. New sources of diversification and return may be needed as inflation undermines the traditional diversifying properties of bonds.And he further opined on the impact of the Russian invasion of Ukraine..."The economic and financial impact of the Russian invasion of Ukraine represents a stagflationary shock for the global economy. The prices of commodities, including fuel, food and metals are all surging. Stagflation, an economic environment of stagnant growth and rising inflation, was once a long-tail risk, but now appears to be a real possibility."If you like macro, the full piece on Advisor Perspectives is worth your time, with many charts of commodity prices, global bond rates, inflation rates, consumer finances, and a comparative study of "company pricing power and cost of workers."Bottom line on Marriott: Consumers are itching to catch a flight to just about anywhere and, while the current downdraft in stock market wealth may trim some appetites, the forecast for a surge in travel & tourism that exceeds 2019 is probably well intact. MAR is a good way to play it from these levels. Investor Alert: Legal Marijuana Looking for big gains? Now is the time to get in on a young industry primed to skyrocket from $13.5 billion in 2021 to an expected $70.6 billion by 2028. After a clean sweep of 6 election referendums in 5 states, pot is now legal in 36 states plus D.C. Federal legalization is expected soon and that could kick start an even greater bonanza for investors. Zacks Investment Research has recently closed pot stocks that have shot up as high as +147.0%. You’re invited to immediately check out Zacks’ Marijuana Moneymakers: An Investor’s Guide. It features a timely Watch List of pot stocks and ETFs with exceptional growth potential.Today, Download Marijuana Moneymakers FREE >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Marriott International, Inc. (MAR): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksMay 16th, 2022

Sunday links: moving the goalposts

MarketsA simple explanation for why stocks are struggling. (ritholtz.com)Have tech stocks corrected enough already? (morningstar.com)Bear markets can bring out the worst of people. (allstarcharts.com)StrategyA bear market survival guide including 'I try to avoid taking the market personally.' (awealthofcommonsense.com)Investing in the stock market, means signing up for drawdowns. (tker.co)Another look at the 'four horsemen of the investor apocalypse.' (humbledollar.com)CryptoWhat kind of financial asset is Bitcoin? (noahpinion.substack.com)Sam Bankman-Fried has become the face of the crypto industry. (nytimes.com)CompaniesElon Musk is angling for a better deal for Twitter ($TWTR). (om.co)Netflix ($NFLX) is considering livestreaming. (theverge.com)TravelFlights are getting more expensive. (axios.com)Everything about summer travel is getting more expensive. (axios.com)GlobalSaudi Aramco made $39.5 billion in Q1. (bbc.com)Global supply chains are reordering themselves. (wsj.com)Africa's demographic transition will be a crucial story for the 21st century. (adamtooze.substack.com)Not everyone is eager to crack down on Russian oligarchs. (nytimes.com)PolicyEverybody, but Congress, wants more skilled immigration. (axios.com)The lack of child care is holding back women from returning to the work force. (nytimes.com)The meatpacking industry worked hard to push back against pandemic health restrictions. (modernfarmer.com)Why the SEC should leave the issue of climate to the markets. (rogerlowenstein.substack.com)Why it's so easy for a handful of activists to hold back development. (theatlantic.com)C-SPAN is getting squeezed by the secular decline in cable subscribers. (politico.com)EconomyNine reasons the U.S. economy is in trouble including 'A recession is coming for Europe.' (theatlantic.com)Why it's unlikely the Fed can bring down inflation without tanking the economy. (wsj.com)Three scenarios for who housing prices may evolve. (calculatedrisk.substack.com)The economic schedule for the coming week. (calculatedriskblog.com)Earlier on Abnormal ReturnsTop clicks last week on the site. (abnormalreturns.com)What you missed in our Saturday linkfest. (abnormalreturns.com)Podcast links: marketplace investing. (abnormalreturns.com)If YOU are the product, how do you ever take a break? (abnormalreturns.com)Two thoughts on nostalgia. (abnormalreturns.com)Are you a financial adviser looking for some out-of-the-box thinking? Then check out our weekly e-mail newsletter. (newsletter.abnormalreturns.com)Mixed mediaHow to do less. (lauriesantos.bulletin.com)Data is not information. (seths.blog)Are layoffs over Zoom ($ZM) ever okay? (protocol.com).....»»

Category: blogSource: abnormalreturnsMay 15th, 2022

The Real Reason Behind The EU"s Drive To Embargo Russian Oil

The Real Reason Behind The EU's Drive To Embargo Russian Oil Authored by Tom Luongo via Gold, Goats, 'n Guns blog, This week the European Union is expected to announce a complete import ban on Russian oil. Hungary, in its first real act of defiance, is threatening to veto this; Germany, after some hemming and hawing, has finally decided it can survive such a ban. Assuming Hungary’s objections are eventually overcome, at first blush this looks like yet another energy “own goal” by the people obsessed with soccer. The U.S. has already issued this ban. Because European industry is heavily dependent on Russian oil and gas, the conventional wisdom is that the EU Commission is just petulant and incompetent. Are they petulant? Yes. Incompetent? Possibly? But only if you think in conventional terms of doing the right thing for their people. What is clear to any serious observer of EU politics is that they are not interested in what their people have to say or want. Theirs is an agenda which will brook no opposition, even if it means destroying its own economy to bring a rival to its knees. That said, I sincerely doubt there will be a “buyers embargo” on natural gas because there is no viable substitute for it. Hungary is using the need for unanimous consent within the European Council to block any ‘gas ban’ in any new economic sanctions package. There are at least three other countries which are happy Hungary is willing to suffer Brussels’ wrath. But banning Russian oil, on the other hand, is different. So, it is interesting that Hungary would do this, given they import no oil from Russia. {Ed. this is wrong, Hungary imports 65% of its oil through the Druzhba pipeline} This veto was predicted by me the morning after the Hungarians overwhelmingly rejected George Soros’s anti-Viktor Orban coalition and handed it an ignominious defeat. Hungary, on the other hand, has energy independence from Brussels by having contracted directly with Gazprom for natural gas via Turkstream’s train that goes into Serbia and Hungary. This should give you some context as to why the EU is trying to sanction Serbia and cut off the flows of that pipeline where it crosses EU territory in Bulgaria. With a fiscally, monetarily (they are not on the euro) and energy independent Hungary there is little argument for them staying in the EU if Brussels is going to treat them as second class members. Orban and his government have been resolute in their refusal to get involved in the Russia/Ukraine conflict even though there has been serious pressure applied by NATO. It is almost as if Orban and the Hungarians are now daring the EU to advance Article 7 procedures to kick them out. The problem with that is, if they do, it would begin the fracturing of the EU. So, what is more likely to happen now is Hungary will use this veto to get the EU to back off on the ‘rule-of-law’ violations which are justifying cutting off Hungary from its EU budget distributions. The horse trade here should be obvious. Because Brussels and their behind-the-scenes backers absolutely want this ban on Russian oil as much as the U.S. and the UK want it. It is part of their long-term strategy to bleed Russia out, after turning Ukraine into Afghanistan 2.0. And it is in the differences between the oil industry and the natural gas industry where they think they can achieve this goal. Of Pipes and Populi In both the oil and gas industries, pressurizing a well is, for the most part, a one-way process. You dig a well and pull the oil and/or gas out. It produces until the well is depleted. You replace the well’s natural decay in production by drilling a new well. But even if there is a big demand shock to the downside, rarely an issue in the oil industry in the aggregate, then those wells keep producing. The market is temporarily glutted with oil, the price drops and old wells are not replaced until such time as supply-and-demand balance is restored. Oil futures curves get constructed by traders to anticipate these effects on prices. And for normal volatility of oil demand, these curves should be reasonably predictable. Unfortunately, we are living through a time where the most powerful people in the world (at least in their minds) are openly trying to destroy the petroleum market for their own purposes and agenda. They are actively working to make oil and gas prices volatile to the point of destroying investment in the industry. They make no bones about this. Oil is the bane of the planet! I call these people The Davos Crowd (for a description of them see my podcast, Episodes 75, 76, and 77 for the background information). They are the unelected oligarchs, bankers, hereditary power and newly Made Men (in the mafia sense) who gather at Davos, Switzerland, every year to decide on the future of humanity. And it is their agenda, using Climate Change and international threats like biowarfare and terrorism as their justifications for a massive expansion of the surveillance state and their control over all things, but especially money. Russia’s massive natural resource pile and sovereigntist-minded government stands wholly in the way of that. If you believe otherwise, you have been gaslit by Davos propaganda. I urge you to put away childish things, some rabbit holes are just holes, not warrens. Back to the oil industry. Capping either a gas or oil well is dangerous because there is no guarantee it can be re-opened. Wells can be damaged and the oil/gas they contain lost without drilling a new one. With gas you can just “flare it off” by burning the excess if your storage is full, rather than capping the well and wait for demand to return. With oil, on the other hand, you cannot really do that. You have to store the stuff somewhere. From all accounts so far, Russia’s oil storage capacity is already full, if not overflowing. The oil industry in general is not geared for massive long-term storage due to supply/demand shocks because there is literally no need for it. What expands is the capacity to move oil around to consume it, not store it in big tanks hoping someone will buy it. The industry has all the spare capacity it needs to coordinate supply and demand within pretty tight tolerances. It is not “just in time” delivery tight, but it is not capable of absorbing a 20% demand shock. And this is where the West thinks it has a big lever to use against Russia right now. By all accounts, Europe is one of Russia’s biggest oil customers, with the port at Rotterdam taking in and refining as much as 1.4 million barrels per day before the war. Believe it or not, The Washington Post had a decent article breaking down where Russia’s exports go. Of the approximately 7.2 million barrels per day Russia exports to the world, 4.8 million go to countries, most of them in Europe, that say they no longer want to buy it from there. Lack of storage capacity should not be a big deal if Russia exported most of the oil to Europe by ship, which it does. According to a recent report by Transport & Environment, an NGO which is wholly geared to convincing Europe to get off Russian energy, the Druzhba pipeline only supplies around 10% of Russian oil to the European market. This is a paltry 250,000 barrels per day. The U.S. embargo is more dangerous to the Russian economy, where in 2021 the U.S., having to replace barrels sanctioned from Venezuela by former President Trump, imported an average of 600,000 barrels per day. Those imports began drying up in 2022, well before Russia invaded Ukraine, so chalk that up as another data point that this war between the West and Russia was planned well in advance of the actual start date back in late February. The point is that the talking point going around the press today is that Russia does not have the storage capacity to deal with a European embargo and as such will have to cut production. Estimates of production cuts from Russia are around 1.8 million barrels per day, while the West is hoping for 3 million. Similar to what Trump did in 2018 against Iran, the shock-and-awe campaign of sanctions froze many oil trading firms in their tracks, not knowing what the future would hold, and refused to do business with Russia for fear of running afoul of sanctions. From Shell to Glencore to Trafigura, Russian oil tenders have become persona non grata and it created a complete mess of their trading books and the commodities-trading industry as a whole, as Credit Suisse’s Zoltan Pozsar’s note from last month described. Because of this financial dislocation in what should be a boring, brain-dead stable industry—trading the most important commodity in the world with the biggest infrastructure to service it—chaos ensued. The collective West, following Davos’s game plan, is hoping for even more. Pozsar’s conclusion was that all these firms will either need a bailout at some point (with possible nationalization the price they pay) or be allowed to go bankrupt to serve the plan of radically overhauling the global energy economy away from petroleum of Davos. At the same time, they would put a major dent in Russia’s economic prospects. Viewed that way, this is a kind of Evil Mastermind Two-fer. But, if backing up the pipeline oil is not that big a hit to Russia’s production, what is the EU trying to accomplish here? By disrupting the routes oil normally takes around the world, there is now a structural shortage of tankers to move oil demanded. Since many of those barrels, more than 2 million per day, now must go on much longer voyages. Instead of the coffee and cake run from St. Petersburg to Rotterdam, those same ships now, at a minimum, must go to storage facilities in the Bahamas and the Caribbean, if not all the way to China or India, their final destination. Read Pozsar’s post, or the ZeroHedge article linked above, to get a sense of the scale of the disruption. This supply shock within the tanker market and the downstream effects of the added costs to the voyages, it is hoped, will create a cascading back-up within the Russian oil industry, forcing the forecasted production hits. This will, in turn, eat into its positive trade balance which is “fueling Putin’s war machine.” It will also present the opportunity for Russia’s competitors to come in and steal market share from them. Through this mechanism and efforts in the West to change Europe’s energy usage, the long-term effect is to destroy Russia’s ability to continue the war by starving it of needed capital. Davos Rhymes with Thanos The U.S. is happy to push Europe to this point and many commentators are happy to end the conversation there: Pick your epithet, but the line is the “Empire of Lies” or “Zone A” or whomever, feels their hegemony is threatened and they are bullying everyone, especially Europe, into their preferred strategy. But I think that story is more of the “Made for TV” version than it is an accurate representation of reality. It leaves out the larger goal structure of the people behind this mess in the first place. Rather than be captives of a hyper-belligerent U.S., the EU nations are absolutely willing partners in this. Davos’s Great Reset strategy is built on the same mistakes about resource scarcity that Thomas Malthus made back in the early 19th century. Theirs is an economic model which does not believe people respond in real time to incentives, pro and con, which moderate their behavior. Rather, they see humans as a virus unleashed upon the world that needs to be controlled. The entire Great Reset can be boiled down to the same argument the villain in the Marvel films, Thanos, made about having to kill off half the life in the Universe to make things “sustainable.” And the power center of this type of thinking is not in the U.S. and the U.S. Empire. We are the hyper-capitalists growing the virus in our Petri dish of individualism. No, this thinking comes squarely out of European critiques of capitalism. To be reductionist it is just Marxism warmed over and given a fresh gloss of rhetorical paint—sustainability, stakeholder capitalism, Environmental, Social and Governance (ESG), shared purpose, etc. The proof that the EU is just as happy with war in Ukraine as neoconservative forces in the U.S. and UK is evident in their unwillingness to end the war through diplomacy. But Europeans are the ones who will suffer the most from this strategy. Bad Scripts Beget Bad Policy If EU leadership, owned by Davos, were acting on average Europeans’ behalf, they would be using the obvious costs of cutting Europe off from Russian energy to tell the US and U.K. to go scratch. Instead, all we hear from them is how Germany can wean itself off Russian energy completely within a year. It does not matter that this is not good for German industry or the German people in the long run. Russian energy is by far the cheapest solution for them, making their labor the most competitive it can be. Instead, after helping manufacture the crisis in Ukraine, they now uphold the notion that it is a moral imperative for Germans to suffer without food, heat and other basic necessities of a supposed advanced first-world society to defeat the evil Russians. In the years leading up to this conflict they would have worked to implement the Minsk Accords. They would have lifted the economic sanctions on Russia and come to an agreement about Crimea and the Donbas politically, and let the U.S. and the UK twist in the wind. Former German Chancellor Angela Merkel and French President Emmanuel Macron did the opposite. They blew smoke up Putin’s ass while running the clock out until Macron was re-elected and Merkel could exit the scene, leaving a weak Davos-approved coalition to blame the collapse on. Deepened trade between Russia and the EU would have eventually ground out the animosity and the U.S.’s insistence on arming Ukraine would have become an albatross politically while Europe would be staring at a potential renaissance, instead of an economic black hole. France and Germany would not have betrayed their own attempts at diplomacy. This, I believe, is much closer to the real story of the conflict, which serves a far larger purpose clearly stated by the architects of our misery than the simplistic framework of just blaming the U.S. for everything. The idea that Europe fears a Russian invasion of Poland or even Germany, which necessitates NATO’s expansion to its border in the Donbas, is ludicrous. Russia’s military is not built along these lines nor is its performance in Ukraine evidence it is capable of such an operation. What is unfolding now is a script that was written a long time ago. The war by the West against Russia has long been in the planning stages. The Russians understand this better than many are willing to accept. Their leadership, Putin and Foreign Minister Sergei Lavrov, have articulated this very clearly at every stage of the war to date. They are under no illusions about where the West and Davos are willing to take this conflict, which is why they have made serious threats about striking out at the real “decision centers” who give the Ukrainian Armed Forces their marching orders. These are warnings not to our politicians, but to us. This is where things lead. They have asked for a parting of the ways, peaceably, between East and West, but that is not part of the agenda. Like classic narcissists with the burning need to control everything, Russia and the rest of Asia will not be allowed to walk away from Davos and their Eurocrat quislings, because they are the righteous saviors of humanity. And we are just, at best, “the help” and at worst an inconvenience. The bigger Davos plan of destroying the old global order to Build it Back Better, where they own everything and you will own nothing and like it or else, is the script. They are now committed to this plan. It does not matter now whether it will work or not. This is what we have to realize in all of our analyses. Do the Russians and their friends in Asia and across the Global South have the means and the tools to come out on top? Possibly. But the bigger question is whether or not this conflict escalates to the point where winning is an irrelevant concept. When you see a bloc as powerful as the European Union willing to commit acts of domestic vandalism this big—and blaming the victim of their unbridled aggression—it tells you we are far past the point of rational settlement. *  *  * Join My Patreon if you like real reasons Tyler Durden Sat, 05/14/2022 - 07:00.....»»

Category: dealsSource: nytMay 14th, 2022

Wall Street"s Biggest Bear Sees Much More Pain, S&P Dropping As Low As 3,350

Wall Street's Biggest Bear Sees Much More Pain, S&P Dropping As Low As 3,350 On the surface there isn't a big difference between Morgan Stanley's Michael Wilson and JPMorgan Marko Kolanovic: both of them are best known for fiercely sticking to their financial view and week-after-week hammering their market position, come rain or shine. The only difference, of course, is that while Marko has been wrong for all of 2022 - a fact which hasn't bothered him one bit and this week he urged what few clients he has left to BTFD for the 19th consecutive week even as the S&P tumbled 1000 points below his year-end price target of 4,900... ... Wilson has been bearish all along, and right. And just as Kolanovic refuses to stop digging the hole he is in, and keeps on repeating that any minute now the ramp will arrive and stocks will merrily return to their all time highs, so Wilson keeps pouring salt into the wounds of bulls - who suddenly find themselves alone and without the Fed's tender, loving POMOing care - and in his latest note, a Mid-Year Outlook Forecast published today (available to pro subscribers in the usual place) he warns that not only is the rout in stocks not over (despite the S&P just 50 points away from his base-case year-end target of 3,900) but he sees much more downside in a worst case scenario amid mounting concerns of slowing growth. Warning that the US equity market "is not priced for this slowdown in growth from current levels" and in fact, based on Wilson's fair value framework, "the S&P 500 is still mispriced for the current growth environment", the strategist leverages the relationship of PMIs versus equity risk premium over time to project fair value ERP based on the current level of the US ISM Composite PMI. Based on this approach, fair value ERP is 330bp. Applying today's 10-year yield to Wilson's fair value risk premium, indicates a forward multiple of ~16x and an S&P 500 price level of 3,700-3,800. Weaving that tactical setup in Morgan Staney's forward 12-month price target of 3,900 implies that the market is expected to overshoot his target to the downside in the near term before working back toward 3,900 next spring (by reference, JPMorgan still expects the S&P to close the year at 4,900). Some more bearish observations from Wilson: We're in the midst of a hotter but shorter cycle in the US. We first made this case in March of last year, arguing that this cycle was likely to progress quicker than the prior four given the velocity of the growth rebound following the Covid recession, the return of inflation after a 40-year absence, and a much earlier-than-expected shift to more hawkish monetary policy. Fast forward to today, and that's what appears to be happening—earnings have accelerated past prior cycle peaks historically quickly and are now starting to decelerate from a growth rate perspective, inflation is at a multi-decade high, and the Fed has hiked twice just two years into the cycle. The key implication here is that the early-to-mid-cycle benefits of positive operating leverage are behind us, and earnings growth is likely to decelerate, driven by margin compression and slowing top-line growth. This dynamic is confirmed by output from our leading earnings model and the recent downward pressure we have seen in earnings revisions breadth. Coupled with decelerating PMIs, this downdraft in earnings growth we expect into next year gives us high conviction that our 'ice' scenario has arrived and it's here to stay for even longer than we envisioned going into this year. Why can Wilson's 'ice' scenario persist in the context of a hotter but shorter cycle? Four reasons: The Russia/Ukraine conflict has exacerbated inflation pressures particularly for energy and food; these cost pressures continue to weigh on already depressed consumer sentiment. Labor and input cost pressures remain sticky and continue to pose a risk to corporate profit margins. Tighter monetary policy is now having an economic impact, particularly within the housing market, where affordability and mortgage costs are affecting households. We're starting to see signs that excess inventory is building in consumer goods; it's happened more slowly than anticipated, but that means pricing/discounting risk for impacted companies can linger for several quarters. Finally, here is a breakdown of Wilson's three price target cases for Q2 2023: Base Case Price Target for 2Q23: 3,900 In our 3,900 base case, the market puts a 16.5x P/E multiple on forward (June 2024) EPS of $236. We expect the market multiple to de-rate further from current levels over the next 12 months driven by a higher equity risk premium (~325 bps) as earnings, economic, policy and geopolitical uncertainty remain high. While the multiple compression we embed in our base case is fairly modest given the recent drawdown we have experienced in equities, we think the risk is elevated that the market multiple overshoots our base case to the downside in the near term (see Weekly Warm-Up: That Escalated Quickly As News Always Follows Stocks). On the earnings front, we take down our estimates as cost pressures continue to ramp up, top line growth slows and output from our leading earnings model points to a further deceleration in EPS growth. Our earnings estimates are now well below consensus out to 2024. Specifically, we see 8% growth in '22 (consensus is at 10%), 5% growth in '23 (consensus is at 10%) and 0% growth in '24 (consensus is at 9%). In short, the over-earning that took place post the covid recession is worked off as demand slows and cost pressures eat into margins. In the absence of a recession (our economists' base case view), this dynamic happens less abruptly at the overall index level, but we continue to believe it may feel like a recession for certain areas of the equity market over the next twelve months (specifically those areas tied to the consumer goods and technology overconsumption that transpired in 2H '20 and '21). Bottom line: 'fire' AND 'ice' persist as the Fed continues to tighten policy into a slowing growth environment. Expect decelerating earnings growth, a lower multiple and elevated volatility. An overshoot to the downside of our next twelve month multiple and price targets is likely tactically as the market discounts (in advance) the consolidation in earnings expectations we expect to transpire over the coming months. Bull Case Price Target for 2Q23: 4,450 In our 4,450 bull case, the market puts a 17.9x P/E multiple on forward (June 2024) EPS of $249. A soft landing is achieved in our bull case. The Fed's hawkish path is not a risk to the US growth backdrop, consumer confidence rebounds as inflation fades, cost pressures ease along with inflation as supply chains reopen in an orderly manner, corporates maintain pricing power, and any excess inventory build in consumer goods is absorbed by household demand. As noted in the Global Strategy Mid-Year Outlook, this scenario could also involve changes to China’s covid policy and a more positive geopolitical situation in Europe. Amid this backdrop, multiples expand to 17.9x, and the equity risk premium remains around post-GFC lows (~280 bps). On the earnings front, growth is modest but still positive out to 2024 as margin pressures are less significant than in our base case. Bottom line: earnings growth slows but is still positive, cost pressures ease as inflation is curbed, consumer confidence rebounds, and excess inventory in consumer goods is absorbed—a soft landing where multiples have room to expand. Bear Case Price Target for 2Q23: 3,350 In our 3,350 bear case, the market puts a 15.9x P/E multiple on forward (June 2024) EPS of $212. This scenario assumes a recession. We have earnings growth decelerating in 2022 and then outright negative in 2023 (-10%) from a calendar year standpoint. We then see 2024 EPS growth rebounding off of recession comps, finishing the year +17%. In this scenario, margin contraction is more severe in 2022 and 2023, and nominal top line growth nearly contracts on a year-over-year basis by 2023, only kept modestly positive by inflation. Bottom line: sticky input/labor cost inflation drives sustained margin pressure. Payback in demand is a dominant theme, leading to a broad deceleration in sales growth. That combination takes EPS growth negative in 2023. At the same time, stickier inflation keeps the Fed on a hawkish path despite decelerating growth and tightening financial conditions. Wilson's call is in sharp contrast to not only Marko Kolanovic who absurdly keeps telling clients to just keep buying stocks into the abyss, but even more respected strategists including Peter Oppenheimer at Goldman Sachs who said on Tuesday that the powerful selloff in stocks in the past weeks had created buying opportunities, with headwinds such as inflation and hawkish central banks already priced in. So far Wilson (and BofA's Hartnett) is right and all of his bullish competitors have been dead wrong. There is more in the full Morgan Stanley note available to professional subs. Tyler Durden Wed, 05/11/2022 - 15:31.....»»

Category: dealsSource: nytMay 11th, 2022

Uber Fails To Impress

If you thought ride-hailing app Uber (NYSE:UBER) was going to deliver the stock market from the horrendous start to the years it’s had, think again. The likes of Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT), who both reported solid numbers last week, were unable to stem the flow of selling, and the company at the forefront of […] If you thought ride-hailing app Uber (NYSE:UBER) was going to deliver the stock market from the horrendous start to the years it’s had, think again. The likes of Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT), who both reported solid numbers last week, were unable to stem the flow of selling, and the company at the forefront of travel tech isn’t about to either. Not for now at least. If anything, Uber risks becoming the latest victim of 2022, which has seen growth and tech stocks suffer their worst start to the year in decades. A cacophony of soaring inflation, slowing growth, and rising interest rates are compounding to create a risk-off environment that’s making even the most bullish investors reconsider their long positions. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q1 2022 hedge fund letters, conferences and more The San Francisco headquartered company reported its Q1 earnings before yesterday’s bell, and they’d have surely been among the most-watched of the week. EPS for the quarter came in at -$3.04, a steep loss that was well below the expected -$0.11. Such was the gap that many outlets were left scratching their heads and commenting that the numbers were not comparable. Bullish Comments On the revenue front, there was impressive growth of 138% year on year registered, and this came in firmly ahead of the consensus. Gross bookings also shone, as they jumped 35% compared to the same quarter last year and came in at the high end of the previously guided range. Leadership struck an optimistic tone initially, with CEO Dara Khosrowshahi saying that he felt that their results demonstrated just how much progress “we’ve made navigating out of the pandemic and how the power of our platform is differentiating our business performance. In April, Mobility Gross Bookings exceeded 2019 levels across all regions and use cases. There’s never been a more exciting time to innovate at Uber and we’re focused on executing our strategy to grow our platform profitably.” CFO Nelson Chai echoed this sentiment when he said "we are pleased with our Q1 results, with the outperformance of our quarterly guidance and strong incremental margins. With free cash flow approaching breakeven in Q1, we now expect to generate meaningful positive free cash flows for full-year 2022.” However, despite what could be called a decent showing at least on the revenue front, Uber’s management went out of its way to highlight the current headwinds and future risks. Khosrowshahi highlighted that global regulatory risks remain a concern for the company and that margins on its expansion to include taxis on its platform were lower than other segments. Getting Involved Uber’s shares had already been under significant pressure coming into the release, and the numbers and comments were enough to make them gap down at the open. They fell as much as 12% from Tuesday’s close, before recovering somewhat into yesterday’s close. They still finished at their lowest level since April 2020, a time when many were wondering if people would ever be comfortable getting in an Uber again. It also means the stock is down more than 50% from last year’s all-time high, and there are few reasons to think the recovery story is about to kick off anytime soon. The company is also contending with stiff competition from Lyft (NASDAQ:LYFT), who’s having some trouble of its own. After their numbers for the quarter came out yesterday morning, Lyft shares fell more than 35%. It’s a tough time to be a tech investor, which means it’s more important than ever to be picky with the stocks you own. Looking at Uber’s chart, there’s not a lot to like right now. Shares have been in a stiff downtrend since this time last year, with lower highs being followed by lower lows - a textbook definition of an unappetizing stock. It’s not quite clear what’s needed to turn things around, but now is not a good time to be an unprofitable company that’s been selling the long-term vision to investors. Interest rates are getting raised more regularly than ever, which means non-profitable companies like Uber will be paying more and more for their borrowing needs. Buyer beware. Should you invest $1,000 in Uber Technologies right now? Before you consider Uber Technologies, you'll want to hear this. MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Uber Technologies wasn't on the list. While Uber Technologies currently has a "Buy" rating among analysts, top-rated analysts believe these five stocks are better buys. Article by Sam Quirke, MarketBeat Updated on May 5, 2022, 5:36 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkMay 6th, 2022

Futures Slip As Traders Read Between Powell"s Lines

Futures Slip As Traders Read Between Powell's Lines After yesterday's torrid, Powell-inspired meltup which saw the S&P soar the most since May 2020 (just days after its biggest drop since June 2020)... In the past week, S&P 500 has had both its best day since May 2020 and its worst day since June 2020 [Past performance is no guarantee of future results] pic.twitter.com/BA9p6MDzWZ — Liz Ann Sonders (@LizAnnSonders) May 5, 2022 ... U.S. futures paused their surge after Jerome Powell eased fears that the Federal Reserve will unleash an even more aggressive tightening path and took a 75bps rate hike off the table. As of 745am EDT, S&P 500 futures dropped 0.6%, while Nasdaq 100 contracts fell 0.8%, as investors digested Powell’s vow to curb inflation, while acknowledging it could inflict some “pain” to the economy. In fact, an example of just what the Fed is fearing came earlier today when the BOE hiked 25bps as expected, but warned a stagflationary recession is be imminent as the central bank now expects GDP to contract while inflation rises double digits in the coming months, which is precisely what happens when central banks are far behind the curve.  In other assets, the dollar jumped to session highs as cable tumbled to July 2020 lows, 10Y yields were flat around 2.95 while bitcoin traded off yesterday's highs between 39K and 40K. “Alongside tightening monetary policy, a number of risks - persistently high inflation, indications that consumer demand is softening, and the economic consequences of the Russian invasion of Ukraine - have raised investors’ concerns about the strength of future economic growth,” said Richard Flynn, U.K. managing director at Charles Schwab. “In this context, market volatility is likely to continue.” For those who missed yesterday's white knuckle session, the US central bank raised the benchmark rate by a half percentage point on Wednesday, the steepest increment since 2000, in order to keep inflation under control. By ruling out a more aggressive hike, the central bank gave a boost to equity markets, with the S&P 500 posting its biggest daily advance since 2020. The Nasdaq 100 closed 3.4% higher, but is still down 17% this year. “We are puzzled why the market thinks that Fed hikes are going to stop inflation,” said Nancy Davis, founder of Quadratic Capital Management. “We see inflation as driven by massive government spending, supply chain disruptions and, more recently, by Russia’s invasion of Ukraine.” Sure, the Fed is powerless to do anything against inflation, but it has to do something. Policy makers are trying to juggle the need to quell the fastest inflation in four decades against hard-won economic growth. In Europe, German factory orders plummeted, highlighting the toll from the war. The soaring price of commodities further complicates efforts to subdue price pressures. “The combination of high inflation and a weakening global economic outlook has fueled concerns about how far central banks will be able to raise interest rates without overburdening the economy,” Fraser Lundie, head of public fixed income markets at Federated Hermes, wrote in a note to clients. In premarket trading, EBay plunged 6.9% as analysts said macro headwinds, including the war in Ukraine, inflation and consumer confidence, will pressure results in the near term. The e-commerce firm gave a lackluster sales and profit outlook for the second  quarter, as a pandemic-driven sales bump fades. U.S.-listed Chinese stocks dropped again as investors mulled an expanding list of firms that face potential security delistings and the Federal Reserve’s rate decision. JD.com (JD US) shares trade down 2.8%, Pinduoduo (PDD US) -3.5% and Bilibili (BILI US)  -5% in premarket. Some other notable premarket movers: Albemarle (ALB US) shares jump 14% in premarket trading after the company boosted its profit and sales guidance for the full year, citing continued strength in pricing in the Lithium and Bromine businesses. . Hycroft Mining (HYMC US) shares surge as much as 36% in U.S. premarket trading after the precious metals producer gave an update for the first quarter, with the firm saying that its strengthened balance sheet allows it to cut debt, complete technical studies and launch an exploration program. Qorvo (QRVO US) analysts said that guidance from the radio frequency solutions fell short of expectations amid weakness in China and high inventory, prompting price target cuts among brokers. Qorvo shares fell 4.9% in postmarket trading on Wednesday after forecasting adjusted earnings per share for the first quarter that missed the average analyst estimate. Booking Holdings (BKNG US) impressed analysts with April bookings topping 2019 levels and positive comments on summer travel. The shares rose 7.7% in postmarket trading after the company’s first-quarter revenue and gross bookings both beat the average analyst estimate. Twilio (TWLO US) analysts highlighted the gross margin performance and reiteration of guidance as encouraging points in the communication-software provider’s results, though some were left wanting more from the firm’s revenue beat. The shares rose 3.8% in after-hours trading Wednesday after adjusted earnings per share for the first quarter beat the average analyst estimate. Fortinet (FTNT US) analysts lauded the infrastructure software company’s solid quarter in light of continued supply chain pressures. The company’s shares rose 7% in extended trading on Wednesday after it reported first-quarter results and raised its full-year forecast. Etsy (ETSY US) analysts were overall positive on the e-commerce firm’s results, though noted that challenges relating to the macroeonomic backdrop and the reopening of economies weighed on the company’s outlook. Etsy shares fell 10% in postmarket trading Wednesday after its forecast for second-quarter revenue fell short of the average analyst estimate. In Europe, the Stoxx 600 was up 1% after rising as much as 1.8%. FTSE 100 up 1.1%, and DAX +1.4%, with most indexes well off session highs. Tech, real estate and industrials were the strongest performing sectors, autos and insurance underperform as gains are faded. Positive results from large caps including Airbus SE, Shell Plc, UniCredit SpA and ArcelorMittal SA also helped brighten the mood. Some notable European movers: Airbus jumps as much as 8.5% on a “solid” 1Q, with adjusted Ebit “significantly” above consensus, Bernstein says, with Jefferies noting key highlight is plan to ramp up A320 production. Shell shares rise as much as 3.6% after company reports record profit for the quarter. Jefferies said the results signaled “strong” second-half buyback acceleration. UniCredit jumps as much as 7.6%, the most intraday since March 29, after reporting revenue for the first quarter that beat estimates. Analysts note “solid” earnings ex-Russia. S4 Capital shares soared as much as 20% on Thursday after Martin Sorrell’s media company said it will publish its results for last year tomorrow, following a lengthy delay. Outokumpu shares rise as much as 9.3% after the Finnish steel maker presented its latest earnings, which included several beats to consensus estimates, including on adjusted Ebitda. Argenx shares rise as much as 6.7% after the Belgian immunology firm posted its latest earnings, which included a large beat on sales for its key drug Vyvgart (efgartigimod). Netcompany shares rise as much as 6.1%, the most intraday in a month, after the software developer reported 1Q earnings that are broadly in line with estimates. Verbund dropped the most in two months after the Austrian Chancellor said he’s asked the finance and economy ministries to develop new rules to administer windfall profits at state-controlled companies. Virgin Money shares slide as much as 6.7% after the lender reported first-half results. Goodbody linked the share price drop to several factors, including the bank not announcing a buyback. Hikma Pharmaceuticals fell as much as 11%, the most since April 2020, after the company reduced guidance for its generics division. Peel Hunt calls update “obviously disappointing.” Earlier in the session, Asia’s stock benchmark rose, poised to snap a three-day decline, as the Federal Reserve’s policy announcement calmed fears about super-sized hikes. The MSCI Asia Pacific Index climbed as much as 1.2% before paring gains to around 0.4%. Tech and materials were the biggest boosts to the Asia gauge as most sectors rose, with TSMC and Infosys hauling up the measure. Bucking the trend, China’s stock gauge closed lower after a three-day holiday in a sign that Beijing’s vow to boost growth has failed to alleviate concerns over the outlook.  The Fed delivered a 50-basis-point increase that was in line with expectations on Wednesday, and said a bigger hike was not being actively considered. Benchmarks in the Philippines and Vietnam were among the top gainers in the region. Japan and South Korea markets were closed for holidays.  Tech stocks will likely “see a further rally until the next U.S. consumer price inflation reading next week,” said Jessica Amir, a market strategist at Saxo Capital Markets Australia. “The rate hikes weren’t as much as feared,” bond yields have pared and volatility is subsiding, she added. The rally marked a reprieve for Asia’s beaten-down shares, which remain mired in a bear market. The regional benchmark is underperforming U.S. and European peers this year, hurt by the impact of China’s strict Covid-19 restrictions and rising inflation around the region. In FX, the Bloomberg Dollar Spot Index jumped as cable tumbled on the BOE's recession warning, clawing back some of its post-FOMC losses when Powell ruled out a more aggressive pace of monetary tightening. The greenback traded higher against all of its Group-of-10 peers and the Treasury yield curve bear-flattened, trimming some of Wednesday’s aggressive bull steepening which followed the FOMC outcome. The euro fell back below $1.06 and yields on short-dated European bonds fell as ECB hike bets were pared. German factory orders plummeted, highlighting the toll from the war. The pound plunged after the Bank of England warned of a stagflationary recession even as it hiked another 25bps. Norway’s krone held a loss after the central bank kept its key policy unchanged, as widely expected among analysts, and confirmed its plan to deliver a fourth increase in borrowing costs next month. Australia’s dollar pared yesterday’s gains; weaker-than- expected Chinese economic data raised concerns over demand for the nation’s commodity exports and weighed on the Australia’s sovereign bond yields. China’s yuan dropped as weak economic data hit sentiment. The USD/CNH rose 0.4% to 6.6489; USD/CNY gains 0.2% to 6.6194 after China’s services activity slumped to its weakest level in more than two years in April as Covid outbreaks and lockdowns continued to pummel consumer spending and threaten economic growth. The Caixin China Services purchasing managers’ index crashed to 36.2 in April, the lowest since February 2020, as Covid outbreaks and lockdowns continued to pummel consumer spending, threatening economic growth. In rates, the Treasury front-end briefly extends losses, following move in gilts after Bank of England hiked 25bp with three voters looking for a bigger 50bp move. U.S. 10-year yields traded around 2.95%, little changed after retreating from day’s high; gilts outperform. Yields cheapened as much as 6bp across front-end of the curve before retreating; U.K. 2-year yields erased the 3bp increase that followed the Bank of England policy announcement; front-end led losses flatten 2s10s, 5s30s spreads by ~2bp and ~4bp on the day.  Bear-flattening move has 5s30s spread near session lows into early U.S. session, unwinding portion of Wednesday’s post-Fed bull-steepening. Fed speakers resume Friday with six events slated. In the aftermath of Wednesday’s policy announcement, overnight swaps are now pricing in close to 50bp rate hikes at the next three policy meetings. Dollar issuance slate empty so far; session has potential to be busy given a number of expected issuers have so far stood down this week. Three-month dollar Libor dropped -3.54bp at 1.37071%, its first decline since April 5.   Looking at today's calendar, we get the BoE policy decision (a hike of 25bps as noted earlier, but accompanied by a very dovish warning of recession in late 2022) and UK local elections. Otherwise from central banks, we’ll hear from the ECB’s Lane, Holzmann and Centeno. Data releases include the weekly initial jobless claims from the US and nonfarm productivity. Finally, earnings releases today include Shell. Market Snapshot S&P 500 futures down 0.7% to 4,267.00 MXAP up 0.4% to 167.94 MXAPJ up 0.4% to 556.06 Nikkei down 0.1% to 26,818.53 Topix little changed at 1,898.35 Hang Seng Index down 0.4% to 20,793.40 Shanghai Composite up 0.7% to 3,067.76 Sensex up 0.3% to 55,834.32 Australia S&P/ASX 200 up 0.8% to 7,364.65 Kospi down 0.1% to 2,677.57 STOXX Europe 600 up 1.2% to 446.50 Brent Futures up 0.4% to $110.56/bbl Gold spot up 0.5% to $1,890.84 U.S. Dollar Index up 0.34% to 102.94 German 10Y yield little changed at 1.01% Euro down 0.3% to $1.0587 Top Overnight NEws from Bloomberg ECB Executive Board member Fabio Panetta said economic expansion has almost ground to a halt in the euro area and faces further “high costs” as policy makers battle record inflation On the eve of the 25th anniversary of its independence, the U.K. central bank is widely expected to hike interest rates to 1% -- the highest since the financial crisis -- and lay out how it intends to take uncharted steps toward unwinding more than a decade of bond purchases U.K. Prime Minister Boris Johnson will meet his Japanese counterpart Fumio Kishida in London where they are expected to discuss a plan to support Asian nations in diversifying away from Russian oil and gas Boris Johnson has been engulfed by scandal for months and came close to being ousted by members of his Conservative Party. On Thursday, voters across the U.K. are likely to give him their own kicking. Local election results typically deliver losses for ruling parties, especially if they’ve been in power for 12 years as the Tories have The Reserve Bank of New Zealand’s Monetary Policy Committee will return to a full complement of seven for the first time this year when it meets later this month. Assistant Governor Karen Silk joins the RBNZ on May 16 and will be an internal member of the committee from that date The dollar fell Wednesday by the most in nearly a month on a trade-weighted basis following the latest Federal Reserve policy decision yet pairs some of those losses as the move was more down to short-term positioning A more detailed breakdown of global markets courtesy of Newsquawk Asia-Pac stocks traded positively as the region reacted to the FOMC meeting where the Fed hiked rates by 50bps as expected and announced to begin reducing the balance sheet from next month, while Fed Chair Powell dispelled concerns of a more aggressive  75bps rate hike. ASX 200 was firmer with gold miners buoyed by higher prices and as the energy sector benefitted from the proposed Russian oil embargo. Hang Seng and Shanghai Comp were higher following the mainland’s return from the Labour Day holidays but with advances initially contained by several headwinds including an extension of COVID restrictions in Beijing, the deterioration in Caixin Services and Composite PMIs, while the US SEC added over 80 companies to its list for possible delisting and HKMA also hiked its base rate by 50bps in lockstep with the Fed. Top Asian News Concerns Mount Over Asset Sales; Stocks Fall: Evergrande Update S&P 500 Remains Expensive Despite Yield-Driven Drop: Macro View North Korea Lifts Sweeping Lockdown After One Day, Yonhap Says India’s Surprise Rate Hike Spurs Aggressive Tightening Bets European bourses are firmer across the board, Euro Stoxx 50 +1.3%, benefitting from the perceived less-hawkish Fed and associated Wall St./APAC performance. Stateside, futures are softer across the board though the likes of the ES remain in relative proximity to overnight best levels, ES -0.5%. Back to Europe, sectors are mostly positive with Real Estate and Tech the outperformers while defensive-biased names are lagging. Top European News UniCredit Takes $2 Billion Hit on Russia to Cover Potential Exit U.K. April Composite PMI 58.2 vs Flash Reading 57.6 BMW Profit Beats Estimates on Strong Demand for Top-End Cars Norway Rate Hike Locked and Loaded for June to Quell Inflation FX: Dollar finds its feet after FOMC fall out on less hawkish than factored in policy guidance from Fed chair Powell, DXY back within reach of 103.000 vs 102.340 low. Aussie* undermined by much weaker than forecast building approvals, mixed trade, technical and psychological resistance; AUD/USD closer to 0.7200 than 0.7250 and AUD/NZD fades just shy of 1.1100. Sterling weak on super BoE Thursday on prospects that MPC may be more circumspect after latest 25 bp hike; Cable down around 1.2550 vs 1.2635 peak and EUR/GBP firm on 0.8400 handle. Euro underpinned by rebound in EGB yields and option expiries as 1.8 bn rolls off 1.0600. Loonie cushioned by crude alongside Norwegian Crown after no change in rates by Norges Bank that is sticking to schedule for next quarter point hike in June; USD/CAD mostly sub-1.2750 and EUR/NOK capped below 9.9000. Turkish Lira deflated as CPI soars even further beyond target and PPI over 100%. Polish Zloty awaits 100 bp hike from NBP and Czech Koruna 50 bp courtesy of CNB. Brazil's Central Bank raised the Selic rate by 100bps to 12.75%, as expected, while it left the door open to further monetary tightening at a slower pace and considered it appropriate to advance the process of monetary tightening significantly into even more restrictive territory. BCB also stated that inflationary pressures arising from the pandemic period have intensified due to problems related to the new COVID-19 wave in China and the Ukraine war, according to Reuters. Norges Bank: Key Policy Rate 0.75% (exp. 0.75%, prev. 0.75%). Reiterates that the next hike will “most likely” occur in June. Adds, the Krone has recently depreciated and is now weaker than projected. Fixed Income Very volatile moves in bonds between the FOMC, BoE and NFP, with Treasuries flipping from bull-to-bear steepening. 10 year note soft within wide 119-09+/118-19+ range, Bunds flat between 153.79-152.74 parameters and Gilts firm in catch-up trade either side of 118.00. Bonos and Oats off best levels after digesting Spanish and French multi-tranche debt issuance Commodities WTI and Brent have been pivoting relatively narrow ranges ahead of today's JMMC/OPEC+ gatherings, currently posting gains of USD 0.30/bbl. OPEC+ is expected to maintain its policy of increase the output quota by 432k BPD in June, lifted from the 400k BPD in May as part of the pacts terms; newsquawk preview here. Spot gold is bid but lost the USD 1900/oz mark in early-European trade, a figure it has spent the morning modestly below. Norway's labour unions said initial wage talks with oil firms broke down and they will proceed with mediation, according to Reuters. Crypto Bitcoin is subdued and returned to existing session lows of USD 39.4k amid coverage of the below WSJ story; more broadly, Bitcoin has been steady at the lower-end of the morning's ranges. US Senators Warren and Smith have sent a letter to Fidelity over its Bitcoin 401(k) plan which would allow investors to allocate as much as 20% of their portfolios into Bitcoin, according to WSJ; senators suggest that Bitcoin could be too risky for savers. US Event Calendar 08:30: 1Q Unit Labor Costs, est. 10.0%, prior 0.9% 08:30: 1Q Nonfarm Productivity, est. -5.3%, prior 6.6% 08:30: April Continuing Claims, est. 1.4m, prior 1.41m 08:30: April Initial Jobless Claims, est. 180,000, prior 180,000 DB's Jim Reid concludes the overnight wrap I'm normally asleep at around 945pm each evening but tense football games often disturb that equilibrium and last night was the ultimate sleep disrupter. I was just about to close down my iPad in bed and fall asleep as Man City we're two goals ahead in injury time in the Champions League semi. I stayed the extra minute and in that minute Real Madrid scored twice, took the game into extra time and ultimately won a stunning tie. I finally turned my iPad off 10 minutes before the end but couldn't sleep so turned it on again after they won. Liverpool vs Real Madrid will be an epic final! So all in all a hectic evening trying to watch the Fed while my wife and I watched Ozark (stressful in its own right) and then the football. I'm worn out this morning. So after all that, the Fed intentionally or unintentionally decided that the market has had enough stress for now and clamped down on the more hawkish potential near-term paths for policy. As a result equities soared, yields fell (especially at the front-end), credit tightened, the dollar slumped and oil built on its earlier rally. Let's very briefly get the boring bit out of the way in a line or two. Basically the FOMC rose rates by +50bps and signalled they would begin to reduce the size of their balance sheet in June, both in line with our expectations (Our full US econ review is here). However the most pressing question for markets was how willing the Committee was to consider future rate increases of +75bps. Market participants didn't have to wait long for an answer, as Chair Powell quickly noted that +75bp hikes were not actively being considered, while +50bp hikes were on the table for the "next couple" of meetings. In line, market pricing for the next two meetings ended the day at +100bps, having stripped out any of the small, but recently growing, premium priced in for +75bps over the June and July meetings. The firm rebuke led to a rally in Treasury yields, led by the short-end, as 2yr yields fell -14.0bps, while 10yr yields were a relatively benign -3.7bps by comparison. The move in nominal 10yrs again masked divergence in the decomposition driven by the market’s dovish interpretation, with breakevens widening +4.9bps to 2.88%, while real yields fell -8.6bps, still managing to finish the day in positive territory at 0.05% though. Elsewhere in the presser, the Chair made multiple mentions of the Committee’s intention to “expeditiously” get policy towards more neutral levels given the monumental inflation-fighting task at hand. He demurred when asked if policy would ultimately need to reach a restrictive rather than just neutral stance, but did not rule it out. He still maintained hope that the Fed could engineer a soft landing after this hiking cycle, but to be fair, it is hard to imagine him saying anything else. He cited strong household and consumer balance sheets as reasons for why the economy could withstand the hiking cycle, when indeed, that very strength when inflation is at multi-decade highs is why policy will probably need to reach restrictive levels not currently appreciated by market pricing. In my opinion the Fed can control the near-term market expectations but beyond that it is all about the inflation data. If it doesn't improve then 50bps will be live at every meeting and not just the "next couple", and 75bps risks will be back on the table. This is all for another day though. When all was said and done, the market took -11.7bps out of policy tightening during 2022, with futures implying fed funds hitting 2.77% after the December meeting. Futures are still implying that the Fed will hit its terminal rates sometime in the third quarter next year, but that rate was around -18bps lower following the meeting at 3.24%. Indeed the breathing space given by the removal of the price hike premiums sent US equities on a tear. Little changed heading into the meeting, the S&P 500 ended the day +2.99% higher, its largest one-day gain since May 2020. Every sector ended in the green, with a full 477 companies posting gains, the most since February. The gains were broad-based, with every sector but real estate (+1.09%) gaining at least 2%, though energy (+4.12%), communications (+3.68%) and tech (+3.51%) were the standouts. In line, the NASDAQ (+3.19%) and FANG+ index (+3.40%) outperformed, on the drop in discount rates. In Asia, mainland Chinese stocks returned following a few days of holidays and are in positive territory with the Shanghai Composite (+0.95%) and CSI (+0.28%) higher. Meanwhile, the Hang Seng (+0.76%) is trading up, but paring its early morning gains. Elsewhere, the S&P/ASX 200 (+0.67%) is climbing while the Japanese and Korean markets are closed for public holidays. Outside of Asia, contracts on the S&P 500 (-0.08%) and NASDAQ 100 (-0.07%) are fractionally lower. Stoxx 50 futures are +2.4% due to a post Fed catch-up effect. Early morning data showed that China’s services sector activity contracted further in April as the Caixin services PMI tumbled to 36.2, its lowest level since the initial onset of the pandemic in February 2020 and compared to March’s reading of 42. Back now to life pre the Fed. Earlier we had seen sovereign bonds sell off in Europe, with yields on 10yr bunds marginally up +0.7bps to 0.97%, having regularly traded above the 1% mark during the session. Those moves were echoed across the continent and there was a further widening in peripheral spreads, with the gap between Italian 10yr yields over bunds widening by +6.7bps to 198bps. That’s their 11th consecutive move wider, and takes the spread to its highest closing level in almost two years. We’ve also seen a similar move with the Spanish spread, which is at its highest in nearly two years as well, at 109bps. It is likely we'll get a decent reversal this morning though. That selloff in sovereign bonds came as oil prices reversed their declines so far this week, with Brent Crude up +4.93% to $110.14/bbl after EU President Von der Leyen proposed a ban on Russian oil in the latest sanctions package. Von der Leyen said this would be done “in an orderly fashion”, with the proposal seeing Russian crude oil phased out within 6 months, and refined products by year-end. Nevertheless, Hungary’s foreign minister said that “In its current form the Brussels sanctions package cannot be supported”, which risks holding up the package since it has to have unanimous agreement among the 27 member states. Bloomberg reported people familiar with the matter saying that Hungary and Slovakia would be granted a longer period until the end of 2023 to enforce the sanctions. Although energy stocks benefited from the rise in prices yesterday, they were mostly the exception in Europe, where the broader STOXX 600 underwent a larger -1.08% decline. This morning, Brent crude (+0.43%) is extending its gains. Looking forward now, central banks will remain on the agenda today as well, with the Bank of England decision at mid-day where the consensus and market pricing are expecting a 25bps hike, which would take Bank Rate up to its highest level since the GFC, at 1%. In his preview (link here), our UK economist is in line with this, and expects the core message from the MPC to remain similar to March, highlighting the uncomfortable and intensifying trade-off between growth and inflation. He’s also expecting that the MPC will confirm its intension to start selling gilts, but doesn’t think we’ll get the details until August, with sales commencing early September. Staying on the UK, we’ve got local elections taking place today as well that’ll be an important mid-term milestone for both the government and opposition, and our UK economists have put together a preview (link here). Last year the Conservatives had a very good set of results as the economy reopened amidst the vaccine rollout. But whereas they were 9 points ahead of Labour in the polls a year ago, they’re now 6 points behind them according to Politico’s average, so it’s a very different context. However, given most of the seats up for grabs today were last fought in 2018 when the Conservatives and Labour were roughly level in the polls during Theresa May’s premiership, the scale of Conservative losses may not be as big as the polling swing over the last 12 months would otherwise imply. One important contest to watch out for will be the Assembly elections in Northern Ireland, where the Irish nationalist Sinn Féin party are leading in the polls, and could become the largest party for the first time since Irish partition in the 1920s. Politico’s poll of polls puts Sinn Féin on 26%, ahead of the unionist DUP on 19%. On the data side yesterday, we saw the ADP’s report of private payrolls for April, which showed weaker-than-expected growth of 247k in April (vs. 383k expected). That comes ahead of tomorrow’s US jobs report, where our economists are expecting that nonfarm payrolls will have risen by +465k in April. Then there was the ISM services index for April, where the headline felt to 57.1 (vs. 58.5), but the prices paid index rose to a record 84.6. Over in Europe meanwhile, the final composite PMI for the Euro Area in April was in line with the flash reading at 55.8, and March’s retail sales fell by -0.4% (vs. -0.3% expected). To the day ahead now, and the highlights will include the aforementioned BoE policy decision and UK local elections. Otherwise from central banks, we’ll hear from the ECB’s Lane, Holzmann and Centeno. Data releases include German factory orders and French industrial production for March, the final UK services and composite PMIs for April, and the weekly initial jobless claims from the US. Finally, earnings releases today include Shell. Tyler Durden Thu, 05/05/2022 - 08:13.....»»

Category: blogSource: zerohedgeMay 5th, 2022

Previewing The Fed"s Decision To Kick Off A Record Tightening Cycle Right Into A Recession

Previewing The Fed's Decision To Kick Off A Record Tightening Cycle Right Into A Recession At the conclusion of tomorrow's FOMC meeting, consensus expects the Committee to raise the target range for the federal funds rate by 50bp to 0.75% to 1.0%, the first "double" rate hike since May 2000 (when the Fed definitively burst the dot com bubble)... ... and to announce the start of the reduction of the size of the Fed’s balance sheet, in line with the parameters set out in the March FOMC minutes, somewhere to the tune of $95BN-$100BN per month in bond maturities without active sales (for now). As shown below, while a 50bps rate hike is fully priced in (and in fact, markets are pricing in a modest probability of a 75bps rate hike), rates traders price a roughly 35% chance of a 75bps rate hike in the June meeting. Overall, markets are expecting just over 10 rate hikes by year-end and just under 11 rate hikes through February 2023, at which point the Fed is expected to halt its tightening cycle and start easing. In its FOMC preview, JPMorgan expects the most relevant part of the FOMC statement — the forward guidance on rates — to indicate an expectation that “ongoing increases” in the funds rate will be appropriate; in the post-meeting press conference the bank looks for Powell to convey the need to expeditiously return the funds rate to neutral, and the high likelihood that the funds rate will need to go into restrictive territory. Notably, JPM believes that it is possible we could see a dissent or two for a larger 75bp move, and while the bank thinks there’s an outside chance (perhaps one-in-five) that the hawks persuade their colleagues to support this bigger move, it sees most of the Committee preferring moves in 50bp increments until they finally get the desired tightening in financial conditions. Turning to the fundamentals, JPM notes that it’s pretty clear that this economy doesn’t need stimulative monetary policy. However, less clear are the speed at which this stimulus should be removed, and the reasons for choosing that speed. Whatever the reasons, almost all FOMC policymakers who spoke since the last meeting indicated varying degrees of comfort with hiking by 50bp at next week’s meeting. Notably, Bullard suggested 75bp might be more appropriate (and more “expeditious” than 50bp), though this seemed to receive little buy-in among other Fed officials. According to JPM, "the near-unanimity of this view suggests that perhaps this option has already been tacitly agreed upon, through either a conference call or bilateral calls." Indeed, the Powell Fed has displayed a strong preference to telegraph its intentions ahead of meeting day, and for that reason 50bps is the most likely outcome . But if there is a time to break from habit it’s when the Fed’s inflation credibility is being called into question 0 like right now -  and so don’t fully write off the possibility of a larger rate move. The statement’s forward guidance will be another critical channel by which to influence financial conditions. The Committee is expected to copy the guidance from the last meeting, that it “anticipates that ongoing increases in the target range will be appropriate.” If this phrase is used at meetings at which the FOMC hikes by 25bp (March) and 50bp (May, presumably), then it wouldn’t lock in expectations for a given size of future rate increases, only that more hikes are needed. The risks to this guidance skew very hawkish. However, something like “continue to expeditiously remove accommodation” might imply 50s until the funds rate gets to neutral, which may be too much for the majority of the Committee to stomach. Other changes to the FOMC statement should be fairly modest. Given the contraction in GDP in 1Q, the upbeat phrase about economic activity could be replaced with an upbeat phrase about domestic demand (more particularly about consumer and business spending). Turning to QT, the statement will almost certainly indicate the start of balance sheet reduction (QT), though most of the details of that decision will be relegated to an accompanying "implementation note." Those details will stick closely to the plan spelled out in the March FOMC meeting minutes: monthly runoff caps of $60bn for Treasuries and $35bn for mortgages, and will likely be phased in over a period of three months. As per recent public remarks, actual asset run-off will likely begin at the start of June. Fed officials have indicated that they expect the balance sheet reduction will be a set-it-and-forget-it process, although that's what Yellen said back before the previous QT and we all know how that ended. JPM thinks there is a chance in coming months that the Committee could revisit their decision to subject T-bill runoff to the monthly caps for Treasuries. That said, don’t expect to hear anything further on asset sales in the implementation note. Needless to say, QT matters: as these charts from Crossborder Capital's from Mike Howell show, the S&P 500 reacts in real time to rises and falls in the balance sheet. The Fed has already made some liquidity reductions since the turn of the year, and they coincided more or less exactly with the beginning of the trouble for the stock market: As Bloomberg's John Authers adds, a further factor is QT’s effect on collateral, or on the ability to roll over or refinance investments: it leaves less cash in markets, and make it harder to find collateral when it is needed (this is what triggered the infamous repo crash of Sept 2019 which then led to the even more infamous "NOT QE" QE episode of late 2019. Sharp QT implies a drastic tightening of conditions and the risk of financial accidents. For an analogy, Authers writes, "remember the subprime debacle. That was based on the assumption that adjustable-rate mortgages with low teaser rates could swiftly be refinanced before higher rates bit. It was when borrowers found that they couldn’t refinance, and then started to default, that the crisis set in." It is the the risk of such accidents, which will first and foremost hit the same tech stocks that benefited greatly from the Fed's balance sheet expansion in the past decade... ... that leaves many in the market still deeply skeptical that QT will happen as scheduled. The following comment from Bear Traps Report author Larry McDonald captures this reality best: The beast inside the market has Chair Powell in his sights for the 2nd time since Q 4 2018. Once again it was the Fed whispering into the ear of a journalist over the weekend: “The Fed is set to start shrinking its 9 trillion asset portfolio Their plan rhymes with the 2017-19 version. But this time will be different They’re going sooner and faster all while preparing a speedier pace of rate increases because inflation is high." WSJ Sunday. Hilarious. The Fed went to 50BN a month in September of 2018 and had to stop five minutes later in December this was after promising Wall St economists they were on Auto pilot all the way up to a 2T reduction. Now, they are going to give it a try at 90B a month in May with back to back 50 bp hikes? Who are they kidding? It's the worst start to a year for stocks in decades, consumer savings is down to the bone, GDP prints negative, and the Fed is going to kick off a record tightening cycle? It´s all a show. With conviction we see a near term top in the US dollar and another leg up for hard assets, value vs growth and emerging markets. Humor aside, JPM concludes by noting that while the statement will be agnostic as to the size of future rate moves, Powell can use the press conference to refine this message and will likely indicate that hikes of 50bp or larger are fair game in coming meetings. More generally, both JPM - and the broader market - expects a sternly hawkish tone from the Chair. That said, considering the recent negative GDP print, even a modest trace of dovishness will send risk assets soaring. Speaking of which, JPM is leaning on the dovish side, and the bank's chief economist Mike Feroli thinks the Fed will only deliver two 50bps rate hikes, well below the four 50bps rate hikes currently priced by the market; for those who agree, JPM urges putting on some long risk particularly in the Tech segment: "Our Derivatives team has seen some interest in bullish cash spreads on Nasdaq/QQQs... Separately, our Delta-One team has seen client interest in switching out of SPX/SPY hedges into something that shows more material downside if we have an extended rally that is similar to what we saw on Thursday." To be sure, JPM admits that the above is the “glass is half full” argument. What would prevent this to coming to fruition? Well, according to Andrew Tyler from JPM's flow trading desk, "the reaction to Financials and MegaCap Tech tell us that investors have a base case that the Fed will tightening us into a recession which is exacerbated by commodity-based inflation that will increasingly hurt consumption." Further, these risks are (i) magnified by China’s COVID-Zero policy, which has yet to be fully incorporated into economic forecast and could trigger another wave of earnings downgrades; and, (ii) Russia/Ukraine. The RU/UKR situation seems likely to extend longer than anticipated with the largest risks to the US coming via the Ags complex, driven by both a lack of fertilizer inducing a global redux in crop yield and reduced commodity exports from both countries. As a result, the JPM trader warns that "it may be the case that any rally will be sold until the aforementioned risks are closer to being solved. If so, then remain tactical, remain market-neutral, and consider taking some swings using derivatives if your investment style permits." In conclusion, all we can say is that what the Fed plans to do is one thing. What the market will let it do, is something else, and inflation or no inflation (expect the definition of CPI to be fully revised in a few months to exclude anything that is surging in price) we expect Powell will abort the Fed's tightening process early, just like it did in Q4 2018, with stocks cratering to drive the point home, and forcing the Fed to not only end its tightening but to fast forward to easing and even more QE. Tyler Durden Tue, 05/03/2022 - 15:05.....»»

Category: blogSource: zerohedgeMay 3rd, 2022

2 Cheap Stocks to Buy in May for Long-Term Growth

The episode then focuses on two retail stocks, Yeti and Sonos, that are starting to look rather cheap and might be worth buying. Today’s episode of Full Court Finance at Zacks dives into the broader market after stocks suffered a brutal April. The selloff pushed the S&P 500 and the Nasdaq right near new 52-week lows, while some strong growth names and established companies are trading below their pre-covid highs. The episode then focuses on two retail stocks, Yeti (YETI) and Sonos (SONO), that are starting to look rather cheap and might be worth buying.Market bears quickly squashed the bounce last Thursday to close April on a dismal note. The S&P 500 fell nearly 8% last month, for its worst showing since the initial covid selloff in March 2020. Meanwhile, the tech-heavy Nasdaq tumbled over 13%, for its largest monthly decline since October 2008, as Wall Street recalibrates growth stocks that are sensitive to higher interest rates.The S&P 500 is trading 15% below its records, with the Nasdaq down roughly 24%. The wave of selling has seen even the largest names on the planet such as Amazon fall over 10% in one session. The downturn, coupled with soaring prices and rising interest rates has many investors selling or moving to the sidelines. The sweeping covid lockdowns in China and the ongoing Russian invasion of Ukraine only add to the fears and unknowns.Despite all of the legitimate reasons for caution and selling, Wall Street must put money to work in order to beat 8.5% inflation. Yet even with interest rates climbing, the 10-year U.S. Treasury is only at 3% (its highest levels since 2018). This could keep investors hunting for inflation-topping returns in stocks.Given this backdrop, some investors with long-term outlooks might want to start taking a look at slowly starting positions in solid stocks with good outlooks that are trading at discounted prices and valuations. The first stock up today is Yeti Holdings, Inc. YETI ahead of its first quarter fiscal 2022 financial results on Wednesday, May 11.Yeti stock has been hit hard amid supply chain disruptions and higher costs that are now chipping away at profit margins. Still, the high-end cooler company and drinkware maker is set to grow both its top and bottom lines by double-digits in 2022 and 2023. Yeti is trading 50% below its highs and it’s trading at its lowest forward earnings multiple since the covid selloff.The other stock we look at today is high-end speaker maker Sonos SONO. The stock is trading for under $25 per share and its Zacks consensus price target represents 85% upside to Monday’s levels. Sonos, which also reports on May 11, has expanded its product lineup and customer base as it competes against the likes of Amazon, Apple, and others. Just Released: Zacks' 7 Best Stocks for Today Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +25.4% per year. These 7 were selected because of their superior potential for immediate breakout. See these time-sensitive tickers now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Sonos, Inc. (SONO): Free Stock Analysis Report YETI Holdings, Inc. (YETI): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksMay 2nd, 2022

Buyback Blackout Period Is Over, And 10 More Reasons Why Goldman Calls The End Of The Market Carnage

Buyback Blackout Period Is Over, And 10 More Reasons Why Goldman Calls The End Of The Market Carnage Two weeks ago, when looking at a recent matrix of market bull and bear cases, we asked if it was time to get bullish on stocks and concluded that the since fundamentals leaned in either direction, the answer was most likely “not yet” for one simple reason: JPM’s resident permabull, Marko Kolanovic, had just turned from modestly bearish – an extremely rare stance for him – to bullish again, urging his clients to reverse from taking profits (unclear on what exactly since he had been bullish all the way down from the market’s all time high)… … to buying the dip again. Meanwhile, at roughly the same time, the far more accurate strategists at Goldman’s flow desk – in this case Tony Pasquariello - had just warned that the market was likely to be well lower in several weeks time, not higher. After last week’s furious rout in the market they were right.  Which is why we find it worth mentioning that after correctly calling the market’s downward inflection point in April, those same Goldman folks are once again leaning bullish, and in a Friday note from Goldman Scott Rubner (which is not for mass distribution to the bank’s entire client base and instead is reserved for a handful of the bank’s top client as it indicate what the bank’s traders actually do believe, it is also available to zero hedge professional subscribers), he says that the worst is behind us and gives 11 reasons why the late April rout may have been the market bottom for the time being. Rubner’s argument in a nutshell: pointing to Thursday’s explosive move higher as testament of the market’s extremely negative sentiment and low positioning (which of course was followed by Friday’s rout), the Goldman trader thinks that global stocks will rally “significantly” in May as the flow-of-funds is set to improve starting on Monday (even though the closely watched 50bps rate hike FOMC meeting is due on May the 4th). Below we lay out Rubner’s bullish 11-point checklist in greater detail. 1. US Corporates return back to the open window on Monday with dry powder. Rubner calculates $5BN of demand per day, every day until mid-June. US corporates are the largest buyer of equities in 2022 and have authorized record YTD (AAPL = $90bn; GOOG = $70bn; MSFT = $60bn; FB = $50bn, etc). 2. Pensions flipped to buy given the recent outperformance of bonds vs stock. This should carry over into next week. 3. S&P Index gamma turned negative on Thursday for the first time since March. 4. Synthetic Short Gamma through CTA and Vol-Control strategies supply will fade over the next week (Thursday’s move will lower some of the supply expectations and Goldman’s estimates will dramatically change next week). 5. Liquidity is simply not available to try to cover liquid macro. As we noted on several occasions last week [insert hyperlink to liquidity tweet], top book liquidity in the S&P 500 futures is $2.8M. This ranks in the 1st percentile in the last 10-years. This is as low as it gets. 6. Sentiment is the most bearish since the market crash lows in March 2009. Rubner says that he has done “more bearish zoom calls these past two weeks, than I can recall.” The bears (AAIIBEAR) published a reading of 59.40 today. This was the highest level since March 5th 2009 (70.27). S&P500 rallied 8.54% in March 2009 and 9.39% in April of 2009. That was the generational market bottom. 7. Money Market Inflows Logged a massive +$60B inflows last week, which was the largest weekly inflow since Covid 2020 (and typically another fear gauge). 8. For the fixed income watchers, Goldman’s CTA models show some impressive demand. Goldman has +$20B of bonds to buy in a flat tape, but +$117B of bonds to buy in an up tape, and $37B of bonds to buy in a down tape. This should ease some of the pressure on long duration equities and largest construction of market cap. 9. Goldman’s Prime Desk notes that hedge funds exposure is dismal. Gross and Net Exposure are currently at 2-year lows. And vs the past 5 years, Gross ranks in the 21st and Net ranks in the 38th. US TMT Megacap L/S ratio declined by -48% in the past 1-month. (~right before earnings) 10. Everyone is short: Short leverage (with options) ranks in the 98th percentile in the last 5 years. 11. New month = New Inflows. There should be some decent inflows to start May per normal rebalancing cycle in retirement accounts. * * * Rubner then does a more detailed breakdown of what the latest flows indicate for markets. We excerpt from the main points below (professional subscribers have access to the full note). 1. Passive USA Large Cap Outflows (and resulting MOC 3:50pm imbalances): = “you ask me for money and I sell” US Equity Funds registered their largest outflows of 2022. b) US large cap Equity funds registered the largest outflows since 2018. c) this is LIFO (last in, first out) behavior. This is where all of the new repatriated safe haven has flowed. * * * 2. “Everything cross-asset outflow” - this is rare. Stocks, Bonds, and Cash all saw outflows this past week You don't see this very often. This is what we call an everything outflow. No lines saw inflows, and its back to checking accounts. * * * 3. Retail Investors buyers of 0-1 DTE (days-to-expiry) puts are largest on record – does retail start buying calls again? Friday's same-day SPX were the highest dollar-volume ever traded for a single expiry on a single day $225bln of puts and $160bln notional of calls traded Already in 12 figures on Friday’s SPX expiration - $105bln in just the the first hour. Keep an eye on DTEs Daily option volume Notional volume ($bln) traded in listed US equity options Final-day trading volume: Notional SPX option volume traded on the day of expiration, excluding Third Friday and end-of-month expirations * * * 4. Both Professional and Retail Sentiment have reached new lows. Rules and Tools have historically marked a contrarian indicator. GS sentiment indicator (SI) current reading of -2.2 is a signal of extremely light positioning and typically acts as a solid contra indicator for the market. Out of 687 weekly readings (first recording: 2/27/09), there have only been 14 instances in which the sentiment indicator was more negative (below -2.2). AAIIBULL (bullish investors) reached the 9th lowest reading since 1987 (1820) observations (zeroth percentile). Market returns after such extremely negative readings have been uniformly bullish, and the hit rate six months after such a reading is 100% (14 of 14 occasions), leading to a median 19% return!  * * * 5. Futures Positioning has been unwound and ranks in the 15th percentile over the past 10 years. For context, the high futures position for 2022 was +$138.4B (January 25th ) vs. +$10B currently. * * * 6. Peak Blackout is behind us. US Corporates return from the blackout window on May 2nd (Monday). The largest buyer of equities in 2022 has been out of the market for much of April and is now back. 51% of the S&P 500 reported last week. This is the largest week for earnings in Q1. Corporates are slowing re-emerging from the blackout. 2022 US corporate authorizations are off to the best year on record. Do they come back to buy stocks at these levels having already authorized? Do we hear about more big authorizations this week? GS buyback activity last week was 2.4x the bank’s average 2021 levels - despite being in the earnings 'blackout window.’ the bank estimates ~59% of companies will emerge by this time next week * * * 7. S&P Index Gamma (no longer long) given institutional “forced hedging” of May puts – do we see monetization of puts after the big FOMC event next week? Dealer long gamma has been unwound, and works in both directions. This will exacerbate, not buffer moves in the same direction as the market. * * * 8. Systematic Equity Supply is far smaller than some have feared given recent deleveraging. Goldman calculates that CTA strategies have to sell $8B over the next 1 week and $21B to sell over the next month. In an up tape, CTA strategies have up to buy $78B vs. down tape -$81B to sell. Said otherwise, they will continue to trade negative synthetic gamma in the same direction as the market * * * 9. Synthetic fixed income short gamma (CTA strategies) have triggered flip levels. Does FI demand ease pressure on rate move and long duration equities? Bond yields lower = SPX construction higher? This might be important chart for equity traders given the large cap tech weighting of the indices. * * * 10. S&P 500 Top Book Liquidity “works in both directions” Liquidity in the most liquid equity future in the world ranks in the 7th percentile in the past 10 years, and offers just $6M to trade on the screens. * * * 12. Seasonals – “Sell in May and Go Away” this year? Positioning is already too low to sell from here. (30-yr look back) This chart will matter if and when May inflows come back. * * * 13. HF Leverage Exposure remains at cycle lows, does May the 4th become another clearing event and quick adding back of exposure? Overall book Gross leverage +1.0 pts to 228.4% (5th percentile one-year) and Net leverage -0.6 pts to 72.9% (lowest since May ‘20). Overall book L/S ratio -0.9% to 1.937 (lowest since May ‘20). Fundamental L/S Gross leverage +1.3 pts to 172% (6th percentile one-year) and Fundamental L/S Net leverage -1.1 pts to 49.3%, near the lowest levels since Apr ‘20. As Rubner concludes, “choppy and wide trading range continues but market technicals flip in favor of the bulls for may.” One thing is clear: the market can’t take much more pain without the Fed having to step in – we are talking the proverbial “flush” - no matter how much Biden berates Powell into standing to the side as stocks crash if it somehow means that inflation will shrink – and boost Biden’s approval rating - just because we enter a bear market. Incidentally, we wonder if Biden’s handlers have considered what will happen to the president’s approval rating if in additional to a stagflationary recession, the president were to also add a market crash to his list of achievements. Finally, for those curious how to best trade the world as envision by the Goldman flow trader, details can be found in the full note available to professional subscribers. Tyler Durden Sun, 05/01/2022 - 16:55.....»»

Category: blogSource: zerohedgeMay 1st, 2022

Tverberg: The World Has A Major Crude Oil Problem; Expect Conflict Ahead

Tverberg: The World Has A Major Crude Oil Problem; Expect Conflict Ahead Authored by Gail Tverberg via Our Finite World blog, Media outlets tend to make it sound as if all our economic problems are temporary problems, related to Russia’s invasion of Ukraine. In fact, world crude oil production has been falling behind needed levels since 2019. This problem, by itself, encourages the world economy to contract in unexpected ways, including in the form of economic lockdowns and aggression between countries. This crude oil shortfall seems likely to become greater in the years ahead, pushing the world economy toward conflict and the elimination of inefficient players. To me, crude oil production is of particular importance because this form of oil is especially useful. With refining, it can operate tractors used to cultivate crops, and it can operate trucks to bring food to stores to sell. With refining, it can be used to make jet fuel. It can also be refined to make fuel for earth moving equipment used in road building. In recent years, it has become common to publish “all liquids” amounts, which include liquid fuels such as ethanol and natural gas liquids. These fuels have uses when energy density is not important, but they do not operate the heavy machinery needed to maintain today’s economy. In this post, I provide an overview of the crude oil situation as I see it. In my analysis, I utilize crude oil production data by the US Energy Information Agency (EIA) that has only recently become available for the full year of 2021. In some exhibits, I also make estimates for the first quarter of 2022 based on preliminary information for this period. [1] World crude oil production grew marginally in 2021. Figure 1. World crude oil production based on EIA international data through December 31, 2021. Crude oil production for the year 2021 was a disappointment for those hoping that production would rapidly bounce back to at least the 2019 level. World crude oil production increased by 1.4% in 2021, to 77.0 million barrels per day, after a decrease of -7.5% in 2020. If we look back, we can see that the highest year of crude oil production was in 2018, not 2019. Oil production in 2021 was still 5.9 million barrels per day below the 2018 level. With respect to the overall increase in crude oil production of 1.4% in 2021, OPEC helped bring this average up with an increase of 3.0% in 2021. Russia also helped, with an increase of 2.5%. The United States helped pull the world crude increase down, with a decrease in production of -1.1% in 2021. In Section [5], more information will be provided with respect to crude production for these groupings. [2] The growth in world crude oil production shows an amazingly steady relationship to the growth in world population since 1991. The major exception is the decrease in consumption that took place in 2020, with the lockdowns that changed consumption patterns. Figure 2. World per capita crude oil production based on EIA international data through December 31, 2021, together with UN 2019 population estimates. The UN’s estimated historical amounts were used through 2020; the “low growth” estimate was used for 2021. Figure 2 indicates that, up through 2018, each person in the world consumed an average of around 4.0 barrels of crude oil. This equates to 168 US gallons or 636 liters of crude per year. Much of this crude is used by businesses and governments to produce the basic goods we expect from our economy, including food and roads. A big downshift occurred in 2020 with the COVID lockdowns. Many people began working from home; international travel was scaled back. The reduction of these uses of oil helped bring down total world usage. Changes such as these explain the big dip in crude oil production (and consumption) in 2020, which continued into 2021. Even in 2019, the world economy was starting to scale back. Beginning in early 2018, China banned the importation of many types of materials for recycling, and other countries soon followed suit. As a result, less oil was used for transporting materials across the ocean for recycling. (Subsidies for recycling were helping to pay for this oil.) Loss of recycling and other cutbacks (especially in China and India) led to fewer people in these countries being able to afford automobiles and smartphones. Lower production of these devices contributed to the lower use of crude oil. On Figure 2, there is a slight year-to-year variation in crude oil per capita. The single highest year over the time period shown is 2005, with 2004 not far behind. This was about the time many people think that conventional oil production “peaked,” reducing the availability of inexpensive-to-produce oil. [3] Crude oil prices dropped dramatically when economies were shut in, beginning in March 2020. Prices began spiking the summer and fall of 2021, as the world economy attempted to open up. This pattern suggests that the real problem is tight crude oil supply when the economy is not artificially constrained by COVID restrictions. Figure 3. Average weekly Brent oil price in chart prepared by EIA, through April 8, 2022. Amounts are not adjusted for inflation. An analysis of price trends suggests that most of the recent spike in crude prices is due to the tightness of the crude oil supply, rather than the Ukraine conflict. The Brent oil price dropped to an average of $14.24 in the week ending April 24, 2020, not long after COVID restrictions were enacted. When the economy started to reopen, in the week ending July 2, 2021, the average price rose to $76.26. By the week ending January 28, 2022, the average price had risen to $90.22. Russia invaded Ukraine on February 24, 2022. The Brent spot price on February 23, 2022, was $99.29. Brent prices briefly spiked higher, with weekly average prices rising as high as $123.60, for the week ending March 25, 2022. The current Brent oil price is about $107. If we compare the current price to the price the day before the invasion began, the price is only $8 higher. Even compared to the January 28 weekly average of $90.22, the current price is $17 higher. Saying that the Ukraine invasion is causing the current high price is mostly a convenient excuse, suggesting that the high prices will suddenly disappear if this conflict disappears. The sad truth is that depletion is causing the cost of extraction to rise. Governments of oil exporting countries also need high prices to enable high taxes on exported oil. We are increasingly experiencing a conflict between the prices that the customers can afford and the prices that those doing the extraction require. In my view, most oil exporting countries need a price in excess of $120 per barrel to meet all of their needs, including reinvestment and taxes. Consumers would prefer oil prices under $50 per barrel to keep the price of food and transportation low. [4] Food prices tend to rise when oil prices are high because products made from crude oil are used in the production and transport of food. History shows that bad things tend to happen when food prices are very high, including riots by unhappy citizens. This is a major reason that high oil prices tend to lead to conflict. Figure 4. FAO inflation-adjusted monthly food price index. Source. [5] Quarterly crude oil data suggests that few opportunities exist to raise crude oil production to the level needed for the world economy to operate at the level it operated at in 2018 or 2019. Figure 5 shows quarterly world crude oil production broken down into four groupings: OPEC, US, Russia, and “All Other.” Figure 5. Quarterly crude oil production through first quarter of 2022. Amounts through December 2021 are EIA international estimates. Increase in OPEC first quarter of 2022 production is estimated based on OPEC Monthly Oil Market Report, April 2022. US crude oil production for first quarter of 2022 estimated based on preliminary EIA indications. Russia and All Other production for first quarter of 2022 are estimated based on recent trends. Figure 5 shows four very different patterns of past growth in crude oil supply. The All Other grouping is generally trending a bit downward in terms of quantity supplied. If world per capita crude oil production is to stay at least level, the total production of the other three groupings (OPEC, US, and Russia) needs to be rising to offset this decline. In fact, it needs to rise enough that overall crude production growth keeps up with population growth. Russian Crude Oil Production The data underlying Figure 5 shows that up until the COVID restrictions, Russia’s crude oil production was increasing by 1.4% per year between early 2005 and early 2020. During the same period, world population was increasing by about 1.2%. Thus, Russia’s oil production has been part of what has helped keep world crude production about level, on a per capita basis. Also, Russia seems to have made up most of its temporary decrease in production related to COVID restrictions by the first quarter of 2022. US Crude Oil Production Growth in US crude oil production has been more of a “feast or famine” situation. This can be seen both in Figure 5 above and in Figure 6 below. Figure 6. US crude oil production based on EIA data. First quarter of 2022 amount is estimated based on EIA weekly and monthly indications. US crude oil production spurted up rapidly in the 2011 to 2014 period, when oil prices were high (Figure 3). When oil prices fell in late 2014, US crude production fell for about two years. US oil production began to rise again in late 2016, as oil prices rose again. By early 2019 (when oil prices were again lower), US crude oil growth began to slow down. In early 2020, COVID lockdowns brought a 15% drop in crude oil production (considering quarterly production), most of which has not been made up. In fact, growth after the lockdowns has been slow, similar to the level of growth during the “growth slowdown” circled in Figure 6. We hear reports that the sweet spots in shale formations have largely been drilled. This leaves mostly high-cost areas left to drill. Also, investors would like better financial discipline. Ramping up greatly, and then cutting back, is no way to operate a successful company. Thus, while growth in US crude oil production greatly supported world growth in crude oil production in the 2009 to 2018 period, it is impossible to see this pattern continuing. Getting crude oil production back up to the level of 12 million barrels a day where it was before the COVID restrictions would be extremely difficult. Further production growth, to support the growing needs of an expanding world population, is likely impossible. OPEC Crude Oil Production Figure 7 shows EIA crude oil production estimates for the total group of countries that are now members of OPEC. It also shows crude oil production excluding the two countries which have recently been subject to sanctions: Iran and Venezuela. Figure 7. OPEC crude oil production to December 31, 2021, based on EIA data. Estimates for first quarter of 2022 based on indications from OPEC Monthly Oil Market Report, April 2022. If Iran and Venezuela are removed, OPEC’s long-term production is surprisingly “flat.” The “peak” period of production is the fourth quarter of 2018. The fourth quarter of 2018 was the time when the OPEC countries were producing as much oil as they could, to get their production quotas as high as possible after the planned cutbacks that took effect at the beginning of 2019. Strangely, EIA data indicates that production didn’t fall very much for this group of countries (OPEC excluding Iran and Venezuela), starting in early 2019. The 2019 cutback seems mostly to have affected the production of Iran and Venezuela. It was only later, in the first three quarters of 2020, when COVID restrictions were affecting worldwide production, that crude oil production for OPEC excluding Iran and Venezuela fell by 4 million barrels per day. Production for this group then began to rise, leaving a shortfall of about 900,000 barrels a day, relative to where it had been before the 2020 lockdowns. It seems to me that, at most, production for the group of OPEC countries excluding Iran and Venezuela can be ramped up by 900,000 barrels a day, and even this is “iffy.” Iraq is reported to be having difficulty with its production; it needs more investment, or its production will fall. Nigeria is past peak, and it is also having difficulty with its production. The high reported crude oil reserves are meaningless; the question is, “How much can these countries produce when it is required?” It doesn’t look like production can be ramped up very much. Furthermore, we cannot count on continued long-term growth in production from these countries, such as would be needed to keep pace with rising world population. Figure 8. Crude oil production indications for Iran and Venezuela, based on EIA data through December 31, 2021. Change in oil production for first quarter of 2021 is estimated based on OPEC Monthly Oil Market Report, April 2022. Figure 8 suggests that, indeed, Iran might be able to raise its production by perhaps 1.0 million barrels a day when sanctions are lifted. Venezuela looks like a country whose crude oil production was already declining before sanctions were imposed. The cost of production there was likely far higher than the world oil price. Also, Venezuela has oil debts to China that it needs to repay. At most, we might expect that Venezuela’s production could be raised by 300,000 barrels per day in the absence of sanctions. Putting the three estimates of amounts that crude oil production can perhaps be raised together, we have: OPEC ex Iran and Venezuela: 900,000 bpd Iran: 1,000,000 bpd Venezuela: 300,000 bpd Total: 2.2 million bpd The shortfall of crude oil production in 2021, relative to 2018 production, was 5.9 million bpd, as mentioned in Section [1]. The 2.2 million barrels per day possibly available from this analysis gets us nowhere near the 2018 level. Furthermore, we have nowhere to go to obtain the rising crude oil production required to support the rising population with enough crude oil to supply food and industrial goods at today’s consumption level. [6] Eliminating, or even reducing, Russia’s crude oil production is certain to have an adverse impact on the world economy. Figure 9 shows the step-down in crude oil production that occurred in early 2020 and indicates that the world’s oil supply is having difficulty getting back up to pre-COVID levels. If Russia’s crude oil production were to be eliminated, it would make for another step-down of comparable magnitude. Major segments of the economy would likely need to be eliminated. Figure 9. Quarterly crude oil production through first quarter of 2022 divided by world population estimates based on 2019 UN population estimates. Crude oil amounts through December 2021 are EIA estimates. Crude oil production estimates for first quarter 2022 are as described in the caption to Figure 5. [7] When there isn’t enough crude oil to go around, the naive belief is that oil prices will rise and either more oil will be found, or substitutes will take its place. In fact, the result may be conflict and elimination of segments of the economy. Our self-organizing economy will tend to adapt in its own way to inadequate crude oil supplies. Eventually, the economy may collapse completely, but before that happens, changes are likely to happen to try to preserve the “better functioning” parts of the economy. In this way, perhaps parts of the world economy can continue to function for a while longer while getting rid of less productive parts of the economy. The following is a partial list of ways the economy might adapt: Fighting may take place over the remaining crude oil supplies. This may be the underlying reason for the conflict between NATO and Russia, with respect to Ukraine. COVID lockdowns indirectly reduce demand for crude oil. A person might wonder whether the current COVID lockdowns in China are partly aimed at preventing oil and other commodity prices from rising to absurd levels. Some organizations may disappear from the world economy because of inadequate funding or lack of profitability. Additional supply lines are likely to break, allowing fewer types of goods and services to be made. The world economy may subdivide into multiple pieces, with each piece able to make a much more limited array of goods and services than is provided today. A shift toward the use of other currencies instead of the US dollar may be part of this shift. World population may shrink for multiple reasons, including poor nutrition and epidemics. The poor, the elderly and the disabled may be increasingly cut off from government programs, as total goods and services (including total food supplies) fall too low. Europe could be cut off from Russian fossil fuel exports, leaving relatively more for the rest of the world. [8] Countries that are major importers of crude oil and crude oil products would seem to be at significant risk of reduced supply if there is not enough crude oil to go around. Figure 10 shows a rough estimate of the ratio of crude oil produced to crude oil products consumed in 2019, the last full year before the pandemic. On an “All Liquids” basis, the US ratio of crude oil production to consumption would appear higher than shown on Figure 10 because of its unusually high share of natural gas liquids, ethanol, and “refinery gain” in its liquids production. If these types of production are omitted, the US still seems to have a deficit in producing the crude oil it consumes.   Figure 10. Rough estimate of ratio of crude oil produce to the quantity of crude oil products consumed, based on “Crude oil production” and “Oil: Regional consumption – by product group” in BP’s 2021 Statistical Review of World Energy. Russia+ includes Russia plus the other countries in the Commonwealth of Independent States. Perhaps all that is needed is the general idea. If inadequate crude oil is available, all of the countries at the left of Figure 10 are quite vulnerable because they are very dependent on imports. Russia and the Middle East are prime targets for countries that are desperate for crude oil. [9] Conclusion: We are likely entering a period of conflict and confusion because of the way the world’s self-organizing economy behaves when there is an inadequate supply of crude oil. The issue of how important crude oil is to the world economy has been left out of most textbooks for years. Instead, we were taught creative myths covering several topics: Huge amounts of fossil fuels will be available in the future Climate change is our worst problem Wind and solar will save us A fast transition to an all-electric economy is possible Electric cars are the future The economy will grow forever Now we are running into a serious shortfall of crude oil. We can expect a new set of problems, including far more conflict. Wars are likely. Debt defaults are likely. Political parties will take increasingly divergent positions on how to work around current problems. News media will increasingly tell the narrative that their owners and advertisers want told, with little regard for the real situation. About all we can do is enjoy each day we have and try not to be disturbed by the increasing conflict around us. It becomes clear that many of us will not live as long or well as we previously expected, regardless of savings or supposed government programs. There is no real way to fix this issue, except perhaps to make religion and the possibility of life after death more of a focus. Tyler Durden Sat, 04/30/2022 - 20:30.....»»

Category: worldSource: nytApr 30th, 2022

The Economy is Great. The Middle Class is Mad

Jeff Swope felt the first spurt of anger bubble up when he learned in February that his landlord was raising the rent on the empty two-bedroom apartment next door by more than 30%, to $2,075 a month. Though Swope, a 42-year-old teacher, and his wife Amanda Greene, a nurse, make $125,000 a year, they couldn’t… Jeff Swope felt the first spurt of anger bubble up when he learned in February that his landlord was raising the rent on the empty two-bedroom apartment next door by more than 30%, to $2,075 a month. Though Swope, a 42-year-old teacher, and his wife Amanda Greene, a nurse, make $125,000 a year, they couldn’t handle that steep a rent increase­—not alongside the student loans and car payments and utility bills and all the other costs that have kept growing for a family of three. “The frustration­—it was always a frog in the boiling water type of thing. I’d always felt it, but on a basic level. Something’s always brewing,” says Swope, from his modest apartment, where Atlanta Braves bobbleheads compete with books for shelf space. “We looked at the rent increase, and it was like, OK, this is ridiculous. I was like, ‘What the???’” [time-brightcove not-tgx=”true”] For Jen Dewey-Osburn, 35, who lives in a suburb of Phoenix, the rage arose when she calculated how much she owed on her student loans: ­although she’d borrowed $22,624 and has paid off $34,225, she still owes $43,304. (She’s in a dispute with her loan servicer, ­Navient, about how her repayments were calculated.) She and her husband know they’re more fortunate than most—both have good jobs—but they feel so stuck financially that they can’t envision taking on the cost of having children. “It’s just moral and physical and emotional exhaustion,” she says. “There’s no right choices; it feels like they’re all wrong.” The exasperation of Omar Abdalla, 26, peaked after his 12th offer on a home fell through, and he realized how much more financial stability his parents, who were immigrants to the U.S., were able to achieve than he and his wife can. They both have degrees from good colleges and promising careers, but even the $90,000 down payment they saved up was not enough when the seller wanted much more than the bank was prepared to lend on the home they wanted. Abdalla’s parents, by contrast, own two homes; his wife’s parents own four. “Their house probably made more money for them than working their job,” he says. “I don’t have an asset that I can sleep in that makes more money than my daily labor. That’s the part that kind of just breaks my mind.” “Our income supposedly makes us upper middle class, but it sure doesn’t feel like it.”Middle-class U.S. families have been treading water for decades—weighed down by stalled income growth and rising prices—but the runaway inflation that has emerged from the pandemic is sending more than a ripple of frustration through their ranks. The pandemic seemed at first as if it might offer a chance to catch up; they kept their jobs as the service sector laid off millions, their wages started climbing at a faster rate as companies struggled to find workers, and they began saving more than they had for decades. About one-third of middle-income Americans felt that their financial situation had improved a year into the pandemic, according to Pew Research, as they quarantined at home while benefiting from stimulus checks, child tax credits, and the pause of federal student-­loan payments. But 18 months later, they increasingly suspect that any sense of financial security was an illusion. They may have more money in the bank, but being middle class in America isn’t only about how much you make; it’s about what you can buy with that money. Some people measure that by whether a family has a second refrigerator in the basement or a tree in the yard, but Richard Reeves, director of the Future of the Middle Class Initiative at the Brookings Institution, says that what really matters is whether people feel that they can comfortably afford the “three H’s”—housing, health care, and higher education. In the past year alone, home prices have leaped 20% and the cost of all goods is up 8.5%. Families are paying $3,500 more this year for the basic set of goods and services that the Consumer Price Index (CPI) follows than they did last year. Average hourly earnings, by contrast, are down 2.7% when adjusted for inflation. That squeeze has left many who identify as middle class reaching to afford the three H’s, especially housing. In March, U.S. consumer sentiment reached its lowest level since 2011, according to the University of Michigan’s Surveys of Consumers, and more households said they expected their finances to worsen than at any time since May 1980. “The mantra has been: Work hard, pay your dues, you’ll be rewarded for that. But the goalposts keep getting moved back,” says Daniel Barela, 36, a flight attendant in Albuquerque, N.M., who is exquisitely aware that his father had a home and four kids by his age. Barela and his partner made around $69,000 between them last year, and he feels as if he’s been jammed financially for most of his adult life. He lost his job during the Great Recession and, after a major credit-card company raised his interest rate to 29.99% in 2008, he had to file for bankruptcy. “No matter what kind of job I’ve held and no matter how much I work, it never seems to be enough to meet the qualifications to own a home,” he says. Even if people Barela’s age, who make up much of the middle class today, earn more money than their parents did, even if they have college degrees and their choice of jobs, even if they have a place to live, an iPhone, and a flat-screen TV, many are now sensing that although they followed all of American society’s recommended steps, they somehow ended up financially fragile. “Our income supposedly makes us upper middle class, but it sure doesn’t feel like it,” says Swope. “If you’re middle class, you can afford to do fun things—and we can’t.” TIME talked to dozens of people across the country, all of whose incomes fall in the middle 60% of American incomes, which is what Brookings defines as the middle class. For a family of three, that means somewhere between $42,500 to $166,900 today. Here’s what we heard: “The American Dream is an absolute nightmare, and I just want out at this point.” “It’s really discouraging. I’m losing hope. I don’t know what to do.” “We did what we’re supposed to do—but we’re just so cost-­burdened.” “It’s the most money I’ve ever made, but I still can’t afford to buy a home.” “I’ve put down roots here. I don’t want to be forced out.” Many mentioned resentment toward their parents or older colleagues who don’t understand why this younger generation don’t bear the hallmarks of the middle class, like a single-­family home or paid-off college debt. “Boomers could literally work the minimum-­wage job, they could experience life—go to national parks or have children and own homes. That’s just not possible for us,” says Julie Ann Nitsch, a government worker in Austin who, when the home she rents goes up for sale in May, will no longer be able to live in the county she serves. “It can take some time for the economic tectonic pressure to build sufficiently—and now the volcano is erupting.”They have a point. Homeownership has become more elusive for each ­successive generation as real estate prices have outpaced inflation. More than 70% of people ages 35 to 44 owned a home in 1980, according to the Urban Institute, but by 2018, less than 60% of people in that age group had bought a place to live. The soaring value of owner-­occupied housing, which reached $29.3 ­trillion by the end of 2019, has created a divide, enriching the older Americans who own homes and shutting out the younger ones who can’t afford to break into the market. Millennials and younger generations came of age in the worst recession in decades, entered a job market where their wages grew sluggishly, and then weathered another recession at the beginning of the pandemic. Through it all, costs continued to rise. Median household income has grown just 9% since 2001, but college tuition and fees are up 64% over the same time period, while out-of-­pocket health care costs have nearly doubled. Just half of all children born in the 1980s have grown up to earn more than their parents, as opposed to more than 90% of children in the 1940s. Both millennials and Generation X have a lower net worth and more debt when they reach age 40 than boomers did at that age, according to Bloomberg. Their worries matter for the larger American economy. As Joe Biden said in 2019, “When the middle class does well, everybody does very, very well. The wealthy do very well and the poor have some light, a chance. They look at it like, ‘Maybe me—there may be a way.’” Mark Steinmetz for TIMEAmanda Greene and Jeff Swope outside their rental in Canton, Ga. If the middle class is feeling left out of one of the strongest economies in decades, when the unemployment rate is at a historic low, it’s a grave sign that social discord is coming. Right now, there’s no Great Recession, no tech meltdown, no collapse of complex real estate investment products to explain away why things are tight. On the surface, the economy looks buoyant. But like Swope’s slowly cooking frog, lots of middle-income earners are realizing that they’re in hot water and going under. “It’s not like this volcano came out of nowhere,” says Reeves, the Future of the Middle Class Initiative director. “To some extent, we’ve seen these long-term shifts in the economy like sluggish wage growth and downward mobility. It can take some time for the economic tectonic pressure to build sufficiently—and now the volcano is erupting.” The costs of all three H’s have soared over the past few decades, but it’s the cost of housing—usually the largest and most crucial expenditure for any family—that is fueling so much of the current discontent. Housing prices have climbed steadily for decades, with the exception of a dip from 2007 to 2009, but growth reached a fever pitch in the past year. Few places are immune; more than 80% of U.S. metro areas saw housing prices grow at least 10%. In the Atlanta metro area, where Swope and Greene live, the median listing price is $400,000, up 7.5% from last year. (They think they could afford a house that costs $300,000.) The rising prices are driven by a legion of forces, including a lag in building in the wake of the Great Recession, a rise in short-term rentals, speculation by institutional investors who own a growing share of single-family homes, a shortage of construction materials, and labor and supply-chain issues. They’re exacerbated by growing demand from families looking to spend the money they’ve saved, boomers who are aging in place rather risking life in a facility during the pandemic, and millennials anxious to start a family. The recent scramble to buy homes has been well documented, but in many places, renters are in a worse position than buyers. Rents rose almost 30% in some states in 2021, and are projected to rise further this year. David ­Robinson, 37, was born and raised in Phoenix and now lives with his girlfriend and three children in a modest three-bedroom apartment in Maryvale, which he considers a low-end part of town. In September, their rent went from $1,200 a month to $2,200, with extra fees, after, he says, “some property-­management company based out of Washington [State]” bought the building. His rent now represents about 50% of his income as a utilities surveyor. “It’s kind of hard to do anything with your family,” he says. “After buying clothes, food, and [paying] the other bills like electricity, water, stuff like that, the financial cushion wears really thin. I’m pretty much working to pay someone else’s bills.” He crosses his fingers that their cars hold out a little longer, not to mention their health. “The No. 1 threat to American constitutional government today is the collapse of the middle class.”Amanda Greene, Jeff Swope’s wife, knows that feeling. She owes $19,000 on her Toyota Corolla, which she downgraded to after her Jeep Cherokee died unexpectedly. And before she married Jeff and went on his health plan, insurance for herself and her 7-year-old daughter through her employer cost $1,400 a month. Greene covered only herself, and paid out of pocket for her daughter. She has a condition that requires extensive testing, and is still paying off thousands of dollars that her insurance didn’t cover. Medical costs have typically risen faster than inflation over the past two decades, propelled by the increased cost of care and more demand for services due to the aging population. National per capita spending on health care in 1980 was $2,968 when adjusted for inflation; by 2020 it was four times that. The pandemic compounded the challenges, as many people lost jobs and the insurance that came with them. More than half of adults who contracted COVID-19 or lost income during the pandemic also struggled with medical bills, according to a survey done by the Commonwealth Fund. Higher education, the third H, has also become steadily more expensive as the cost of college grew and federal funding for public universities plummeted. As prices rose, more students took out loans. Average student-­loan debt in 2020 was $36,635, roughly double what it was in 1990, when adjusted for inflation. Families struggle for decades to keep up with payments. Greene thought she was setting herself apart when she went to a private college to get a degree in nursing. Now she owes $99,000 in loans, while her two sisters who didn’t go to college are debt-free. For many college graduates, the pandemic provided some relief, when the CARES Act paused payments on federal student loans. Suddenly, people had money to pay their other bills, and saw what life would be like without crippling student debt. Greene watched an app on her phone as her loans paused at $99,000—and stayed there. She’s dreading when payments start up again. All told, the three H’s—rent, health care, and higher-­education loans—take up a growing share of Swope and Greene’s take-home pay. Add necessities like food and utilities, and they have months when they write their rent checks without having enough money in their checking account. (Swope gets paid monthly.) They don’t eat out. They switched to generic grocery brands. Although they both work full time, Swope is considering picking up a part-time job. Some economists argue that the parlous state of the middle class is being disguised by poor accounting. Eugene Ludwig, the former comptroller of the currency in the Clinton Administration, says the CPI distorts the real economic picture for lower- and middle-­income Americans because it counts the costs of discretionary items such as yachts, second homes, and hotel rooms. By his calculations, the cost of household minimal needs rose 64% from 2001 to 2020, 1.4% faster than inflation. In March, the Ludwig Institute for Shared Economic Prosperity released a report that suggested housing prices had actually risen 149% (the CPI put it at 54%) and medical costs were up 157% (vs. the CPI’s 90%). “We found that while people in 2001 maybe did have just a little bit of discretionary spending, by 2019 as a comparison, many households did not, particularly the ones with more children,” says the Ludwig Institute’s executive director, Stephanie Allen. (The pandemic made tracking these data too ­unreliable to estimate discretionary spending since then, she says.) The stress and anger people in their 30s and 40s feel is spilling over into their relationships with their parents’ generation. Today, a family in the U.S. making the median household income would need to pay six times that income to buy a median-price house. In 1980, they would have needed to pay double. But many boomers don’t seem to have much sympathy for their children’s predicament. Jeff Swope’s father was able to support a family of three on a social worker’s salary, and bought a house in Sandy Springs, Ga., for around $50,000. His mother sold it last year for $255,000, and that buyer sold it in March for 30% more than that. Swope, on the other hand, graduated from college with a marketing degree in 2003, and got a job selling Yellow Pages ads. When that business disappeared with the proliferation of online search engines, he waited tables and got a second degree so he could teach. He graduated in 2008 in the midst of the Great Recession and supported himself by working as a trivia host and taking whatever teaching placements he could find. He didn’t get an entry-level public school teacher job until 2013. Even now, his income, $55,000, wouldn’t be enough to support a family. He and Greene applied for preapproval for a mortgage but haven’t heard back. He feels stuck. “It’s kind of like, you’re not an adult unless you have a house,” he says. “The older generation looks down on you because they just don’t understand.” One of the things it’s harder for some folks to grasp are the ripple effects of structural changes that were just ­beginning when they were younger. The decades-long decline of unions, for example, has made it harder for workers to negotiate better wages and benefits. Swope is not in a teachers’ union, because Georgia doesn’t allow for collective bargaining for public educators, which is one reason the average public school teacher there made 5% less in the 2020–2021 school year than in 1999–2000, when adjusted for inflation. In Massachusetts, a state with strong teachers’ unions, the average public school teacher’s salary grew 19% over the same time period. Across the nation, a job with health care and other benefits is becoming harder to find. There are at least 6 million more gig workers than there were a decade ago. Even revenue-­rich companies like Google and Meta outsource such functions as cleaning, food service, and some tech jobs, excluding many of the people who work in their offices from the benefits of full-time employment. Adria Malcolm for TIMEThe relationship between Daniel Barela Jr., left, and Sr. has been strained by Daniel Jr.’s struggle to feel middle class At the same time, the unabated rise of automation and technology has meant that ever more employers want workers with a college education. About two-thirds of production supervisor jobs in 2015 required a college degree, according to a Harvard study, while only 16% of already-­employed production supervisors had one. Flight attendant Daniel Barela’s father Daniel Barela Sr. can’t understand why his children are struggling. When he first moved to Albuquerque in 1984, he was making $5.40 an hour as a custodian. He doesn’t have a college degree, but he worked his way up at his company and bought the house where Daniel grew up. He and his wife now own nine properties around New Mexico. “My generation—we didn’t end the week at 40 hours,” he says. “It started at 40 hours if you wanted to be successful, and we did whatever it took. This generation­—at 40 hours, they’re exhausted. They don’t call it the Me Generation for nothing.” The elder Barela has a pension, which people in his role wouldn’t receive today. And he acknowledges that housing is more expensive than it was when he was buying real estate. But he’s also been surprised how hard it is to find ­someone to help him fix up one of his rental ­properties for $12 to $15 an hour. “It’s not just my kids. I see it in other kids—they just don’t want to work,” he says. This frustrates his son to no end. He’s put in long hours to work his way up in the aviation industry and still can’t even qualify to own a home. Whenever he gets a raise, he says, health-­insurance premiums and other costs go up the same amount. It’s not just his imagination. According to the Ludwig Institute, a teacher and an ambulance driver in Albuquerque would make $77,000 a year, which is higher than the U.S. median income of $67,000—but they’d still have to go $6,000 into debt to meet their minimum adequate needs every year. During the pandemic, Barela did have a taste of what life might have been like for his father. Since he was furloughed, and receiving unemployment benefits and stimulus money, he was able to pay off all of his debt, he says. Now that he’s working again, he’s back to using credit cards and living paycheck to paycheck. “Absolutely ridiculous that you can have two of the most important jobs out there and still barely afford to live. I hate this country.”It’s getting so Barela is feeling as if he should just fulfill his father’s prophecy and stop trying so hard. Toil hasn’t gotten him anywhere. Why put in more hours dealing with angry passengers for pay that will get eaten up by bills? “I think if anything, COVID taught us: Is it worth working to the bone over quality of life?” he says. “For myself, I will start to just sustain what I need to sustain, but I’m not going to bend over backwards to fulfill some corporate mantra.” He—like Jeff Swope, and many of the other people interviewed for this story—direct much of their frustrations at the very rich, who accumulate wealth in investments, which when withdrawn are taxed at a far lower rate than wages. Widespread dissatisfaction and shrinkage in the ranks of the middle class has long been linked with political instability. In times of great economic inequality, the rich oppressed the poor or the poor sought to confiscate the wealth of the rich, leading to violence and revolution. But the presence of a middle class has helped America evade that conflict, says Vanderbilt University law professor Ganesh Sitaraman. That’s why he argues that “the No. 1 threat to American constitutional government today is the collapse of the middle class.” It’s no coincidence that the diminishing faith Americans have in their institutions has mirrored the decline in the fortunes of the middle class. And President Biden, who has long fashioned himself as a champion of those in the middle, is nevertheless losing their support; only a third of people approved of his handling of the economy in a March NBC poll, a drop of 5 percentage points since January. Some economists believe that the years following World War II were an anomaly—a period of unprecedented productivity growth and prosperity that will never be replicated. Millions of people went to college on the GI Bill, and wages shot up, allowing families to buy homes and cars and televisions. That means that comparing middle-­class workers with their parents may not be the most useful way to measure their economic state. If their childhoods were built in a period of exceptional economic growth, it’s no wonder that people like Swope and Barela feel left behind today. Moreover, previous generations kept many Americans, including people of color and women, from entering the workforce and from owning homes. “Some of the reasons middle-­class Americans were able to do so well before is that they were excluding people from the labor market, and they had strong trade unions that got them higher wages than the market would have given them,” Reeves says. Adjusting to the new world isn’t going to be easy. Reeves cautions families to compare themselves not with their parents’ generation, but instead with where they would be without the policy actions during the Great Recession and the pandemic recession. Where would the American economy be if the government hadn’t bailed out the banks and the auto companies? What if it hadn’t paused student-­loan payments during the pandemic and sent out stimulus checks and child tax credits? If families could compare themselves with the counter­factual, they might not get so angry—and maybe their anger wouldn’t be as easily weaponized against whoever they think created their economic woes, whether it be people of different races, or Big Business. A little while ago, after Jeff Swope found out about the rising prices in his apartment complex, he posted something in a Facebook group called No One Wants to Work that mocked all the businesses complaining about how they can’t find workers—while they’re offering minimum wage for terrible jobs. “A nurse and a teacher with a 125k household income are about to not be able to not get ahead with any savings. It’s that bad,” he wrote. Some of the commenters blamed him for poor money management. They couldn’t sympathize with someone making a six-figure income and still struggling. But many more of the hundreds of commenters felt something else—that they knew exactly what Swope was feeling. “My boyfriend and I have union jobs at a steel mill and are in about the same boat,” one wrote. Another, also a nurse, wrote that she and her husband, an engineer, were also living paycheck to paycheck. In the comments, their fury was unbridled. “Absolutely ridiculous that you can have two of the most important jobs out there and still barely afford to live,” another commenter said. “I hate this country.” —With reporting by Leslie Dickstein/New York.....»»

Category: topSource: timeApr 28th, 2022

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

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

Category: blogSource: zerohedgeApr 20th, 2022

Cathie Wood On Twitter; Europe In Recession

Cathie Wood on Twitter Inc (NYSE:TWTR), Europe in recession, inflation has peaked & supply chain has gone the other way with fat inventories except autos. Cathie Wood just made these comments in an interview conducted with Melissa Francis on Magnifi Media by TIFIN. Magnifi is a fintech platform that uses artificial intelligence so individuals and advisors […] Cathie Wood on Twitter Inc (NYSE:TWTR), Europe in recession, inflation has peaked & supply chain has gone the other way with fat inventories except autos. Cathie Wood just made these comments in an interview conducted with Melissa Francis on Magnifi Media by TIFIN. Magnifi is a fintech platform that uses artificial intelligence so individuals and advisors can instantly search stocks, ETFs, mutual funds and model portfolios and trade based on their preferences. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q1 2022 hedge fund letters, conferences and more Elon Musk/Twitter Elon Musk will bide is time with his offer and will be interesting if any other bidders show up and I’m hearing that there are some other bidders. One thing that has hampered Twitter: it's advertising model and this scares analysts. Advertisers don't like to have their ads next to questionable content. The idea of a subscription service is a possibility but open sourcing the algorithm is the first thing Elon will do so there is transparency on what is censored or not censored. Even Jack Dorsey thought Twitter tied itself in knots over censorship and he was wondering what to do with censorship. They do need to do something. we know we can unfollow someone , and unfollow, in a civil way. Even Jack was saying we need a change and we have to change and he and Elon are aligned to an open source agorithim to something more subscription based. What is Twitter worth? So much uncertainty but out Our compound annual rate of return is 25% for Twitter and their model will change. we have short term oriented shareholders who want to make a fast buck. the model is going to change. we will revisit once we know what’s going on and we think a lot can be done to improve the model but it may take more than our 5-year timeline investment horizon. We probably would have more confidence in the platform and want to hear what Elon has in mind in terms of perpetuating the platform Need his ideas on becoming a transparent and sustaining product and people will be open to his ideas Are you supportive of Elon taking over? The route Jack was going, which we supported, was opening the algorithm and this is a continuation of that. We have held Twitter because we believe it is a verification platform, it could become a  verification platform for NFTs. There are very few vertification platforms out there. Cathie Wood On Tesla Her call on Tesla Inc (NASDAQ:TSLA) at $4600--we have been building out Tesla model for years and publish 5 year projection which started in 2019 when that was misunderstood. WE felt that open sourcing  and update people how much share Tesla has and keeping in the electric vehicle space and  how capital efficient Tesla and more efficient than any other company out there We keep an eye on battery costs and technology and our biggest assumption changes over the past few years marketshare and keeping it, ability to scale and he says is a manufacturer  or factories, capital efficiency and we’ve been shocked and ability to increase gross margins over time In the five year forecast we had a 50-50 probably of automous vehicles and now its higher We know now autonomous is possible because it’s happening Cathie Wood Defends Criticisms On ARK We give away our research away not because we are altruistic but we want to educate and how the world is changing and how to keep so much is going to change Five change platforms: genomic sequencing, adaptive robotics, energy storage, artificial intelligence and blockchain technology Those platforms are changing and growing at exponential rates and converging. We want the sell side and the buy side and they are used to short term time horizons and they are focused on beating benchmarks but we are focused on new technologies and the technology to transform the future  We have a 5 year investment time horizon. Very few active managers have outperformed the markets in the past five years. In past 10 years 11% of large cap managers have outperformed their benchmarks and 25% of all active managers have outperformed  their benchmarks. We have outperformed the NASDAQ, S&P and MSCI handsomely over the past five years and compounded annual rate of return at 22% For a six week period during covid we had a risk off epoisde and we underperformed but from the bottom to the peak in Feb. 2021 our flagship strategy was up 360% since then at our worst point we were down 60% We believe that disruptive innovation in global public equity markets is valued today at a  $10 trillion market cap and that will go to $210 trillion by 2030 so that is a 35-40% compounded rate of growth When people talk about risk management people think of us a generalist we have risk control We have risk control built into scoring system. When we move to risk off period and concentrate into higher conviction names for our flagship strategy we went from  58 names to 35 names from a risk control point of view.  We push more higher scoring names in risk of periods Long term studies show that the most concentrates strategies are the most successful the strategy. We use volatility to curb the risk by concentrate the portfolio and many people think higher concentrate is riskier and we disagree. What about personal attacks by Morningstar There are companies that don’t understand we don’t fit into their style box and style boxes will become a thing of the past as technology blurs the lines and across the cap range. We are index agnostic and that’s a problem for many companies. Our objective is minimal compounded annual rate of return at 15% over next five years. We are closer you will find like a VC in public market as anyone  they have not seen an animal like ours. If you look at technology in the S&P 500 we  have no overlap on those names and the technologies of the future will be different than the technologies of past. Offer good diversification if you own FANG but our stocks are not in broad based indices ARK has seen $17 Billion in inflows last year and that’s because advisors know we are a diversifier and we will protect against the value traps that are populating broad based portfolios. Our analyst team on innovation domain experts we don’t have MBAs because it’s much easier to teach a biochecmial engineering a financial statement Deflation Deflation---disruptive innovation is inherently deflationary in two ways. The good way is truly disruptive innovation is followed by cost declines  when more people have access and that causes exponential growth because the cost decline opens up a new markets Companies cater to short term shareholder by manufacturing earnings—buying back shares to increase earnings or pay dividends but they are leveraged up to do so and they haven’t invested in innovation. Because the companies haven’t invested in innovation they will need to service their debt and they will have to cut prices and we think that the gas powered autos will have to do that first Big disagreement today is cyclical inflation—we believe inflation is in process of peaking. Some of the early signs that we are seeing mostly in inventory accumulation especially in the retail world, excluding autos, that the inventories are piling up. Many companies double and triple ordered when they couldn’t get supplies and they they will end up with so much inventory on their balance sheet and they will have to cut prices Oil prices is an outlier and food prices with Ukraine There is demand destruction underway in energy sector Russia hasn’t been turned off yet. It’s oil exports going elsewhere Surprised to see oil at $130 and then at $117 and lower high is the first sign demand destruction is having an impact Consumer Sentiment Not sure why people aren’t focused on Consumer sentiment-- U of Michigan and I’ve watched it for 45 years is down to levels in ’08 and ’09 and people were losing home, jobs and cars and oil prices were at $147 Consumers won’t be rushing out to buy and that’s a recipe for decline We could have a global recession Europe is in recession; China feels recessionary and Asia will caught a cold Sri Lanka about to default is like the Asian crisis in 1997 and there many warning signs Bond yields as Fed talking up interest rate the 10 year yield hasn’t even cracked 3% Inflation will start unwinding rapidly now. Last April CPI was up .9 and PPI was up 1.1 and if If we come in below that for April and those YOY cmpareisions will come down and see a lot more economists say they think inflation has peaked and the question is how low will it go Surprise will be on the low side because large inventories, disruptive innovation and creative destruction. Interview Transcript 00:00:01 Melissa Francis Welcome everyone. 00:00:02 Melissa Francis Today we're here to talk about magnifying bigtiff in a marketplace where you can harness real time proprietary data to help individual investors and financial advisors find, compare and buy investment products like stocks and ETFs, mutual funds, and model portfolios to grow and preserve your wealth. 00:00:20 Melissa Francis I'm Melissa Francis. 00:00:21 Melissa Francis I know just a little bit about this subject matter. 00:00:24 Melissa Francis I'm a former CNBC, MSNBC, Fox business and Fox News anchor. 00:00:29 Melissa Francis And you will remember if you've watched us before we talked about the best crypto investment strategies with Anthony Scaramucci, the best bond strategies with the Bond king himself. 00:00:39 Melissa Francis Jeffrey Gundlach. 00:00:40 Melissa Francis And the best private equity strategies with martinis. 00:00:43 Melissa Francis But now we have a very special guest that I'm super excited about to talk about stock. 00:00:48 Melissa Francis Box and everything hot out there. Kathy would. She's the CEO of Ark. She is a board member of Tiffin, which is Magnify's parent company Kathy. 00:00:57 Melissa Francis So thank you so much for being here. 00:00:59 Melissa Francis I want to drill down on your latest blog because there were so many good Nuggets in there and I found some of them kind of counter intuitive. 00:01:05 Melissa Francis So I want to get into those. 00:01:06 Melissa Francis But first, if I could take you to. 00:01:08 Melissa Francis The hot story of the day, which of course is. 00:01:12 Melissa Francis Twitter and I wanted to ask you looking at where things stand today and I know it's fast moving. 00:01:18 Melissa Francis It keeps changing, but if. 00:01:21 Melissa Francis You were Elon. 00:01:22 Melissa Francis Musk, what would your next move be? 00:01:24 Melissa Francis What would you do from? 00:01:24 Cathie Wood Here, well, he's got a $54.00 I guess is $54.20 offer out there. 00:01:32 Cathie Wood So I think he'll bide his time. 00:01:34 Cathie Wood It will be interesting to see if other bidders show up I'm I'm. 00:01:40 Cathie Wood I'm hearing that there are some so, so let's see. 00:01:43 Cathie Wood Not not quite sure. 00:01:44 Cathie Wood It's still quite fluid, right? 00:01:46 Melissa Francis Yeah no. 00:01:46 Melissa Francis And he says that if this doesn't work, he has. 00:01:48 Melissa Francis Plan B, what do you think that is? 00:01:51 Cathie Wood Goodness, I don't know if it would be something a little more hostile. 00:01:54 Cathie Wood Just I have no idea. 00:01:55 Cathie Wood You know, Elon Musk is has his own mind and and and is I'm, I'm sure, thinking very creatively about this. 00:02:04 Melissa Francis If he does succeed. 00:02:05 Melissa Francis And you were him again. 00:02:07 Melissa Francis What would you do with the company? 00:02:08 Melissa Francis What do you think that they need to correct? 00:02:11 Cathie Wood Well, one of the things that I think has Hanford Twitter is its advertising model and. 00:02:17 Cathie Wood This is what? 00:02:17 Cathie Wood Scares analysts out there. 00:02:20 Cathie Wood Oh my gosh, you know he's going to upend the advertising model. 00:02:26 Cathie Wood Because advertisers don't like to be to have their ads shown next to questionable content, which is something different for everyone, right? 00:02:36 Cathie Wood And so, this idea of perhaps a subscription service is a possibility. 00:02:41 Cathie Wood Or a tipping service, but certainly open sourcing the algorithm. 00:02:46 Cathie Wood Will be the first thing he'll do so that there's transparency associated with what is and is not censored. 00:02:56 Melissa Francis So do you think that's a good or a bad thing for the company? 00:02:59 Melissa Francis I mean, it might be a good thing for freedom of speech, or however, may you. 00:03:02 Melissa Francis You may look at it politically, but if you are a shareholder, is it a good idea for him to get that out there so everybody knows how the algorithm really works? 00:03:11 Cathie Wood Well, I think. 00:03:12 Cathie Wood Even Jack Dorsey thought that Twitter was beginning to tie itself. 00:03:16 Cathie Wood And not over the the censorship. 00:03:19 Cathie Wood And so he was trying to figure out what can we do to overcome this monster really, and so I think they do need to do something and many people would describe what's happened to Twitter as becoming a cesspool. 00:03:35 Cathie Wood Now we don't think that we use Twitter, it's. 00:03:39 Cathie Wood It's become quite important to our business, as have other social media platforms. 00:03:45 Cathie Wood And so we know that we can unfollow someone that is hampering our research or our ability to engage with others in a civil way. 00:03:57 Cathie Wood But I I think that I think that even Jack was saying, OK, we need a change. 00:04:03 Cathie Wood We have to change what we're doing. 00:04:05 Cathie Wood And I think he and Ellen probably are aligned. 00:04:08 Cathie Wood And this idea of an open source algorithm, a shift away from the advertising model towards something more subscription based. 00:04:17 Cathie Wood And you know more transparency? 00:04:19 Cathie Wood I mean, Ark is radically transparent. 00:04:22 Cathie Wood Everything we do is transfer. 00:04:25 Cathie Wood And it has done nothing but help our business. 00:04:28 Cathie Wood Sure, you've got people out there who are denigrating our work. 00:04:34 Cathie Wood But we know those people as we're as we drill into what they're saying. 00:04:38 Cathie Wood They're not doing any research we're really interested in engaging with people who are doing real research, and I think. 00:04:45 Cathie Wood Transparency would make that make our experience with Twitter even better. 00:04:51 Melissa Francis Yeah, the fact that you're not afraid to engage like that, and to you know, hear from those who might oppose you shows how confident you are about what you're doing. 00:04:59 Melissa Francis You have to wonder about a company that wants to hide what they're doing. 00:05:02 Melissa Francis Let me ask you though. On the Twitter front. So what do you think the company is worth? I mean, I know I want to talk to you about your Tesla target, but as you look at what Elon's willing to pay, what do you think? 00:05:14 Melissa Francis If you had to put a price target on the stock two years down the road, or four years. 00:05:18 Melissa Francis Down the road, what would you say? 00:05:19 Cathie Wood Well, I think there's so much uncertainty right now that I I couldn't give you one hour based on their existing. 00:05:28 Cathie Wood Model our compound annual rate of return expectation for Twitter is roughly 25% now their model is going to change. 00:05:40 Cathie Wood There are going to be a lot of dislocations. 00:05:42 Cathie Wood We have a lot of very short term oriented shareholders who are probably now have moved into Twitter. 00:05:48 Cathie Wood To make a fast buck 5420 fifty $4.20. 00:05:52 Cathie Wood Sense, but the model is going to change, and so we will revisit once we understand what's going on, we will revisit the upside to the model and we do think that a lot can be done to improve the model so, but it may take more time than even our five year investment time horizon. 00:06:12 Melissa Francis So if you. 00:06:13 Melissa Francis If Elon Musk does get control of the company, would you adjust that upward? 00:06:17 Melissa Francis You think it has more potential with him in charge. 00:06:19 Melissa Francis Or would it be more of a wait and see? 00:06:21 Melissa Francis How would you feel? 00:06:23 Cathie Wood We probably probably would have more confidence in the platform. 00:06:28 Cathie Wood Arm would want to hear what Elon. 00:06:31 Cathie Wood And what he has in mind in terms of perpetuating the platform. 00:06:36 Cathie Wood I'm sure he does not want to run it as a charitable organization or a non profit, so we'd like to see how he thinks it could become. 00:06:46 Cathie Wood A very transparent but also self sustaining. 00:06:50 Cathie Wood Model and you know he's very creative and I think that it is our global town square and and that a lot of people would miss it. 00:07:01 Cathie Wood So I think there will be a lot of people very supportive and very open to his ideas. 00:07:06 Melissa Francis So putting politics aside entirely and just thinking about. 00:07:10 Melissa Francis Pure money. 00:07:11 Melissa Francis As a shareholder, you would be in favor of Elon Musk taking over. 00:07:15 Cathie Wood Well, I do think that the route Jack was going, which we supported was opening up the algorithm or open sourcing it in some way. 00:07:27 Cathie Wood And so I think this is a continuation of that. 00:07:31 Cathie Wood We also think one of the reasons we have held Twitter is because we believe it is a verification platform. 00:07:39 Cathie Wood You know, the little blue check and we believe that it could become a verification platform for shifts. 00:07:47 Cathie Wood As well and so. 00:07:49 Cathie Wood You know there are. 00:07:50 Cathie Wood Few call options here and there. 00:07:53 Cathie Wood Verification algorithms we think are well respected out there and so I think Elon would also build on. 00:08:02 Melissa Francis Wow, fascinating stuff. 00:08:03 Melissa Francis That's great. 00:08:04 Melissa Francis I'm sure you just made some news there without question before we stray too far from Elon 'cause he is such a fascinating character. 00:08:10 Melissa Francis I know that you put a 2026 target on Tesla of $4600. How did you work that math and how? 00:08:17 Melissa Francis Do you feel about that call? 00:08:19 Cathie Wood Yes, well we as we have been building out the Tesla model for years of course, and each year we publish our five year projection, we started doing this. I believe in 2019 when we believe Tesla was so misunderstood. 00:08:38 Cathie Wood And I think our projections were so much closer to the mark for for 2020, two 2324 that we we felt that open sourcing it and and continuing to update people would help them understand number one. 00:08:57 Cathie Wood How much share Tesla has and is keeping in the electric vehicle space how? 00:09:06 Cathie Wood Capital efficient the company is. 00:09:09 Cathie Wood We're even shocked at how capital efficient it is more efficient than any other company. 00:09:15 Cathie Wood Out there we keep a constant. 00:09:19 Cathie Wood Eye on batteries and battery costs and and battery technology. 00:09:26 Cathie Wood So we like to update that, but I think our biggest assumption changes over the last few years have been market share keeping a lot more than we expected. 00:09:37 Cathie Wood Ability to. 00:09:38 Cathie Wood GAIL, in fact, Elon is saying he's now a manufacturer of factories. 00:09:44 Cathie Wood That's one of their core competencies, and we agree with that and capital efficiency. 00:09:49 Cathie Wood We've been shocked at how good that is, and you know, their ability to increase their gross margins. 00:09:58 Cathie Wood Overtime much, much higher than I think most people might have anticipated, and in our five year forecast was. 00:10:05 Cathie Wood Uh, last year we we had a 5050 shot at autonomous being a reality now as you can see from the model, we put a 25 percentile, 75 percentile probabilities and we have price targets associated with those. Sort of the the the low end and. 00:10:25 Cathie Wood High end, we know now that autonomous is possible because cruise automation is autonomous in San Francisco. 00:10:34 Cathie Wood A big city Waymo has done it in Arizona, so it is possible we no longer have to answer that. 00:10:43 Melissa Francis Yeah, I can't wait to not drive my kids around, but I hear you. 00:10:47 Melissa Francis I I want to ask you specifically about Ark. 00:10:51 Melissa Francis You talk a lot about your risk management and your research. 00:10:55 Melissa Francis Can you get into a little bit more specifics about why your risk and research your research and risk management is so proprietary? 00:11:02 Melissa Francis I mean, I, I know it's proprietary, so you can't talk detail. 00:11:05 Melissa Francis But can you give me, you know, a little sketch of? 00:11:07 Cathie Wood It well, our research is is not proprietary we. 00:11:10 Cathie Wood Give it away. 00:11:11 Cathie Wood And so we, that's that's one of the powers of social media, our social media and marketing strategy. 00:11:19 Cathie Wood We give our research away not because we are altruistic, although we do. 00:11:25 Cathie Wood Want to educate? 00:11:27 Cathie Wood Not just investors. 00:11:28 Cathie Wood But parents and grandparents about how the world is changing and how rapidly is it's changing and how to keep their children and grandchildren on the right side of change. 00:11:41 Cathie Wood And even for adults, how to retrain so much is going to change because of the five innovation platforms genomic sequencing. 00:11:49 Cathie Wood Adaptive robotics energy storage, artificial intelligence and blockchain technology. 00:11:54 Cathie Wood So much is changing and those platforms themselves are all growing at exponential rate. 00:12:03 Cathie Wood And they are converging, so it's 1 S curve feeding another S curve and we want people to understand that we want not just investors and registered investment advisors, but also, as I mentioned, the the sell side and the buy side. 00:12:21 Cathie Wood You know they're used to very short term. 00:12:23 Cathie Wood Right? 00:12:24 Cathie Wood And they haven't until recently been as focused on these new technologies. 00:12:29 Cathie Wood They've been much more focused on benchmarks and how to beat benchmarks. 00:12:34 Cathie Wood They haven't been. 00:12:34 Cathie Wood Thinking as much about the future and and the technologies that are going to transform the future. 00:12:40 Cathie Wood So we give our research away because we want to engage with. 00:12:44 Cathie Wood And become a part of the communities that are innovating and I feel like we've done that. 00:12:49 Melissa Francis So if I could just jump in, I mean 'cause this has been a very successful strategy for you, especially during the pandemic and the lockdown economy. 00:12:57 Melissa Francis It's been tougher, obviously more recently, and you know you've seen a lot of correction within the portfolios, and you know you've taken a lot of criticism from the outside. 00:13:08 Melissa Francis I would ask you. 00:13:09 Melissa Francis First of all. 00:13:09 Melissa Francis Is there any part of the criticism that you feel like you're receiving that rings true? 00:13:14 Cathie Wood So let me put in perspective what has happened over the past five years. 00:13:18 Cathie Wood We have a five year investment time horizon, so we'll start with the past. 00:13:21 Cathie Wood Five years and. 00:13:22 Cathie Wood Then we'll look forward at the next five years. 00:13:24 Cathie Wood Past five years. 00:13:25 Cathie Wood As we as we stated in one of our research pieces recently and fund pieces, very few active managers have outperformed the markets during the past five to 10 years. 00:13:41 Cathie Wood I think in the past ten years, which is a recent study that we read. 00:13:47 Cathie Wood 11% of large cap managers have outperformed their benchmarks, and 25% of all active managers have performed outperformed their benchmarks. We have outperformed the NASDAQ, the S&P and the MSCI handsomely. 00:14:05 Cathie Wood Over the past five years, I think our compound annual rate of return is around 22%. 00:14:10 Cathie Wood So that's the past five years. 00:14:12 Cathie Wood Then we go into the pandemic and the crisis period we had for about a six week period. 00:14:19 Cathie Wood A significant risk off. 00:14:23 Cathie Wood Episode and and we underperformed, as we usually do in a risk off period and then from the bottom of the coronavirus to the peak in February of 21, our flagship strategy was up 360%. 00:14:42 Cathie Wood Since then, at our worst point, we were down 60%, so I just wanted to put that in context. 00:14:48 Cathie Wood If we are right now, I'm talking about our innovation platforms. 00:14:52 Cathie Wood Broadly, we believe that disruptive innovation in the global public equity markets is valued. 00:15:02 Cathie Wood Today, at about a $10 trillion market cap and we believe that is going to 210 trillion by 2030, so that's anywhere from a 35 to 40%. 00:15:17 Cathie Wood And compound annual rate of growth for those platforms and we would hope to outperform because we are focused only on the future and and we have centered our research and investing around those platforms. 00:15:30 Cathie Wood When people talk about risk management, they they seem to think that we're a general. 00:15:37 Cathie Wood Just kind of asset manager. 00:15:40 Cathie Wood We are not. 00:15:41 Cathie Wood We are focused exclusively on disruptive innovation and when they say where is the risk management or the risk control, we have many levers of risk control, including our partners who oversee the risk in. 00:15:58 Cathie Wood Their portfolios and I'm talking our minority partners and our distribue 00:16:01 Cathie Wood Partners so we are fielding questions and and are thinking carefully about the risks we're taking in the certainly in the context of the questions we're getting. 00:16:11 Cathie Wood But it's been built into our scoring system. 00:16:15 Cathie Wood Our top and bottom, top down and bottom up modeling there's there are risk assessments. 00:16:21 Cathie Wood Each step along the way, I think. 00:16:25 Cathie Wood Many people confuse generalist portfolio managers who have to shift between this sector and that sector, or between cash and no cash. 00:16:34 Cathie Wood We're not doing that right now, we. 00:16:36 Melissa Francis OK. 00:16:37 And so I. 00:16:37 Melissa Francis Absolutely hear what you're saying and I'm wondering that is that the same as you wouldn't do anything differently in terms of what about? 00:16:45 Melissa Francis Even in the approach with the media and the way that you've engaged people you talked about social media and elsewhere, is there anything that you would do differently, or do you feel like everything is going according to plan? 00:16:55 Cathie Wood So after a one of one of the rougher interview is out there. 00:17:02 Cathie Wood I was trying to figure out why don't they understand how we are controlling risk and and one of our clients actually said well, you sounded like you know you wouldn't do anything differently. 00:17:19 Cathie Wood We actually do when we move into these. 00:17:22 Cathie Wood Risk off period. 00:17:24 Cathie Wood Since we concentrate our portfolios to our highest conviction names and what that means in this last go around for our flagship strategy, we went from 58 names in that strategy to 35. So we basically said from a risk control point of view. 00:17:44 Cathie Wood That OK using our scoring system? 00:17:47 Cathie Wood Where is our conviction the lowest? 00:17:49 Cathie Wood They're all getting hit equally practically in this risk off period. 00:17:54 Cathie Wood So why don't we push towards the higher scoring names and it gives our analysts and and me and our associate portfolio managers the the psychological wherewithal to say, OK, this is. 00:18:10 Cathie Wood A risk off market, all of our stocks are being treated the same. 00:18:14 Cathie Wood Why don't we come out right now with all of our concerns lurking deep down inside and then concentrate. 00:18:23 Cathie Wood So that's we do take risk off the table and if you look at long term stuff. 00:18:27 Cathie Wood These they will show you that the most concentrated strategies are the most successful because typically active managers have a very high degree of confidence in several of their names. 00:18:40 Cathie Wood But there are a lot of names. 00:18:42 Cathie Wood They would be the tail of the portfolio, where they they. 00:18:45 Cathie Wood They just don't have as much confidence, so we use. 00:18:48 Cathie Wood The volatility to curb the risk by further concentrating our portfolios and the only thing else. 00:18:54 Cathie Wood There is many people say wait a minute, that's not risk control concentration is higher risk. 00:19:00 Cathie Wood We disagree. 00:19:01 Melissa Francis Yeah, no, I I'm glad you explained that because that that is really interesting and I'm I'm not sure a lot of people out there understood that. 00:19:07 Melissa Francis That's what you were doing just in terms of some of the personal attacks. I mean, for example when I saw Morningstar's downgrade. 00:19:15 Melissa Francis They were focused so much on succession which. 00:19:19 Melissa Francis Uhm, you know? 00:19:20 Melissa Francis Obviously it's important. 00:19:21 Melissa Francis But there have been a lot of other funds out there, and. 00:19:23 Melissa Francis Fund managers that. 00:19:24 Melissa Francis They haven't had that same criticism and focus. 00:19:26 Melissa Francis Do you think it has anything to do with your gender? 00:19:28 Melissa Francis You think it's sexist at all? 00:19:31 Cathie Wood I really don't, I I do know there are companies like that one that do not understand what we're doing. 00:19:40 Cathie Wood We do not fit into their style boxes and I think style boxes will become a thing of the past as as sectors. 00:19:50 Cathie Wood As technology blurs, the lines between and among sectors. 00:19:54 Cathie Wood And as innovation goes, global and goes across the cap range, you know. 00:19:59 Cathie Wood So I think those style boxes are are going to be will seem quite provincial. 00:20:06 Cathie Wood At some point we are index agnostic. 00:20:10 Cathie Wood That is a big problem for many of these companies. 00:20:12 Cathie Wood Our objective is. 00:20:14 Cathie Wood A minimum compound annual rate of return of 15%. 00:20:18 Cathie Wood At an annual rate over the next five years, we are the closest you will find to a venture capital company in the public equity markets. 00:20:27 Cathie Wood And I think organizations like that one have a very difficult time like that. 00:20:32 Cathie Wood They've never seen an animal like ours where we are thrilled that our active share 00:20:38 Cathie Wood Relative to the broad based indices is in the high 90% range we have. If you look at technology in the S&P 500, we have no overlap. We are doing something. 00:20:49 Cathie Wood We are saying the technologies of the future. 00:20:53 Cathie Wood Are going to be very different from the technologies of the past, and so we offer a good opportunity for diversification for registered investment advisors. 00:21:04 Cathie Wood They own the fangs and Microsoft NVIDIA and now even our beloved Tesla, 'cause it's in indexes but they don't own our stocks 'cause they're not. 00:21:14 Cathie Wood In these broad based indices. 00:21:16 Cathie Wood So I think many much of our success because we have had despite the performance we discussed earlier. 00:21:22 Cathie Wood We've had inflows last year, 17 billion in inflows. 00:21:25 Cathie Wood This year we're still in flowing, even though we've been in this pacing period and no one sure if the next move is up or the next move is down, but we are. 00:21:36 Cathie Wood In in flow and I think that's because advisors know we are a diversifier and we will protect them against the value traps that we believe are populating broad based benchmarks which are becoming part of their core portfolio. 00:21:53 Cathie Wood We are a hedge against the DIS intermediation of the old World order. 00:21:59 Melissa Francis Yeah, it just to clarify for people that are watching so you have your inflows have exceeded your outflows. 00:22:05 Melissa Francis You have more people coming in more money coming in. 00:22:07 Melissa Francis Right now, yeah. 00:22:08 Cathie Wood Yes, right? 00:22:09 Cathie Wood We are in that inflow mode, yes. 00:22:11 Melissa Francis I I'm also fast. I mean, you're so contrarian. And I do think that your fun. If you truly understand what it's about, it it sort of becomes we've talked on this show and magnify a bunch of times about how the old model of you know however you want to slice it. The 4060 is is really broken and that you have to have a whole bunch of. 00:22:27 Melissa Francis Different approaches to your portfolio and having a slice of what you do is something that is so different from what you would get elsewhere and is backed by huge brain power and huge research that it's a way to take. 00:22:40 Melissa Francis You know this this oppositional point of view, almost, but do it in a very smart way along those lines. 00:22:47 Melissa Francis And we talked to Jeff Gundlach a while ago. 00:22:49 Melissa Francis Of course, the bond king he was saying that, you know, he's really obviously a lot of people are worried about inflation right now. 00:22:54 Melissa Francis I I read, I think it was in your Blogger. 00:22:56 Melissa Francis I heard you do an interview. 00:22:56 Melissa Francis You talked a lot about the possibility of deflation. 00:22:59 Melissa Francis A year from now. 00:23:00 Melissa Francis Walk me through that. 00:23:02 Cathie Wood Sure, and before I do that, Melissa, I do you hit on something that I think is critically important? 00:23:08 Cathie Wood This the the analyst team that we have focused on truly disruptive innovation. Innovation is unmatched out there. I am sure of that because it is our sole focus. We have domain experts. We do not have MBA's. It is much easier. 00:23:27 Cathie Wood To treat, to teach a biochemical engineer or a rocket scientist how to read financial statements than it is to teach me. 00:23:38 Cathie Wood Uh, biochemical engineering and rocket science. 00:23:43 Cathie Wood This is an A throwback to the Bernstein days Sandy Bernstein set up his company with that in mind and I think it's absolutely right when it comes to innovation. 00:23:54 Cathie Wood So now I have to. 00:23:57 Cathie Wood Inflation well? 00:24:00 Cathie Wood Disruptive innovation is inherently deflationary in two ways. 00:24:04 Cathie Wood One good, one bad, the good way is just truly disruptive. 00:24:10 Cathie Wood Innovation follows learning curves, which are expressed as cost declines over time, and as costs decline, demand increases. 00:24:21 Cathie Wood For new technologies and and more people around the world have access to them. 00:24:27 Cathie Wood So they can reach mass markets, and that's what causes exponential growth. 00:24:33 Cathie Wood The costs decline. 00:24:35 Cathie Wood They open up. 00:24:35 Cathie Wood A new market costs continue to climb. 00:24:37 Cathie Wood Even so, we're seeing we're seeing massive opportunities from those five platforms. 00:24:44 Cathie Wood The other side of disruptive innovation is creative. 00:24:47 Cathie Wood Destruction, and this is a little bit back to what I said before, but a lot of companies in the broad based indices in particular are very short term oriented in in terms of wanting to cater to their shareholder base. 00:25:05 Cathie Wood And so we have watched them for years, especially since the tech and telecom bust and the 0809 meltdown and the risk aversion that pushed everyone towards these benchmarks. 00:25:16 Cathie Wood We've seen companies cater to that short term. 00:25:21 Cathie Wood Shareholder, by manufacturing earnings buying back shares to increase earnings per share or paying dividends. 00:25:28 Cathie Wood But they've leveraged up to do so, and they haven't invested enough in innovation. 00:25:34 Cathie Wood And so we believe that another source of deflation. 00:25:38 Cathie Wood Secular deflation out. 00:25:39 Cathie Wood There will be bad. 00:25:41 Cathie Wood And that is these companies products going obsolete. 00:25:44 Cathie Wood Wait, they need to service their debt and to do so, they'll have to cut prices. 00:25:48 Cathie Wood We think that's going to happen to the auto market big time. 00:25:52 Cathie Wood The gas powered side of the auto market. 00:25:55 Cathie Wood The big disagreement today is cyclical inflation and we believe it is in the process of peaking. 00:26:04 Cathie Wood And we also believe some of the early signs that we're seeing, whether it's mostly in inventory accumulation, especially in the retail world, excluding autos. 00:26:17 Cathie Wood And then the inventories are piling up. 00:26:20 Cathie Wood And because I think many retailers and maybe wholesalers double and triple ordered when they couldn't get supplies because of supply chain issues that they are going to end up with so much inventory on their balance sheets that they're going to have to cut prices. 00:26:37 Cathie Wood Dramatically, now, of course we have oil prices as well. 00:26:42 Cathie Wood As the outlier here, oil and food with the Russian invasion of of Ukraine, the bread basket of Europe and of course Russia being such a big factor in energy, we think that demand destruction is underway in the energy sector. 00:27:00 Cathie Wood Seeing a lot of substitution. 00:27:01 Cathie Wood I see a lot more bikes in Saint Pete and scooters, and you know. 00:27:06 Cathie Wood And I see people deciding to make fewer trips to the grocery store each week and what have you? 00:27:10 Cathie Wood So we're seeing downright demand destruction and we're seeing. 00:27:16 Cathie Wood Russia hasn't been turned off yet. 00:27:18 Cathie Wood It still may be. 00:27:19 Cathie Wood Europe may may stop, but we're seeing that its oil imports are going. 00:27:24 Cathie Wood Our exports are going elsewhere and we'll have a reshuffling of of where the how the supplies get from one country to another. 00:27:32 Cathie Wood So I actually think I was surprised to see in early March. 00:27:36 Cathie Wood Oil prices peaked out in the one 30s and then they tried again and they peaked out in the one 15117 range. 00:27:43 Cathie Wood So let's see if that could be lower. 00:27:46 Cathie Wood Highs are often the first sign that demand destruction is beginning to have an impact as supplies are starting to. 00:27:54 Cathie Wood Increase including production in the United States. 00:28:00 Melissa Francis Yeah, we just talked to Mark Fisher a couple days ago. 00:28:01 Melissa Francis Who courses master of that space and he said similar things and they actually if you listened to him. 00:28:06 Melissa Francis He had said that Nat gas was going to explode and it had. 00:28:09 Melissa Francis It had a definitely that was a prescient call at the time, so it's interesting to hear you talk. 00:28:14 Melissa Francis That way about energy and also about the supply chain. 00:28:17 Melissa Francis That makes a lot of sense, because this idea that you can't get what you. 00:28:20 Melissa Francis One has been going on for a long time and I know that you also said you have a consumer that doesn't feel particularly good about his or herself right now. 00:28:30 Melissa Francis In addition to that, the fact that wages aren't really keeping up with the prices that you're seeing out there is another reason why we could see these supplies stack up. 00:28:38 Melissa Francis A final word to you on that. 00:28:40 Cathie Wood So I'm asking. 00:28:40 Melissa Francis And and maybe I don't want to forget. 00:28:41 Melissa Francis To ask you. 00:28:42 Melissa Francis Where you see the 10 year bond trading a year from today so. 00:28:45 Melissa Francis Those two things real quick if you don't mind. 00:28:48 Cathie Wood So the consumer sentiment, I don't know why many people or many economists. 00:28:53 Cathie Wood Strategists are not focusing on. 00:28:55 Cathie Wood This consumer University of Michigan Consumer Sentiment survey, which I've watched it for 45 years, is the best out there at measuring consumer sentiment is down to levels that we have not seen since 0809. In 0809, people were losing their homes, losing their jobs, losing their cars. 00:29:15 Cathie Wood And and oil prices were at $147. And and here we are there feeling that badly that tells me this idea of velocity, the velocity of money. 00:29:27 Cathie Wood Consumers not going to be racing out to buy because the consumers becoming risk averse. 00:29:33 Cathie Wood That's a recipe for a continued decline in the velocity of money, which which diffuses the inflationary impact of the reserves out there. 00:29:42 Cathie Wood So that's the first thing I'll say, and that and we I think we could. 00:29:47 Cathie Wood End up in a global recession. I think that there's such a fine line now. I think Europe's in recession, China feels very recessionary to me, which means Asia is going to catch a cold. We're seeing. 00:29:58 Cathie Wood Thing and and these are Canaries in the coal mine. But tree Lanka, you know threatening to default. This is like the beginning of the Asian crisis in 1997 when the Thai baht devalued. 00:30:09 Cathie Wood So you know, I think there are a lot of warning signs out there, and so is the US going to fall into a technical recession or not, I don't know. 00:30:18 Cathie Wood I don't think it matters, I just think I just think there's a lot of weakness out there and then finally on the bond yield. 00:30:25 Cathie Wood I think it's been really interesting as the Fed has been talking up interest rates. 00:30:31 Cathie Wood That the the 10 year yield has has not been able to even crack 3%. So in the 2 1/2 to 3% this is the 10 year Treasury yield and I believe that inflation is going to start unwinding pretty rapidly now because if you look if if for no other reason. 00:30:51 Cathie Wood Then the base effect last April, the CPI was up .9 and the PPI was up one or one point 1. Those are the comparisons. 00:31:00 Cathie Wood Now if we come in below that for April, then both of those year over year comparisons will come down for the first time and I'm seeing a lot more economists saying that they think inflation has peaked and now the only question is how? 00:31:15 Cathie Wood Low it will go. 00:31:17 Cathie Wood And we think the surprise will be on the low side. 00:31:21 Cathie Wood For cyclical reasons, inventories I just described, as well as secular reasons, disruptive innovation, and creative destruction. 00:31:30 Melissa Francis Yeah, well, you know you never fail to disappoint. 00:31:33 Melissa Francis We always go against what is out there and makes so much sense it is such a pleasure to talk to you. 00:31:39 Melissa Francis Thank you so much for doing this today, I think. 00:31:42 Melissa Francis Everybody out there really gained a lot from it. Thank you for joining us For more information on Art, Cathy Wood, or anything you've heard today, please go to magnify.com/media. 00:31:53 Melissa Francis We'll be right back. Updated on Apr 19, 2022, 11:47 am (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkApr 19th, 2022

Is The Woke Cultural Agenda Of Union Leaders Undermining Support For Organized Labor Groups?

Is The Woke Cultural Agenda Of Union Leaders Undermining Support For Organized Labor Groups? Authored by Batya Ungar-Sargon via Outside Voices, Doug Tansy is living the American Dream. A 44-year-old Native Alaskan, Tansy is an electrician living in Fairbanks in a house he and his wife Kristine own. Kristine has a social work degree, but for 13 years she stayed home to raise their five kids. It was something the couple could afford thanks to Tansy’s wages and benefits, secured by the International Brotherhood of Electrical Workers. All of Tansy’s union friends have similar stories; those who chose not to have kids traveled the world on the money they earned.  Buena Park, CA, Monday, April 11, 2022 - Union organizer answers questions as Southern California grocery workers vote to approve a union contract at UFCW Local 324. (Robert Gauthier/Los Angeles Times via Getty Images) Tansy started an apprenticeship right out of high school, a decision he calls “one of the best things I ever did for myself.” His high school pushed everyone to go to college, which Tansy did, but to pay for his first year he took a summer job working construction. It provided an instructive contrast with his college courses. “College was certainly challenging, but it didn't excite me. Construction did. It grabbed me,” Tansy told me. “I was always told ‘find what your hands want to do, and when you do, do it with all your might.’ And I did.” Tansy now serves as the assistant business manager of the IBEW in Fairbanks and as president of the Fairbanks Central Labor Council, which is sort of like the local chapter of the AFL-CIO. “I consider myself a labor person and that simply means a lot of what we do is focus on the middle class,” Tansy explained. “Putting really great wages into our economy and helping people save up to get ahead, to pay off a house.” But the union is about more than just securing a middle-class life for working class Americans. Tansy calls it a fraternity. “If I ever have trouble, I can make one phone call and that's the only call I need to make,” he says. “They will take care of the rest of it and whatever I need will be coming.” And this support system traverses ideological and ethnic divisions. The IBEW in Fairbanks has Republicans, independents, Democrats, progressives, and everything in between. Debates can get testy, especially when social issues like abortion come up in the breakroom. Tansy has also on rare occasions experienced racism. And yet there is a deep bond connecting the members of the IBEW that crosses ideological lines. This bond is the result of a simple fact: that more unites members of the union than divides them, and that what unites them is sacred. “Having good wages, good benefits, good conditions, and being treated fairly and with dignity in retirement should not be only for Republicans or Democrats or red states or blue states,” Tansy explained. “To me, these are nonpartisan issues that should be for everybody. And that's how we reach our common ground.” Tansy’s story is not unique. According to the U.S. Bureau of Labor Statistics, Americans who belong to unions in the U.S. make on average 17% more than their non-unionized brothers and sisters, with a median $1,144 in weekly earnings—compared to $958 for those not unionized. It’s not just wages, either. Unions offer apprenticeships and ongoing training, a debt-free career, a pension, and workplace safety and other protections. They give workers a seat at the table and a voice to balance out the power of the businesses they work for, no mean feat at a time when the majority of working-class Americans are living lives of precarity. Working-class wages decoupled from production and stagnated in the late 70s; it’s estimated that over $47 trillion of working- and middle-class wages have been sapped from the bottom 90% of earners and redistributed to the top 1% since then. So it’s no surprise that approval of labor unions is the highest it’s been since 1965: 68% of Americans told Gallup they approve of unions last year. And yet, despite this fact, Americans aren’t signing up to join unions at record rates. Just the opposite: fewer Americans than ever belong to unions, a scant 6% of Americans working in the private sector. Many believe they are a dying institution in the U.S. Some cast this as proof of yet another case of working-class conservatives choosing a cultural stand against their economic interests. William Sproule is the Executive Secretary-Treasurer of the Eastern Atlantic States Regional Council of Carpenters and says his union is actively engaged in combating negative stereotypes about unions when recruiting. “In the South and other parts of the country, the Southeast, even some of the middle of the country, you say the word ‘union,’ people have been basically brainwashed to think that there are people like me who are some kind of fat-cat millionaires who are stealing money from their pension funds and all this other stuff, all these bad things they try to present about unions,” Sproule says. Of course, there are political reasons unions aren’t popular in some corners of the South. Labor has for a century been affiliated with the Democratic Party and remains so. Sproule views the Democrats as much better for organized labor, and though the Carpenters Union will endorse pro-labor Republicans, right now he says it’s important that the Democrats maintain control over government. “The predominant anti-union forces do seem to come from the Republican Party,” Sproule says, citing things like punishing, anti-union “Right to Work” laws. The Carpenters Union advised its members to vote for Joe Biden based on the policies President Trump pursued that were hostile to organized labor—things like deregulations at the National Labor Relations Board and appointments of pro-business judges, among other things.  Certain pro-labor positions are undoubtedly the province of the Left, from minimum wage campaigns, to support for the NLRB and the PRO Act, to even the expansion of social security benefits. Then there’s healthcare. When employers are responsible for employee healthcare, they have immense, unfair, and corrosive leverage over their workers. The push for universal healthcare is crucial for stabilizing the downward slide of many working-class families, and it is something only Democrats bring up, however sporadically. And yet, thanks to an emergent class chasm in America, the laboring class is increasingly made up of people who find more in common with the Republican Party. In 2020, Bloomberg News found that truckers, plumbers, machinists, painters, correctional officers, and maintenance employees were among the occupations most likely to donate to Trump (Biden got the lion’s share of writers and authors, editors, therapists, business analysts, HR department staff, and bankers).  Others have blamed the fear of corporate consolidation—and corporate retaliation—for a lack of interest in unionizing. The pressures of starting a union are immense, like trying to hold an election in a one-party state, David Rolf, Founding President of Seattle-based Local 775 of the Service Employees International Union and author of The Fight for Fifteen: The Right Wage for a Working America, explained. “Sort of like if you were running to become the mayor, but before you were allowed to be the mayor, you had to first fight to establish that there should be a mayor at all. And then once you establish that there should be a mayor, then you find that your opponent is the only one with access to the electorate for eight hours a day, and that they've had the voter list for years and you just get it six weeks before the election. Also they have unlimited resources.” Meanwhile, there are numerous stories of ugly union busting and retaliation at companies like Tesla and Amazon. But even in companies where union busting is minimal, many people don't want to go to work and have a permanently conflict-based and litigious relationship with their boss, Rolf explained. And there’s the fact that things like sectoral or regional bargaining are just not part of the American worker’s lexicon. But in addition to overcoming the immense challenges of starting a union from scratch while facing corporate union busting, there’s another, less discussed reason workers give for not flocking to unions at a time when they are most in need of what unions offer: a political and class divide separating the people leading unions from the rank and file. More and more, unions are led not by people like Doug Tansy, who sees his job as overcoming partisan divides, but by people enmeshed in a progressive culture that is increasingly at odds with the values of the people the unions purport to represent. And it’s resulted in the paradox of waning union membership despite the near record level of popular support for unions. Labor is definitely having a moment. Anywhere from 25,000 to 100,000 workers went on strike in October 2021. Workers at four Kellogg cereal plants ended an 11-week strike after announcing a deal had been made with the company. The first Starbucks voted to unionize a branch in Buffalo, New York, and has been followed subsequently by other branches across the nation, many of them voting unanimously. At the end of last year over 10,000 workers at John Deere ended a five-week strike after making substantial improvements to their working conditions. Those included a 20% increase in wages over the next six years as well as a return on cost-of-living adjustments and gains to their pension plan. Most recently, an Amazon warehouse in Staten Island became the first Amazon center to unionize, an effort that the corporation spent $4.3 million to combat. The COVID-19 pandemic created a much tighter labor market, which has given workers the upper hand in negotiations for the first time in decades. Expanded unemployment and stimulus checks gave many workers a cushion, some for the first time in their lives, which, combined with the absence of childcare for much of the pandemic and a shortage of workers due to illness or even death, created a real labor shortage. In some cases, that shortage has led to resignations. Over 4 million Americans quit their jobs in November, the majority of them low-wage. In other cases, it’s led to workers demanding better conditions in order to stay—and succeeding at getting them. Chris Laursen lives in Ottumwa, Iowa and has worked at John Deere as a painter for 19 years. He says the strike was a long time coming and sees in it evidence of the rebirth of the American labor movement. “The strikes like the one that we spearheaded showed working people that it is possible to take a stand and get a seat at the table and secure better wages and benefits for your families and yourselves,” Laursen says. “The cheap labor bubble’s busted. Gone are the days where you can bring in employees and not pay them anything.” Like in the IBEW, for John Deere workers, the union’s power is a non-partisan proposition. Ottumwa is the kind of factory town that went for Barack Obama in 2012 then for Trump in 2016. A 2018 rally for Bernie Sanders saw 800 people turn out—followed by one for Trump two weeks later which drew a crowd of 1,200. “Twenty years ago, if you were a Republican here, you were pretty much a closet case about it,” Laursen, who was a delegate for Bernie Sanders, says. “That's really not the case anymore.”  Key to the strike’s success was a laser-like focus on what united the striking workers over what divided them. “We didn't want to politicize the strike or have anything that could divide us, because we understood the importance of us staying together,” Laursen explained. “People who own all the stuff and the media, they want to divide the herd and get us fighting amongst each other. And it really is nonsense because we work in the same place, and our kids go to the same schools. We eat in the same restaurants. We have a lot more commonalities than we do differences.” The COVID labor market has been a boon for non-union workers, too. Latasha Exum is a health aid in a school in Cleveland. She’s in charge of evaluating children who need medical attention. Exum has been in the medical field for 10 years—she’s certified as a medical assistant—but she’s new to her current job and not sure she’ll stay (she loves children, but she worries about how much they spread germs in the age of COVID). And due to the current pressures of the job market, she’s certain that she would be able to find another one. She had no trouble finding this job and was even able to negotiate for a higher starting pay, although the supply chain crisis has made her job harder (thermometers and even band aids have been in short supply).  “Pay isn't everything as far as working conditions,” Exum explained. “Pay is one of the factors that some places are willing to wiggle and negotiate, but the conditions might not be the best.” The COVID economy hasn’t worked for everyone, though. Jenna Stocker is a former marine who worked retail at a pet store in Minneapolis throughout the pandemic. Her job was deemed essential, and she couldn’t afford to miss a paycheck, so while millions were able to work from home, she went to work every day. “I couldn’t afford to stay home and bake bread,” she said. “And those who did looked at us like we were lepers. Essential workers were looked down upon for having a job that allowed other people to stay home.” And she does mean lepers. “They didn’t want to touch us,” Stocker recalled. “When I would deliver dog food, they made me leave it outside. It was dehumanizing.” But it was also part of a larger trend Stocker has noticed, of feeling what she calls “morally wrong” for being poor or working class. There’s a smugness that’s imposed on the lower classes by those in the upper classes, and the class divide is only getting worse. Yet within the working class, divisions evaporate. “I work with a whole spectrum of people, including liberals and conservatives,” Stocker says. “It’s just not something that divides us. We have to work together. We have to make it work. Politics is not something we let divide us at work or in our friendships.” They simply don’t have that luxury. One of the things that the labor shortage has done is something the federal government failed to do: It normalized the idea of a $15 an hour wage. 80% of American workers now make at least $15 an hour—up from 60% in 2014. But that’s nothing close to a living wage for most American cities. Working-class wages have simply not kept up with production; all that extra GDP that’s come from increased production went instead to the top 1%. “Had you merely kept pace with the economy since the 1970s, a full-time, prime-age worker in America who in 2020 made $50,000 a year, that person would be making between $93,000 and a $103,000 a year without any growth in their personal income or share of GDP since the 1970s,” Rolf said. “Half of the income people should have expected to receive over that time was functionally stolen by a series of public policy and boardroom decisions that rewired the economy as upwardly sucking.” Jason Offutt is a 47-year-old from Parma, Ohio who paints lines on roads and in parking lots. He’s seen wage stagnation firsthand. Offutt took a summer job as a line painter when he was 16 and stayed with the company after he left school. He worked for a number of other companies after that, until he was finally able to buy a line-painting machine—it was a friend's, and it was in pieces—for $1,000. He put it back together by hand, and now he works for himself. “I just got tired of watching everybody else making money that I was busting my butt for,” Offutt told me. It took a while to become viable, but once Offutt got in the church directories, the jobs started to come regularly.  In the 30 years Offutt has been a line painter, he’s seen the security of working-class life collapse. “Inflation has gone up so much, even compared to when I started,” he told me. “I was making $16, $17 an hour back in my 20s and 30s, so that was pretty decent money back then, if you had one kid and didn't have too many responsibilities. But as you get older and your kids get older, your son's out working and he barely has enough to pay for his apartment, where I could work and pay for my apartment and car and still be ok. Now, if you’re working class, you've got to have two incomes, two and a half incomes, just to be an above-board person and enjoy your life. Back then, you could do great on just one income.” The percentage of American workers who have what might be called a secure job—who work at least 30 hours a week and earn $40,000 a year with health benefits and a predictable schedule—is less than one in three, and for people without a college degree, it’s just one in five. That’s what Oren Cass, executive director of American Compass and author of The Once and Future Worker, recently found in an extensive survey. “The economy has generally bifurcated into a labor market that has relatively better paying, secure jobs in what we would call knowledge industries, that have tended to see expansion and wage growth and so forth, and generally less secure jobs in shrinking or stagnating industries, that tend to be filled with people without college degrees,” says Cass. One of those people is Cyrus Tharpe, a 46-year-old hazmat truck driver from Phoenix. Tharpe has spent his entire life living below the state median household income everywhere he has lived, and he is deeply cynical about talk of a resurgent labor movement. “Everything is getting worse,” Tharpe tells me. Working class bodies are born to work until they are in too much pain to do so—and then die. “If you’re working class, you die in your early seventies. You know that and there's nothing you can do about it. This is the business model,” Tharpe says. Most of the successful strikes have been won by the tiny percentage of workers who are already unionized. But the 94% of workers in private sector jobs without union representation like himself are just out of luck; to them, attempting to unionize means an antagonistic relationship with management or retaliation from bosses or risking their jobs entirely, facing an influx of new workers flown in from elsewhere or a corporation shutting down the branch where they work. These are luxuries most American workers just can’t afford. Someone from the AFL-CIO in Arizona once reached out to Tharpe and asked if he was interested in forming a union. He said yes and asked for contact information for the lawyers who would back him up when his boss started pushing back. He never heard back from the union representative. It's exhilarating to see workers at places like Amazon and Starbucks unionize. But those jobs tend to be temporary ones—by design at a place like Amazon, which is infamous for paying people to quit. Meanwhile Starbucks workers are often younger and even college-educated. Though both are huge employers—Amazon is America’s second biggest—they also aren’t typical of working-class jobs. And there’s a question of scale, too. The efforts at the Amazon warehouse in Staten Island succeeded where others had failed in large part due to the eschewal of a national union in favor of the creation of a new one specific to the site—the Amazon Labor Union. Far from an endorsement, the success of the Staten Island Amazon warehouse is largely being viewed as a rebuke of organized labor. Moreover, there’s something of a Catch-22 to starting a union in the workplaces where people most need union protections and collective bargaining: It requires someone who paradoxically doesn’t really need the work, who will be ok if the corporate backlash is extreme and they lose their job. Gianna Reeve is a 20-year-old shift supervisor who has worked at a Starbucks in Buffalo for a year and a half. Reeve is a student at Buffalo University where she’s studying psychology, and she is active in the effort to unionize her branch, hoping to follow the lead of another Buffalo Starbucks, the first to unionize. For now, Reeve’s branch seems to have voted against unionizing, though the pro-union faction is contesting the results. Reeve came to Starbucks from Tim Hortons, which she says was grueling work. At Starbucks, employees—Starbucks calls them “partners”—seemed happy to come to work, and Reeve initially felt that they were respected by the company. But in mid-August, a coworker texted to ask if they could talk about something to do with work but “outside of work.” They met at another coffee shop that had recently unionized—a symbolic choice, it turned out—and Reeve’s coworker explained the unionization effort to her and asked if she was interested in helping out.  “I was like, yeah,” Reeve recalled. “I mean, of course, if it means better working conditions for people like my partners, then absolutely.” Reeve was thinking of the people she supervises, most of whom are older than her. She made a point of checking her privilege, pointing out the sad irony of union organizing. “I don't blame any of my partners for being scared or being against unionizing,” she told me. “I'm in a position where I'm able to say, yeah, you know what, let's do it either way. But it's a privilege. I don’t have kids. I don’t have a family I support,” she explained. “I don’t really have anything personally that tethers me. I know that I’m going to be financially and benefits-wise stable, no matter what, so it’s not really a threat they can put against me.” But it’s not just economic privilege. There is an emerging cultural disconnect between the people who most need unions and the people who sometimes run them. At the national level, union staff—especially on the political and public policy side of things—are very likely to be part of what one longtime union leader called the “revolving door of Democratic operatives in Washington.” They have often been guilty of subordinating core working-class interests to what he called “the permanent culture of progressive college-educated coastal elites.” And they are alienating the workers they're supposed to be representing—who are much more socially conservative. A YouGov/American Compass survey of 3,000 workers found that “excessive engagement in politics is the number one obstacle to a robust American labor movement.” “Among those who said they would vote against a union, the top reason cited was union political activity, followed by member dues,” the survey found. “These workers anticipate that unions will focus on politics rather than delivering concrete benefits in their workplaces, and don’t want to pay the cost.” Meanwhile, fear of retaliation was the least cited reason workers gave for why they haven’t unionized. The alliance of unions and Democratic politics often goes beyond labor issues, whether it’s the president of the AFL-CIO applauding a Netflix walkout over a Dave Chappelle special, or one of America's biggest unions endorsing Supreme Court packing, or unionization efforts drawing on slogans like Black Lives Matter to convince workers to vote yes. “When you survey workers, which is what we did, what you find is that this is the thing that they most hate about unions,” Cass told me. Jeff Salovich is a pipefitter foreman at the Minneapolis City Hall, which means he’s in charge of all the heating, air conditioning, and ventilation systems for local government offices, including those of the police chief, the fire chief, City Council, and the mayor. Salovich has been with the Local 539 since 2002, something he’s proud of. But he’s worried about the future of labor in America.  “I think unions are dying,” Salovich told me. And he blames what he calls “political theater.” “There's too many progressives in my mind that don't really understand unions. And although they're trying to represent unions, they're actually doing more harm to unions than they are good.” Though Salovich’s union has people from across the political spectrum, it leans conservative, and there is a divide forming between the blue-collar members and the top-down liberal culture that’s being imposed upon them. “A great majority of the people that I work with—other pipefitters and plumbers and mechanical trades—I would say at least 75% of the workers tend to lean more conservative and are more concerned about keeping their jobs instead of saying the right things or addressing people by pronouns and this and that, all the theatrics that are going on,” he said. “Whereas the people that are running things are being pressured by outside influences to succumb to that.”  For example, in the pipefitter trade, there’s a tool called a nipple that connects different pieces of pipe. But as part of what Salovich sees as progressive pressures on leadership, the word is now verboten, and if you're caught saying it, you'll get reprimanded by your boss. It’s a small example of a much larger trend, he explained. “I think there's that breaking point where people will start to leave if they feel like their dues money is going to political alliances that don't line up with their family's convictions,” he explained.  Many conservatives in the union just stay quiet, hoping this new tidal wave will blow over. But for some, even the good pay and benefits that the union provides isn’t worth it. So, they’re willing to give up their economic interests for cultural issues? “No,” Salovich explained. “Because my interests are not just limited to my paycheck. It's your life,” he said. “They don't understand that people just want to work. I'm coming from a mechanical side. As far as trade staff like painting and plumbing and carpentry and trades that people work with their hands, we don't want to have to be perfect in how we address people and how we talk or be afraid to talk or be who we are as people And the Left side, the progressives, are really pushing a lot of agendas that are not aligned with how we raise our families.” There are a lot of people willing to work for half as much as the unions are offering for peace of mind and a stress-free environment, and to not see their dues go to groups that fund Planned Parenthood. But the more progressive culture may also be contrary to their economic interests; after all, marriage has been correlated with significantly higher earnings, especially for men. They may not have the data at hand to support what they can observe in their communities, but working-class people resisting a politics that is indifferent at best and hostile at worst to traditional values like marriage are, it turns out, acting in their economic interests, too. Many union leaders are cognizant of this cultural divide, like Doug Tansy of Alaska. Tansy is a registered Democrat, but he actively works to combat the politicization of his union. “I purposely always try to get people that will check me,” he told me. “I definitely want that conservative voice at the table, debating with me and decision-making with me because, left to my own devices, I will go too far. I represent a very diverse membership and I use my conservative friends to help check me, to make me defend my ideas and to defend my choices, because I don't want to be one-sided.” But how many Tansys are there?  There’s a devastating irony to the fact that it was a bipartisan anti-worker consensus that resulted in stagnant wages and downward mobility for America’s working-class, and that it is now partisanship that is keeping a strong working class from fighting back.  Americans are often told how divided the nation is, how politically polarized, how we entombed in our own tightly sealed echo chambers. But this is not the reality for millions and millions of working-class Americans outside the few elites who make up our political and chattering classes. Political polarization is a luxury they cannot afford in a marketplace dominated by powerful, profit-maximizing corporations. With the blessing of free-market policies pushed by both political parties in the U.S., millions of good working-class jobs have been shipped overseas, jobs that once catapulted working-class Americans into the middle class and now do the same for the burgeoning middle class in China and elsewhere.  What would help America’s working class? A number of solutions came up with everyone I spoke to. Vocational training was the first. America is unique among wealthy countries in its refusal to invest in skilled trades, something that in countries like Germany and Switzerland has offset the drastic effects of offshoring manufacturing. Universal healthcare was another thing nearly everyone I spoke to agreed upon. Regional or sectoral bargaining was another option that came up, or just a larger culture of collective bargaining that isn’t tied to individual workplaces; it’s why across Northern Europe, corporations like Starbucks and Amazon are forced to deal with unions. And we need new federal labor laws that protect workers—not just businesses.  But none of these goals are achievable so long as organized labor is a political football and what one longtime union organizer and leader called a “subsidiary of the Left wing of the Democratic Party.” Rather than holding the benefits of organized labor hostage until Republican workers agree to fund groups that support Planned Parenthood, those who claim to want a strong labor movement would do better to meet workers where they are—which is increasingly on the social and political right. In other words, Americans who truly care about a stable and thriving working class, one that has access to the American Dream, would do well to learn what workers understand: that more unites us than divides us. In other words, politicians and pundits and journalists and influencers who seek to advance workers’ causes should stop trying to lead and should start following.  Batya Ungar-Sargon is the deputy opinion editor of Newsweek. She is the author of "Bad News: How Woke Media Is Undermining Democracy." *  *  * NOTE FROM GLENN GREENWALD: As is true with all of the Outside Voices freelance articles that we publish here, we edit and fact-check the content to ensure factual accuracy, but our publication of an article or op-ed does not necessarily mean we agree with all or even any of the views expressed by the writer, who is guaranteed editorial freedom here. The objective of our Outside Voices page is to provide a platform for high-quality reporting and analysis that is lacking within the gates of corporate journalism, and to ensure that well-informed, independent reporters and commentators have a platform to be heard. To support the independent journalism we are doing here, please obtain a gift subscription for others and/or share the article Tyler Durden Fri, 04/15/2022 - 19:15.....»»

Category: personnelSource: nytApr 15th, 2022

Beating Inflation: Are The Fed’s Dreams Gold’s Worst Nightmare?

While investors remain happy-go-lucky, fundamental data for gold and silver is now worse than in 2021. Is this the last chance to come back to earth? As another week comes to a close, the winds of change are blowing across the financial markets. However, while many investors and analysts can see only sunny days ahead, […] While investors remain happy-go-lucky, fundamental data for gold and silver is now worse than in 2021. Is this the last chance to come back to earth? As another week comes to a close, the winds of change are blowing across the financial markets. However, while many investors and analysts can see only sunny days ahead, fundamental storm clouds should rain on their parade over the medium term, and it’s quite possible that it’s going to happen shortly. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get Our Activist Investing Case Study! Get the entire 10-part series on our in-depth study on activist investing in PDF. Save it to your desktop, read it on your tablet, or print it out to read anywhere! Sign up below! (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q1 2022 hedge fund letters, conferences and more To explain, this week culminated with the USD Index soaring above 100, the U.S. 10-Year real yield hitting a new 2022 high, and Goldman Sachs’ Financial Conditions Index (FCI) hitting its highest level since the global financial crisis (GFC). However, the PMs paid no mind yet. In fact, investors across many asset classes continue to ignore the implications of these developments. So far. With sentiment poised to shift when the economic scars begin to show, the “this time is different” crowd may regret not heeding the early warning signs. For example, the Bank of Canada (BoC) announced a 50 basis point rate hike on Apr. 13., and with the Fed likely to follow suit in May, the domestic fundamental environment confronting the PMs couldn’t be more bearish. Please see below: Source: BoC Moreover, BoC Governor Tiff Macklem (Canada's Jerome Powell) said: "We are committed to using our policy interest rate to return inflation to target and will do so forcefully if needed." Furthermore, while he added that the BoC could "pause our tightening" if inflation subsides, he cautioned that "we may need to take rates modestly above neutral for a period to bring demand and supply back into balance and inflation back to target." However, with the latter much more likely than the former, the BoC's decision is likely a preview of what the Fed should deliver in the months ahead. Please see below: Source: Reuters To that point, while investors continue to drown out officials’ hawkish cries, I warned on Apr. 13 that the Fed knows full well about the difficulty of the task ahead. I wrote: Fed Governor Lael Brainard said on Apr. 12: “Inflation is too high, and getting inflation down is going to be our most important task.” She added: “I think there’s quite a bit of capacity for labor demand to moderate among businesses by actually reducing job openings without necessitating high levels of layoffs.” As a result, she’s telling you that Fed officials will make it their mission to slow down the U.S. economy.  With phrases like “capacity for labor demand to moderate” and “reducing job openings” code for what has to happen to calm wage inflation, the prospect of a dovish 180 is slim to none. As such, this is bullish for real yields and bearish for the PMs. More importantly, notice her use of that all-important buzzword? Source: Reuters And: Source: Reuters Moreover, where do you think she got it? Source: Reuters Echoing that sentiment, Chicago Fed President Charles Evans (a relative dove) said on Apr. 11 that more than one 50 basis point rate hike could be on the horizon. "Fifty is obviously worthy of consideration; perhaps it's highly likely even if you want to get to neutral by December." As a result, with the USD Index and the U.S. 10-Year real yield already soaring, what do you think will happen if the Fed pushes the U.S. federal funds rate "to neutral by December?" Please see below: Source: Reuters Even more hawkish, Fed Governor Christopher Waller said on Apr. 13: “I think we’re going to deal with inflation. We’ve laid out our plans. We’re in a position where the economy’s strong, so this is a good time to do aggressive actions because the economy can take it.” He added: “I think we want to get above neutral certainly by the latter half of the year, and we need to get closer to neutral as soon as possible.” As a result: Source: CNBC Now, if we presented these quotes to the permabulls, they would say: "So what? We already know that the Fed is going to raise interest rates."  However, while a higher U.S. federal funds rate is now the worst-kept secret, the impact on U.S. economic growth is far from priced in. With investors assuming the Fed will normalize inflation without hurting the U.S. economy, they are positioned for an unrealistic outcome. Stagflation, anyone? Moreover, with the gold and silver prices ignoring everything the Fed throws at them, they're attempting to re-write the history books. However, with Brainard and Waller telling you that their goal is to create a bullish environment for the USD Index and the U.S. 10-Year real yield, the PMs have fought this battle before and lost this battle before. To explain, I wrote on Apr. 6: Please remember that the Fed needs to slow the U.S. economy to calm inflation, and rising asset prices are mutually exclusive to this goal. Therefore, officials should keep hammering the financial markets until investors finally get the message. Moreover, with the Fed in inflation-fighting mode and reformed doves warning that the U.S. economy “could teeter” as the drama unfolds, the reality is that there is no easy solution to the Fed’s problem. To calm inflation, it has to kill demand. As that occurs, investors should suffer a severe crisis of confidence. To that point, Fed officials aren’t even pretending anymore. Waller said on Apr 13: “All we can do is kind of push down demand for these products and take some pressure off the prices that people have to pay for these products. We can’t produce more wheat, we can’t produce more semiconductors, but we can affect the demand for these products in a way that puts downward pressure and takes some pressure off of inflation.” Likewise, Waller was even more realistic when he spoke on Apr. 11: He said: “With housing, can we cool off demand for housing without tanking the construction industry? Can we cool down the labor demand without causing employment to fall? That’s the tricky road that we’re on.” As a result, while Fed officials understand how difficult it will be to normalize inflation, investors remain in la-la land. However, when the “collateral damage” eventually unfolds, the shift in sentiment should result in the profound re-pricing of several financial assets. Please see below: Source: Bloomberg Thus, investors’ uninformed state of denial will likely seem obvious in the months ahead. (Yes, I know, it’s difficult to remain rational while surrounded what’s irrational, and that’s the very thing that makes investing “simple, but not easy”). Moreover, while Macklem cautioned that the BoC could “pause our tightening” if inflation subsides, the same rule applies to the Fed. However, with inflation still raging, the Fed and the BoC are unlikely to change their hawkish tones anytime soon. Case in point. The U.S. Bureau of Labor Statistics (BLS) released the Producer Price Index (PPI) on Apr. 13.,and with outperformance across the board, green lights were present for all of the wrong reasons. For context, the gray figures in the middle column were economists’ consensus estimates. Please see below: Source: Investing.com Likewise, the NFIB released its Small Business Optimism Index on Apr. 12. The report revealed: “The NFIB Small Business Optimism Index decreased in March by 2.4 points to 93.2, the third consecutive month below the 48-year average of 98. Thirty-one percent of owners reported that inflation was the single most important problem in their business, up five points from February and the highest reading since the first quarter of 1981. Inflation has now replaced ‘labor quality’ as the number one problem.” How about this divergence? “Owners expecting better business conditions over the next six months decreased 14 points to a net negative 49%, the lowest level recorded in the 48-year-old survey.” “The net percent of owners raising average selling prices increased four points to a net 72% (seasonally adjusted), the highest reading recorded in the series.” Moreover, “a net 50 percent plan price hikes (up 4 points).” Please see below: Source: NFIB On top of that, “a net 49 percent reported raising compensation, down 1 point from January’s 48-year record high reading. A net 28 percent plan to raise compensation in the next three months, up 2 points from February.” Please see below: Source: NFIB Thus, while the Fed hopes to rein in inflation, U.S. small businesses plan more price hikes and wage increases than in February. Therefore, officials’ hawkish intentions are not nearly hawkish enough. As a result, the medium-term outlook for the U.S. federal funds rate, the USD Index and the U.S. 10-Year real yield couldn’t be more bullish. As mentioned, let’s not forget how optimism often turns to pessimism when the drama unfolds. The bottom line? Investors lack the foresight to see how the Fed’s rate hike cycle will likely unfold. Moreover, with Fed officials warning of the “collateral damage” that occurs when they curb demand to reduce inflation, the permabulls have simply closed their eyes and covered their ears. However, when sentiment is built on a foundation of sand, it often collapses when reality re-emerges. In conclusion, the PMs rallied on Apr 13 as momentum remains the name of the game. However, while sentiment remains robust, gold, silver, and mining stocks’ fundamentals are worse now than at any point in 2021. As a result, history shows that not only are the current prices unsustainable, but profound drawdowns are required for the PMs to reflect their intrusive values. What to Watch for Next Week With more U.S. economic data to be released next week, the most important ones are as follows: 21: Philadelphia Fed manufacturing index With the regional data providing early insight into April’s inflation dynamics, continued price increases will put more pressure on the FOMC. 22: S&P Global’s U.S. manufacturing and services PMIs Unlike the Philadelphia Fed’s index, S&P Global’s data covers the entire U.S. As a result, the performance of growth, employment, and inflation will be of immense importance. All in all, economic data releases impact the PMs because they impact monetary policy. Moreover, if we continue to see higher employment and inflation, the Fed should keep its foot on the hawkish accelerator. And if that occurs, the outcome is profoundly bearish for the PMs. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFA Founder, Editor-in-chief Sunshine Profits: Effective Investment through Diligence & Care All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice. 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Category: blogSource: valuewalkApr 14th, 2022

The Anatomy Of Big Pharma"s Political Reach

The Anatomy Of Big Pharma's Political Reach Authored by Rebecca Strong via Medium.com, They keep telling us to “trust the science.” But who paid for it? After graduating from Columbia University with a chemical engineering degree, my grandfather went on to work for Pfizer for almost two decades, culminating his career as the company’s Global Director of New Products. I was rather proud of this fact growing up — it felt as if this father figure, who raised me for several years during my childhood, had somehow played a role in saving lives. But in recent years, my perspective on Pfizer — and other companies in its class — has shifted. Blame it on the insidious big pharma corruption laid bare by whistleblowers in recent years. Blame it on the endless string of big pharma lawsuits revealing fraud, deception, and cover-ups. Blame it on the fact that I witnessed some of their most profitable drugs ruin the lives of those I love most. All I know is, that pride I once felt has been overshadowed by a sticky skepticism I just can’t seem to shake. In 1973, my grandpa and his colleagues celebrated as Pfizer crossed a milestone: the one-billion-dollar sales mark. These days, Pfizer rakes in $81 billion a year, making it the 28th most valuable company in the world. Johnson & Johnson ranks 15th, with $93.77 billion. To put things into perspective, that makes said companies wealthier than most countries in the world. And thanks to those astronomical profit margins, the Pharmaceuticals and Health Products industry is able to spend more on lobbying than any other industry in America. While big pharma lobbying can take several different forms, these companies tend to target their contributions to senior legislators in Congress — you know, the ones they need to keep in their corner, because they have the power to draft healthcare laws. Pfizer has outspent its peers in six of the last eight election cycles, coughing up almost $9.7 million. During the 2016 election, pharmaceutical companies gave more than $7 million to 97 senators at an average of $75,000 per member. They also contributed $6.3 million to president Joe Biden’s 2020 campaign. The question is: what did big pharma get in return? When you've got 1,500 Big Pharma lobbyists on Capitol Hill for 535 members of Congress, it's not too hard to figure out why prescription drug prices in this country are, on average, 256% HIGHER than in other major countries. — Bernie Sanders (@BernieSanders) February 3, 2022 ALEC’s Off-the-Record Sway To truly grasp big pharma’s power, you need to understand how The American Legislative Exchange Council (ALEC) works. ALEC, which was founded in 1973 by conservative activists working on Ronald Reagan’s campaign, is a super secretive pay-to-play operation where corporate lobbyists — including in the pharma sector — hold confidential meetings about “model” bills. A large portion of these bills is eventually approved and become law. A rundown of ALEC’s greatest hits will tell you everything you need to know about the council’s motives and priorities. In 1995, ALEC promoted a bill that restricts consumers’ rights to sue for damages resulting from taking a particular medication. They also endorsed the Statute of Limitation Reduction Act, which put a time limit on when someone could sue after a medication-induced injury or death. Over the years, ALEC has promoted many other pharma-friendly bills that would: weaken FDA oversight of new drugs and therapies, limit FDA authority over drug advertising, and oppose regulations on financial incentives for doctors to prescribe specific drugs. But what makes these ALEC collaborations feel particularly problematic is that there’s little transparency — all of this happens behind closed doors. Congressional leaders and other committee members involved in ALEC aren’t required to publish any records of their meetings and other communications with pharma lobbyists, and the roster of ALEC members is completely confidential. All we know is that in 2020, more than two-thirds of Congress — 72 senators and 302 House of Representatives members — cashed a campaign check from a pharma company. Big Pharma Funding Research The public typically relies on an endorsement from government agencies to help them decide whether or not a new drug, vaccine, or medical device is safe and effective. And those agencies, like the FDA, count on clinical research. As already established, big pharma is notorious for getting its hooks into influential government officials. Here’s another sobering truth: The majority of scientific research is paid for by — wait for it — the pharmaceutical companies. When the New England Journal of Medicine (NEJM) published 73 studies of new drugs over the course of a single year, they found that a staggering 82% of them had been funded by the pharmaceutical company selling the product, 68% had authors who were employees of that company, and 50% had lead researchers who accepted money from a drug company. According to 2013 research conducted at the University of Arizona College of Law, even when pharma companies aren’t directly funding the research, company stockholders, consultants, directors, and officers are almost always involved in conducting them. A 2017 report by the peer-reviewed journal The BMJ also showed that about half of medical journal editors receive payments from drug companies, with the average payment per editor hovering around $28,000. But these statistics are only accurate if researchers and editors are transparent about payments from pharma. And a 2022 investigative analysis of two of the most influential medical journals found that 81% of study authors failed to disclose millions in payments from drug companies, as they’re required to do. Unfortunately, this trend shows no sign of slowing down. The number of clinical trials funded by the pharmaceutical industry has been climbing every year since 2006, according to a John Hopkins University report, while independent studies have been harder to find. And there are some serious consequences to these conflicts of interest. Take Avandia, for instance, a diabetes drug produced by GlaxoSmithCline (GSK). Avandia was eventually linked to a dramatically increased risk of heart attacks and heart failure. And a BMJ report revealed that almost 90% of scientists who initially wrote glowing articles about Avandia had financial ties to GSK. But here’s the unnerving part: if the pharmaceutical industry is successfully biasing the science, then that means the physicians who rely on the science are biased in their prescribing decisions. Photo credit: UN Women Europe & Central Asia Where the lines get really blurry is with “ghostwriting.” Big pharma execs know citizens are way more likely to trust a report written by a board-certified doctor than one of their representatives. That’s why they pay physicians to list their names as authors — even though the MDs had little to no involvement in the research, and the report was actually written by the drug company. This practice started in the ’50s and ’60s when tobacco execs were clamoring to prove that cigarettes didn’t cause cancer (spoiler alert: they do!), so they commissioned doctors to slap their name on papers undermining the risks of smoking. It’s still a pretty common tactic today: more than one in 10 articles published in the NEJM was co-written by a ghostwriter. While a very small percentage of medical journals have clear policies against ghostwriting, it’s still technically legal —despite the fact that the consequences can be deadly. Case in point: in the late ’90s and early 2000s, Merck paid for 73 ghostwritten articles to play up the benefits of its arthritis drug Vioxx. It was later revealed that Merck failed to report all of the heart attacks experienced by trial participants. In fact, a study published in the NEJM revealed that an estimated 160,000 Americans experienced heart attacks or strokes from taking Vioxx. That research was conducted by Dr. David Graham, Associate Director of the FDA’s Office of Drug Safety, who understandably concluded the drug was not safe. But the FDA’s Office of New Drugs, which not only was responsible for initially approving Vioxx but also regulating it, tried to sweep his findings under the rug. "I was pressured to change my conclusions and recommendations, and basically threatened that if I did not change them, I would not be permitted to present the paper at the conference," he wrote in his 2004 U.S. Senate testimony on Vioxx. "One Drug Safety manager recommended that I should be barred from presenting the poster at the meeting." Eventually, the FDA issued a public health advisory about Vioxx and Merck withdrew this product. But it was a little late for repercussions — 38,000 of those Vioxx-takers who suffered heart attacks had already died. Graham called this a “profound regulatory failure,” adding that scientific standards the FDA apply to drug safety “guarantee that unsafe and deadly drugs will remain on the U.S. market.” This should come as no surprise, but research has also repeatedly shown that a paper written by a pharmaceutical company is more likely to emphasize the benefits of a drug, vaccine, or device while downplaying the dangers. (If you want to understand more about this practice, a former ghostwriter outlines all the ethical reasons why she quit this job in a PLOS Medicine report.) While adverse drug effects appear in 95% of clinical research, only 46% of published reports disclose them. Of course, all of this often ends up misleading doctors into thinking a drug is safer than it actually is. Big Pharma Influence On Doctors Pharmaceutical companies aren’t just paying medical journal editors and authors to make their products look good, either. There’s a long, sordid history of pharmaceutical companies incentivizing doctors to prescribe their products through financial rewards. For instance, Pfizer and AstraZeneca doled out a combined $100 million to doctors in 2018, with some earning anywhere from $6 million to $29 million in a year. And research has shown this strategy works: when doctors accept these gifts and payments, they’re significantly more likely to prescribe those companies’ drugs. Novartis comes to mind — the company famously spent over $100 million paying for doctors’ extravagant meals, golf outings, and more, all while also providing a generous kickback program that made them richer every time they prescribed certain blood pressure and diabetes meds. Side note: the Open Payments portal contains a nifty little database where you can find out if any of your own doctors received money from drug companies. Knowing that my mother was put on a laundry list of meds after a near-fatal car accident, I was curious — so I did a quick search for her providers. While her PCP only banked a modest amount from Pfizer and AstraZeneca, her previous psychiatrist — who prescribed a cocktail of contraindicated medications without treating her in person — collected quadruple-digit payments from pharmaceutical companies. And her pain care specialist, who prescribed her jaw-dropping doses of opioid pain medication for more than 20 years (far longer than the 5-day safety guideline), was raking in thousands from Purdue Pharma, AKA the opioid crisis’ kingpin. Purdue is now infamous for its wildly aggressive OxyContin campaign in the ’90s. At the time, the company billed it as a non-addictive wonder drug for pain sufferers. Internal emails show Pursue sales representatives were instructed to “sell, sell, sell” OxyContin, and the more they were able to push, the more they were rewarded with promotions and bonuses. With the stakes so high, these reps stopped at nothing to get doctors on board — even going so far as to send boxes of doughnuts spelling out “OxyContin” to unconvinced physicians. Purdue had stumbled upon the perfect system for generating tons of profit — off of other people’s pain. Documentation later proved that not only was Purdue aware it was highly addictive and that many people were abusing it, but that they also encouraged doctors to continue prescribing increasingly higher doses of it (and sent them on lavish luxury vacations for some motivation). In testimony to Congress, Purdue exec Paul Goldenheim played dumb about OxyContin addiction and overdose rates, but emails that were later exposed showed that he requested his colleagues remove all mentions of addiction from their correspondence about the drug. Even after it was proven in court that Purdue fraudulently marketed OxyContin while concealing its addictive nature, no one from the company spent a single day behind bars. Instead, the company got a slap on the wrist and a $600 million fine for a misdemeanor, the equivalent of a speeding ticket compared to the $9 billion they made off OxyContin up until 2006. Meanwhile, thanks to Purdue’s recklessness, more than 247,000 people died from prescription opioid overdoses between 1999 and 2009. And that’s not even factoring in all the people who died of heroin overdoses once OxyContin was no longer attainable to them. The NIH reports that 80% of people who use heroin started by misusing prescription opioids. Former sales rep Carol Panara told me in an interview that when she looks back on her time at Purdue, it all feels like a “bad dream.” Panara started working for Purdue in 2008, one year after the company pled guilty to “misbranding” charges for OxyContin. At this point, Purdue was “regrouping and expanding,” says Panara, and to that end, had developed a clever new approach for making money off OxyContin: sales reps were now targeting general practitioners and family doctors, rather than just pain management specialists. On top of that, Purdue soon introduced three new strengths for OxyContin: 15, 30, and 60 milligrams, creating smaller increments Panara believes were aimed at making doctors feel more comfortable increasing their patients’ dosages. According to Panara, there were internal company rankings for sales reps based on the number of prescriptions for each OxyContin dosing strength in their territory. “They were sneaky about it,” she said. “Their plan was to go in and sell these doctors on the idea of starting with 10 milligrams, which is very low, knowing full well that once they get started down that path — that’s all they need. Because eventually, they’re going to build a tolerance and need a higher dose.” Occasionally, doctors expressed concerns about a patient becoming addicted, but Purdue had already developed a way around that. Sales reps like Panara were taught to reassure those doctors that someone in pain might experience addiction-like symptoms called “pseudoaddiction,” but that didn’t mean they were truly addicted. There is no scientific evidence whatsoever to support that this concept is legit, of course. But the most disturbing part? Reps were trained to tell doctors that “pseudoaddiction” signaled the patient’s pain wasn’t being managed well enough, and the solution was simply to prescribe a higher dose of OxyContin. Panara finally quit Purdue in 2013. One of the breaking points was when two pharmacies in her territory were robbed at gunpoint specifically for OxyContin. In 2020, Purdue pled guilty to three criminal charges in an $8.3 billion deal, but the company is now under court protection after filing for bankruptcy. Despite all the damage that’s been done, the FDA’s policies for approving opioids remain essentially unchanged. Photo credit: Jennifer Durban Purdue probably wouldn’t have been able to pull this off if it weren’t for an FDA examiner named Curtis Wright, and his assistant Douglas Kramer. While Purdue was pursuing Wright’s stamp of approval on OxyContin, Wright took an outright sketchy approach to their application, instructing the company to mail documents to his home office rather than the FDA, and enlisting Purdue employees to help him review trials about the safety of the drug. The Food, Drug, and Cosmetic Act requires that the FDA have access to at least two randomized controlled trials before deeming a drug as safe and effective, but in the case of OxyContin, it got approved with data from just one measly two-week study — in osteoarthritis patients, no less. When both Wright and Kramer left the FDA, they went on to work for none other than (drumroll, please) Purdue, with Wright earning three times his FDA salary. By the way — this is just one example of the FDA’s notoriously incestuous relationship with big pharma, often referred to as “the revolving door”. In fact, a 2018 Science report revealed that 11 out of 16 FDA reviewers ended up at the same companies they had been regulating products for. While doing an independent investigation, “Empire of Pain” author and New Yorker columnist Patrick Radden Keefe tried to gain access to documentation of Wright’s communications with Purdue during the OxyContin approval process. “The FDA came back and said, ‘Oh, it’s the weirdest thing, but we don’t have anything. It’s all either been lost or destroyed,’” Keefe told Fortune in an interview. “But it’s not just the FDA. It’s Congress, it’s the Department of Justice, it’s big parts of the medical establishment … the sheer amount of money involved, I think, has meant that a lot of the checks that should be in place in society to not just achieve justice, but also to protect us as consumers, were not there because they had been co-opted.” Big pharma may be to blame for creating the opioids that caused this public health catastrophe, but the FDA deserves just as much scrutiny — because its countless failures also played a part in enabling it. And many of those more recent fails happened under the supervision of Dr. Janet Woodcock. Woodcock was named FDA’s acting commissioner mere hours after Joe Biden was inaugurated as president. She would have been a logical choice, being an FDA vet of 35 years, but then again it’s impossible to forget that she played a starring role in the FDA’s perpetuating the opioid epidemic. She’s also known for overruling her own scientific advisors when they vote against approving a drug. Not only did Woodcock approve OxyContin for children as young as 11 years old, but she also gave the green light to several other highly controversial extended-release opioid pain drugs without sufficient evidence of safety or efficacy. One of those was Zohydro: in 2011, the FDA’s advisory committee voted 11:2 against approving it due to safety concerns about inappropriate use, but Woodcock went ahead and pushed it through, anyway. Under Woodcock’s supervision, the FDA also approved Opana, which is twice as powerful as OxyContin — only to then beg the drug maker to take it off the market 10 years later due to “abuse and manipulation.” And then there was Dsuvia, a potent painkiller 1,000 times stronger than morphine and 10 times more powerful than fentanyl. According to a head of one of the FDA’s advisory committees, the U.S. military had helped to develop this particular drug, and Woodcock said there was “pressure from the Pentagon” to push it through approvals. The FBI, members of congress, public health advocates, and patient safety experts alike called this decision into question, pointing out that with hundreds of opioids already on the market there’s no need for another — particularly one that comes with such high risks. Most recently, Woodcock served as the therapeutics lead for Operation Warp Speed, overseeing COVID-19 vaccine development. Big Pharma Lawsuits, Scandals, and Cover-Ups While the OxyContin craze is undoubtedly one of the highest-profile examples of big pharma’s deception, there are dozens of other stories like this. Here are a few standouts: In the 1980s, Bayer continued selling blood clotting products to third-world countries even though they were fully aware those products had been contaminated with HIV. The reason? The “financial investment in the product was considered too high to destroy the inventory.” Predictably, about 20,000 of the hemophiliacs who were infused with these tainted products then tested positive for HIV and eventually developed AIDS, and many later died of it. In 2004, Johnson & Johnson was slapped with a series of lawsuits for illegally promoting off-label use of their heartburn drug Propulsid for children despite internal company emails confirming major safety concerns (as in, deaths during the drug trials). Documentation from the lawsuits showed that dozens of studies sponsored by Johnson & Johnson highlighting the risks of this drug were never published. The FDA estimates that GSK’s Avandia caused 83,000 heart attacks between 1999 and 2007. Internal documents from GSK prove that when they began studying the effects of the drug as early as 1999, they discovered it caused a higher risk of heart attacks than a similar drug it was meant to replace. Rather than publish these findings, they spent a decade illegally concealing them (and meanwhile, banking $3.2 billion annually for this drug by 2006). Finally, a 2007 New England Journal of Medicine study linked Avandia to a 43% increased risk of heart attacks, and a 64% increased risk of death from heart disease. Avandia is still FDA approved and available in the U.S. In 2009, Pfizer was forced to pay $2.3 billion, the largest healthcare fraud settlement in history at that time, for paying illegal kickbacks to doctors and promoting off-label uses of its drugs. Specifically, a former employee revealed that Pfizer reps were encouraged and incentivized to sell Bextra and 12 other drugs for conditions they were never FDA approved for, and at doses up to eight times what’s recommended. “I was expected to increase profits at all costs, even when sales meant endangering lives,” the whistleblower said. When it was discovered that AstraZeneca was promoting the antipsychotic medication Seroquel for uses that were not approved by the FDA as safe and effective, the company was hit with a $520 million fine in 2010. For years, AstraZeneca had been encouraging psychiatrists and other physicians to prescribe Seroquel for a vast range of seemingly unrelated off-label conditions, including Alzheimer’s disease, anger management, ADHD, dementia, post-traumatic stress disorder, and sleeplessness. AstraZeneca also violated the federal Anti-Kickback Statute by paying doctors to spread the word about these unapproved uses of Seroquel via promotional lectures and while traveling to resort locations. In 2012, GSK paid a $3 billion fine for bribing doctors by flying them and their spouses to five-star resorts, and for illegally promoting drugs for off-label uses. What’s worse — GSK withheld clinical trial results that showed its antidepressant Paxil not only doesn’t work for adolescents and children but more alarmingly, that it can increase the likelihood of suicidal thoughts in this group. A 1998 GSK internal memo revealed that the company intentionally concealed this data to minimize any “potential negative commercial impact.” In 2021, an ex-AstraZeneca sales rep sued her former employer, claiming they fired her for refusing to promote drugs for uses that weren’t FDA-approved. The employee alleges that on multiple occasions, she expressed concerns to her boss about “misleading” information that didn’t have enough support from medical research, and off-label promotions of certain drugs. Her supervisor reportedly not only ignored these concerns but pressured her to approve statements she didn’t agree with and threatened to remove her from regional and national positions if she didn’t comply. According to the plaintiff, she missed out on a raise and a bonus because she refused to break the law. At the top of 2022, a panel of the D.C. Court of Appeals reinstated a lawsuit against Pfizer, AstraZeneca, Johnson & Johnson, Roche, and GE Healthcare, which claims they helped finance terrorist attacks against U.S. service members and other Americans in Iraq. The suit alleges that from 2005–2011, these companies regularly offered bribes (including free drugs and medical devices) totaling millions of dollars annually to Iraq’s Ministry of Health in order to secure drug contracts. These corrupt payments then allegedly funded weapons and training for the Mahdi Army, which until 2008, was largely considered one of the most dangerous groups in Iraq. Another especially worrisome factor is that pharmaceutical companies are conducting an ever-increasing number of clinical trials in third-world countries, where people may be less educated, and there are also far fewer safety regulations. Pfizer’s 1996 experimental trials with Trovan on Nigerian children with meningitis — without informed consent — is just one nauseating example. When a former medical director in Pfizer’s central research division warned the company both before and after the study that their methods in this trial were “improper and unsafe,” he was promptly fired. Families of the Nigerian children who died or were left blind, brain damaged, or paralyzed after the study sued Pfizer, and the company ultimately settled out of court. In 1998, the FDA approved Trovan only for adults. The drug was later banned from European markets due to reports of fatal liver disease and restricted to strictly emergency care in the U.S. Pfizer still denies any wrongdoing. “Nurse prepares to vaccinate children” by World Bank Photo Collection is licensed under CC BY-NC-ND 2.0 But all that is just the tip of the iceberg. If you’d like to dive a little further down the rabbit hole — and I’ll warn you, it’s a deep one — a quick Google search for “big pharma lawsuits” will reveal the industry’s dark track record of bribery, dishonesty, and fraud. In fact, big pharma happens to be the biggest defrauder of the federal government when it comes to the False Claims Act, otherwise known as the “Lincoln Law.” During our interview, Panara told me she has friends still working for big pharma who would be willing to speak out about crooked activity they’ve observed, but are too afraid of being blacklisted by the industry. A newly proposed update to the False Claims Act would help to protect and support whistleblowers in their efforts to hold pharmaceutical companies liable, by helping to prevent that kind of retaliation and making it harder for the companies charged to dismiss these cases. It should come as no surprise that Pfizer, AstraZeneca, Merck, and a flock of other big pharma firms are currently lobbying to block the update. Naturally, they wouldn’t want to make it any easier for ex-employees to expose their wrongdoings, potentially costing them billions more in fines. Something to keep in mind: these are the same people who produced, marketed, and are profiting from the COVID-19 vaccines. The same people who manipulate research, pay off decision-makers to push their drugs, cover up negative research results to avoid financial losses, and knowingly put innocent citizens in harm’s way. The same people who told America: “Take as much OxyContin as you want around the clock! It’s very safe and not addictive!” (while laughing all the way to the bank). So, ask yourself this: if a partner, friend, or family member repeatedly lied to you — and not just little white lies, but big ones that put your health and safety at risk — would you continue to trust them? Backing the Big Four: Big Pharma and the FDA, WHO, NIH, CDC I know what you’re thinking. Big pharma is amoral and the FDA’s devastating slips are a dime a dozen — old news. But what about agencies and organizations like the National Institutes of Health (NIH), World Health Organization (WHO), and Centers for Disease Control & Prevention (CDC)? Don’t they have an obligation to provide unbiased guidance to protect citizens? Don’t worry, I’m getting there. The WHO’s guidance is undeniably influential across the globe. For most of this organization’s history, dating back to 1948, it could not receive donations from pharmaceutical companies — only member states. But that changed in 2005 when the WHO updated its financial policy to permit private money into its system. Since then, the WHO has accepted many financial contributions from big pharma. In fact, it’s only 20% financed by member states today, with a whopping 80% of financing coming from private donors. For instance, The Bill and Melinda Gates Foundation (BMGF) is now one of its main contributors, providing up to 13% of its funds — about $250–300 million a year. Nowadays, the BMGF provides more donations to the WHO than the entire United States. Dr. Arata Kochi, former head of WHO’s malaria program, expressed concerns to director-general Dr. Margaret Chan in 2007 that taking the BMGF’s money could have “far-reaching, largely unintended consequences” including “stifling a diversity of views among scientists.” “The big concerns are that the Gates Foundation isn’t fully transparent and accountable,” Lawrence Gostin, director of WHO’s Collaborating Center on National and Global Health Law, told Devex in an interview. “By wielding such influence, it could steer WHO priorities … It would enable a single rich philanthropist to set the global health agenda.” Photo credit: National Institutes of Health Take a peek at the WHO’s list of donors and you’ll find a few other familiar names like AstraZeneca, Bayer, Pfizer, Johnson & Johnson, and Merck. The NIH has the same problem, it seems. Science journalist Paul Thacker, who previously examined financial links between physicians and pharma companies as a lead investigator of the United States Senate Committee, wrote in The Washington Post that this agency “often ignored” very “obvious” conflicts of interest. He also claimed that “its industry ties go back decades.” In 2018, it was discovered that a $100 million alcohol consumption study run by NIH scientists was funded mostly by beer and liquor companies. Emails proved that NIH researchers were in frequent contact with those companies while designing the study — which, here’s a shocker — were aimed at highlighting the benefits and not the risks of moderate drinking. So, the NIH ultimately had to squash the trial. And then there’s the CDC. It used to be that this agency couldn’t take contributions from pharmaceutical companies, but in 1992 they found a loophole: new legislation passed by Congress allowed them to accept private funding through a nonprofit called the CDC Foundation. From 2014 through 2018 alone, the CDC Foundation received $79.6 million from corporations like Pfizer, Biogen, and Merck. Of course, if a pharmaceutical company wants to get a drug, vaccine, or other product approved, they really need to cozy up to the FDA. That explains why in 2017, pharma companies paid for a whopping 75% of the FDA’s scientific review budgets, up from 27% in 1993. It wasn’t always like this. But in 1992, an act of Congress changed the FDA’s funding stream, enlisting pharma companies to pay “user fees,” which help the FDA speed up the approval process for their drugs. A 2018 Science investigation found that 40 out of 107 physician advisors on the FDA’s committees received more than $10,000 from big pharma companies trying to get their drugs approved, with some banking up to $1 million or more. The FDA claims it has a well-functioning system to identify and prevent these possible conflicts of interest. Unfortunately, their system only works for spotting payments before advisory panels meet, and the Science investigation showed many FDA panel members get their payments after the fact. It’s a little like “you scratch my back now, and I’ll scratch your back once I get what I want” — drug companies promise FDA employees a future bonus contingent on whether things go their way. Here’s why this dynamic proves problematic: a 2000 investigation revealed that when the FDA approved the rotavirus vaccine in 1998, it didn’t exactly do its due diligence. That probably had something to do with the fact that committee members had financial ties to the manufacturer, Merck — many owned tens of thousands of dollars of stock in the company, or even held patents on the vaccine itself. Later, the Adverse Event Reporting System revealed that the vaccine was causing serious bowel obstructions in some children, and it was finally pulled from the U.S. market in October 1999. Then, in June of 2021, the FDA overruled concerns raised by its very own scientific advisory committee to approve Biogen’s Alzheimer’s drug Aduhelm — a move widely criticized by physicians. The drug not only showed very little efficacy but also potentially serious side effects like brain bleeding and swelling, in clinical trials. Dr. Aaron Kesselheim, a Harvard Medical School professor who was on the FDA’s scientific advisory committee, called it the “worst drug approval” in recent history, and noted that meetings between the FDA and Biogen had a “strange dynamic” suggesting an unusually close relationship. Dr. Michael Carome, director of Public Citizen’s Health Research Group, told CNN that he believes the FDA started working in “inappropriately close collaboration with Biogen” back in 2019. “They were not objective, unbiased regulators,” he added in the CNN interview. “It seems as if the decision was preordained.” That brings me to perhaps the biggest conflict of interest yet: Dr. Anthony Fauci’s NIAID is just one of many institutes that comprises the NIH — and the NIH owns half the patent for the Moderna vaccine — as well as thousands more pharma patents to boot. The NIAID is poised to earn millions of dollars from Moderna’s vaccine revenue, with individual officials also receiving up to $150,000 annually. Operation Warp Speed In December of 2020, Pfizer became the first company to receive an emergency use authorization (EUA) from the FDA for a COVID-19 vaccine. EUAs — which allow the distribution of an unapproved drug or other product during a declared public health emergency — are actually a pretty new thing: the first one was issued in 2005 so military personnel could get an anthrax vaccine. To get a full FDA approval, there needs to be substantial evidence that the product is safe and effective. But for an EUA, the FDA just needs to determine that it may be effective. Since EUAs are granted so quickly, the FDA doesn’t have enough time to gather all the information they’d usually need to approve a drug or vaccine. “Operation Warp Speed Vaccine Event” by The White House is licensed under CC PDM 1.0 Pfizer CEO and chairman Albert Bourla has said his company was “operating at the speed of science” to bring a vaccine to market. However, a 2021 report in The BMJ revealed that this speed might have come at the expense of “data integrity and patient safety.” Brook Jackson, regional director for the Ventavia Research Group, which carried out these trials, told The BMJ that her former company “falsified data, unblinded patients, and employed inadequately trained vaccinators” in Pfizer’s pivotal phase 3 trial. Just some of the other concerning events witnessed included: adverse events not being reported correctly or at all, lack of reporting on protocol deviations, informed consent errors, and mislabeling of lab specimens. An audio recording of Ventavia employees from September 2020 revealed that they were so overwhelmed by issues arising during the study that they became unable to “quantify the types and number of errors” when assessing quality control. One Ventavia employee told The BMJ she’d never once seen a research environment as disorderly as Ventavia’s Pfizer vaccine trial, while another called it a “crazy mess.” Over the course of her two-decades-long career, Jackson has worked on hundreds of clinical trials, and two of her areas of expertise happen to be immunology and infectious diseases. She told me that from her first day on the Pfizer trial in September of 2020, she discovered “such egregious misconduct” that she recommended they stop enrolling participants into the study to do an internal audit. “To my complete shock and horror, Ventavia agreed to pause enrollment but then devised a plan to conceal what I found and to keep ICON and Pfizer in the dark,” Jackson said during our interview. “The site was in full clean-up mode. When missing data points were discovered the information was fabricated, including forged signatures on the informed consent forms.” A screenshot Jackson shared with me shows she was invited to a meeting titled “COVID 1001 Clean up Call” on Sept. 21, 2020. She refused to participate in the call. Jackson repeatedly warned her superiors about patient safety concerns and data integrity issues. “I knew that the entire world was counting on clinical researchers to develop a safe and effective vaccine and I did not want to be a part of that failure by not reporting what I saw,” she told me. When her employer failed to act, Jackson filed a complaint with the FDA on Sept. 25, and Ventavia fired her hours later that same day under the pretense that she was “not a good fit.” After reviewing her concerns over the phone, she claims the FDA never followed up or inspected the Ventavia site. Ten weeks later, the FDA authorized the EUA for the vaccine. Meanwhile, Pfizer hired Ventavia to handle the research for four more vaccine clinical trials, including one involving children and young adults, one for pregnant women, and another for the booster. Not only that, but Ventavia handled the clinical trials for Moderna, Johnson & Johnson, and Novavax. Jackson is currently pursuing a False Claims Act lawsuit against Pfizer and Ventavia Research Group. Last year, Pfizer banked nearly $37 billion from its COVID vaccine, making it one of the most lucrative products in global history. Its overall revenues doubled in 2021 to reach $81.3 billion, and it’s slated to reach a record-breaking $98-$102 billion this year. “Corporations like Pfizer should never have been put in charge of a global vaccination rollout, because it was inevitable they would make life-and-death decisions based on what’s in the short-term interest of their shareholders,” writes Nick Dearden, director of Global Justice Now. As previously mentioned, it’s super common for pharmaceutical companies to fund the research on their own products. Here’s why that’s scary. One 1999 meta-analysis showed that industry-funded research is eight times less likely to achieve unfavorable results compared to independent trials. In other words, if a pharmaceutical company wants to prove that a medication, supplement, vaccine, or device is safe and effective, they’ll find a way. With that in mind, I recently examined the 2020 study on Pfizer’s COVID vaccine to see if there were any conflicts of interest. Lo and behold, the lengthy attached disclosure form shows that of the 29 authors, 18 are employees of Pfizer and hold stock in the company, one received a research grant from Pfizer during the study, and two reported being paid “personal fees” by Pfizer. In another 2021 study on the Pfizer vaccine, seven of the 15 authors are employees of and hold stock in Pfizer. The other eight authors received financial support from Pfizer during the study. Photo credit: Prasesh Shiwakoti (Lomash) via Unsplash As of the day I’m writing this, about 64% of Americans are fully vaccinated, and 76% have gotten at least one dose. The FDA has repeatedly promised “full transparency” when it comes to these vaccines. Yet in December of 2021, the FDA asked for permission to wait 75 years before releasing information pertaining to Pfizer’s COVID-19 vaccine, including safety data, effectiveness data, and adverse reaction reports. That means no one would see this information until the year 2096 — conveniently, after many of us have departed this crazy world. To recap: the FDA only needed 10 weeks to review the 329,000 pages worth of data before approving the EUA for the vaccine — but apparently, they need three-quarters of a century to publicize it. In response to the FDA’s ludicrous request, PHMPT — a group of over 200 medical and public health experts from Harvard, Yale, Brown, UCLA, and other institutions — filed a lawsuit under the Freedom of Information Act demanding that the FDA produce this data sooner. And their efforts paid off: U.S. District Judge Mark T. Pittman issued an order for the FDA to produce 12,000 pages by Jan. 31, and then at least 55,000 pages per month thereafter. In his statement to the FDA, Pittman quoted the late John F. Kennedy: “A nation that is afraid to let its people judge the truth and falsehood in an open market is a nation that is afraid of its people.” As for why the FDA wanted to keep this data hidden, the first batch of documentation revealed that there were more than 1,200 vaccine-related deaths in just the first 90 days after the Pfizer vaccine was introduced. Of 32 pregnancies with a known outcome, 28 resulted in fetal death. The CDC also recently unveiled data showing a total of 1,088,560 reports of adverse events from COVID vaccines were submitted between Dec. 14, 2020, and Jan. 28, 2022. That data included 23,149 reports of deaths and 183,311 reports of serious injuries. There were 4,993 reported adverse events in pregnant women after getting vaccinated, including 1,597 reports of miscarriage or premature birth. A 2022 study published in JAMA, meanwhile, revealed that there have been more than 1,900 reported cases of myocarditis — or inflammation of the heart muscle — mostly in people 30 and under, within 7 days of getting the vaccine. In those cases, 96% of people were hospitalized. “It is understandable that the FDA does not want independent scientists to review the documents it relied upon to license Pfizer’s vaccine given that it is not as effective as the FDA originally claimed, does not prevent transmission, does not prevent against certain emerging variants, can cause serious heart inflammation in younger individuals, and has numerous other undisputed safety issues,” writes Aaron Siri, the attorney representing PHMPT in its lawsuit against the FDA. Siri told me in an email that his office phone has been ringing off the hook in recent months. “We are overwhelmed by inquiries from individuals calling about an injury from a COVID-19 vaccine,” he said. By the way — it’s worth noting that adverse effects caused by COVID-19 vaccinations are still not covered by the National Vaccine Injury Compensation Program. Companies like Pfizer, Moderna, and Johnson & Johnson are protected under the Public Readiness and Emergency Preparedness (PREP) Act, which grants them total immunity from liability with their vaccines. And no matter what happens to you, you can’t sue the FDA for authorizing the EUA, or your employer for requiring you to get it, either. Billions of taxpayer dollars went to fund the research and development of these vaccines, and in Moderna’s case, licensing its vaccine was made possible entirely by public funds. But apparently, that still warrants citizens no insurance. Should something go wrong, you’re basically on your own. Pfizer and Moderna COVID-19 vaccine business model: government gives them billions, gives them immunity for any injuries or if doesn't work, promotes their products for free, and mandates their products. Sounds crazy? Yes, but it is our current reality. — Aaron Siri (@AaronSiriSG) February 2, 2022 The Hypocrisy of “Misinformation” I find it interesting that “misinformation” has become such a pervasive term lately, but more alarmingly, that it’s become an excuse for blatant censorship on social media and in journalism. It’s impossible not to wonder what’s driving this movement to control the narrative. In a world where we still very clearly don’t have all the answers, why shouldn’t we be open to exploring all the possibilities? And while we’re on the subject, what about all of the COVID-related untruths that have been spread by our leaders and officials? Why should they get a free pass? Photo credit: @upgradeur_life, www.instagram.com/upgradeur_life Fauci, President Biden, and the CDC’s Rochelle Walensky all promised us with total confidence the vaccine would prevent us from getting or spreading COVID, something we now know is a myth. (In fact, the CDC recently had to change its very definition of “vaccine ” to promise “protection” from a disease rather than “immunity”— an important distinction). At one point, the New York State Department of Health (NYS DOH) and former Governor Andrew Cuomo prepared a social media campaign with misleading messaging that the vaccine was “approved by the FDA” and “went through the same rigorous approval process that all vaccines go through,” when in reality the FDA only authorized the vaccines under an EUA, and the vaccines were still undergoing clinical trials. While the NYS DOH eventually responded to pressures to remove these false claims, a few weeks later the Department posted on Facebook that “no serious side effects related to the vaccines have been reported,” when in actuality, roughly 16,000 reports of adverse events and over 3,000 reports of serious adverse events related to a COVID-19 vaccination had been reported in the first two months of use. One would think we’d hold the people in power to the same level of accountability — if not more — than an average citizen. So, in the interest of avoiding hypocrisy, should we “cancel” all these experts and leaders for their “misinformation,” too? Vaccine-hesitant people have been fired from their jobs, refused from restaurants, denied the right to travel and see their families, banned from social media channels, and blatantly shamed and villainized in the media. Some have even lost custody of their children. These people are frequently labeled “anti-vax,” which is misleading given that many (like the NBA’s Jonathan Isaac) have made it repeatedly clear they are not against all vaccines, but simply making a personal choice not to get this one. (As such, I’ll suggest switching to a more accurate label: “pro-choice.”) Fauci has repeatedly said federally mandating the vaccine would not be “appropriate” or “enforceable” and doing so would be “encroaching upon a person’s freedom to make their own choice.” So it’s remarkable that still, some individual employers and U.S. states, like my beloved Massachusetts, have taken it upon themselves to enforce some of these mandates, anyway. Meanwhile, a Feb. 7 bulletin posted by the U.S. Department of Homeland Security indicates that if you spread information that undermines public trust in a government institution (like the CDC or FDA), you could be considered a terrorist. In case you were wondering about the current state of free speech. The definition of institutional oppression is “the systematic mistreatment of people within a social identity group, supported and enforced by the society and its institutions, solely based on the person’s membership in the social identity group.” It is defined as occurring when established laws and practices “systematically reflect and produce inequities based on one’s membership in targeted social identity groups.” Sound familiar? As you continue to watch the persecution of the unvaccinated unfold, remember this. Historically, when society has oppressed a particular group of people whether due to their gender, race, social class, religious beliefs, or sexuality, it’s always been because they pose some kind of threat to the status quo. The same is true for today’s unvaccinated. Since we know the vaccine doesn’t prevent the spread of COVID, however, this much is clear: the unvaccinated don’t pose a threat to the health and safety of their fellow citizens — but rather, to the bottom line of powerful pharmaceutical giants and the many global organizations they finance. And with more than $100 billion on the line in 2021 alone, I can understand the motivation to silence them. The unvaccinated have been called selfish. Stupid. Fauci has said it’s “almost inexplicable” that they are still resisting. But is it? What if these people aren’t crazy or uncaring, but rather have — unsurprisingly so — lost their faith in the agencies that are supposed to protect them? Can you blame them? Citizens are being bullied into getting a vaccine that was created, evaluated, and authorized in under a year, with no access to the bulk of the safety data for said vaccine, and no rights whatsoever to pursue legal action if they experience adverse effects from it. What these people need right now is to know they can depend on their fellow citizens to respect their choices, not fuel the segregation by launching a full-fledged witch hunt. Instead, for some inexplicable reason I imagine stems from fear, many continue rallying around big pharma rather than each other. A 2022 Heartland Institute and Rasmussen Reports survey of Democratic voters found that 59% of respondents support a government policy requiring unvaccinated individuals to remain confined in their home at all times, 55% support handing a fine to anyone who won’t get the vaccine, and 48% think the government should flat out imprison people who publicly question the efficacy of the vaccines on social media, TV, or online in digital publications. Even Orwell couldn’t make this stuff up. Photo credit: DJ Paine on Unsplash Let me be very clear. While there are a lot of bad actors out there — there are also a lot of well-meaning people in the science and medical industries, too. I’m lucky enough to know some of them. There are doctors who fend off pharma reps’ influence and take an extremely cautious approach to prescribing. Medical journal authors who fiercely pursue transparency and truth — as is evident in “The Influence of Money on Medical Science,” a report by the first female editor of JAMA. Pharmacists, like Dan Schneider, who refuse to fill prescriptions they deem risky or irresponsible. Whistleblowers, like Graham and Jackson, who tenaciously call attention to safety issues for pharma products in the approval pipeline. And I’m certain there are many people in the pharmaceutical industry, like Panara and my grandfather, who pursued this field with the goal of helping others, not just earning a six- or seven-figure salary. We need more of these people. Sadly, it seems they are outliers who exist in a corrupt, deep-rooted system of quid-pro-quo relationships. They can only do so much. I’m not here to tell you whether or not you should get the vaccine or booster doses. What you put in your body is not for me — or anyone else — to decide. It’s not a simple choice, but rather one that may depend on your physical condition, medical history, age, religious beliefs, and level of risk tolerance. My grandfather passed away in 2008, and lately, I find myself missing him more than ever, wishing I could talk to him about the pandemic and hear what he makes of all this madness. I don’t really know how he’d feel about the COVID vaccine, or whether he would have gotten it or encouraged me to. What I do know is that he’d listen to my concerns, and he’d carefully consider them. He would remind me my feelings are valid. His eyes would light up and he’d grin with amusement as I fervidly expressed my frustration. He’d tell me to keep pushing forward, digging deeper, asking questions. In his endearing Bronx accent, he used to always say: “go get ‘em, kid.” If I stop typing for a moment and listen hard enough, I can almost hear him saying it now. People keep saying “trust the science.” But when trust is broken, it must be earned back. And as long as our legislative system, public health agencies, physicians, and research journals keep accepting pharmaceutical money (with strings attached) — and our justice system keeps letting these companies off the hook when their negligence causes harm, there’s no reason for big pharma to change. They’re holding the bag, and money is power. I have a dream that one day, we’ll live in a world where we are armed with all the thorough, unbiased data necessary to make informed decisions about our health. Alas, we’re not even close. What that means is that it’s up to you to educate yourself as much as possible, and remain ever-vigilant in evaluating information before forming an opinion. You can start by reading clinical trials yourself, rather than relying on the media to translate them for you. Scroll to the bottom of every single study to the “conflicts of interest” section and find out who funded it. Look at how many subjects were involved. Confirm whether or not blinding was used to eliminate bias. You may also choose to follow Public Citizen’s Health Research Group’s rule whenever possible: that means avoiding a new drug until five years after an FDA approval (not an EUA, an actual approval) — when there’s enough data on the long-term safety and effectiveness to establish that the benefits outweigh the risks. When it comes to the news, you can seek out independent, nonprofit outlets, which are less likely to be biased due to pharma funding. And most importantly, when it appears an organization is making concerted efforts to conceal information from you — like the FDA recently did with the COVID vaccine — it’s time to ask yourself: why? What are they trying to hide? In the 2019 film “Dark Waters” — which is based on the true story of one of the greatest corporate cover-ups in American history — Mark Ruffalo as attorney Rob Bilott says: “The system is rigged. They want us to think it’ll protect us, but that’s a lie. We protect us. We do. Nobody else. Not the companies. Not the scientists. Not the government. Us.” Words to live by. Tyler Durden Sat, 04/09/2022 - 22:30.....»»

Category: personnelSource: nytApr 9th, 2022

Peter Schiff: America Is Heading For Stagflation

Peter Schiff: America Is Heading For Stagflation Via SchiffGold.com, Most people seem to think that tighter monetary policy will bring on a recession, but they believe that it will solve the inflation problem. In his podcast, Peter Schiff explained why they’ve got it half right. We are heading toward a recession, but it’s not going to solve the inflation problem. In reality, we’re heading for stagflation. Inflation is a problem globally, but the only major central bank talking about fighting inflation is the Fed. The European Central Bank and the Bank of Japan continue to hold interest rates down and run quantitative easing, despite rising prices in both economies. And as Peter said, all the Fed is doing is talking. It won’t actually fight inflation. Their inconsequential, tiny rate hikes are going to do anything. In fact, the only reason they’re raising rates at all is to pretend they can keep on doing it. But at some point, they will reverse course because the bond market has that right. These higher rates are going to cause a recession, and it’s not going to take that many hikes to push the economy into recession given how addicted the economy is and how overleveraged the economy is. So, once the impact on the economy and on the financial markets is felt, then the Fed is going to give up all the tough talk and inflation is going to continue to get worse.” As Peter mentioned, the bond market is already signaling recession warnings with inversions of the yield curve. Meanwhile, bonds had their worst quarter in 40 years. And the data is starting to reveal cracks in the economy. Construction spending disappointed, coming in 0.4% below expectation. It was up 0.5%. The expectation was a 0.9% increase. This reflects an increase in the dollars spent on construction, not an increase in construction per see. Peter said he thinks construction is slowing down due to rapidly rising costs. What’s happening is we’re constructing fewer structures, but we are paying a lot more to construct the ones we are building, and that’s why construction spending is going up — because builders are spending more money to build fewer homes. So, again, this is not good news. This is bad news for the economy.” And it’s only going to get worse as mortgage rates increase. Mortgage applications have already dropped as rates charted the fastest run-up since 1994. ISM manufacturing numbers also came in weaker than expected. Manufacturing grew in March, but it was down from February. The expectation was for the ISM to come in at 59, up slightly from 58.6 in February. The actual number was 57.1. We also got the March jobs numbers last week. Most pundits spun them as good news with the addition of 431,000 jobs and significant upward revisions the January and February. But this was largely a function of huge adjustments made by the BLS. Nevertheless, the unemployment rate dropped down to 3.6%. Of course, government numbers understate unemployment. But this is still a low number. Most mainstream economists, particularly those at the Fed, believe low unemployment is correlated to inflation. That being the case, Peter said interest rates should be much higher. We have a huge inflation problem, and the Fed continues to drag their feet. Even though they acknowledge that it’s a big problem, they’re doing nothing about solving it. Raising interest rates from zero to 25 basis points in the face of this huge problem is not solving it. It’s continuing to make it worse. They are throwing gasoline on a fire even though they acknowledge that the fire is burning, which again proves it’s not about inflation. The Fed knows they can’t fight inflation. But they also know they can’t admit that. So, they’re trying to solve the problem by pretending they’re fighting inflation even though they continue to create it.” There are all kinds of reasons bandied about for rising prices. But ultimately, it is the Federal Reserve and its expansion of the money supply. To the extent that the economy gets weaker, they’re going to try to expand the money supply even more aggressively to try to stimulate it, which is why we’re going to have more inflation during the next recession.” All of this adds up to stagflation. In this podcast, Peter also talks about the stock market, the dollar, the bond market and commodities. Tyler Durden Wed, 04/06/2022 - 08:15.....»»

Category: personnelSource: nytApr 6th, 2022

"Now It"s About The Ice": Mike Wilson Says Bear Market Rally Is Over

"Now It's About The Ice": Mike Wilson Says Bear Market Rally Is Over With one half of Wall Street - such as the degenerate permabulls at JPM - desperate to see the record distribution extend and retail investors continue to buy everything that liquidating hedge funds have to sell, and urging anyone who still listens to them to ignore such recession signs as yield curve inversion, while the other half of Wall Street is dazed and confused and unable to decide whether to buy here (along with most other hedge funds) or to bet it all on green (along with most degenerated retail traders) and pray for another short squeeze, few dare to invoke the worst case: namely, that the March bear market rally is over and that a recession is imminent. However, Morgan Stanley's chief US equity strategist Mike Wilson, who has been feuding with BofA's Michael Hartnett for biggest reformed bear (unlike the likes of Albert Edwards who were always bearish), has no such problems and in his latest Weekly Warm-up note writes that "after one of the roughest quarters in history for stocks and bonds collectively, the markets better reflects the "Fire" part of our narrative; but now it's about the "Ice," and that's decidedly worse for stocks relative to bonds." And so, as the market comes to the realization of just how bad it will still get, Wilson declares that "the bear market rally is now over" as markets grasp the realization that the US economy is heading for a sharp slowdown driven by  i) payback in demand from last year's fiscal stimulus, ii) demand destruction from high prices, iii) food and energy price spikes from the war that serve as a tax, and iv) inventory builds that have now caught up to demand. And as this increasingly brutal macroeconomic backdrop eats away at corporate profits, it will be increasingly harder for investors to ignore, and stock prices will be hammered next. Some more background. First, looking back at the just concluded quandary of a quarter, Wilson writes that given how bad first quarter returns were for both stocks and bonds, "most investors (both asset owners and manager) were probably happy to see it end." Furthermore, the bear market rally in the second half of March - which as we explained on several occasions was not due to fundamentals but to technicals and positioning - made it considerably better for stocks than it was looking just a few weeks ago. In the end, Wilson notes, "bond returns ranked much worse than stocks from a historical perspective, with Treasuries posting their worst quarter in 50 years." Yet while for many the turmoil of Q1 was a surprise, it was not surprise to Wilson who writes that "the tough 1Q was very much in line with our view coming into 2022 – i.e. we didn't see many fat pitches given the Fed's (and other central banks') resolve to fight the surge in inflation in the face of slowing growth (Tightening Fed and Slowing Growth = Defense)." Indeed, whether it was for technical or fundamental reasons, bond and stock markets ignored this risk into year end 2021 and instead they required an additional prompt, which the Fed - which as a reminder is hoping to crash stocks according to Zoltan Pozsar - gladly supplied with the minutes of its December meeting on January 5th. From that moment, both stocks and bonds made a sharp U-turn and never really looked back for the entire first month of the year. In short, headline indices in stocks and bonds finally adjusted to the "Fire" part of Wilson's narrative, i.e., the sharply higher rate reality, a risk that started to price under the surface in early November when Powell was renominated. And so, with inflation (finally) on everyone's mind in 1Q more than any other risk, it made sense that bonds would be worse than equities. It also makes sense that stocks most vulnerable to higher rates did even worse than the more diversified S&P 500 index – i.e. the Nasdaq performance was considerably worse than both the S&P 500 and Russell 2000, a very rare occurrence over the past few years. And, this is after a major rally in the past two weeks that was led by the Nasdaq. Wilson's takeaway was that markets were preoccupied with the Fed's sharp pivot more than anything else and it played out in asset prices, appropriately. … but now comes the slowdown It's not just the fire and ice narrative: the other major driver of markets in Q1 was the war in Ukraine. While tensions had been building since late last year, it's fair to say markets had ignored this risk as much as the Fed's pivot. The only difference is that the Fed's pivot was well telegraphed while Russia's invasion was far from a sure thing and more of an unknown known to most, including Wilson. Such an event did materially factor into the risks for 1Q by accentuating the Fire and Ice – i.e., it made inflation worse while dampening growth prospects simultaneously.  It has also rattled confidence for both businesses and consumers, especially in Europe. And since this was not in Morgan Stanley's already bearish calculus when the bank made its forecasts for 2022, it now finds itself "incrementally more negative on growth trends than we were at the end of last year." Wilson lays out what this incremental bearishness means in practical terms: Last fall we pushed out the timing of the Ice part of our narrative to 1H22 when we realized the economy still had plenty of strength left for companies to deliver on earnings growth. But, now investors face multiple headwinds to growth that will be harder to ignore – i) payback in demand from last year's fiscal stimulus, ii) demand destruction from high prices, iii) food and energy price spikes from the war that serve as a tax, and iv) inventory builds that have now caught up to demand. While the first three headwinds are somewhat appreciated, we think the last one is not. Specifically, and in keeping with last week's FreightWaves "recession is imminent" note that crushed the freight sector, Morgan Stanley had been highlighting the risk for supply to overwhelm demand in many goods this year while most have viewed the recent build in inventory as mainly a positive that will help tame inflation. Here, Wilson would warn investors to be careful what you wish for: "Inflation has been an elixir for profits for most of this recovery. Until now, companies have had little problem passing along higher costs, hence why we have inflation. However, as supply catches up to demand, pricing power will likely dissipate and discounting could return in many areas of consumer goods that typically are price takers." Separately, Wilson expects to also see cancellations of orders that were doubled up due to the shortages. It's why the bearish strategist warns that "semiconductor stocks and other areas of the market that have very fragmented supply chains look to be the most vulnerable." Which brings us to the punchline of Wilson's latest note: The bear market rally is over On that score, the strategist writes that "Friday's ISM release showed a sharp deterioration in the orders component, and relative to inventories, it looks even worse, with the inventory component of the index now below orders for the first time since the recovery began." Think of this as a book to bill for the broader manufacturing economy. Based on the Ice and over-ordering thesis, this is precisely the worst case outcome that Wilson had been expecting... and now it is here. As shown previously, this differential between the orders and inventories components leads the headline index (Exhibit 2). Importantly for investors, it suggests the S&P 500 has another rough month(s) ahead (Exhibit 3). Bottom line, the rally in stocks over the past few weeks has been remarkable, but in our view it has all the characteristics of a bear market rally, and we view month/quarter end as the perfect spot for it to come to an end. How to trade the end of the bear market rally? While we know of quite a few banks and strategists who will go apeshit at Wilson's dismal assessment, most of all Marko Kolanovic who has literally said to buy the dip every single week in 2022... ... Wilson goes one step further and rubs it into the faces of all those sellsides who expected the S&P to close above 5,000 (and are now desperately dragging their forecasts lower) and writes that based on his Fire and Ice narrative and all of the building evidence to support it, he has been defensively positioned in his strategy recommendations since he published his year ahead outlook back in mid November: "while not a straight line, this positioning has worked well and has dominated a growth or cyclicals bias (Exhibit 4 and Exhibit 5). Our big miss was being equal weight Energy although in our Fresh Money Buy list we have effectively been overweight with our 10% position in Exxon as a "defensively" oriented energy stock. Bottom line, defensive positioning has been the right move." This defensive domination may surprise Wilson's readers given the large weighting of Energy within cyclicals and the fact that rates have moved up so much in the past several months. As he explains, "typically defensives act poorly in a rising rate environment as they serve as a bond proxy in many ways. However, bond proxies are doing well, especially over the past week when Real Estate and Utilities were the best-performing sectors. It's also worth noting that on the back of Friday's strong labor market report, 30-year bonds rallied 2 points from the intra-day lows." While some of this may be due to the ugly ISM report noted above, Wilson's sense is that the markets are starting to price in our Ice scenario right on cue. And, in this context, the strategist thinks that 30-year Treasuries offer an excellent hedge against the growth scare he expects now that the Fed is fully priced: "Last week's price action seems to support such a view and we're sticking to it with our reiteration of defensive stocks as the place to be. We remain overweight Utilities, REITs and Healthcare." Conversely, Wilson is also underweight Consumer Discretionary and cyclical Tech while keeping equal weights in everything else and focusing on stock picking; MS is also recommending Defensives over both cyclicals and growth. Finally, following Wilson's last week downgrade of Banks, he thinks that the pair of Utilities over Banks looks particularly attractive. With Banks positively correlated to back end rates, "this is another example of the internals of the market saying we close to a top." Last but not least, the inversion of the yield curve - which was not mentioned yet - is clearly supportive of this relative value trade as it signals late cycle, a time when Utilities dominate early cycle groups like Banks. The pair is also highly correlated to the ISM manufacturing index, which is headed much lower. Tyler Durden Mon, 04/04/2022 - 14:05.....»»

Category: dealsSource: nytApr 4th, 2022

"Will Retail Traders Force Institutions To Chase Stocks" - Why Goldman Expects "Massive" Rotation Into Stocks In Q2

"Will Retail Traders Force Institutions To Chase Stocks" - Why Goldman Expects "Massive" Rotation Into Stocks In Q2 Over the weekend, when looking at the latest JPMorgan Prime Brokerage data, we noted that the "pain trade" remains higher as unlike retail, hedge funds have been selling every rally aggressively with the largest US bank seeing "net selling in 8 of the past 9 days," during which stocks have staged a torrid rally. At the same time, we also observed that the bulk of the recent market meltup has been on the back of a massive short squeeze and covering of puts (creating a delta and gamma squeeze) which makes it especially difficult to predict what happens next as most if not all of the recent market meltup has been due to technicals and positioning, not fundamentals. Still, one can conclude that either hedge funds will reverse their selling soon and jump on board the retail buying bandwagon (at which point it will again be time to short), or retail will run out of buying power amid the hedge fund-to-retail "distribution", and stocks will tumble once again. The outcome of that tensions is, according to Goldman's flow trader Scott Rubner, the $64 trillion question: as he writes in his latest Tactical Flow of Funds note - in which he says that the top institutional investor question has been "who is buying the market +500 points in the last two weeks?" - do retail traders force institutional investors to re-leverage back into the equity market above (the prior ceiling of $4600). Here are Rubner's 5 main (bullish, of course) observations: The S&P 500 has closed up more than >1% in 6 out of the last 8 trading days. In the last 80 years, that’s only happened 2 other times. US bonds are down -6.3% so far this year, on pace for their worst year on record (record is - 2.9% in 1994). If the month closed today, US bonds would have the worst monthly performance in 42 years. "I expect a MASSIVE rotation into equities in Q2. When do we start talking about new all-time highs for US Equities? Great Rotation / Great Migration type of stuff." Global PWM’s are making the calls today for next week. “hey, so we have these bonds, and we are sitting on cash”..... but inflation, yadda yadda yadda. new Q = new inflows. Going back to the divergence between retail and institutional investors, here is why Rubner is "tracking the message boards again": US Households own 39% of the $80 Trillion US Equity Market. ($31 Trillion) Hedge Funds own 2% of the US Equity Market. Households own 20x more market cap than Hedge Funds (ZH: this, however, is a grossly inaccurate at best, since household ownership is a plug in the Fed's Flow of Funds report, and if anything, represents how little the Fed actually knows where the money ends up). Goldman's analysis shows that the largest owner of the equity market, has scope to become the largest trader of the equity market yet again (ZH: we very much doubt this, which is nothing more than Goldman's desperate attempt to goal seek a bullish case). This is the biggest swing factor in the market today, and also the largest source of aggressive trading demand (at a time when liquidity and value traded has decreased). You have to remember, despite the bearish macro backdrop and investor sentiment, this is not true for message board traders. Open the apps’s today to get the vibe. The next few charts show the surge in recent retail participation: This is where retail participation is highest: Rubner then takes a look at the bigger tactical flow of funds checklist, and gives the lists the following 12 reasons why the S&P rallied ~500 handles in 11 trading days, and why he expects it will keep rallying? April is a strong seasonal month. Over the last decade the average return for April is 2.34%, the second best month after November. Great Rotation - Investors are reducing money in bonds, 11 straight weeks of outflows, and huge redemptions from cash funds losing to inflation by -7%. Households have $15 Trillion in cash holding. Retail is back. Retail participation has dramatically increased and retail are buying weekly calls again. (+50% moves in GME, and huge gains in core retail favorites, TSLA/NVDA). Watch TSLA stock split news. They have fully paid their April 18th tax bill. Great Repatriation Migration “I’m coming home”. This was the largest monthly move back into the USA on record (out of rest of world). Lot of $ is parked in low quality overseas. Foreigners also coming back to the US. Systematic. We have +$46B worth of equities to buy from CTAs. This will take us through the end of the quarter. Corporates are still the largest buyer in market, in a modest blackout window. Net demand (buybacks ex-issuance) is expected to be a record $700 Billion. $3.5 Trillion worth of option notional rolled off two weeks ago. Gamma is short. The street is very short gamma around ATM strike. PWM Model portfolios are aggressively selling bonds / credit, and moving back into US quality / tech / dividends. Our PB team, showed a further capitulation of gross and net HF exposure. HF’s generally are under exposed to a rally, and want not lag indices before statements go out on quarter-end. Sentiment remains below COVID, March 2020 lows. (-1.8%) Liquidity remains challenged. You can trade $5M on the screens of ESA (E-mini futures), this ranks in the 4th percentile in the last decade. This has had the most impact on the shorts trying to cover. Goldman's bottom line: "flow of funds are still positive for the next two weeks, and there is a lack of supply." Tyler Durden Mon, 04/04/2022 - 12:45.....»»

Category: smallbizSource: nytApr 4th, 2022

Sri Lanka Turns Off Street Lights As Energy Crisis Worsens; Fishermen Unable To Sail For Lack Of Fuel

Sri Lanka Turns Off Street Lights As Energy Crisis Worsens; Fishermen Unable To Sail For Lack Of Fuel Tiny Sri Lanka is struggling through an economic crisis that is having terrible repercussions for its economy, as a brutal energy crisis threatens to blossom into shortages of food and other essential goods. Thanks to an energy crisis (and China's reluctance to allow the country to restructure its debts), Sri Lanka is resorting to turning off its street lights to save electricity as its worst economic crisis in decades bites, forcing - among other cutbacks - the temporary closure of the local stock market as the impact of the crisis is felt (the Colombo Stock Exchange reduced daily trading to two hours from the usual four-and-a-half because of the power cuts for the rest of this week at the request of brokers). The island nation of 22 million people is struggling with rolling power cuts for up to 13 hours a day as the government is unable to make payments for fuel imports because of a lack of foreign exchange. According to Reuters, the energy-drained country expects a diesel shipment paid for under a $500 million line of credit from neighboring India is expected to arrive on Saturday, but the situation isn't expected to improve any time soon, as power restriction will need to continue, according to the country's power minister. "We have already instructed officials to shut off street lights around the country to help conserve power," Power Minister Pavithra Wanniarachchi told reporters. ... "Once that arrives we will be able to reduce load shedding hours but until we receive rains, probably some time in May, power cuts will have to continue," Wanniarachchi told reporters, referring to the rolling power cuts. "There's nothing else we can do." Another reason for the power crisis (and a lesson for all nations that are aiming to ramp up 'green' energy sources): Water levels at reservoirs feeding hydro-electric projects had fallen to record lows, while demand had also hit record levels during the hot, dry season, she said. As Reuters explains, the crisis in Sri Lanka is the result of a confluence of factors that have drained the country's foreign exchange reserves. The crisis is a result of badly timed tax cuts and the impact of the coronavirus pandemic coupled with historically weak government finances, leading to foreign exchange reserves dropping by 70% in the last two years. Sri Lanka was left with reserves of $2.31 billion as of February, forcing the government to seek help from the International Monetary Fund and other countries, including India and China. And if the situation doesn't improve soon, the small country's energy crisis could metastasize into a food crisis. Because, as the AFP explains, without fuel, the country's fishermen have been stranded on shore, unable to reel in the day's catch. And the ramifications are being felt by families across the country. "If we queue up by five in the morning, then we will get fuel by three in the afternoon, on good days," Arulanandan, a seasoned member of Negombo's close-knit fishing community, tells AFP. "But for some, even that is not possible, because by the time they get to the end of the queue, the kerosene is gone." As they look for somebody to blame, the locals have settled on one key culprit: Beijing, and its 'debt diplomacy', which seems to have caught Colombo in its trap. One of the reasons behind economic crisis in Sri Lanka is its huge debt to China. Sri Lanka asked China to restructure debt repayments. China will implement its debt trap diplomacy in Sri Lanka Instead of claiming Indian territory, Nepal should learn from the Sri Lankan crisis — Anshul Saxena (@AskAnshul) March 31, 2022 Tyler Durden Thu, 03/31/2022 - 20:00.....»»

Category: blogSource: zerohedgeMar 31st, 2022