US Stocks Extend Losses On China Smartphone News US equity markets were already in puke mode following catastrophic earnings from WMT, TGT, and a bunch of other retailers confirming the US consumer is about to implode, but headlines from Nikkei just sparked another leg lower. According to Nikkei, China’s top smartphone makers - Xiaomi, Vivo, and Oppo - have told suppliers to scale back orders for the upcoming quarters by about 20% due to supply chain disruptions from the country’s Covid-19 lockdowns (i.e., demand has cratered). Xiaomi, China's biggest smartphone maker and No. 3 globally, has told suppliers that it will lower its full-year forecast to around 160 million to 180 million units from its previous target of 200 million. Xiaomi shipped 191 million smartphones last year and is aiming to become the world's leading smartphone maker. The company could adjust its orders again as it continues to monitor the supply chain situation and consumer demand in its home market. Meanwhile, Vivo and Oppo are also seeking to reduce excessive inventories. Vivo told suppliers it will not update specifications for key components to reduce costs. The news sent futures into an (even faster) freefall, led by a 3.5% plunge in Nasdaq... With AAPL down hard... As stocks plunge, bonds are bid with yields tumbling 6-8bps across the curve, with 10Y once again unable to hold above 3.00%... How much more pain is Powell willing to take? Tyler Durden Wed, 05/18/2022 - 11:35.....»»

How Much Has Inflation And Free-Money Goosed Consumer Spending?.....»»

Half Of Biden's Twitter Followers Are Fake According To Audit An audit of President Joe Biden's Twitter account found that nearly half of his 22.2 million followers are fake. According to Newsweek, an audit tool provided by SparkToro found that 49.3% of accounts following @POTUS, who officially received the most votes in US history, are "fake followers." The analysis was based on several factors, including 'location issues, default profile images and new users,' according to the report. SparkToro defines fake followers as "accounts that are unreachable and will not see the account's tweets (either because they're spam, bots, propaganda, etc. or because they're no longer active on Twitter)." The software company's tool also found that Biden's account has more fake followers than most. -Newsweek The topic of fake accounts has resurfaced following Elon Musk's deal to purchase the social media giant for $44 billion. On Tuesday, Musk said the deal "cannot move forward" until CEO Parag Agrawal publicly proves that 5% or less of Twitter accounts are "fake/spam," as his offer "was based on Twitter's SEC filings being accurate. On Monday, Agrawal posted a lengthy Twitter screed in which he essentially said he couldn't reveal how many users are actually fake. "Unfortunately, we don’t believe that this specific estimation can be performed externally, given the critical need to use both public and private information (which we can’t share)," to which Musk replied with a poo emoji and asked "So how do advertisers know what they’re getting for their money? This is fundamental to the financial health of Twitter." So how do advertisers know what they’re getting for their money? This is fundamental to the financial health of Twitter. — Elon Musk (@elonmusk) May 16, 2022 Shares of Twitter are now trading under its pre-Musk announcement price of $39.31. Tyler Durden Wed, 05/18/2022 - 12:05.....»»

Pennsylvania GOP Senate Race Too Close To Call, Recount Expected Authored by Jeff Louderback via The Epoch Times (emphasis ours), For weeks, polls showed that the Pennsylvania GOP U.S. Senate primary was too close to call. Results from primary election day demonstrate that projection was accurate. Republican U.S. Senate candidate Mehmet Oz greets supporters after the primary race resulted in an automatic re-count due to close results on May 17, 2022, in Newtown, Pa. (Stephanie Keith/Getty Images) Though he slipped to third in some recent polls and saw former President Donald Trump endorse celebrity doctor Mehmet Oz in April, hedge fund investor and  U.S. Treasury Dept. official David McCormick carried a slim lead for most of the night in the primary on May 17. In the early hours of May 18, Oz pulled ahead. With 95 percent of the precincts reporting at 12:30 a.m., Oz received 31.2 percent of the vote (397,347) while McCormick tallied 31.1 percent (396,724) and Barnette accumulated 24.7 percent (314,828), according to Decision Desk HQ. In Pennsylvania, an automatic recount is triggered when the difference between the leading candidates is within .5 percent. An official winner might not be known for days. At 11:30 p.m., McCormick took the stage at his watch party in Pittsburgh as results showed he was clinging to a .2 percent lead. “We had a pretty good day today,” McCormick said, drawing applause from the crowd. “There was a huge outpouring of support across the state. We knew it. We felt it on the ground. “We are going to win this campaign,” he added. “Right now, tens of thousands of mail-in ballots have not been counted and will need to be counted tomorrow. There will be no resolution tonight, but we can see victory ahead.” Thank you to all of #TeamMcCormick who’s working hard all over the Commonwealth to help us cross the finish line! pic.twitter.com/VQwMachqA7 — Dave McCormick (@DaveMcCormickPA) May 17, 2022 Some Pennsylvania counties do not begin counting mail-in ballots until the day after the election. McCormick’s team believes it has the advantage on early votes and feels confident that it will maintain the lead and win the race. Oz did not concede when he addressed a crowd of supporters in Newtown at 11:50 p.m. He thanked Trump and Sean Hannity, saying he’s “like a brother to me.” He also talked about the hope that a strong America brings to other countries. “My parents were immigrants and saw that shining city on the hill that President Reagan talked about,” Oz said. “I  am running to allow all of us to see that brilliance. We are the land of plenty and nothing can hold us back. “We are a role model to the world. When our city on the hill is shining bright, others see it,” Oz added. Oz wrapped up his talk by claiming there will be a “ferocious charge” and “I will be the next senator of Pennsylvania.” Pennsylvania Republican U.S. Senate candidate Dr. Mehmet Oz joins former President Donald Trump on stage during a rally in support of his campaign at the Westmoreland County Fairgrounds in Greensburg, Penn., on May 6, 2022. (Jeff Swensen/Getty Images) The GOP winner will face Pennsylvania Lt. Gov. John Fetterman in the general election. Fetterman, who suffered a stroke on May 13 and underwent a procedure to get a pacemaker and defibrillator on the afternoon of May 17, gained 59 percent of the vote followed by U.S. Rep. Conor Lamb with 27.5 percent and state Rep. Malcolm Kenyatta at 9.2 with 71 percent of the precincts reporting at 10:26 p.m. In mid-April, Trump endorsed Oz and Ohio GOP Senate candidate J.D. Vance. Oz didn’t get the bump in the polls that propelled Vance to a primary victory. Oz led in about every poll in recent weeks, but he held a tiny advantage. In a new Emerson College poll released on May 16, Oz had 28 percent followed by Barnette at 24 percent and McCormick with 21 percent support. According to the survey, 15 percent were undecided. An internal survey from the pro-McCormick super PAC Honor Pennsylvania indicated that Barnette surged over the last week, leaving McCormick at 25 percent, and Oz and Barnette deadlocked at 24 percent. Trump called McCormick “a good person” but said he is  “an insider who absolutely sold us out to China.” McCormick, who was Under Secretary of the Treasury for International Affairs during the George W. Bush administration, attacked Oz by calling him a liberal and criticizing his dual U.S.-Turkey citizenship. Though McCormick did not gain Trump’s endorsement, his campaign is based on Trump policies. Republican Senatorial Candidate David McCormick and his wife Dina Powell McCormick head to vote at his polling location on the campus of Chatham University in Pittsburgh, Pa on May 17, 2022. (Jeff Swensen/Getty Images) As Pennsylvania voters headed to the polls on the morning of May 17, McCormick appeared on Fox & Friends for an in-depth discussion about the primary. “Pennsylvanians are zeroed in on this race because they see that the stakes are so high and so it’s understandable they’re taking their time to make a decision,” McCormick said. “I’m confident they’re going to make the right decision. And this seat is so important for Pennsylvania because to fight on all those issues of inflation and energy policy and open border, we need a conservative leader in the Senate from Pennsylvania that can fight. “But beyond that, this race will determine whether, you know, Chuck Schumer goes packing and takes his suitcase back to New York and is done. And because of that, he will throw everything at it. “And we need a candidate who has been he’s been battle-tested, who has had the experience to be able to prevail in a fight, who can marshal the resources, build the team, has the credibility, and has the resilience. And I think that that’s why I feel great momentum.” McCormick added that it is important to elect a candidate who can make an impact when he or she arrives in Washington. He believes that his background as a West Point graduate, a combat veteran and paratrooper, a hedge fund executive, and a former U.S. Treasury official makes him qualified. “Once you win, who can actually go to Washington and make a difference on day one? We’re in a crisis, and we don’t have time for on-the-job training. If you want to know what on-the-job training looks like, look at Kamala Harris. That’s on-the-job training,” McCormick said. “We can’t have that. So we have to have somebody that can show up on day one and deal with inflation, deal with Ukraine, deal with China. And that’s my candidacy. And that’s the experience I’m running on.” The “on-the-job training” comment appeared to be directed at Barnette, whose campaign surged in the last month. In the primary, Oz spent $12 million of his own funds on the campaign. McCormick poured $11 million into the hotly contested race. Barnette operated her bid to become the first Republican black female elected to the U.S. Senate on a shoestring budget after raising $1.7 million. In May, she emerged as a serious contender to Oz and McCormick, prompting a plea from Trump to Pennsylvania voters. “Kathy Barnette will never be able to win the general election against the radical left Democrats,” Trump said in a statement. “Dr. Oz is the only one who will be able to easily defeat the crazed, lunatic Democrat in Pennsylvania. A vote for anyone else in the primary is a vote against victory in the fall!” Barnette carries political baggage that will drag her down, Trump said, before adding that he would support her in the future when the current Pennsylvania U.S. Senate race is over. “She has many things in her past which have not been properly explained or vetted, but if she is able to do so, she will have a wonderful future in the Republican Party—and I will be behind her all the way,” Trump said. Barnette’s personal pro-life story resonated with voters and powered her rise in the polls. Republican U.S. Senate candidate Kathy Barnette speaks to attendees at a campaign event at The Star Barn at Stone Gables Estate in Elizabethtown, Pa. on May 17, 2022. (Caroline Gutman/Getty Images) Barnette brought up Oz’s pro-choice past in a May 4 debate. She described how she is the “byproduct of a rape.” Her ascent in the race over the last month is attributed to a powerful personal life story that includes a personal climb out of poverty and being a child conceived from rape, which has shaped her staunch pro-life stance. Barnette picked up support from conservative groups, including the well-funded Club for Growth Action super PAC. “My mother was 11 years old when I was conceived, my father was 21,” Barnette explained in the debate. “I was not just a ‘lump of cells.’ As you can see, I’m still not just a ‘lump of cells.’ My life has value. “It was disturbing when I saw Mehmet Oz running for this race when I have seen him on numerous occasions saying my life was nothing more than an acorn with electrical currents,” Barnette added. “I am wondering if the good doctor has since changed his position on that.” McCormick or Oz will transition to what is projected to be a competitive race against Fetterman in the general election. On May 15, Fetterman revealed that he suffered a stroke. “On Friday, I wasn’t feeling well, so I went to the hospital to get checked out,” Fetterman said in a statement. “The good news is I’m feeling much better, and the doctors tell me I didn’t suffer any cognitive damage. I’m well on my way to a full recovery.” “Our campaign isn’t slowing down one bit, and we are still on track to win this primary on Tuesday, and flip this Senate seat in November,” Fetterman said. On primary election afternoon, the Fetterman campaign released a statement that said, “John Fetterman just completed a successful procedure to implant a pacemaker with a defibrillator. The procedure began at 3:15 p.m., John was released at 5:56 p.m., and he has been given the all-clear that it was successful. He is resting at the hospital and recovering well. John continues to improve every day, and he is still on track for a full recovery.” Fetterman tweeted a photo of himself casting an absentee emergency ballot at Penn Medicine Lancaster General Hospital. Just cast my Primary Election Vote from Penn Medicine Lancaster General Hospital using an emergency absentee ballot. ✅ pic.twitter.com/HftIKtZG2V — John Fetterman (@JohnFetterman) May 17, 2022 McCormick encouraged Pennsylvania Republicans to unify, regardless of the primary outcome. “I feel proud of the campaign we’ve run and I’m excited about what lies ahead for Pennsylvania and for me,” McCormick said in the Fox & Friends interview. “Once we get through primary, we need to come together as conservatives to win in November,” he added. “We’re going to be fighting against a socialist agenda that is weak and woke and taking our country in a direction we won’t recognize.” McCormick mentioned that he was asked if he is “America First” at a recent campaign stop He responded by saying, “I’ve been ‘America First’ my whole life from the day I volunteered for West Point at 18 and served in the 82nd Airborne Division.” Tyler Durden Wed, 05/18/2022 - 12:24.....»»

S&P Cuts World's Largest EV Maker From ESG Index, Musk Slams "Outrageous Scam" The world’s largest and most-famous electric-vehicle maker has been removed from the ESG version of the S&P 500 Index. Margaret Dorn, senior director and head of ESG indices for S&P Dow Jones in North America, said in a Tuesday blog post: “While Tesla may be playing its part in taking fuel-powered cars off the road, it has fallen behind its peers when examined through a wider ESG lens." ..."playing its part?" The index provider also cited concerns related to working conditions and the firm’s handling of an investigation into deaths and injuries linked to its drive-assistance systems. Here are the top holdings remaining in the index, including Exxon Mobil (fossil fuels), Apple (China slave labor), and Amazon (which is working against unions)... And Tesla is worse than all of them? .@SPGlobalRatings has lost their integrity — Elon Musk (@elonmusk) May 18, 2022 This is not the first time we have discussed ESG and its surreal virtue-signaling claims: Danske Bank Slaps 'ESG' Label On 95% Of Its Funds As Top Banker Speaks Out Against "Greenwashing" ESG Investing - The Great Wall Street Money Heist "This Is Absurd" - Wall Street Pushes For Defense Stocks To Get 'ESG' Label Laughing To The Bank... Unfortunately, for investors, while these funds cost much more to own, their performance isn’t any better than just holding the substantially cheaper index fund. As shown, the correlation between Blackrock’s USA ESG fund and the S&P 500 Index is almost perfect. 10-day rolling returns correlation between SUSA and SPY. (Chart courtesy of Michael Lebowitz, CFA) “These funds lately haven’t beat ­indices that are simply created to make you money and only do so when they pack themselves with high-flying tech names. Sounds good on paper — until you drill down. For starters, such investing methods are highly political and veer far to the left. Companies often get good grades for supporting lefty causes such as Black Lives Matter. Oil companies like Exxon will get higher marks for building wind farms that produce energy inefficiently. But here’s where Larry Fink and BlackRock still come out ahead: They have sensed that with all the media hype of ESG investing as the next frontier, they can also make a lot of money creating a new type of fund dedicated specifically to ESG — and then charge more for it.” – NY Post In short, while Wall Street pushes out products to make “you” feel like you are socially responsible, they laugh all the way to the bank. Tesla founder and CEO Elon Musk summed up the thoughts of many at this farcical decision: ESG is an outrageous scam! Shame on @SPGlobal — Elon Musk (@elonmusk) May 18, 2022 "Outrageous Scam" indeed... we wonder if Tesla would still be in the index if Musk wasn't trying to bring free speech to Twitter? Despite Tesla doing more for the environment than any company ever! pic.twitter.com/ImxrhnRepj — Elon Musk (@elonmusk) May 18, 2022 As Musk added in a tweet shortly after... "Political attacks on me will escalate dramatically in coming months." Tyler Durden Wed, 05/18/2022 - 12:36.....»»

New Financial Controversies Rock BLM As Marc Elias Reportedly Leaves Board Authored by Jonathan Turley, New financial controversies have arisen about the use of donations by Black Lives Matter (BLM), including additional allegations that co-founder Patrisse Cullors used BLM funds and resources to benefit herself and friends. I previously wrote a column asking why Democratic prosecutors like New York Attorney General Letitia James shown comparably little interest in these allegations even as James sought to disband the National Rifle Association (NRA) over similar allegations. In the meantime, the Washington Examiner is reporting that former Clinton campaign lawyer Marc Elias has left the BLM board after his firm. the Elias Law Group, had “taken control of its books and finances.” Black Lives Matter reportedly raised $90 million after the death of George Floyd and still has $60 million in cash. Even with the rising scandals over the use of donations, many Democratic politicians (who called for the prosecution of the NRA) remain conspicuously silent on the BLM scandals. Cullors was always a curious choice of corporate donors given her intensely anti-corporate stances. She insisted that she and her BLM co-founder “are trained Marxists. We are super versed on, sort of, ideological theories.” She has denounced capitalism as worse than COVID-19. Nevertheless, corporations poured money into BLM and some, like Warner Bros. hired Cullors to guide their programming. Cullors recently said that BLM was flooded with “white guilt money.” However, BLM failed to file required tax reports and some of that money appears to have gone to buying expensive properties and supporting personal friends of Cullors. Cullors stepped down last year as executive director of the Black Lives Matter Global Network Foundation, and there have been other resignations that left the group effectively headless. Those resignations followed the New York Post’s revelation that BLM Global Network transferred $6.3 million to Cullors’ spouse, Janaya Khan, and other Canadian activists to purchase a mansion in Toronto in 2021. Then reports surfaced of the purchase of expensive homes and other allegations of using BLM resources or funds for personal benefits. A $6 million Los Angeles mansion has been the most recent focus of these allegations of personal use of BLM assets. There are also allegations that Black Lives Matter Global Network Foundation paid out $4 million in consulting payments to its board secretary, co-founder Patrisse Cullors’ brother, and the father of Cullors’ child. That includes $970,000 to Trap Heals LLC, a company established by Damon Turner, the father of Cullors’ child. It also includes $840,000 to Cullors Protection LLC, a security firm owned by her brother, Paul Cullors. Some $2.1 million also allegedly went to Bowers Consulting, a firm run by Shalomyah Bowers, the foundation’s board secretary. Cullors once declared that “while the COVID-19 illness is tragic, what’s more tragic is capitalism.” She is fast making that tragedy a reality. Tyler Durden Wed, 05/18/2022 - 12:51.....»»

Rabobank: If The US Is Going To Win This War, It Needs Higher Rates, A Stronger Dollar, And Lower Commodity Prices By Michael Every of Rabobank Everything Old is New Again Using the matrix of both bond yields AND commodity prices I suggested yesterday as a judge of what the market is thinking vs. what the Fed then needs to be doing seems to have held water. Amid the usual “why bother paying attention to facts when one can buy dips” equity action, US 10-year yields surged 8bp back to 2.99% and 2-year yields 12bps to 2.69%, AND oil and wheat moved higher, the former to over $115 before dipping back to around $113, the latter starting lower but closing at a new record high. Bonds sold off after we got a hawkish Powell interview that showed he was looking at the continued rise in commodities, not any falls in demand. Specifically, Powell stated ”There’s an overwhelming need to get inflation under control”; that “this is not a time for tremendously nuanced readings of inflation: we need to bring it down in a convincing way. We do not see that right now. Some signs are promising, others are not”; and that the Fed “will push ahead with rate increases until we get as far as we need to get – we’ll keep going.” Indeed, Powell stressed, “Neutral is not necessarily a stopping point. If we have to go beyond neutral, we will not hesitate.” He also underlined “We will tighten until we are at a place where financial conditions are appropriate, and inflation is coming down.” In other words, bond yields cannot truly come down before key commodities do. Whocouldanooed? For those rightly thinking that rate hikes don’t help inflation driven by the supply side, which is seeing real incomes fall sharply for those outside Wall Street, there was no succour. Powell added the Ukraine war could last longer than expected, as could Chinese lockdowns, and that “there is a real possibility that globalisation does into reverse to some extent.” Indeed, while inflation is partly driven by supply bottlenecks, the Fed is not seeing much evidence of it “healing,” and, crucially, “is not setting policy based on the view we get relief from the supply side.” As such, “we clearly have a job to do on the demand side.” But what of the Fed’s 2020 shift to focus on the lowest possible unemployment rate for all Americans in order to bridge socio-economic chasms? Well, now Powell sees the natural rate of unemployment as likely higher than 3.6%, where it sits, and implied he expects joblessness to rise ahead, adding he wants to see only “healthy” nominal wage inflation consistent with 2% CPI, which it currently exceeding in many places. (Australia just saw a 2.4% y-o-y print for Q1, which was below consensus, and may take some heat out of Aussie markets.) Overall, Powell said there would be “pain involved” in doing what was necessary, and a “soft-ish” landing was only now “plausible”. So, yes, the implication is the recession Mr Market is talking of – just not the rates easing-of-financial-conditions Fed response he was already starting to price for. That was followed up by Evans arguing the Fed should raise rates to a 2.25%-2.5% neutral range “expeditiously”, and favours “front-Loaded” hikes to transition to a more measured pace, which would give them time to monitor supply chains --which are being noticed and have no resolution-- in order to evaluate tighter policy. In short, everything old is new again: hawkishness; wanting higher unemployment and lower nominal (and real) wage growth; and a Fed that is prepared to talk the talk – although walking the walk, or walking and chewing gum at the same time, is yet to be seen. Meanwhile, we got more central bank news from Europe, where Reuters says, ‘Exclusive-ECB's Lagarde gives national central bank chiefs louder voice on policy’. The details are that ECB President Lagarde “has given national central bank chiefs a bigger say in policy meetings, asking her own board to speak less and set aside more time for debate,” according to sources. Chief economist Lane and fellow board member Schnabel have been told to limit their presentations and leave more space for the central banks of the euro’s 19 countries to air their views. This is implied as being introduced because “a few voices typically dominate,” and “criticism has grown since last summer as Lane and his staff repeatedly underestimated the size and duration of inflationary pressures. The surge in prices, which some ECB policymakers warned were persistent, eventually prompted the central bank to change tack and open the door to higher interest rates.” So, this is not so much about democracy as the fact that the loudest voices on inflation have been completely wrong (by not seeing everything everywhere all at once, as noted yesterday). Regardless, it takes us back to an older era when a wider variety of speakers had a say. On which, wouldn’t it be nice if we also got business, trade/logistics, and union voices heard around the central bank table too today, rather than just the financial sector and academic economists like Lane? Their input would certainly be relevant, it appears. And why not national security figures too? The first modern central bank, the BOE, was set up to finance a major war, as were its European counterparts. (As the EU and UK are daggers drawn again over Northern Ireland, with trade war in the wind.) Today they cannot even do a good job of fighting inflation, let alone defending Western interests. Yet everything old may be new again there too due to the Ukraine metacrisis. US Treasury Secretary Yellen is now talking of a new Marshall Plan, which takes us back to the 1950s. Inconveniently, that involves winning the war first, which means US Lease-Lease, which is already in place, taking us back to the 1940s, and integrating military, economic, and financial components: after all, the measurement of ‘GDP’ originated in the US in WW2 as a tool to win it, not to set up the quarterly ‘guess the weight of the cake and make billions’ competition it has since become. If the US is going to win this war, it needs to address the economic component – which implies higher rates, a stronger dollar, and lower commodity prices to tame its inflation and reduce Russian income. Others might want similar FX movement, as the EIA notes today: “A strong US dollar means that countries that use currencies other than the US dollar pay more as crude oil prices increase. Since June 1, 2021, the Brent crude oil price has increased by 59% in US dollars and by 86% in euros.” Now imagine your currency collapses because you try to do ‘new normal’ QE while running commodity-driven trade deficits - and you don’t get Fed swap lines,… as Turkey’s TRY stumbles further over geopolitics, and China stops reporting foreign investor bond trades as capital outflows accelerate, and new home prices just dropped 0.3% m-o-m. Yet the US will also need to address the financial component. Being *very* charitable, that might explain why there are rumors flying around that the White House is considering de facto forcing Russia to default on its foreign debt by not extending a soon-to-lapse rule allowing Moscow to make such dollar payments. It will also involve joined-up actions such as offering India $500m in US military aid, approaching the levels offered to Egypt and Israel, to persuade it to switch from Russian to US weapons, as part of a broader geopolitical realignment. (Which was already underway via The Quad: this is also to help tip the balance as India decides between French and US planes.) Yet at the same time, this links back to supply chains. There are reports that Ukraine has already depleted a quarter and a third of the total US stock of Javelin and Stinger missiles, and current US production is in no way capable of replacing them: they are being fired far faster than they can roll off of production lines. Imagine what happens if the war drags on beyond the end of the year. Imagine if a new war begins somewhere else. Imagine the global military hegemon without the weaponry it needs to fight. And that dilemma brings us back to integrating military, economic, and financial components. Relatedly, we recently got another ‘old is new’ shift from the IMF, who are now officially more supportive of capital controls, pre-emptively in some cases. Those who follow a Godley approach to balance sheets would point out that there are many good reasons for introducing capital controls like the ones we had under Bretton Woods, which takes us back to 1945-1971. If you don’t have destabilizing global capital flows, you don’t have destabilizing global trade deficits, because the former drives the latter. Meanwhile, those who follow a geopolitical-realist approach to markets will extend the argument to say it is the US which is most likely to ultimately introduce capital controls (and more tariffs) against some countries which it runs large bilateral trade deficits with, i.e., no US capital outflows to China, and no capital inflows to the US from China, which would effectively decouple the two. And when one says ‘ultimately’, one is not looking too far into the future at the rate things are shifting and given the train of thought from the US Trade Representative. One is not only looking at China in this regard. Germany could be in the cross-hairs too if the country fails to follow through on its promise to rearm before the 2024 US presidential election, and instead goes for more appeasing ‘trundle durch bumble’. Imagine the rates impact of this kind of US policy shift towards trade only within an Anglosphere, or a Network of Liberty, or ‘Freedom Trade’ not free trade. Yet is not out of the question based on the current political and geopolitical trends and the iron logic of war. Far from it. Rather, everything old is new again. ”Don't throw the past away; You might need it some rainy day; Dreams can come true again; When everything old is new again Get out your white suit, your tap shoes and tails; Put it on backwards when forward fails; Better leave Greta Garbo alone; Be a movie star on your own” Tyler Durden Wed, 05/18/2022 - 11:05.....»»

Biden"s "Disinfo" Board Paused, "Scary Poppins" Drafts Resignation.....»»

How US Trade Policy Is Making The Baby Formula Shortage Worse By Eric Kulisch of FreightWaves Policy analysts say U.S. trade restrictions, including ones engineered under the Trump administration, along with lean manufacturing practices help explain why stores can’t easily replenish stocks of baby formula. The taxes and extra regulatory hoops make it expensive and difficult to import the specialized baby food. Parents are increasingly frustrated by the nationwide shortage of infant formula The U.S. produces 98% of the infant formula it consumes, but that self-sufficiency is being tested by limited availability of ingredients because of supply chain disruptions, labor shortages and the February shutdown of Abbott Laboratories’ (NYSE: ABT) Sturgis, Michigan, plant over contamination concerns. The nationwide out-of-stock average for baby formula reached 43% for the week ending May 8, according to retail technology firm Datasembly. The Biden administration points to other industry data showing an 80% in-stock rate, but with less variety of products than normal. The Food and Drug Administration late Monday advised international businesses of new flexibilities allowed in the import process in an effort to increase the availability of infant formula across the country.  Under the relaxed rules, the FDA will not object to the importation of certain infant formula products intended for a foreign market or distribution in the U.S. of products manufactured here for export to foreign countries. It also said it may provide room for domestic companies that manufacture infant formula for export to shift more production for sale in the U.S. market. Tariff barriers High tariffs and policies to protect the U.S. dairy industry from Canadian competitors have kept a lid on infant formula imports and made it difficult, notwithstanding the FDA’s emergency action, for distributors to substitute formula from overseas sources, according to trade experts. “We’ve reached the point where producers are no longer able to maintain supply and there aren’t other close-at-hand markets that you can turn to,” said Eric Miller, president of Rideau Potomac Strategy Group, an international trade advisory firm based in Washington, in an interview. “The U.S. has basically said our priority is keeping subsidized imports and products made with subsidized inputs out of the U.S. market. So there’s no excess production that’s available and we keep prices high for consumers in the U.S.” Infant formula is subject to a 17.5% tariff, and imports from some countries can be hit with additional duties above a certain volume threshold.  Canadian dairy products have mostly been kept out of the U.S. market for decades because the U.S. considers them subsidized. The Canadian dairy sector operates under a supply management system that limits production, sets prices and restricts imports. Additionally, the Trump administration, under pressure from the U.S. Export Dairy Council, then headed by current Agriculture Secretary Tom Vilsack, included provisions in the United States‐​Mexico‐​Canada Agreement to restrict exports of formula from Canada.  The USMCA’s agriculture annex limits Canadian exports of infant formula anywhere in the world, not just to the U.S., largely to minimize sales to China after China’s largest formula maker, Feihe International, invested $175 million to build a baby formula plant in Ontario.  Canada is considered a safe, clean source of infant formula by Chinese parents after a 2008 scandal in which tainted, domestically produced baby formula resulted in the deaths of six infants and led to deep distrust of locally made formula. Trump officials reasoned that if China was purchasing more infant formula from Canada, then it wasn’t buying from U.S. companies. Under the USMCA rules, Canada is required to apply an export charge of CA$4.25 per kilogram to global exports of infant formula in excess of 13,333 metric tons for the remainder of the dairy year. The quota increased to 40,000 metric tons in year two of the trade agreement and by only 1.2% annually after that. The charges are designed to offset the amount of subsidies that producers get on the input side, said Miller, a former policy adviser for the Business Council of Canada and the Canadian Embassy in Washington.  The export limits were actually below the production capacity of the Feihe plant, which does business as Canada Royal Milk, according to the Canadian Broadcasting Corp. The U.S. imported no baby formula from Canada in 2021 because of the confusing USMCA regulations and expensive tariff-quotas, writes Gabriella Beaumont‐​Smith, a trade policy analyst at the Cato Institute, a libertarian think tank in Washington. “Over time what it means is that the Canadian dairy infrastructure has built up to serve the Canadian market, with some cases set up to serve non-U.S. markets,” Miller said. U.S. government and IBISWorld figures show Mexico is the largest overseas source of infant formula in the U.S., but formula accounts for a tiny fraction of the total imports from Mexico. Other primary exporters of formula are Ireland, Chile and the Netherlands. Red tape Nontariff barriers, such as a 90-day waiting period for new entrants to distribute infant formula, also act to limit imports, experts say. The FDA has rigorous regimes for marketing certifications and ensuring that specialty products are properly labeled and authorized for sale in the U.S. market. Obtaining certifications for foreign dairy facilities is extremely intensive as well.  “Businesses also have little incentive to go through the onerous regulatory process to sell to American retailers, given the aforementioned tariffs and the relatively short duration of the current crisis,” said Beaumont-Smith. It is illegal, for example, to import baby formula from the European Union for commercial purposes because it doesn’t comply with FDA labeling requirements, although parents can import it for personal use. Last summer, Able Groupe recalled German-made infant formulas distributed in the U.S. via mail service because the labels didn’t include notification that iron levels were below U.S. standards (1 milligram of iron per 100 calories) and weren’t in English.   Beaumont-Smith said many medical experts believe the differences between American and European formulas are minor and that the regulatory burden for meeting U.S. standards doesn’t noticeably increase safety.  U.S. Customs and Border Protection took credit in April 2021 for seizing 588 cases of infant formula in Philadelphia because they lacked appropriate nutritional labeling. The formula from major brands HiPP and Holle was imported by a freight forwarding company in 17 separate shipments from Germany and the Netherlands, where the companies are based.  The Food, Drug & Cosmetic Act (FDCA) prohibits interstate and import shipments of foods that have been misbranded. The FDA’s import safety alert said the cases of formula didn’t list the ingredients associated with formula for infants under the age of 1. The manufacturers also failed to comply with FDA regulatory requirements to sell their infant formula in the United States, CBP said in a news release. Miller said formula makers such as Nestle typically use the same recipes in other markets but would have to go through an “excruciating” process to get them certified and labeled for sale in the U.S. “The great absurdity of this is that less than a hundred miles from the U.S. border you have this plant in Canada that is exporting to China. It’s all about the perversions of trade policy and who’s market is being protected,” said Miller, who is also a fellow at the Woodrow Wilson International Center. FDA supply efforts Since February the FDA has taken a series of steps to increase domestic formula supply, including expediting certificates to allow already permitted products from abroad more flexibility moving into the U.S. and streamlining the import entry review process for certain products coming from foreign facilities with favorable inspection records.  The FDA says loosening import rules, in conjunction with the Department of Agriculture and U.K. and European authorities, has enabled a 300% increase in imports of infant formula year-to-date from last year. Much of the increase is likely connected to an ongoing airlift of infant formula from Abbott Labs’ facility in Ireland. Companies interested in taking advantage of the latest flexibilities should submit information for the FDA to quickly evaluate whether the product can be used safely and whether it provides adequate nutrition. The FDA said it will look for proper labeling, information on nutritional adequacy and safety testing, and information about facility inspection history. The agency intends to prioritize submissions that can demonstrate the safety and nutritional adequacy of their products, and have the largest volume available and/or can get shipments on U.S. store shelves the quickest.  The FDA is already in discussions with some manufacturers and suppliers regarding additional supply.  “Today’s action paves the way for companies who don’t normally distribute their infant formula products in the U.S. to do so efficiently and safely. We are hopeful this call to the global market will be answered and that international businesses will rise to the occasion to assist in bolstering the supply of products that serve as the sole source of nutrition for many infants,” said FDA Commissioner Robert Califf. “With these flexibilities in place, we anticipate that those products that can quickly meet safety and nutrition standards could hit U.S. stores in a matter of weeks.” Manufacturing constraints In a commentary for The Hill newspaper, Willy Shih, professor of management practice at the Harvard Business School, blamed the shortage on a lack of spare capacity, low inventory strategies, market concentration in four main producers and elongated supply chains all aimed at meeting consumer expectations for low prices instead of building resilience. Meanwhile, Abbott on Monday agreed with the FDA to take corrective action necessary to resume production at the facility and maintain quality controls. The Department of Justice filed a complaint alleging that Abbott managers failed to comply with quality and safety practices for producing infant formula, including protecting against the risk of contamination from bacteria. To resolve the complaint, Abbott agreed to enter into a consent decree requiring it retain an independent expert to help bring the Sturgis facility into compliance with the FDCA and safe food manufacturing standards. The consultants must periodically evaluate Abbott’s regulatory compliance.  The proposed safety plan, which is subject to court approval, includes requirements  for testing products, as well as ceasing production, and promptly notifying the FDA should contamination be detected. The proposed consent decree also requires Abbott to implement a sanitation plan, environmental monitoring plan and employee training programs.  Once the FDA confirms all conditions have been met, Abbott said it could restart the site within two weeks. The company would begin production of EleCare, Alimentum and metabolic formulas first and then begin production of Similac and other formulas. After the reopening, it will take six to eight weeks before products are available on shelves.  Tyler Durden Wed, 05/18/2022 - 11:30.....»»

Turkey Blocks Sweden, Finland NATO Accession Talks; Issues List Of Demands Turkey has issued its "list" of demands that must happen before it would accede to granting formal NATO membership to Scandinavian countries Finland and Sweden. This coming on the same day both countries handed in their formal applications. In a photo op with the Finnish and Swedish ambassadors, NATO Secretary-General Jens Stoltenberg hailed the "historic moment". But given that for days Turkey has voiced vehement denunciation of the move, calling the countries 'terror safe-havens' over their alleged support for the outlawed Kurdish PKK (also as Sweden is home to one of the largest Kurdish communities in Europe), Brussels is in for a long-haul of gridlock as there must be consensus among the 30-member states for new entry. Within hours after an application submission ceremony, FT is reporting Turkey has already blocked the planned initial accession talks with Sweden and Finland essential to processing the requests: Turkey has blocked Nato’s initial decision to process requests by Finland and Sweden to join the military alliance, throwing into doubt the hopes for a quick accession of the two Nordic countries. Nato ambassadors met on Wednesday with the aim of opening accession talks on the same day that Finland and Sweden submitted their applications but Ankara’s opposition stopped any vote, according to a person with direct knowledge of the matter.    Image: Associated Press The FT report continues: "The postponement raises doubt that Nato will be able to approve the first stage of Finland’s and Sweden’s applications within one or two weeks, as secretary-general Jens Stoltenberg indicated. It also sets the stage for several days of intense diplomacy between the US, Turkey, Finland and Sweden over the issue." Meanwhile, three "senior Turkish officials" have issued to Bloomberg key actions that Finland and Sweden must implement if they hope to gain Ankara's approval. Despite their expressing that Turkey isn't seeking to negotiate beyond the scope of Finnish, Swedish issues - other elements looming in the background are coming into play, like the blocked F-35 deal which grabbed headlines over past years. Turkey's foreign minister Mevlut Cavusoglu recently told a meeting of NATO diplomats that majority of Turkish citizens - which is the country that also happens to form NATO's second largest military - are adamantly opposed to Sweden and Finland's membership, given they host and give aid to PKK "terrorists". Below is the list as summarized based on information in the Wednesday Bloomberg report... 1) Denounce the Kurdistan Workers' Party (PKK) and crack down on their activities in host countries The senor officials told Bloomberg that not only must Helsinki and Stockholm take a public stance of denouncing the PKK as a 'terrorist organization' - but both governments must crackdown on PKK activities and those of its sympathizers domestically. Likely also with the Syrian Kurdish YPG in mind, which enjoys support from Washington, Finland and Sweden must also denounce the PKK's "affiliates before being allowed to join the bloc," the senior officials said.  This has also included breaking reports of a demand for the countries to extradite identified 'terrorists' to Turkey... #Turkey's Erdoğan blocks @NATO accession talks with Sweden and Finland; asks for extradition of 30 'terrorists'. — Yannis Koutsomitis (@YanniKouts) May 18, 2022 2) Immediately lift arms export restrictions imposed in 2019  A number of EU countries, including Sweden and Finland, imposed arms export restrictions on Turkey due to its cross border military campaign against Syrian Kurdish militias - most especially the YPG, which Turkey's leaders see as but an extension of the PKK. However, the YPG has enjoyed the longtime backing of the West, with US troops having for years at this point trained them on the ground in northeast Syria, enraging Turkish leaders. "Turkey also wants Sweden and Finland to put an end to arms-export restrictions they imposed on Turkey, along with several other European Union members, after its 2019 incursion into Syria to push the YPG back from the frontier," the officials were quoted in Bloomberg as saying. 3) Washington should restore Turkey's participation in F-35 program Though not directly a demand of Finland and Sweden, the issue of Washington previously halting the F-35 program for Turkey still looms large.  "Turkey wants to be re-included in the F-35 advanced aircraft program, from which it was barred after it bought S-400 missile-defense systems from Russia," Bloomberg writes based on its Turkish government sources. "It also has an outstanding request to the US to purchase dozens of F-16s warplanes and upgrade kits for its existing fleet." 4) Lift sanctions related to Turkey's possession of Russian S-400s As part of the Turkish wish-list, Bloomberg notes, "Moreover, Turkey wants the US to lift sanctions over its possession of the S-400 missiles." This was closely related to the saga of the blocked F-35 deal, widely viewed as a humiliation for the Erdogan government, and which took US-Turkey relations to a low point under the Trump administration, despite the two leaders at the time being viewed as on very friendly terms. * * * Meanwhile, the issue of Turkey for many years having unsuccessfully sought EU membership while at the same time more recently having to stand by as enthusiastic talk emerges of 'fast-tracking' others (such as Ukraine) has without doubt added insult to injury... I would ask full EU membership for Turkey in return of Sweden and Finland’s NATO membership if I were Erdogan. Fair and neat. — Ragıp Soylu (@ragipsoylu) May 18, 2022 Tyler Durden Wed, 05/18/2022 - 08:45.....»»

High Gasoline And Diesel Prices Are Here To Stay Authored by Tsvetana Paraskova via OilPrice.com, U.S. gasoline and diesel prices are at record highs and show no sign of falling or of denting demand. Refining capacity has shrunk dramatically since 2020 due to the covid pandemic, driving fears of a supply crisis. It is looking increasingly likely that the only cure for these high prices would be a recession, a cure that could be as bad as the disease. U.S. gasoline and diesel prices are soaring to record highs nearly every day these days, as crude oil prices hold above $110 a barrel, the Russian invasion of Ukraine upends global crude and refined product trade flows, and refinery capacity globally is now lower than before the pandemic after some refineries—including in the United States—closed permanently after COVID crippled fuel demand in early 2020. There isn't a quick fix for all-time high fuel prices in America— or elsewhere — analysts say. The quickest fix is actually not one American consumers would want — a recession that would lead to job losses. Despite the Biden Administration's months-long efforts to lower gasoline prices — including massive releases of crude from the Strategic Petroleum Reserve (SPR) and blaming oil companies for price gouging — U.S. refineries cannot catch up with demand.  Not that demand has soared so much. It's the capacity for supply, globally and in the U.S, that is now a few million barrels per day lower than it was before the pandemic.  U.S. Refinery Capacity Lowest Since 2015  Some 1 million barrels per day (bpd) of refinery capacity in America has been shut permanently since the start of the pandemic, as refiners have opted to either close losing facilities or convert some of them into biofuel production sites. Globally, refinery capacity is also stretched thin, especially after Western buyers — including in the U.S. — are no longer importing Russian vacuum gas oil (VGO) and other intermediate products necessary for refining crude into gasoline, diesel, and jet fuel.  The fuel market is extremely tight in Europe, too, considering that many refiners refuse to stock Russian crude and suppliers shun Russian diesel, even if the EU is still struggling to reach a common stance on an embargo on Russian oil imports.  In the U.S., refinery operable capacity was at just over 18 million bpd in 2021, the lowest since 2015, per EIA data.   "As you well know, 1 million barrels of distillation capacity has exited the system since pre-pandemic," Mike Jennings, CEO at refiner HF Sinclair and Holly Energy Partners, said on the Q1 earnings call last week.  Distillate refining margins are sky high due to a shortage of refined product, he added.  "How long that persists? I don't see any signs of it ending soon or well," Jennings said.  Rising demand since economies reopened and people returned to travel, combined with lower refining capacity and very tight distillate markets have drawn down U.S. product inventories to below seasonal averages and at multi-year lows, with record-low inventories reported on the East Coast.  Distillate fuel inventories fell by 900,000 barrels in the week ending May 6 and are about 23% below the five-year average for this time of year, the EIA said in its latest weekly inventory report. At 104 million barrels, distillate inventories — which include diesel — are at their lowest since 2008. On the East Coast, they are at their lowest ever, as the refinery capacity in the region has halved over the past decade to just 818,000 bpd now. "We're Ripe for a Potential Supply Crisis" Globally, around 3 million bpd of refining capacity has been shut down since early 2020, according to estimates from Wood Mackenzie.  "For companies with aging refineries that required significant investment to remain viable, it has been difficult to justify the spending in the face of a weak demand outlook, particularly for gasoline as a result of increased fuel efficiency and the rise of electric vehicles," Ed Crooks, Vice-Chair, Americas, at WoodMac wrote last week.  At the same time, new refining capacity in the Middle East and Asia is only now entering the market after being delayed, in part because of the pandemic and weak refining margins, Crooks notes.  "We're ripe for a potential supply crisis," John Auers, executive vice president at energy consultancy Turner, Mason & Co told Bloomberg last week. As the summer driving season approaches, U.S. gasoline prices are at an all-time high but haven't dented demand yet.  Moreover, the paper market signals high prices for gasoline throughout the summer as gasoline futures in New York hit on Monday $4.00 a gallon for the first time ever.  "The continuous inventory withdrawal over the past few weeks has pushed US gasoline stocks to levels significantly below the five-year average at this point in the season and reflects acute supply tightness," ING strategists Warren Patterson and Wenyu Yao said on Monday, commenting on the record gasoline future prices.  The situation on the diesel market is even worse. Distillate stocks are 23% below the seasonal average and prices are at record highs, too.   "I wouldn't be surprised to see diesel being rationed on the East Coast this summer," John Catsimatidis, CEO at United Refining, told Bloomberg in an interview last week.  No Short-Term Fix  Prices are not expected to drop significantly from record highs any time soon, analysts and industry professionals say, as they note there isn't any quick fix for the fundamental tightness in the fuel product markets globally.   "I think that we can expect, assuming the economies stay reasonably strong, that commodity prices and, particularly prices of our products, are going to be relatively high," HF Sinclair's CEO Jennings said on the Q1 call last week.  Record-high diesel and gasoline prices are threatening economic growth, adding further upward pressure on U.S. inflation figures. As diesel prices impact every part of the economy, the fight against inflation becomes more complicated for the Fed, as steeper interest rate hikes could lead to the deterioration of economic activity and household spending and, ultimately, recession. "When we look at the tight market, the natural conclusion is to say that a recession sorts this," Mark Williams, Wood Mackenzie's research director for short-term refining and oil product markets, said, commenting on the diesel market imbalance.  Right now, a recession may be the only short-term "fix" for the very tight fuel markets, but it's surely the least welcome cure for high gasoline and diesel prices.    Tyler Durden Wed, 05/18/2022 - 09:05.....»»

Here Come More Lay Offs: Netflix Reduces Employee Count By 150, Mostly In U.S. A couple of days ago we wrote an article highlighting a lot of the layoffs being made as the U.S. heads face first into a recession and quantitative tightening.  In addition to the names mentioned, Netflix is giving 150 employees - mostly in the U.S. - their walking papers. The lay offs are slightly less than 2% of the company's total staff.  The company explained to CNBC this week: “As we explained on earnings, our slowing revenue growth means we are also having to slow our cost growth as a company."  It continued: “So sadly, we are letting around 150 employees go today, mostly US-based. These changes are primarily driven by business needs rather than individual performance, which makes them especially tough as none of us want to say goodbye to such great colleagues. We’re working hard to support them through this very difficult transition”. The lay offs are less than one month after Netflix's horrific earnings report that showed its first subscriber loss in a decade and helped shares fall more than 70% since January.  Netflix is working on lower-priced ad-based tiers to help expand its reach, the company said last month. It's also going to be cutting back on password sharing, a feature being used by more than 100 million households.  We noted days ago that companies like Better, Noom, Canopy Growth and Robinhood were also all making layoffs.  Tyler Durden Wed, 05/18/2022 - 09:25.....»»

Target's Plunge Exposes Inflation's Risk To Margins By Justin Zacks, Bloomberg Markets Live commentator and analyst While share prices of retailers have been all over the map in 2022, this week’s post-earnings plunges in Target and Walmart are highlighting the damage inflation can do to profit margins. Still, the exact influence of inflation on retailers depends on what they sell, who they are selling to and the methods they are using to do so. This influence will change as consumer demand and supply chains adapt. [ZH: Top-down, producers have still not passed along prices to consumers, with huge aggregate pressures building] Among chain stores in the S&P 500, only Dollar Tree (+15%) and Walmart (+2.4%) had positive returns year-to-date before Tuesday. The two worst-performing retailers were ecommerce sites Amazon.com (-34%) and Etsy (-60%). This rotation by investors generally was based on two themes, the switch from online to bricks-and-mortar retailers due to the continued economic reopening following the waning of Covid-19 cases and the expectation that consumers would shift to lower-priced goods due to high inflation. New York City raising its Covid-19 alert level to high on Tuesday is a warning that the pandemic (along with online retailing) might not be over yet, while Tuesday’s disparate results from the two largest brick-and-mortar retailers in the US, Walmart and Home Depot, are examples of how the effects of inflation are not the same across the board. Walmart fell 11% Tuesday, the most in 35 years, after it sliced its 2022 outlook due to inflationary pressures. Its first-quarter gross profit rate was 38 basis points lower than the previous year as customers shifted to buying lower-margin groceries. Target plunged 22% in premarket trading on Wednesday after lowering its operating margin outlook for the full year. Similar to Walmart, the big-box department-store chain saw strong demand for groceries and household essentials at the expense of discretionary categories in the first quarter. “The Fed is very concerned about your lower and middle income persons who are struggling with higher inflation,” Dana Peterson, chief economist at the Conference Board, said in a Bloomberg TV interview Tuesday. She noted that “in the present situation, people are still pretty optimistic,” but are “concerned about the economy in the future as they see higher interest rates and inflation affecting consumption” which “may bleed over into their labor market prospects.” The large retailers themselves are already seeing overstaffing issues, according to Business Insider. On Tuesday, Federal Reserve Chair Jerome Powell said the Fed will continue to raise rates until there is “clear and convincing” evidence that inflation has abated. Just how severe the effects of inflation have been on lower-income consumers will be further tested next week as Dollar General and Burlington Stores report earnings. Meanwhile, Home Depot closed higher by 1.7% on Thursday after reporting first-quarter comparable sales that exceeded the average analyst estimate. While customer transactions were down 8.2% year-on-year, the home-improvement retailer more than made up for that with an 11.4% increase in the average ticket. Price is less of an issue for Home Depot’s customers than for Walmart’s, which tend to skew toward the lower end of the income distribution. But while the home-improvement retailer’s outlook is strong, its sales growth did not outpace inflation. Competitor Lowe’s, which is positioned slightly down the income spectrum and which doesn’t have as big of a professional-contractor business as Home Depot, is trading lower in the premarket after reporting worse-than-expected first-quarter comparable store sales. “Its about what strata of consumer you are talking about,” Bloomberg Intelligence analyst Jennifer Bartashus said in a Bloomberg TV interview Tuesday. Consumers that have the discretionary income to spend are still spending,” she said. “When I look at the consumer landscape, I just see a bifurcation happening that is probably set to continue over the short term,” noted Bartashus. Consumers with incomes on the high end of the spectrum are less sensitive to inflation and are ready to spend after being cooped up at home during the various waves of the coronavirus pandemic over the past two years. “We are expecting a big summer season of vacation,” Telsey Advisory Group CEO Dana Telsey said in a Bloomberg TV interview Tuesday. And after Covid-19 delays, there will be 2.6 million weddings with the average attendee spending $430 in 2022, she noted. Telsey expects “the luxury good universe will do very well,” as Asian travelers return to the US once Covid-19 restrictions are lifted. Two of the largest US luxury-goods manufacturers, Estee Lauder and PVH Corp., are both down about 35% year-to-date due to the lack of a rebound in international tourism. April US retail sales were better than expected, but overall those sales have failed to keep up with inflation, perhaps one of the reasons the VanEck Retail ETF is down 16.5% year-to-date. Stagflation concerns and negative sentiment led Goldman Sachs strategists to lower their short-term outlook for global equities Tuesday. Tyler Durden Wed, 05/18/2022 - 09:45.....»»

Stocks Puke As TINA Unwind Accelerates Remember the rally yesterday and how great that felt... "is the bottom in?" etc... yadadadada... Well... it's gone... US equity futures are tanking after the cash markets open, taking out yesterday's lows... As Nomura's Charlie McElligott notes, it appears this is the potential unwind of the "TINA" phenomenon, as, thanks to the repricing of the risk-free rate - then pushing into yields on spread-product - "there is an alternative" to equities once again. And this aligns with something that has increasingly come up in conversation with Multi-Asset investors into said potential for an “economic cycle downshift,” but one that does not see a “systemic” shock increase in default cycle, as Corporate balance sheets have been cleaned-up - which is the relative attractiveness of IG Credit in particular, which now has handsome Yield again, but of course too is “up” in capital structure versus Equities And as the chart above shows, IG spreads are at a somewhat critical level too - The Fed has typically folded like deck-chair at around this level of risk. However, as McElligott notes, there was a clear “hawkish” directional tilt and even another “signal” from Jay Powell yesterday, acknowledging increased likelihood of “hard-landing” risk On over-interpreting / “cherry-picking” inflation data for signs of progress, or the potential for “pause” when the hit they perceived ‘neutral’ rate: “Truthfully, this is not a time for tremendously nuanced reads of inflation.  We need to see inflation coming down in a convincing way.  That is what we need to see.  Until we see that, we are going to keep going.” On running “restrictive”: “What we need to see is inflation coming down in a clear and convincing way, and we’re going to keep pushing until we see that.  If that involves moving past broadly understood levels of ‘neutral,’ we won’t hesitate at all to do that.” Notable that this was the second-consecutive interview where he noted that that this is going to tough-sledding: “There could be some pain involved in restoring price stability.” Further: in order to get inflation down to 2% target, “..we have to slow growth to do that...(but) we don’t have precision tools.” So maybe it's different this time for Powell's Fed and he will let financial conditions tighten deeper and for longer than anyone since Volcker? We suspect a lot will depend on Biden's polls... and we know which direction that is heading. Tyler Durden Wed, 05/18/2022 - 09:59.....»»

NYC Mayor Eric Adams Is Pleading Jamie Dimon To Ride The Subway To Work New York Mayor Eric Adams has resorted to begging businesspeople to ride the subway on the daily, as he strives to get more people back into their offices. Among those he has asked to ride the subway is JP Morgan boss Jamie Dimon. Hmm...should I wear my $20,000 suit and $50,000 Rolex on a private corporate helicopter to work or on the filthy New York City subway, we're sure Dimon asks himself daily.  Adams doesn't seem to care how bold of a request it is, telling the Financial Times this week: “We’re telling our corporate leaders: ‘Hey, get on the train!’ We need to advertise that New York is back.” Photo: NY Post The Times noted that only 40% of workers have returned to offices despite the Mayor's plea and the city's "re-opening" that still involves constant headlines about Covid cases. Surveys have found that "fear of a crime-plagued subway" is the overwhelming reason people don't return to the office. Adams has added more police to the subways and has added to their training, the report says.  Adams said: "When I was a transit cop, I graduated and I had to go through a whole training system of how to police the subway system. They stopped doing that. So we’re now reinstituting that.” Speakign about Dimon specifically, Adams said: “We’re going to get him on the train. We’re going to get everyone on the train. He understands the need of getting his people back and leading from the front.” Sure he does, Eric... Photo: NY Post Adams did admit that it had been a challenge to rope in crime in the city. Shootings were up 75% from two years prior and hate crimes are up 103% over the same period. Shoplifting is "rampant", the report says. Adams has blamed his lack of performance on guns: “We thought by the middle of February we were going to turn the corner on crime. But our entire equation was disrupted because of the flow of guns into our city, the ready accessibility of guns and the reluctance of prosecuting people who are carrying guns.” Adams is against the "defund the police" narrative and has increased the city's policing budget by $200 million. “After the [George] Floyd case, people were so terrified by what they saw that they said: ‘Take everything away from public safety.’ But there were those of us who said, ‘No. We can have safety and justice,’” he said. “I have not attended one meeting in my 32-year history where community groups said: ‘Take my police away.’” Tyler Durden Wed, 05/18/2022 - 10:10.....»»

Lost Decade On Menu As Yields Collide With 3% Hurdle By Garfield Reynolds, Bloomberg Markets commentator and analyst The extraordinary rally in Treasuries that defied last week’s red-hot inflation print looks set to cement the 3% barrier as a hard ceiling for yields, and that makes it possible this year’s cross-asset crash is the start of a years-long downtrend. The turnaround in sentiment among investors was almost as rapid as the shift from Federal Reserve Chairman Jerome Powell and the ultimate message is the same. Even with unemployment close to the lowest since the 1960s, and central bank officials saying that the US economy is in robust health, equities are acting as though yields above 3% are more than businesses can cope with. Then again, this was in many ways a bond rally that was waiting to happen. That’s because 10-year yields had already gone as far and fast as at almost any stage in the past 30 years. Based on the past three decades, the 207 basis point increase from August 2021’s trough to the May 9 peak at 3.20% is set to be as high as yields get for a while to come. Looking back at 10 episodes since 1992 when 10-year yields climbed from trough to peak, this was already the largest increase since the 2003-2007 Treasuries rout added 225 basis points. The table below examines moves of at least 100 basis points that also involved discernible and sustained sell offs. On the surface, this seems like a cause for optimism for investors. The harsh selling that sent global government bonds to their worst losses on record may be drawing to a close, removing a danger for risk assets that have slid as higher yields made historically excessive valuations harder to justify. The problem is that inflation looks way too elevated for nominal yields to stay this low, or for the Fed to accept them at these levels. If 10-year yields stay under 3%, the gap to Fed funds will soon be 100bps or less with Powell committed to hiking 100bps to a 2% target ceiling by July. That would give the Fed little wiggle room considering the last three hiking cycles ended when 10-year yields slipped below the central bank rate. Any bonds rally from here may be shallow, and if that then reverses to send yields back toward 3% the concern would be that equities and other risk assets again struggle to cope. The Fed has shifted away from kind words about engineering a soft landing toward harsher truths about how a recession may be unavoidable -- and that what they are focused on, above all, is inflation. Powell’s trenchantly hawkish comments Tuesday that he wants to keep hiking until it’s clear inflation is cooling underscored the dangers. That signals an end to Fed puts for bonds and stocks, or at the very least much lower strikes at a time when a decline in China’s growth impulse and the geopolitical dislocations caused by Russia’s invasion of Ukraine are also creating strong headwinds for assets. Tyler Durden Wed, 05/18/2022 - 10:26.....»»

WTI Erases Gains Despite Big Crude, Gasoline Draws; SPR At 1987 Lows Oil pries are up overnight as China relaxed some of its quarantine restrictions on Shanghai extending gains from the surprise crude draws reported by API. For now, all eyes are on the middle market as refineries shift their mix amid record high gasoline and diesel prices... "Gasoline prices on the exchanges had followed the two price peaks seen on the crude oil market in March to only a disproportionate extent. Margins had increased on the diesel market in particular, partly because product stocks were and remain very low. The focus appears to be shifting as the summer driving season draws ever closer in the US: the crack spread on the diesel market has dropped back noticeably while that on the gasoline market has soared," Commerzbank analyst Barbara Lambrecht said in a note. Will the official data confirm API's draws after last week's huge official build in crude stocks? API Crude -2.445mm (+1.553mm exp) Cushing -3.071mm - biggest draw since Oct 2021 Gasoline -5.102mm - biggest draw since Oct 2021 Distillates +1.075mm DOE Crude -3.394mm (+1.553mm exp) Cushing -2.403mm - biggest draw since Feb Gasoline -4.779mm - biggest draw since Oct 21 Distillates +1.235mm This is the 7th straight weekly draw in gasoline stocks (and 14th week of the last 15) and we are seeing a major crude draw... Source: Bloomberg Distillates stockpiles recovered on the East Coast and nationally. Full Colonial pipes carrying maximum distillates and gasoline are moving at a much faster pace to Linden, New Jersey. “We are getting into uncharted territory of crude inventories,” said Peter McNally, global sector lead at Third Bridge. “It’s tricky to implement these bans at a time when demand normally picks up and inventories are low.” The headline draw of 3.4 million barrels in crude stockpiles was supplemented by the withdrawal of another 5 million barrels of crude from the Strategic Petroleum Reserve last week. That’s 30 straight weeks of crude draws from the SPR, and there’s going to be many more of them to come. US Crude Production rebounded last week... Source: Bloomberg WTI was hovering around $110 ahead of the official data, having slid back from over $112 as US equities tumbled, andafter a small bounce on the draws, WTI is fading fast along with stocks Refiners may be incentivized to maximize gasoline as gasoline cracks inched above diesel this week, but they must also balance jet fuel and diesel production. “Despite the surge in inflation,” says BI’s Valle, “we still expect oil prices will get help from shrinking inventories, as supply struggles to catch up due to labor and equipment bottlenecks and Russian sanctions.” Finally, with the SPR at its lowest level since 1987... Source: Bloomberg It appears gas prices at the pump are well on their way to $5 average national within days... Source: Bloomberg And that means the reciprocal slide in Biden's approval rating. Tyler Durden Wed, 05/18/2022 - 10:38.....»»

1,000 Azovstal Fighters Have Surrendered Since Monday, But Top Commanders Remain: Kremlin According to fresh statements from Russia's defense ministry Wednesday nearly 700 more Ukrainian fighters have surrendered at Mariupol's Azovstal steelworks plant since the initial Tuesday reports that 300 had laid down their arms, with the wounded transferred to a Russian-controlled hospital. This would bring the total number to almost 1,000 fighters surrendered, according to the Russian statements. The Russian MoD counted "694 Ukrainian fighters who had been holed up in Mariupol’s Azovstal steelworks have surrendered over the past 24 hours, according to a report by the country’s RIA news agency." Image via Yahoo News Regional media has reported, however, that the Ukrainian Azov battalion's top commanders have yet to come out of the large Azovstal plant. Pro-Russian separatist leader Denis Pushilin was cited as saying of the top leadership, "They have not left [the plant]." This despite Ukrainian defense officials claiming on Tuesday that there was an intentional decision to wind down "combat operations". The Ukrainians were taken into Russian detention after laying down their arms, in what the Kremlin asserted was an obvious "surrender". Additionally Ukraine's President Volodymyr Zelensky dubbed it an "evacuation": "The operation to rescue the defenders of Mariupol was initiated by our military and our intelligence officers with the goal to return them home. The work continues and this work requires tact and time," he said. As we reported previously, multiple major Western media outlets also refused to use the term "surrender" in their headlines. "Hundreds of Ukrainian fighters were taken by bus to Russian controlled territory," a NY Times report said. "Ukraine's president said the combat mission in the city was over, capping some of the longest, fiercest resistance." At this point, the Russian military's official number of those fighters now in its custody from the Azovstal seige stands at 959 Ukrainian troops. Tyler Durden Wed, 05/18/2022 - 10:45.....»»

Twitter Board 'Intends To Close The Transaction' With Musk Despite Spam Controversy Twitter's board says it plans to enforce its $44 billion buyout deal with Elon Musk, who has spent the last week making the case that the number of 'fake/spam' accounts is much higher than the 5% claimed by the company. "We intend to close the transaction and enforce the merger agreement," the board told Bloomberg Tuesday afternoon, noting that they voted earlier to unanimously approve Musk's offer at $54.20 per share. The proposed takeover includes a $1 billion breakup fee for each party, which Musk will have to pay if the deal falls apart due to financing issues. But Musk can’t just walk away by paying the charge. The merger agreement includes a specific performance provision that allows Twitter to force Musk to consummate the deal, according to the filing. That could mean that, should the deal end up in court, Twitter might secure an order obligating Musk to complete the merger rather than winning monetary compensation for any violations of it. -Bloomberg Earlier in the week, Musk said the deal was "on hold" until he gets to the bottom of how many spam bots are on the platform - suggesting at a Miami tech conference that renegotiating a lower price wouldn't be "out of the question." "My offer was based on Twitter's SEC filings being accurate," Musk tweeted on Tuesday. adding, "this deal cannot move forward until he does." 20% fake/spam accounts, while 4 times what Twitter claims, could be *much* higher. My offer was based on Twitter’s SEC filings being accurate. Yesterday, Twitter’s CEO publicly refused to show proof of.....»»

US Housing Starts, Permits Plunge In April As Mortgage Rates Soar Following March's modest rise in Housing Starts and Permits, analysts expected reality to catch up with the homebuilder market in April (just as we saw in the NAHB sentiment survey slumping to 2 year lows). Housing Starts and Building Permits both dropped in April but the picture was mixed with Starts falling just 0.2% MoM (against -2.1% MoM exp), but that was due to a huge downward revision in March Starts from +0.3% to -2.8% MoM?! Building Permits tumbled 3.2% MoM (more than the expedcted 3.0% MoM drop) with only minimal revisions to March. Source: Bloomberg Overall Start and Permits appear to be rolling over... Source: Bloomberg On the Starts side of the equation, multi-family Starts soared in April (+16.8% MoM to 612K from 524K, and the second highest on record, only Jan 2020 higher) as single-family starts plunged (-7.3%MoM to 1.100MM, lowest since Sept 2021)... On the more forward-looking side of the housing market , a 4.6% MoM plunge in Single-family permits (to the lowest since Oct 2021) dominated the Permits slide (with multi-family permits down just 0.6% MoM)...     The average for a 30-year loan rose to 5.3% last week, up from 2.94% a year prior and the highest since 2009, Freddie Mac data show. "The housing market is facing growing challenges," Robert Dietz, chief economist at the NAHB, said in a statement. "Building material costs are up 19% from a year ago, in less than three months mortgage rates have surged to a 12-year high and based on current affordability conditions, less than 50% of new and existing home sales are affordable for a typical family. Entry-level and first-time home buyers are especially bearing the brunt of this rapid rise in mortgage rates." Finally, given the collapse in mortgage applications (purchases now crashing, following refi apps crash), we suspect the collapse in the new home construction business is just beginning (judging by the spread to forward-looking building permits)... Source: Bloomberg And Powell will only make things worse... "Soft landing" my arse! Tyler Durden Wed, 05/18/2022 - 08:37.....»»