Regular Fare:
Hickman: 4th-Wave Of
COVID-19 Will Push Rates To Zero
It isn’t over, and financial markets don’t accept that yet. I realize
suggesting anything negative about the virus is misanthropic, but the truth
matters, and the optics are misleading. New cases decrease in the third wave
because we are past the holidays, not because of vaccinations. It is a common misconception
the decrease we’ve seen in the virus is due to vaccinations. The two aren’t
related, at least yet.
….
Taken together, it is probable that the world will have at least one more
severe wave of infections this spring and summer – a fourth wave – before the
inoculated and previously infected can crowd out those with no protection.
Re-vaccination (booster shots) for new variants add to this timeline. Such
isn’t doomsday, but at a minimum, it elongates the time until battered
industries (hospitality, entertainment) will have a chance to recover. So far,
markets continue to believe the pandemic is a net benefit to bigger businesses
globally (all-time highs in public companies).
…
even without a fourth COVID-19 wave, the negative impact on jobs, rents,
consumer demand, tax revenue, and entire economy segments (hospitality,
entertainment) has yet to be considered seriously. As they become so, risk-on
markets (stocks, commodities, crypto-currencies, houses, and non-G-7
currencies) will drop, and long-term U.S. Treasury yields will fall
dramatically.
On the other hand:
Nordea: Taper tantrum
2.0? Here is how to trade it in rates…
Inflationary vibes have led to a duration scare but how far are we from a
2013-like tantrum? We argue that risks are elevated
Then again:
Sub-zero Rates
Are Coming to the US and the UK
Negative rates are the destruction of money, an economic aberration based
on the mistakes of many central banks and some of their economists, who all
start from a wrong diagnosis: the idea that economic agents do not take more
credit or invest more because they choose to save too much and therefore saving
must be penalized to stimulate the economy. Excuse the bluntness, but it is a
ludicrous idea.
Inflation and growth are not low due to excess savings, but because of
excess debt, which perpetuates overcapacity with low rates and high liquidity
and zombifies the economy by subsidizing the low-productivity and highly
indebted sectors and penalizing high productivity with rising and confiscatory
taxation.
…. the financial repression of central banks begins with a misdiagnosis
assuming that low growth and below-target inflation is a problem of demand, not
of the previous excess, and ends up perpetuating the bubbles that it sought to
solve.
1.25% 10Y Yields: Now What?
Given the fact rates are edging higher on a combination of bearish
underpinnings as opposed to a distinct driver, the technical landscape is
useful in gauging the extent to which any repricing may extend. Beyond 1.273%,
there is little support for 10s until an opening gap from 1.431%-1.471% that
was established in late-February. 1.50% also holds obvious significance,
however a 25 bp selloff driven by a series of already known bearish factors is
difficult to envision, leaving us to anticipate dip-buying will emerge long
before the overhead opening gap with an eye on anything >1.30% as sufficient
incentive for any demand not sated by last week’s auction of $41 bn 10s at
1.155%.
To be fair, there are plenty of factors supporting a durable repricing
toward higher Treasury yields;
1.
inflation expectations as evidenced by 10-year
breakevens at 224 bp overnight,
2.
elevated energy prices as the front-month WTI
nears $61/barrel,
3.
progress toward Biden’s stimulus deal expected
by month’s end now that the impeachment trial has been concluded,
4.
massive Treasury issuance needs and, of
course,
5.
record high equity prices yet again.
We’d be remiss to argue against the intrinsic bearishness of these
factors, rather the challenge is gauging the extent to which any repricing can
sustainably press before running up against the bullish concerns.
Chief among the influences expected to keep yields from returning to an
environment in which 2-handle 10s are back on the table is the overhang of
slack in the labor-market resulting from the initial hit to the front-line
service sector. While jobs have been recovered and the unemployment rate
dropped dramatically, there remains a large segment of sidelined workers that
will require more than simply vaccinations and reopenings to be reengaged. This
structural underemployment will keep wages contained for years and without
upward pressure on wages, it will be a struggle to achieve the true, demand
driven inflation the Fed seeks. This isn’t to suggest investors won’t be faced
with pockets of idiosyncratic inflation via the reversal of the initial
pandemic impact, however the base effects will distort the more modest monthly
gains as the March-May period unfolds. With transitory and supply side
inflation more a tax on the consumer than enduring trends, we’re cautious
against assuming the bearishness currently underway in Treasuries will prove
sustainable.
The interplay between higher rates and equities also warrants a nod;
particularly as >1.25% 10s and record high stocks reflect a shared optimism
that risks conflicting with the ‘low rates drive higher valuations’ narrative
that has been in play throughout much of the pandemic. Needless to say, there
is a level 10- and 30-year yields at which the equity market wobbles, financial
conditions tighten, the Fed takes notice, and the low right environment is
reinforced either through forward guidance or changes in QE. As it stands, such
an extreme appears to be further out on the macro horizon – at least for the
time being. In the interim, we’re content to watch the cheaper and steeper
trade get pressed and suspect this episode will serve to redefine the upper
bound for the rates trading range once again as opposed to establishing a new
floor for Treasury yields.
Already Tried: イールドカーブコントロール
In historical context, it's really clear that falling bond yields have
nothing to do with QQE, QE, NIRP, YCC, or the (too) many central bank
"tools" that are actually all the same tool with different
appearances.
Inflation
Problems Depend on Where You Look for Them
If the Fed’s low interest rates lead to trouble, the reason might be
climbing asset prices rather than consumer prices
Nancy Davis, founder of Quadratic Capital, notes that in swaps markets,
where companies hedge inflation and interest-rate risk, firms are pricing in
inflation in the two-to-10-year horizon at about 1% a year, even further below
the Fed’s target. The market might be complacent, she said. Or it might be
saying that the risk of a pickup in
Inflation is no more serious than the risk of falling consumer prices,
known as deflation. “Nobody knows what’s going to happen,” she said, “especially
the economists.”
Will The Economy
Replace Ten Million Jobs By 2022?
Popular forecasts call for a return to pre-pandemic levels of employment
and economic activity by yearend. Really? We are not so sure.
Driven by
Mortgages, Household Debt Hits New High
Biden's Coronavirus Relief Package Has Almost Nothing to Do With the Coronavirus
The fiscal response, he has argued, must be commensurate to the crisis at
hand. "Now is the time we should be spending," he said at a CNN town
hall this week. "Now is the time to go big." Biden has certainly gone
big. His $1.9 trillion deficit-funded plan would be among the largest stimulus/relief
packages in history. But much of the spending he has proposed would do little
or nothing to help actually struggling Americans. Instead, the plan is padded
with non-urgent, pre-existing Democratic policy priorities that have, at most,
only tangential relationship to the crisis at hand. …. Biden keeps insisting
that time is of the essence, that massive federal spending is urgently needed
to speed America's recovery from its coronavirus-induced health and economic
downturn. But the practical details of his plan say otherwise.
On the other hand:
JPM Joins
"Overheating" Bandwagon: Sees 6.4% GDP As Stimulus Forecast Doubles
To $1.7TN
Bubble Fare:
The Two Pins
That Will Pop The Stock Market Bubble.
There are three big drivers of the commodity supercycle:
1.
The long era of monetary-policy dominance is
over, leading to a heightening of inflation risks not seen since the 1960s
2.
Investors are deeply underweight and will need
real assets such as commodities as a hedge against inflation
3.
Commodities are generationally cheap, both
compared to themselves and to other assets
It is rare in macro-forecasting when the stars align so perfectly.
COVID-19 notes:
The coronavirus is here to stay — here’s what that means
A Nature survey shows many scientists expect the virus that causes
COVID-19 to become endemic, but it could pose less danger over time.
Two variants
have merged into heavily mutated coronavirus
'Wildly unfair':
UN says 130 countries have not received a single Covid vaccine dose
10 countries have administered 75% of all vaccinations
(not just) for the ESG crowd:
UN: Huge changes in
society needed to keep nature, Earth OK
Rescue plan for
nature: How to fix the biodiversity crisis
if you compare Earth’s history to a calendar year, we have used one-third
of its natural resources in the last 0.2 seconds
Nigeria’s
ecological emergency
No amount of clean technology, industrial growth or boosts to GDP will
avert the economic and climate crises inextricable to profit-driven extraction.
Monetary and
ecological hierarchies: towards a unified
framework
Join us to hear Romain Svartzman (McGill University) talk about his
research on 'greening' the International Monetary System (Feb. 22, 3:30–5pm)
Canadians
support government investment in renewables and clean nuclear energy to fight
climate change despite competing economic
priorities, reveals new study
Other Fare:
Vehicle
Dependability at All-Time High, J.D. Power Finds
EXTRA [controversial or non-market-related] FARE:
COVID Fare:
Vaccine rollout
will trigger new Covid variants, Oxford scientist warns, adding ‘new layer of
complexity’ to pandemic fight
The Regius Professor of
Medicine at Oxford Univesity, Sir John Bell, has revealed that Covid
vaccination causes more mutations of the virus, requiring new vaccines in an
endless chase
The Covid
Pandemic Is The Result of Public Health Authorities Blocking Effective
Treatment
The reason people have died
from Covid is the refusal to treat and to prevent with known effective
means. Instead, governments and health
authorities have interfered with doctors and prevented treatment with HCQ and
Ivermectin, while using the presstitutes to brainwash the public that these
effective and safe treatments are dangerous.
The massive disinformation
campaign waged against effective prevention and treatment does not come from
ignorance and incompetence of public authorities. It comes from the agendas that Covid is being
used to advance, agendas whose toll in human life and suffering is unimportant
to those whose agendas are being served.
What reason is there for
people in any country to have confidence in their government and public health
authorities?
Coronapocalypse;
Big Pharma's Doomsday Vaccine
Imagine for a minute that
everything we are currently experiencing is not the random response of a
government that is trying to muddle through a thorny and stressful crisis, but
part of a broader plan to generate as much hysteria as possible in order to
create a submissive public that clicks its heels and follows orders without
question? Is that too far-fetched?
…
As for the vaccines, well,
we know that reputable professionals have warned us that these zombie
injections could impact fertility health and mortality, but is that probable?
After all, the experts, celebrities and media are promoting these mRNA vaccines
with more exuberance than any Madison Avenue product-launch in history. Maybe
we should set aside our concerns and just go with the flow. After all, what
could go wrong?. Check out this except from an interview with Dr. Chris Shaw,
Ph.D, Specialist in Neuroplasticity and Neuropathology. Here’s what he said: …
… lots…
So, here’s the
million-dollar question: Are the Covid vaccines safe or not?
How could they be? They were
not sufficiently tested, the technology is new and experimental, Phase 3 Trials
have not been completed, thorough animal trials were never conducted, there is
no data on long-term adverse side effects, and the final product was ramrodded
through the “rubber stamp” FDA under the Emergency Use Authorization provision.
On top of that, medical professionals are now warning us that the vaccines
could “cause microvascular injury to the brain, heart, liver and kidneys.” The
American people need to consider these things before they make their decision.
Of course, the blunt refusal
to do any kind of research into the mental health threats posed by lockdowns
does not stand alone. There’s also the evenly blunt refusal to look at
substances that can serve as prophylaxis. ….. Instead, we are told to get
vaccinated -or else-, injecting substances into our veins that have never been
properly tested. Can we offer 100% evidence that vitamin D, HCQ and ivermectin
would have -mostly- prevented the pandemic? No, we can’t, but in the same way
that we have no proof the vaccines are safe or successful: a refusal to do
proper testing. …. One thing is for sure: the vaccines will be challenged by
new strains of the virus at some point, and there’s no guarantee they can be
adapted for those strains. The prophylactics have no such issue. Boosting your
immune system provides you with overall protection. And you don’t need 100%:
bring down infections by 50%, and everything changes.
…
For the elderly it means
having to spend their last years and days in near absolute solitude. If you
would ask them, many would say: just give me the virus, as long as I can see my
children and grandchildren and friends while I’m still alive. But nobody asks
them. They spent their entire lives just to be silenced. In order to eradicate
a virus, we eradicate the very people who built the world we inherited from
them. For the very young it means stunted development. There is a ton of
literature about how the first 5 or 10 years shape a child for life. Well, we
just took a full year and counting away from that shape. We have no way of
knowing to what extent that will affect them, but it won’t be zero. People are
adaptive, sure, but that can be a negative thing just as much as a positive
one. Caged animals adapt too; with neurosis.
….
Meanwhile, there’s not only
the prophylactics that are ignored, we also have the exact same PCR tests used
for a year, whose own inventor says they’re not fit for the purpose, we have
facemasks on every weak immune system for which it’s doubtful that they have
much effect, unless they’re N95, FFP2-3, and even then. And we have an almost
complete lack of attention for the fact that we now know the virus is airborne,
and doesn’t stick to surfaces. From which follows the lack of scrutiny of air
filtration systems, HVAC, HEPA, that might actually help, and perhaps allow
schools, restaurants etc. to open up again. Lazy, shoddy, hardly science.
Political Fare:
Congress
Escalates Pressure on Tech Giants to Censor More, Threatening the First
Amendment
Joe Biden Is As
Depraved As Ever
So a president creepily
calls an eight-year-old girl whom he just met "Baby," and then
further demeans her by ordering her to stop worrying her pretty little head
about ever catching Covid and other children ever catching Covid, or even about her parents and
other children's parents ever catching Covid. You're forgiven if you thought
that I was talking about Donald Trump. But since it was Joe Biden's exhibition
of creepiness and mendacity and sexist disdain, delivered in that over-familiar
grandfatherly way of his, the whole
world is feeling ever so much better now. Or so the gushing corporate media
informs us.
…
It's a vicious cycle and a
closed feedback loop. The relentless performance of ignorance and stupidity at
the very highest levels of the media-political complex does (unlike their
wealth) have the effect of trickling down on the audience. This result is
desirable for them, not so much for us.
Big Thoughts:
The End of the
Megamachine: A Seneca Cliff, by any Other Name, Would Still be so
Steep..
Our civilization seems to be acutely aware of an impending decline that
nowadays is rapidly taking the shape of a collapse. It is still officially
denied, but the idea is there and it appears in those corners of the memesphere
where it makes an long term imprint even though it doesn't acquire the flashy
and vacuous impression of the mainstream media.
…
The megamachine is just one of the biggest systems that ever appeared in
the history of Earth's ecosphere. As such it has follow the trajectory that's
described in the concept of the "Seneca Effect." At the beginning, it grows slowly, but the
more it grows, the faster it can grow. Now, the resources that make it grow
start dwindling and the giant brute starts stumbling around in search for more.
In doing that, it exhausts itself and prepares for the final fall: the steep
descent called the "Seneca Cliff"
That is where we stand right now: on the edge of the cliff and, probably,
we have already started sliding down. Scheidler's description of how we arrived
here is both impressive and breathtaking. It was a run toward the cliff that we
ran convinced that we would have been climbing up forever but, alas, that
couldn't be the case and it wasn't.
Is there life on the other side of the cliff? Of course, yes! The universe
moves in cycles and it never stands still. That's also the message of "The
End of the Megamachine" that concludes with a look at a possible
transition. The human civilization will never be as it was before, it will be
based more on collaboration than on competition and with a more constructive
relation with the ecosphere. And that's not a choice, it is a requirement for
the survival of humankind.
Quote of the Week:
Caitlin Johnstone: One of the most
consequential collective delusions circulating in our society is the belief
that our society is free. Our society is exactly free enough to create the
illusion that we have freedom; from that line onwards it’s just totalitarianism
veiled in propaganda.
Video of the Week:
The baroque music of
Jean-Philippe Rameau coupled with modern street dance. The result is nearly
mind-boggling.
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