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Wednesday, August 3, 2022

2022-08-03

*** denotes well-worth reading in full at source (even if excerpted extensively here)

Economic and Market Fare:


Despite rising tensions between the world’s two most-powerful countries over US House Speaker Nancy Pelosi’s possible visit to Taiwan, global risk markets have been quite resilient.

That fits the historical pattern since markets often struggle to handicap geopolitical risks pre-emptively. Investors may also take comfort that market reaction to geopolitical events tends to be short-lived. Either way, we are in unchartered territory, and these risks increase the appeal of bonds in both countries....



Bottom Line
Recession risk is worse than inflation for markets.

I’m not sure the Fed has done enough to avoid a recession (inventories keep popping up as a major warning sing).

I doubt the Fed messaging is going to help much this week, as they seem to want to beat down on the idea that they’ve made a dovish shift.

We should get some relief if the Pelosi visit goes without incident, but I find it difficult to believe China won’t respond in the coming days, if not with a show of force, but economically.


Democrats want to keep shrinking the deficit to fight inflation but also keep the economy out of recession. Good luck with that.

................ It’s such an important point, and one that I think most economists (not to mention most policymakers) simply don’t understand. Let me state it again: to maintain a strong economy, at least one sector needs to be willing and able to consistently spend more than its income.

Here’s the problem.

In the United States, that “someone” is almost always going to have to be the federal government. And yet no one seems to get it! ....

..... The government sector as a whole (federal/state/local) was deeply in deficit, and the US private sector (as a whole) carried a whopping financial surplus equal to 16.5 percent of GDP. Those weren’t historically “normal” figures. They were boosted by pandemic-induced changes in desired saving patterns coupled with trillions in fiscal support for households and businesses.

But look what’s happened over the course of the last year. In the first quarter of 2022, the government deficit was no longer big enough to keep the private sector in surplus. Some of the collapse in the government deficit happened organically, since the government’s financial balance tends to be procyclical—i.e. tax receipts climb during expansions and fall off when the economy slows or enters a recession. But most of it was the result of the massive withdrawal of fiscal support as pandemic spending programs wound down in 2021.




In a lengthy FEDS Note, “What does the Beveridge curve tell us about the likelihood of a soft landing?,” published July 29, Governor Chris Waller and Fed associate director Andrew Figura challenge the conclusions of our PIIE Policy Brief, “Bad news for the Fed from the Beveridge space.” We looked at their note with interest, in the hope of being educated on a more optimistic view of the American economy’s soft landing prospect. Unfortunately, our judgment is that it contains misleading conclusions, errors, and factual mistakes.

We find it entirely unconvincing as support for the “soft landing” idea—pushed mostly recently by Fed chair Jerome Powell in his July press conference—that vacancies can decline substantially taking pressure off inflation without driving unemployment way up. Rather the data support our conclusion that vacancies are very unlikely to normalize without a major increase in unemployment. ...


Impoverishing the American people is the worst way to deal with inflation.

.......... It follows that there are two basic strategies of dealing with the inflation. Either we can create enough goods and services to satisfy demand, or we can impoverish the American people so they can’t afford them anymore. The latter strategy is explicitly what the Fed is doing. ...



.... Of course, with oil and gasoline sliding in anticipation of Biden's recession, and most other commodities at or below Ukraine war levels, it's unlikely that inflation will remain quite so sticky, especially when considering that yesterday, we saw the ISM-Prices Paid sub-index print 60.0, down from 78.5 prior. This, JPMorgan writes, “...feeds into our house view from Mike Feroli that between now and the September FOMC we should continue to see CPI levels cool due to energy prices/base effects and along with likely softening in jobs data, indicative from higher initial claims recently, leaves us expecting a 50bp hike in September and a more dovish stance for the rest of the year. Jackson Hole at the end of August could deliver more support for the dovish pivot.”

Here we completely agree with JPM for once, as it has been our base case for a long time that the Fed will use this month's Jackson Hole to hint at the coming dovish reversal.

But let's assume that's not the case and inflation remains deeply entrenched, Friday's jobs come in hot, wage growth continues to beat expectations as the wage-price spiral proves unbreakable, and next week's CPI print comes in far hotter than expected. Well, that in a nutshell is what Zoltan Pozsar's latest note is all about.

According to the repo guru, inflation is now so embedded, that the US economy may need to undergo a deeper and longer recession than investors (and he himself) anticipate before sharply higher prices can be brought under control. ...

... So what does Pozsar think will help? Well, as he writes, "instead of playing “catch-up” with the pre-GFC trend of aggregate incomes, we’re now playing “catch-down” to the post-nativist, post-Covid, and post-Ukraine trend of aggregate supply. The level of economic activity needs to adjust down in an “L”-shaped manner. If it doesn’t, we will have more inflation problems..." ...

... Well... maybe Zoltan should stop listening to the Fed - which itself now admits it is clueless and will no longer provide forward guidance, and instead will react to data - including "data" from US politicians - and listen to Congress, where anger at the Fed is already building up. ...

... The problem with this line of thinking is that Pozsar thinks anyone - whether Congressional Republicans or Democrats - will agree to a "depression" just to contain inflation. Spoiler alert: they won't as it means an immediate end of all their political (and all other careers). ...






Home Price Growth Suffers Largest Monthly Decline Since 1970s

... Black Knight Data & Analytics President Ben Graboske said June was a record-breaking slowdown of nearly two percentage points from 19.3% to 17.3% annual home price growth and coincided with the largest single-month increase in homes listed for sale in 12 years.







Quotes of the Week:

CIBC FX: US JOLTS (Jun) Job openings have witnessed a third straight fall for the first time since Feb to Apr 2020. Moreover, the pace of correction in vacancies has accelerated. It seems that evidence is increasingly pointing towards a rolling over in the labour market, we expect that to be reflected in NFP on Friday.




Charts: 
1:

9:
10:



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Vid Fare:




I really don’t know how to describe the disturbing trend over the last few months of the Biden administration, along with Treasury Secretary Janet Yellen, simply lying to the American people about the economy.

Months worth of political spin has culminated in embarrassing recent attempts to redefine the word “recession”: a futile effort to pull the wool over an American public that is growing increasingly suspect both Biden and Yellen’s competence to be overseeing the the country, and the economy, respectively.

By now, the administration’s pathetic falsehood of a narrative about our economy has been called out, ridiculed, dismantled and generally beaten to death by anyone with a shred of common sense.

However, there is something far more important that people aren’t talking about: the administration lying about the health of the economy could wind up exacerbating any financial crisis that we have in the near future.

Put simply, the more you tell people that “everything is fine” when it isn’t, the more surprised and shocked they are going to be when markets start to panic.

I don’t think a market crash is an outrageous scenario that has no chance of happening, either. I noted in my latest portfolio update that I thought the market could have a short-term rally based on the idea of participants thinking that the Fed is preparing to pivot.

But over the course of the longer-term, the rate hikes that have already been put into place are going to eventually make their way to the economic-narrative-foreground in the form of huge forthcoming aftershocks throughout the economy.

And so everybody who has been buying the dip over the last two weeks, whether it is out of FOMO, being forced out of short positions or a genuine belief that equities are now cheap, may still have to face pronounced upcoming market shocks. ...



(not just) for the ESG crowd:


Other Fare:



The legend of the Loch Ness Monster might not be fictional.




Contrarian Perspectives

Extra [i.e. Controversial] Fare:

*** denotes well-worth reading in full at source (even if excerpted extensively here)


Regular Fare:

Former Labour leader was subject to the longest continuous smear campaign in British history


“Forget They Are an Animal”



Unsustainability / Climate Fare:

Scientists say there are ample reasons to suspect global heating could lead to catastrophe
Lenton, Rockstrom, Schellnhuber, Steffen et al: Climate Endgame: Exploring catastrophic climate change scenarios

Abstract
Prudent risk management requires consideration of bad-to-worst-case scenarios. Yet, for climate change, such potential futures are poorly understood. Could anthropogenic climate change result in worldwide societal collapse or even eventual human extinction? At present, this is a dangerously underexplored topic. Yet there are ample reasons to suspect that climate change could result in a global catastrophe. Analyzing the mechanisms for these extreme consequences could help galvanize action, improve resilience, and inform policy, including emergency responses. We outline current knowledge about the likelihood of extreme climate change, discuss why understanding bad-to-worst cases is vital, articulate reasons for concern about catastrophic outcomes, define key terms, and put forward a research agenda. The proposed agenda covers four main questions: 1) What is the potential for climate change to drive mass extinction events? 2) What are the mechanisms that could result in human mass mortality and morbidity? 3) What are human societies' vulnerabilities to climate-triggered risk cascades, such as from conflict, political instability, and systemic financial risk? 4) How can these multiple strands of evidence—together with other global dangers—be usefully synthesized into an “integrated catastrophe assessment”? It is time for the scientific community to grapple with the challenge of better understanding catastrophic climate change.

Pielke: A Challenge to Climate Hawks
Please explain how the Inflation Reduction Act actually reduces emissions



Instead of scaling up renewable energy, researchers promote unproved ideas


Will people abandon the American Southwest or fight like hell to keep it?



Climate Tweets and Quotes of the Week:

Art Berman: I suppose you have missed my point entirely. There IS no plausible solution that includes using as much energy as we have since the latest stage of the carbon pulse began 75 years ago. Let's try again:



Luke Kemp: New paper with PNAS just released. Climate Endgame: Exploring Catastrophic Climate Change Scenarios- https://bit.ly/3BCFUW2 We outline why catastrophic climate risks are underexplored, why they are critical, why they are plausible, and how to study them. A short overview thread!




COVID Fare:

I've continued to come across too much excellent COVID-related content (with contrarian evidence-based points-of-view!!) to link to it all
Read everything by eugyppius; el gato malo; Mathew Crawford; Steve Kirsch; Jessica Rose!
Paul Alexander, Berenson, Chudov, Lyons-Weiler, Toby Rogers are also go-to mainstays; a list to which I have added Andreas Oehler, Joey Smalley (aka Metatron) and, Julius Ruechel; Denninger worth staying on top of too for his insights, and especially his colorful language; and Norman Fenton; Marc Girardot; plus Walter Chesnut (on twitter); new additions: Sheldon Yakiwchuk and Aaron Kheriarty; I will of course continue to post links to key Peter McCullough material, and Geert Vanden Bossche, and Robert Malone, and Martin Kulldorff, and Jay Bhattacharya, and Sucharit Bhakdi, and Pierre Kory, and Harvey Risch, and Michael Yeadon, and John Ioannidis, and Paul Marik, and Tess Lawrie, and Zelenko, and Dolores Cahill, and [local prof] Byram Bridle, and Ryan Cole, and…
but going forward, my linking to material by those mainstays mentioned above will be reduced to key excerpts and/or essential posts


.... Dr. Theo Schetters:         Yeah. Well, and that's the problem with this technology because this mRNA travels through your body because of the formulations that they used.

Dr. Robert Malo...:        Which physicians were told was not the case.

Marlies Dekkers:           No, it should stay in the arm.

Dr. Theo Schetters:         So it potentially affects all organs. And that's what the medical doctors now see, they see all sorts of symptoms that they do not know what it is. And because the adverse effects are so not just single one adverse effect, but can be anything, they surface very difficult to a statistical level. And that's why we do analysis on all cause mortality, because say, okay, and if we do not know what is exactly related to vaccination, of course, the coagulation problems, myocarditis, we know that, but there are many more things happening at the moment. And so that's why we look at all cause mortality ....


A new elephant no one wants to notice.



Most of you will probably already be aware of the following pre-print that’s doing the rounds amongst the maskerbators. I’m not going to go over this paper in any detail; others have already done so. I will, however, just say that this paper is SO appallingly bad and flawed that it can, surely, only be a kind of sarcastic ‘hoax’ to demonstrate that it’s easy to get insanely awful “science” out there provided it fits The Narrative™. ...

..... Nowhere has this been more evident than in the promotion of masks over the last couple of years. People will see the link to the paper above and think “ooh, look it’s on the medical archive - must be a proper good piece of work” when in reality the paper above is shite beyond all measure. It is the very essence of shite. Shite so pure it could fertilize an entire planet. It is so very, very bad that I can only imagine it has to be a kind of hoax/protest paper

... The level to which so much junk science has penetrated people’s psyche is depressing - although not wholly unexpected given the propagandist war on science that has been waged by governments and their media buddies.

... Honestly, I don’t think there’s any way to reverse this kind of damage without another media onslaught every bit as widespread as the anti-scientific shite they liberally pebble-dashed us all with in the first place.



Tweets & Quotes of the Week:






In the days leading up to the mandate, transportation officials were frantically looking for a rationale for it. They came up short.


Yale epidemiologist Harvey Risch cites explosion of "early unexpected mortality claims," largely not COVID-related, that insurers are struggling to pay following alleged misrepresentations about "all-cause mortality" from clinical vaccine trials.

Yale University epidemiologist Harvey Risch is expecting insurers to seek financial compensation from COVID-19 vaccine makers to cover “early unexpected mortality claims,” as they “they have a major financial risk that they have to figure out how to manage.” Insurers’ actuaries estimated COVID vaccinees would “live longer than they have” based on misrepresentations about “all-cause mortality … from the original [clinical] trials,” Risch told the “Just the News, Not Noise” TV program. In a followup interview he pointed to statements by insurers that offer group life insurance. OneAmerica CEO Scott Davison told a healthcare conference in December that death rates had risen an “unheard of” 40% in the working-age people it insures compared to pre-pandemic rates, when a “one-in-200-year catastrophe” would only bring a 10% increase.



COVID Corporatocracy Fare:

Please watch... it will make you laugh.



Back to Non-Pandemic Fare:

GeoPolitical Fare:

ilargi: Theater Opening

If you’re Chinese or Russian, and you watch videos of the top three “most powerful” people in the US, Biden, Kamala and Pelosi, what do you think? You think all three are incoherent and should not be anywhere near any decisive, let alone nuclear, lever.

If you’re anybody anywhere, and you look at the top three “most powerful” people in the world, Xi, Putin and Biden, what do you think? You think two of them have got it together (nothing to do with you liking them or not), and one can’t even read coherently from a teleprompter.

Nowhere near half of Americans understand these two things to be true, but probably some 90% of Chinese and Russians do, as well as a vast majority of people in other non-US/NATO/EU countries.

Another threesome: Sergei Lavrov (Russia), Tony Blinken (US) and Liz Truss (UK) are all foreign ministers (or Secretaries of State, give the beast a name). Who would you trust to represent your own interests best in the field of diplomacy? It’s not even a question, is it? If the US or UK had a Lavrov, he would be their man (he would most likely decline). But they don’t. The US has a nobody (they have lots of those!) in the role, and the UK has someone with zero qualifications who dreams of getting the top job.

The world outside of the G7 or G20 (give the wheel a spin) sees this happening. Is it any wonder they clamor to be part of BRICS? The “collective west” is fast finishing off itself, and yes, you’re right, that is a dangerous moment. It’s also why it very much looks like the “collective west” is trying to open a second theater of war in Europe. One that looks a lot like the one they opened in Ukraine. And the EU, to its utter shame, does nothing to prevent this from happening – on its “own” soil!.

I know, there’s Crazy Nancy on her way to Taipei as well as we speak, we’ll get to that yet. Imagine: you’re 80-odd years old, and you want your legacy to be WWIII. Not your grandchildren, but live nukes. Just imagine that.

Kosovo’s unilateral secession from Serbia was recognized by the “main Western powers” in 2008. But not China, Russia, or the UN!. Not too long after Bill Clinton’s NATO bombed the heebeejeebees out of former Yugoslavia in 1990. Just because they could. Today, the US -and NATO- try to use a tiny sliver of former Yugoslavia to ignite a major fire in Europe, a second fire besides Ukraine. ...



The cultural and historical elements that determine the relations between Russia and Ukraine are important. The two countries have a long, rich, diverse, and eventful history together.

This would be essential if the crisis we are experiencing today were rooted in history. However, it is a product of the present. The war we see today does not come from our great-grandparents, our grandparents or even our parents. It comes from us. We created this crisis. We created every piece and every mechanism. We have only exploited existing dynamics and exploited Ukraine to satisfy an old dream: to try to bring down Russia. Chrystia Freeland’s, Antony Blinken’s, Victoria Nuland’s and Olaf Scholz’s grandfathers had that dream; we realized it.

... On 20 January 1991, before the independence of Ukraine, the Crimeans were invited to choose by referendum between two options: to remain with Kiev or to return to the pre-1954 situation and be administered by Moscow…. 93.6% of Crimeans agreed to be attached to Moscow….

... On February 26, 1992, the Crimean parliament proclaimed the “Republic of Crimea” with the agreement of the Ukrainian government, which granted it the status of a self-governing republic. On 5 May 1992, Crimea declared its independence and adopted a Constitution….

….on 17 March 1995, it [Ukraine] forcibly abolished the Crimean Constitution. It sent its special forces to overthrow Yuri Mechkov, President of Crimea, and de facto annexed the Republic of Crimea, thus triggering popular demonstrations for the attachment of Crimea to Russia. An event hardly reported by the Western media.


In both cases, the West put no pressure on the side it supports to adhere to signed international deals

....

Having now touched down in Taiwan, the Pelosi flight saga is complete!
However the series of events this visit has sparked haven’t even begun. 

.......

For all the anticipation this opening move generated, China was never going to do something as brash and escalatory as shooting down Pelosi’s plane. Contrary to the disappointed reactions, China has not “blinked”, made empty threats, or allowed their redlines to be stepped on.

China simply didn’t instinctively flinch at a blatant provocation. The weeks ahead will demonstrate that China, led by the CPC and guided by the principles of dialectical materialism, has many points of leverage at their disposal now that the west has exposed their intentions.


The Anti-China Brainwashing Is Working: Notes From The Edge Of The Narrative Matrix

If someone criticizing the most dangerous agendas of the most powerful and destructive government on earth looks like “Russian propaganda” or “Chinese propaganda” to you, it’s because you yourself have been brainwashed by propaganda.

❖

The western propaganda campaign against China is succeeding, even among many who consider themselves anti-war or critical of establishment power. Whatever sick future agendas they’re manufacturing consent for, they’ll be able to roll right on out. People’s brains are turning to soup.

❖

There needs to be a major war every generation or two, otherwise peace becomes normalized and becomes the expectation. If you allow that to happen then war begins to stand out against expected norms like the freakish abomination that it is, and militarism looks insane.

They use propaganda to facilitate war, but they also use war to facilitate propaganda. Keeping the wars going helps the propaganda machine spin war as something normal and expected and to be continuously prepared for. It acts as an immunosuppressant against the public’s natural, healthy rejection of war. The more normalized war becomes, the more suppressed our collective immune system’s rejection of it becomes.

War is the absolute worst thing in the world. It’s the most insane thing humans do. ...


Other Quotes of the Week:

Welsh: This is all very slim “good news”. With respect to climate change I am of the opinion that we will not hold it at 2 degrees C, though some climate scientists disagree. I have found that the more “pessimistic” forecasts have consistently been more reliable, and I believe that self-reinforcing cycles, such as methane release from permafrost and swamps and the destruction of most of the world’s remaining great forests have been triggered. We can and should mitigate climate change by reducing emissions, but we have left it too late to contain catastrophic climate change. (I also expect a couple of marine inundations this century (colloquially, great floods) and earlier than most people think likely.)


Barlow: Putting green levies on ordinary people, taxing ordinary people, is designed, and I say purposely so, to make green policy unpopular. Put massive taxes on billionaires, their private jets etc, and green policy would be popular. I wonder why they always chose the policy that makes it unpopular, and then give the billionaires and multi-millionaires a free pass, although they have the highest emissions by far.


Heying: I have been hearing from people who feel very much alone. People who are grateful that I and many others are speaking up and out. We who speak up are publicly analyzing trends and claims. We refuse to kowtow to authoritarians, including the ones who wear lab coats or have fancy degrees or work at legacy institutions. And we call out bullshit when we see it. Because I am one such public voice who has been standing for science and against newspeak, I know this for sure: You are not alone.







Fun Fare:



Putin Awards Self Medal Of Freedom For Dropping Gas Prices






Pics of the Week:






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