Pages

Monday, May 22, 2023

2023-05-22

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


Economic and Market Fare:

Fed chair says banking strains could mean rates don’t have to rise as much to tame inflation

............ Earlier, New York Fed President John Williams presented research at the conference showing the Covid-19 pandemic didn’t change estimates of a “neutral” interest rate that neither stimulates nor restricts demand, a finding with important implications for how high officials may raise rates to slow the economy.

Between the 2008 financial crisis and the 2020 pandemic, Fed officials and economists had concluded the neutral rate of interest—or the level that balances supply and demand when the economy is operating at full strength—had declined sharply. That, together with weak growth following the crisis, ushered in a period of historically low interest rates.

Williams said a widely followed model used to estimate the inflation-adjusted neutral rate of interest showed “there is no evidence that the era of very low natural rates of interest has ended.” ........


As the bond rally runs out of steam, the case for shorting Treasuries is becoming increasingly compelling.
The bond market that US political advisor James Carville wanted to be reincarnated as is about to get intimidating again.
The rally off last October’s lows is fading, and there are now a litany of reasons why longer-term Treasuries are likely to soon fall in price, taking yields higher and supporting the yield curve:
  • Global financial conditions are easing
  • Excess liquidity is rising
  • Inflation is becoming entrenched
  • An increasingly precarious fiscal situation
  • Declining overseas demand for USTs
  • An expected jump in issuance when the debt-ceiling is resolved
First of all, let’s get the debt-ceiling elephant out of the way.
In the two previous debt-ceiling episodes in 2011 and 2013, bond yields mostly fell. Perversely, in a risk-off environment Treasuries were the only safe-haven asset, even if they were at the center of why risk was elevated in the first place.
We may get the same knee-jerk reaction this time, but that’s just a selling opportunity ....








.............. In all, it’s now been over seven months since the S&P 500 hit its lows back in October—that tends to mean the lows are in, and it also tends to bode well for future returns. When the S&P 500 has made it seven months or more without a new low in the past, it’s been higher 86% of the time over the following year. 


The world-changing narrative around AI has hooked up with the Fed’s determination to provide liquidity, even during a rate-raising cycle.


Wilson: Great Expectations, in PDF via The Bond Beat
… Last week’s price action showed signs of panic buying by investors who are afraid they’ll miss the next bull market. We believe this will prove to be a head fake rally like last summer’s, for many reasons. First, valuations are not attractive, and it’s not just the top 10-20 stocks that are expensive. The S&P 500 median stock forward P/E is 18.3x (in the top 15% of historical levels back to the mid-1990s), the S&P 500 ex-tech median P/E is 18.0x (also within the top 15% of historical levels) and the equity risk premium is only 200bp. Second, a very healthy re-acceleration is baked into 2H consensus earnings estimates (mid-to-high single-digit growth for both the overall index and the index ex-tech). This flies directly in the face of our forecasts, which continue to point materially lower. We remain highly confident in our model given how accurate it has been over time and recently. We first started talking about the coming earnings recession a year ago and received very strong pushback, just like today. However, our model proved quite prescient based on the results and is now projecting a much more dire outcome than consensus. Given its historical and more recent track record, we think consensus estimates are off by as much as 20% for this year.

Other reasons we are wary of the current rally:
● The equity market is now pricing in Fed cuts before year-end without any material implications for growth. Yet, Morgan Stanley economists believe the Fed will only cut rates if we definitively enter a recession, or if stresses in the banking system increase and/or credit markets deteriorate significantly. What’s more, the Fed cuts currently in the price implicitly assume that inflation will fall to at least 3%. That is possible, but not without significant growth implications.
● There’s also a presumption that the banking situation will not worsen and become systemic. While we don’t think this is 2008-09, we do think it will accelerate the credit crunch that was already likely to begin by year-end, based on loan officer surveys from January. 
....







Many central bank officials have been trying all sorts of conditioning narratives to convince us that their interest rate hikes have been justified. Now they are actually defying the information presented in the official data to simply make things up. Last Wednesday (May 17, 2023), the Bank of England governor gave a speech to the British Chamber of Commerce – Getting inflation back to the 2% target − speech by Andrew Bailey. It came after the Bank raised the bank rate by a further 25 points to 4.5 per cent the week before. In that speech, he admitted inflation was declining and the main supply-side drivers were abating. But he said the rate rises were justified and unemployment had to rise because there was now persistent inflationary pressures coming from a “wage-price spiral”. The problem with this claim is that there is no data to support it. .......




Michael Steinhardt: "The only analytic tool that mattered was an intellectually advantaged disparate view. This included knowing more and perceiving the situation better than others did."


Many investors are occasionally tempted to speculate. It is important to avoid confusing speculation with investment operations.

Benjamin Graham believed that an investment operation must promise safety of principal and an adequate return with the investor basing the decision on thorough analysis. If these conditions do not hold, the decision is inherently speculative. In Graham’s view, it is critical for investors to know the difference between investing and speculation and to avoid fooling themselves into thinking they are investing when they are really speculating. This advice sounds simple but is actually quite challenging to implement if the investor does not have a firm grasp of his circle of competence.



.... The tl;dr version is that Congress has a power to make binding commitments for the United States and the President is constitutionally obligated to perform those commitments. If the Treasury lacks the funds, then the President must borrow. No specific authorization is needed. Instead, it is implicit every time Congress appropriates funds to perform a binding commitment. ......


Levitin: Debunking Debt Ceiling Myths



Earnings Fare:



Shalett: "More than 50% of the $2.9 trillion in commercial mortgages will need to be renegotiated in the next 24 months when new lending rates are likely to be up by 350 to 450 basis points."
Zandi: "Lots more price declines are coming." 


Mac10: The debt ceiling is not priced in, it's priced out. 
Further rate hikes are not priced in, they are priced out.
Recession is not priced in, it's priced out. 
How do we know? Because the most overvalued sector is now deemed a "safe haven" from risk. You can't make this shit up



Charts:
0:
1: 
2: 
3: 
5: 
6: 


...
...
...



(not just) for the ESG crowd:



Global warming not only increases ocean temperatures, it triggers a cascade of effects that are stripping the seas of oxygen. Fish are already moving to new waters in search of oxygen, and scientists are warning of the long-term threat to fish species and marine ecosystems.








A corporate document reveals why Toyota will focus more on hybrids over EVs




Media Matters:

Western News Media Exist To Administer Propaganda

The single most overlooked and under-appreciated aspect of our society is the way domestic propaganda is used to shape the way mainstream westerners perceive and think about their world.

Typically the only time you’ll ever hear the word “propaganda” mentioned in mainstream discourse is in reference to things other countries do to their own citizenry or as part of foreign influence operations, despite the fact that the overwhelming majority of the times we’ve encountered propaganda in our day to day lives, the call was coming from inside the house. .....



Western media are feeding us bullshit. It is so strong that even western politicians, like the public, seem to believe in it. The reason is that it is increasingly difficult to detect the bullshit because there is just too much of it. .................



Our ruling class will use any means necessary—no matter how lawless, vicious, or brazen—to preserve its power and privilege. And it will seemingly never pay a price for its corruption and criminality. That is the ultimate lesson conveyed in the more than three hundred pages of gory details about the republic-eroding scandal that is Russiagate, comprising Special Counsel John Durham's final report. .....

Russiagate’s aim from the jump was to delegitimize, destabilize, and destroy Donald Trump’s presidency. Hatched by the Hillary Clinton campaign, this would be her revenge for losing to Trump—an attempt to make his victory a Pyrrhic one. This would be the deep state’s way to sabotage and subvert a commander in chief who threatened to upend its agenda, and that of the entire political establishment. Neither fidelity to the law and truth, nor any sense of shame, nor any fear of consequences could temper the zealous would-be vanquishers of the “bad orange man.” We know this because, as Durham’s report spells out, and as even casual observers have long been aware, the story of Trump-Russia collusion was a farce from the very beginning and in virtually every respect.

It was born of hearsay, ludicrous innuendo, and laughable inferences. Its sources were biased, unscrupulous, and shady. The investigators acted corruptly, lawlessly, and violated basic practices and time-honored norms in pursuing a probe of the highest stakes. They could not corroborate the key pillars on which they “built” their “case” and covered their eyes and ears in the face of exculpatory evidence at every turn. The lack of due diligence and carelessness is staggering—if you were to assume the FBI and Justice Department were operating in good faith. Despite the glaring deficiencies in their case and the blatant violation of the rights of innocent Americans, including among them true patriots, nothing would slow them down.

It did not have to be this way. Were American journalists at our nation’s most storied publications adversaries of the ruling class rather than its stenographers—had they even a modicum of skepticism, curiosity, or intellectual honesty, they could have stepped in to defend our republic. They could have exposed one of the greatest scandals in American history: that our national security and law enforcement apparatus effectively sought to halt the transfer of power to a president they feared and loathed by pursuing him as a traitor, based on crackpot conspiracy theories borne of his political opponent’s research. Consider Gen. Michael Flynn’s purported Logan Act violations; George Papadopoulos’ comments to an Australian diplomat; Carter Page’s supposed Russian ties; the contents of the Steele dossier; Sergei Millian’s significance; the secret Alfa Bank back channel to Russia. The list of shoddy stories pertaining to purported Russian collusion is virtually endless, and as the Durham Report shows—as did reporting from independent, contrarian journalists at the time—such stories would fall apart under the slightest scrutiny. .........



War Fare:

On the global stage, US can only barely keep up the pretense that it is not losing its mind.


Signers say the conflict will be ‘our undoing’ if we don’t ‘dedicate ourselves to forging a diplomatic settlement that stops the killing.’



The recent letter published in the New York Times from a collection of former national security advisors (they include Jack Matlock and Jeffrey Sachs) calls for a US strategic diplomacy (in the absence of any diplomacy at all) that is adult enough to recognize that opponents are rational and have real interests that are as every bit important to them as ours is [are] to us. It then immediately stumbles at the first gate namely, by blaming Russia for its Special Military Operation (SMO) in Ukraine.

This inability to dig beneath cliche superficiality on the single most important principle that underlines the war is shocking testimony to the stubborn determination to be wrong that is manifested by practically ever western expert on this issue who enjoys any crumb of mainstream status. They believe that a system of international law that is essentially the product of imperial powers, that is infused with agents of those same powers, educated and propagandized by them, a system that is not set up to even recognize the tool of war most commonly wielded by those powers namely, regime change, is the immutable word of God.

Putin launched the SMO precisely because he was intelligent enough to confront and defy the reality that the west was relentlessly working towards just such a conflict and that, as Machiavelli once observed, the longer he refrained from acting then the more disadvantageous his ultimate military plight. Not just that, not just the fact that the fount of inspiration for the US military industrial complex, RAND, had in 2019 explained precisely how it would seek to dismember Russia through manipulation of its Ukrainian proxy, not just western disregard for over thirty years of strident Russian attempts to articulate its concerns over NATO’s purposeless drift to the east (purposeless, that is say, unless the intention was indeed dismemberment of Russia) and acknowledgment from responsible western diplomats like Jack Matlock and, at that time, William Burns, that Russia’s concerns might indeed provoke conflict….Not just these considerations, I say, but that Ukraine, under the leadership; of NATO’s unscrupulous and duplicitous protege, and heir to the US-instigated coup d’etat of 2014, Zelenskiy, did everything it possibly could to bring about a war: sabotaging the Minsk agreements, currying favor with NATO at every turn, begging for admission, being so very helpful to NATO in staging aggressive wargames along Russian borders, talking about having nuclear weapons, building up fortifications over eight years in preparation for war, with NATO aid, assistance and weapons, killing more and more of its Russian-speaking citizens in the Donbass, augmenting the size of Ukrainian armed forces along the border with the people’s republics, and not just in numbers but in the variety of Nazi brigades that they incorporated.

This culturally-determined mental defect (exhibited, as I say, in the letter to the New York Times) constitutes the reason first, why Russia and now the Global South which, with China, have lined up on the side of Russia, will not accept any compromise in this conflict that fails to address, head-on, what are the objectives of Russia: Ukrainian neutrality, De-militarization, De-Nazification, and integration of the Donbass into Russia which is where it always should have remained. It continues to make sense to respect Russia’s term for its actions of February 24, 2022 precisely because the SMO is not a war in the conventional sense. If it was a war in the conventional sense then the SMO would not have confined itself to the mainly pro-Russian oblasts of the Donbass and would not have fought a slow grinding war of attrition over many months even while it is obvious that Russia has all along had the means to obliterate and overrun all major power centers in Ukraine with a million man army, artillery and air force, with or without the intervention of western weapons. .......

...... There, crisp suits and sharp dresses belied the utter deficit of wisdom in this motley crew, the empty vessels of a materialistic, corporate-fashioned, privileged and know-nothing elite whose main contributions to the sickness of their world is a simplistic and self-serving ideology of neoliberalism, cultivated air of self-righteousnes and self-importance, deference to fossil fuel, permanent enrichment of the arms industry, reckless disregard for nuclear danger, and massive extension of wealth inequality between nations, races and social classes. ......



..... What sounded like a great idea to a certain claque of so-called neo-cons in our country — to use Ukraine as a bear trap — has instead rather suddenly revealed Europe’s and America’s manifold bankruptcies and revolted the whole rest of the world outside of Western Civ. Oh, the wonder and nausea!

     Try to imagine Mr. Zelensky’s predicament. Mighty America and redoubtable Europe conned the former comedian to thinking that if he went along with a genius scheme to ruin Russia and knock Vlad Putin off the global gameboard, his sad-sack country would be transformed into something like Ukro-Disneyworld, while he, Mr. Z, would be lionized and made rich beyond his wildest imaginings. His backup was the greatest hegemonic power the world has ever seen. The game was called Let’s You and Him Fight.

     The poor schlemiel fell for it. He let NATO (that is, the USA) set-up, equip, and train the largest army in Europe, including battalions of bad-ass, hard-core Ukro-Nazis — who had previously been so useful in the American-sponsored 2014 Maidan “color revolution.” Mr. Z followed the US State Department’s orders to rain down rockets and artillery on Russian-speakers who lived in his own eastern provinces. He formally applied for membership in the NATO club. His country received billions of US dollars without audit oversight, just screaming to be creamed off by Ukraine’s leadership — who, after all, deserved a little something for all these goings-along. What could go wrong?

     Thus, Western Civ kicked off Europe’s biggest hot war since the 1940s. So, in February, 2022, Mr. Putin had enough of the monkey business on his “front porch” and sent in a clean-up crew. Game on! The US neo-cons were ready to feed countless Ukrainian troops into a meat grinder that would, theoretically, exhaust the will and resources of the execrable bear and yield countless benefits reinforcing our dominant position in the world. Our hapless NATO “partners” went along with the program, despite being asked to commit economic suicide for the greater good of the alliance (or something like that). Anyway, they didn’t need that filthy Russian nat-gas. They were going “green” (Klaus Schwab said so, didn’t he?)

     Meanwhile, the citizens of our country were groomed to perfection by the US Propaganda-Industrial Complex screaming “Russia, Russia, Russia,” .......



.................. The US plotted a coup and moved NATO’s borders east, and Russia reacted exactly how they said they would. No nukes, no nazis, no NATO. They got the last two, and know they can expect the first too. But still the west maintains Russia’s special operation was entirely unprovoked. Look, they’re not even listening anymore. They would like to negotiate and end all this, but negotiate about what? Putting AZOV back on the borders of the Donbass, so they can kill more Russians there? Not going to happen.

It’s not only about weaponry, though that plays a major role: the hegemon can no longer make its demands based on military might. It’s been surpassed. Nor can it make demands based on the dollar’s reserve currency status, and it caused that itself. Weaponization of the currency has backfired to the extent that de-dollarization has become a process that can no longer be halted.

The moment that Saudi prince MbS turned his back on “Joe Biden” is a milestone. Because once he did that, it was obvious many would follow. .....

............. Ukraine had perhaps the best boots on the ground force in Europe, financed and trained since 2014 by NATO, and they lost to a caterer and a loose group of hired hands. You’re not going to win that. Your only option is long distance weapons, missiles, planes, you name it. But NATO has no advantage in that over Russia. To put it mildly.

The sole thing that’s in your favor is that Russia doesn’t seek to destroy you. They want to live in peace and trade with you. Same thing for China. NATO equals unipolar. But the world has moved towards multipolar. Ergo, NATO is obsolete. Ukraine will never reconquer its “lost” territories, and Zelensky will move to some property in Italy or Florida, never to be heard from again, unless perhaps in his obituary. ........








Posted by at

No comments:

Post a Comment

Subscribe to: Post Comments (Atom)