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[l] at 6/30/22 9:39am
Why The Housing Bubble Bust Is Baked-In Authored by Charles Hugh Smith via OfTwoMinds blog, Putting this all together, it's clear that the source of the current housing bubble is the explosion of financial speculation fueled by central bank policies. Those benefiting from speculative bubbles have powerful incentives to deny the bubble can bust. Rationalizations abound as bubbles inflate, and the continued ascent of speculative bets seems to "prove" the rationalizations are correct. But bubbles arise from speculative excesses, and once these reach extremes and reverse, bubbles burst and all the self-serving rationalizations are revealed as rationalizations. Let's start with some caveats I've already covered in Is Housing a Bubble That's About to Crash? (May 2, 2022): 1. Housing is local, so there may be locales where prices are still rising due to unquenchable demand and low supply and other places where demand is low and supply ample where prices plummet. 2. The wealthiest 1% on a global scale is a very large number, and wealthy buyers seeking a safe haven in North America come with cash and don't care about mortgage rates. Desirable enclaves could see home prices climb even as the national bubble pops. (World population: 7.8 billion X 1% = 78,000.000 or roughly 30,000,000 households.) 3. Wealthy investors are holding a large number of dwellings off the market as investments. These empty units consequentially reduce the supply in desirable locales, and create an artificial scarcity that would not exist if central banks hadn't inflated the Everything Bubble. 4. The number of homes bought by corporations has soared. This has driven demand in many markets, but if rents dive due to recession, corporate buyers become corporate sellers. With those caveats out of the way, let's look at the foundation of home ownership for the bottom 95%: income and mortgage rates. As mortgage rates rise, more income must be devoted to the monthly payment. If household income lags the increase in housing prices, price eventually exceed what the bottom 95% can afford once mortgage rates rise. The first chart below is the national Case-Shiller Index.  Note that housing prices have soared 63.6% since the previous housing bubble peak in 2007, outpacing inflation (up 41%) and median household income (up 34%), the second chart. The third chart shows mortgage rates have broken out of a 37-year downtrend. It is noteworthy that mortgage rates were in the 7% to 8% range in previous economic booms (late 1960s, the 1990s) but now 6% mortgages are considered the end of the world. That suggests a dependence on cheap money / low rates is the primary support of the current bubble rather than an organic economic expansion such as we enjoyed in the 1990s. Courtesy of my colleague CH at Econimica, the next three charts shed light on housing fundamentals. The first Econimica chart shows the rate of growth in population, employment and housing units. The U.S. population increased by a scant 1.5 million since 2019, the number of employed was flat and the number of housing units increased by 2.8 million. The second Econimica chart shows the Fed Funds Rate (FFR), the staggering increase of mortgage-backed securities purchased by the Federal Reserve to keep mortgage rates low (from zero to $2.7 trillion), declining rate of population growth year-over-year and the remarkable rise in the number of housing units under construction. The third Econimica chart shows housing units per capita (per person), which has reached the same level as the previous housing bubble peak in 2007-08. As CH observed: "Housing units (per capita) against US population should suggest not a shortage of housing units but a surplus of dollars with which to buy them." Putting this all together, it's clear that the source of the current housing bubble is the explosion of financial speculation fueled by central bank policies. Housing prices that far exceed the growth of household incomes are not sustainable, and neither are housing prices that rose solely on the basis of unprecedentedly low mortgage rates. It's also clear that those with access to the (temporary) wealth created by central banks' trillions in new credit have poured many of these "free money" trillions into housing globally as a hedge against inflation, a safe-haven investment or for corporations, for rental income. All of these factors exacerbate an artificial demand and equally artificial scarcity. As I've noted in the past, bubbles typically manifest a symmetry in their ascent and decline. All the gains are eventually reversed, and if the system is destabilized by the bubble bust, then prices drop far below previous lows. Setting aside rationalizations in favor of fundamentals, the housing bubble's bust is already baked in. *  *  * My new book is now available at a 10% discount this month: When You Can't Go On: Burnout, Reckoning and Renewal. If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com. Tyler Durden Thu, 06/30/2022 - 11:39
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[l] at 6/30/22 9:20am
In Landmark Ruling, Supreme Court Deals Massive Blow To Biden's Climate Change Agenda At the same time as it give the Biden admin a token victory by overturning Trump's "remain in Mexico" rule, the US Supreme Court also struck a major blow to Biden's fight against climate change, when in a landmark ruling, the SCOTUS also curbed the ability of America’s top environmental regulator to limit greenhouse gas emissions. In a majority opinion authored by chief justice John Roberts, the justices ruled that in the latest example of Democratic overreach, the Environmental Protection Agency was not specifically authorized by Congress to reduce carbon emissions when it was set up in 1970. The ruling leaves the Biden administration dependent on passing legislation if it wants to implement sweeping regulations to curb emissions. The opinion from the court's conservative majority said that “a decision of such magnitude and consequence rests with Congress itself, or an agency acting pursuant to a clear delegation from that representative body”. The justices added they doubted Congress intended to delegate the question of “how much coal-based generation there should be over the coming decades, to any administrative agency”. The dissenting opinion authored by justice Elena Kagan and joined by the court’s other two liberal justices said the EPA had the authority to regulate “stationary sources” of polluting substances that are harmful to the public, adding that curbing the output of greenhouse gas emissions was “a necessary part of any effective approach for addressing climate change”. In other words, the usual green tripe that has sent the country to the edge of a hyperinflationary commodity disaster. “This Court has obstructed EPA’s effort from the beginning,” Kagan wrote. “The limits the majority now puts on EPA’s authority fly in the face of the statute Congress wrote.” As the FT reports, at the heart of the case is a disagreement over how broadly the EPA should be allowed to interpret portions of the 1970 Clean Air Act, particularly the sections that direct the EPA to develop emissions limitations for power plants. Dubbed West Virginia vs EPA, the case was brought by a host of Republican attorneys-general and the coal industry. Their argument centres on a regulation that never took effect: an Obama-era proposal known as the Clean Power Plan, which would have mandated that power plants make 32 per cent reductions in emissions below 2005 levels by 2030. The Supreme Court ordered that rule to be suspended in 2016. That rule was later torn up by the Trump administration in favor of its Affordable Clean Energy rule, designed to support the coal industry. The Trump administration’s regulation, however, was struck down by the US Court of Appeals for the DC Circuit last year. Challenging the lower court’s reversal of Trump’s rule at the Supreme Court, West Virginia has argued that the Obama-era Clean Power Plan relied on an overly broad interpretation of the Clean Air Act and gave the EPA excessive and “industry transforming” power. West Virginia argued that the lower court’s interpretation of the law granted the EPA “unbridled power” to issue significant rules that would reshape the US electricity grid and decarbonise sectors of the economy. It said the EPA should only have very limited authority to regulate emissions inside “the fence line” of power plants, and cannot apply broader industry-wide measures like carbon credit trading or biomass co-firing. Defending the case, Biden’s EPA has said that nothing in the Clean Air Act makes a distinction between inside the fence line measures and broader, industry-wide regulatory measures. It added that West Virginia’s “real concern” was that the agency might introduce some elements of Obama’s Clean Power Plan into a future rule. But the EPA said that the Supreme Court is not authorised to issue an advisory opinion on the types of measures a future rule could contain. Dick Durbin, the Democratic whip in the Senate, predictably said the decision was “a dangerous step backwards and threatens our air and our planet”, adding it “sets a troubling precedent both for what it means to protect public health and the authority regulatory agencies have to protect public health”. What he means is that the US may once again be on the path to becoming self-sufficient in energy, and not peddling money to corrupt "green" lobbies and interests. The ruling by the court’s conservative majority is the latest in a string of dramatic decisions that have challenged established legal precedents, including the recent reversal of Roe vs Wade. Last week, it also struck down a century-old New York state law requiring an individual to show “proper cause” to carry a concealed gun in public, deeming the statute unconstitutional. The court on Monday also ruled in favour of a former high school coach dismissed for praying at football games, fuelling the fraught debate on the separation of church and state. Tyler Durden Thu, 06/30/2022 - 11:20
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[l] at 6/30/22 9:05am
Biden Admin Inks $3.2 Billion Deal With Pfizer For 105 Million COVID-19 Vaccines Authored by Tom Ozimek via The Epoch Times (emphasis ours), The Biden administration said it has signed a new agreement with Pfizer and partner BioNTech for 105 million doses of their COVID-19 vaccine for a fall vaccination campaign, with the deal worth $3.2 billion. President Joe Biden receives a third dose of the Pfizer/BioNTech COVID-19 vaccine in the South Court Auditorium in the White House in Washington, Sept. 27, 2021. (Anna Moneymaker/Getty Images) The contract includes doses for both adults and children, as well as supplies of a retooled Omicron-adapted vaccine that is currently pending approval by federal health authorities, the Department of Health and Human Services (HHS) said in a statement. “We look forward to taking delivery of these new variant-specific vaccines and working with state and local health departments, pharmacies, health care providers, federally qualified health centers, and other partners to make them available in communities around the country this fall,” said HHS Assistant Secretary for Preparedness and Response Dawn O’Connell. Pharmaceutical firms have been developing vaccines for the Omicron variant that the Centers for Disease Control and Prevention (CDC) says is the dominant strain in the United States. “This agreement will provide additional doses for U.S. residents and help cope with the next COVID-19 wave. Pending regulatory authorization, it will also include an Omicron-adapted vaccine, which we believe is important to address the rapidly spreading Omicron variant,” Sean Marett, Chief Business and Chief Commercial Officer of BioNTech, said in a statement. The Food and Drug Administration (FDA) is expected to issue a decision in the coming days following a Tuesday meeting in which external advisers recommended modifying the vaccines to better target Omicron. Under the new Pfizer contract, the U.S. government has the option to buy an additional 195 million doses, bringing the total up to 300 million, HHS said. “Over the past 18 months, we have procured and delivered more than 750 million doses of COVID-19 vaccine nationwide, contributing to two-thirds of American adults being fully vaccinated,” O’Connell said. Read more here... Tyler Durden Thu, 06/30/2022 - 11:05
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[l] at 6/30/22 8:49am
10Y Yields Tumbles Back Below 3.00%, Stocks Slammed Just when investors were hoping for a month- and quarter-end rebalancing uptick in stocks after the carnage of the last few months, US equity markets are ending the first half of the year on an ugly note with Nasdaq leading the charge lower... And recession fears have sent the 10Y Yield back below 3.00% for the first time since June 10th's CPI print... Interestingly, rate-hike expectations are fading and subsequent rate-cut expectations are rising... But for now it appears stocks are more worried about The Fed driving us into recession than the post-recession easing and QE rebound. Tyler Durden Thu, 06/30/2022 - 10:49
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[l] at 6/30/22 8:45am
Must Watch: Tucker Carlson Exposes Biden DOJ Targeting Of Political Dissidents Tucker Carlson has done it again. On Thursday night, the Fox News host laid bare the Biden administration's escalating war against political enemies. "Here's a list of the things they've done, because no one has assembled them," said Carlson. First on the list is Douglass Mackey - who was arrested for allegedly creating memes aimed at trolling Hillary Clinton voters by convincing them they could cast their ballots by phone. Next, Tucker notes the FBI raid on the homes of two men who lawfully organized a permitted January 6th political rally. Tucker continues, reminding us of the time the feds seized Rudy Giuliani's attorney-client privileged records, as well as the arrest of InfoWars journalist Owen Shroyer for telling the J6 crowd that they were marching against the 2020 "stolen election" - which Carlson notes is protected free speech. He then notes the raid of Project Veritas founder James O'Keefe and associates over how they obtained Ashley Biden's "inappropriate showers with Joe" diary. The list goes on and on, with Carlson noting the DOJ's double standards and gestapo tactics against political opponents. Watch: (h/t The Last Refuge) Tyler Durden Thu, 06/30/2022 - 10:45
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[l] at 6/30/22 8:29am
Supreme Court Grants Biden Victory Over Remain-In-Mexico Asylum Rule The Supreme Court has ruled in favor of the Biden administration on Thursday, which sought to end the Trump-era "Remain in Mexico" policy that requires asylum seekers to wait in Mexico until their case is heard, instead of being allowed to await their hearings in the United States. The court ruled 5-4, with Chief Justice John Roberts and Justice Brett Kavanaugh joining the three liberal judges in the majority. The program, officially known as Migrant Protection Protocols (MPP), resulted in a 75% drop in illegal crossings according to former acting commissioner of Customs and Border Protection, Mark Morgan, calling it "the most significant game-changer" in immigration policy at the time. “That’s on the outer limits of the estimates, [which] are coming from the American intelligence community. … This is what they’re expecting,” Bensman said. “They’re saying it could be as low as 12,000 a day. But to give you some context, we’re at [6,000] and 7,000 a day right now, which is just too big to handle at present.” President Joe Biden had suspended the MPP on his first day in office in January 2021 and the Department of Homeland Security (DHS) officially terminated it in June. But the administration restarted the policy in early December 2021, in El Paso, Texas, after it was ordered by a lower court to do so. U.S. District Judge Matthew Kacsmaryk had ruled on Aug. 14, 2021, that the Biden administration had to revive the program, after Texas and Missouri sued the administration for having ended the MPP, saying that the decision worsened conditions at the border. The Supreme Court had declined to intervene on Aug. 24 after the Biden administration filed an emergency motion requesting a stay of Kacsmaryk’s order, only to change their mind after the Biden DOJ asked them to hear the case on the grounds that the appeals court decision was made in error. Meanwhile, a federal judge ruled in May that the Biden administration must pause plans to ditch a similar Trump-era policy known as Title 42, which requires US Border agents to expel any noncitizens stopped at the border without proper travel documents. The rule has resulted in an estimated 1.8 million people having to remain outside the US while awaiting an immigration trial. As the Epoch Times noted in April, Title 42 is a federal health statute that allows the government to impose health control measures to limit the number of people seeking asylum from entering the country during a health emergency. It’s slated to end on May 23. During the Trump presidency, “everybody [who] gets caught crossing the border goes back immediately to Mexico. That drove the numbers down to kind of historic low levels,” Bensman said. He said that although Biden was forced to keep Title 42, he carved out “huge exemptions in it for family groups and unaccompanied minors, that … created the mass migration crisis that we have today.” With the Biden carve-outs, record numbers of illegal immigrants are entering the United States, but intelligence officials are predicting that after Title 42 is lifted, between 12,000 and 18,000 illegal immigrants will flood the southern border each day. “That’s on the outer limits of the estimates, [which] are coming from the American intelligence community. … This is what they’re expecting,” Bensman said. “They’re saying it could be as low as 12,000 a day. But to give you some context, we’re at [6,000] and 7,000 a day right now, which is just too big to handle at present.” Tyler Durden Thu, 06/30/2022 - 10:29
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[l] at 6/30/22 8:20am
Biden Says Turkey Will Get New F-16 Jets, Claims "No Quid Pro Quo" With Erdogan President Joe Biden in his Thursday press conference from the Madrid NATO summit claimed that he's never waivered on supporting a new F-16 sale to Turkey, also emphasizing in response to a reporter's question that there was "no quid pro quo" with Erdogan regarding Finland and Sweden's entry into NATO. "Biden at press conference says the United States should sell Turkey the F-16 fighter jets but adds there was no quid pro quo in relation to Ankara's lifting of its veto for Finland and Sweden," a Reuters correspondent writes of his latest statements. "Says Congress approval needed for sale but he's confident that can obtained." The day prior, the US assistant secretary of defense for international security affairs Celeste Wallander previewed the White House stance in saying, "Strong Turkish defense capabilities contribute to strong NATO defense capabilities." She added, "The US Department of Defense fully supports Turkey’s modernization plans for its F-16 fleet." Via Reuters  Concerning the assertion that there was "no quid pro quo", the statements come the day after Biden and Erdogan met on the sidelines of the two-day NATO summit. One regional report emphasized of that meeting: On the same day, Biden thanked Erdogan profusely for revoking his opposition to the entry of Finland and Sweden into NATO. "I want to particularly thank you for what you did putting together the situation with regard to Finland and Sweden," Biden told Erdogan at a meeting on the sidelines of the NATO summit in Madrid. So it looks precisely like Turkey's sudden flip on the NATO membership question was centered on the US offering to grease the wheels and fully back and expedite approval for the F-16 transfer. Starting in October, Turkey said it formally requested of Washington approval to buy 40 Lockheed Martin-made F-16 fighter jets and nearly 80 modernization kits, which would upgrade its current fleet of fighter jets.  Erdogan's government had been consistent in denouncing Swedish and Finish "support" for Kurdish "terrorist" groups, namely the outlawed PKK and its affiliates, for example in northern Syria. The two countries agreed this week to designate it a terrorist organization, while agreeing to other demands of Ankara regarding things like extraditing alleged terror operatives back to Turkey. Was the F-16 deal Erdogan's "reward" for lifting objections over Finland and Sweden's accession? It certainly appears so. Tyler Durden Thu, 06/30/2022 - 10:20
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[l] at 6/30/22 8:05am
Rabobank: It's Lenin's Ideas That Sadly Explain Where We Are All Drifting Today By Michael Every of Rabobank I-Bear-Ian Apart from a downwards revision to Q1 GDP that made an already bad number look really ugly, most of yesterday’s main action took place in Iberia: and everything there was even worse. As a result, markets are truly I-Bear-ian. After the Fed’s Mester (in the US) stated policy tightening was only getting started, is likely to mean 75bps in July, getting to 3-3.5% Fed Funds by year end, and to over 4% by early 2023, we also got the usual collection of central-bank warblers-in-chief in Sintra, Portugal. Powell stated the global economy is in a “new world”, which is something this Daily has been trying to tell people like him for a long time. He also admitted, “We understand how little we understand inflation,” which is something covered here recently. He underlined fears that inflation will stay above 2% for a long time as we transition into a higher inflation regime, and that his job “is literally to prevent that from happening. And we will prevent that from happening.” That appears to be a response to Mohamed El-Erian warning of the dangers of the Fed doing something the market is not considering: cutting --which the market is pricing in, and ever sooner-- and then having to *hike* rates again. Indeed, either the Fed don’t understand how little they understand about inflation, and a deflationary crash looms - Powell was closer to admitting a recession lies ahead; or the market doesn’t understand how little they understand about inflation, and after deflation, a further wave of inflation returns, as during previous high inflation regimes. Once retailers have slashed inventory at fire-sale prices they have to restock. Those goods are going to cost much more due to the commodity price increase we are already seeing, despite the drop from the peak in most of them. Cut rates now and watch commodities go straight back up again. For now the focus is on the euphemism of ‘demand destruction’, meaning missing out, going hungry, or risking death by starvation: the mildest version is US citizens driving less, or, alongside warnings of July 4 airport chaos to match that in Europe, flying less. Yet in time the focus might shift back to the structural inflation built into this “new world”.     For example, few in Sintra are following the geopolitical angle properly. Russia just said it is considering buying the FX of “friendly countries” to alleviate upwards pressure on RUB, which due to a collapse in imports and high commodity prices is very strong, albeit in virtually non-existent USD- and EUR- cross markets. On crosses nobody looks at now but soon may, CNY/RUB has gone from around 12 to 24 to 8 this year, and RUB/INR from 1.0 to 0.50 to 1.5. That doesn’t mean Russia is ‘strong’, but it does mean the West is weak; and that a friend/foe FX dynamic is playing out. Indeed, Reuters reports an Indian firm is buying Russian coal and paying in CNY to avoid the US dollar, something unseen in 25 years. It may be just one case: but is it ‘monkeypox’ or ‘Covid’? In short, the Fed has more work to do, and pain to cause, to keep the dollar top dog vs. rising commodities and rivals. Cutting rates might boost global dollar liquidity, but not geopolitics. As such, the US is geostrategically better off hiking until things break in the Eurodollar space, and then offering swap lines only to friends. Which takes us back to Sintra again. There, the ECB’s Lagarde didn’t understand how little she understands about inflation or what is about to happen in the Eurodollar space. As Spanish CPI hit 10% and Germany’s only dipped to 7.6% due to subsidies that last three months, Lagarde admitted a low inflation environment is unlikely to return, and the post-Covid and Ukraine world “is going to change the framework and the scenario in which we operate.” That means changing the ECB’s interest rates too: which is going to hurt a lot. Especially when Lagarde added states shouldn’t hand out broad fiscal stimulus to cushion inflationary blows, and another ECB voice implied the more fiscal stimulus seen, the more hawkish monetary policy will have to be. We also got hints about the ECB’s new anti-fragmentation tool (AFT) about to go live. Yet our ECB team conclude AFT “can only disappoint. The announcement in July could be pretty empty if the ECB wants to maintain as much ambiguity as we expect.” Moreover, it implies a flatter curve because “If the ECB manages to strike the right balance, this probably enables more rate hikes, shifting the short-end of the curve higher. If the AFT disappoints, renewed safe-haven demand should depress long-dated yields.” (See here for more.) You think that was all I-Bear-ian? It gets worse. In Madrid, the NATO summit saw the US announce a massive permanent increase in its military deployment to Europe, from Spain and the UK to Romania and the Baltics. Europe, for all of the talk of re-arming, is still mostly doing the catering - and Ukraine’s President Zelenskiy also stated he needs $5bn a month to keep the lights on and the war going. Much, MUCH more needs to be spent, by Europe, on arms – NOW. The 2% of GDP NATO target was designed for a fully-functioning military during peacetime, not a paper tiger during wartime. Yet isn’t that fiscal stimulus, and so higher rates? With economies slumping, money tight, and people deeply unhappy, it’s the political cliché the neoliberal/Bloombergian/QE generation of market participants have never even heard of: “guns or butter”. How do you tell your people you need guns when they can’t afford butter? Perhaps by telling them they will never be able to afford butter again if they don’t have guns. But let’s see Europe try to do that: and we will all see what happens to them in time if they can’t. One thing is for sure: more things are going to have to change in this “new world” than rates. And it gets far worse than that. NATO’s updated Strategy Concept says: “The Euro-Atlantic area is not at peace. The Russian Federation has violated the norms and principles that contributed to a stable and predictable European security order. We cannot discount the possibility of an attack against Allies’ sovereignty and territorial integrity. Strategic competition, pervasive instability and recurrent shocks define our broader security environment. The threats we face are global and interconnected.” Is that message clear enough for markets? Russia “is the most significant and direct threat to Allies’ security and to peace and stability in the Euro-Atlantic area. It seeks to establish spheres of influence and direct control through coercion, subversion, aggression and annexation. It uses conventional, cyber and hybrid means against us and our partners. Its coercive military posture, rhetoric and proven willingness to use force to pursue its political goals undermine the rules-based international order.” ‘Don’t do business with Russia’ is the market message. China’s “stated ambitions and coercive policies challenge our interests, security, and values. The PRC employs a broad range of political, economic, and military tools to increase its global footprint and project power, while remaining opaque about its strategy, intentions, and military build-up. The PRC’s malicious hybrid and cyber operations and its confrontational rhetoric and disinformation target Allies and harm Alliance security. The PRC seeks to control key technological and industrial sectors, critical infrastructure, and strategic materials and supply chains. It uses its economic leverage to create strategic dependencies and enhance its influence. It strives to subvert the rules-based international order, including in the space, cyber and maritime domains. The deepening strategic partnership between the PRC and the Russian Federation and their mutually reinforcing attempts to undercut the rules-based international order run counter to our values and interests.” Yet ‘keep doing business with China’ is still the market message(?) How much louder does NATO’s geopolitical signal get before markets suddenly wake up in shock, as with Russia? We shall see. On a related note, as Xi Jinping prepares to visit Hong Kong, which gets the top headline on Bloomberg, the Financial Times just underlined that the must-have university degree in China right now is Marxism. Those who have studied Marx are being snapped up left, left, and not center to help firms navigate their way through the increasingly ideological local landscape of historical materialism, dialectics, labor surplus value, the reserve army of labor, the circulation of commodities, M C C(MP) C+ M+, constant vs. variable capital, and fictitious vs. productive capital. (As you can see, I’m covered for an alternative career path: are you?) This ideological trend was covered last year in ‘Pro-Fund or Profound Revolution?’, which underlined that common prosperity is not “regulatory change”, as almost every other analyst bravely opted to call it. Regardless of the bottom-picking game in Chinese assets, which can deliver rich pickings to some, claims of things being “uninvestable” might ultimately mean more against the political and geopolitical backdrop described above. Or the US FCC calling to ban TikTok “because it harvests swathes of sensitive data.” People have known that for ages but chose not to act on it “because markets”: now welcome to a “new world”. Consider doing extra political-economy reading round Marx. Not as a geopolitical Cold War hedge, because that is being done by TikTok users, hedge-fund billionaires, ‘I wish both sides well’ types, ‘we don’t do politics’ technocrats, and ‘I’d like to teach the world to sing in perfect harmony’ choir members. Rather because if we keep mismanaging the Western economy, there are going to be lots more Marxists here too. Or worse, as Martin Wolf was saying. The best Marxist analysis such as Kalecki also got big calls like negative rates right when the smartest quant guys got it totally wrong. However, it’s Lenin’s ideas on what happens during the ‘highest stages of capitalism’ that better match where we are all sadly drifting today. He was also the one who said, “The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation.” "you look for the person who will benefit, and uh, you know"https://t.co/OohPP2z7mt pic.twitter.com/eihUEmmi1V — zerohedge (@zerohedge) June 27, 2022 And, today, via lower asset prices, driven by a necessary drying up of fictitious capital. Crypto appears to be heading for the crypt, despite Bloomberg TV coverage like in this link: did anyone really understand any part of it? And in New Zealand, the RBNZ just said its housing market fundamentals may be changing, and that house prices will likely move back towards more sustainable levels. In May they had forecasted a 15% drop in house prices from their peak. Imagine if that is seen everywhere globally. Imagine if that is optimistic given higher rates, higher inflation, lower real wages, and lower employment. So, “Asset speculators of the world, unite!” - in the hope we can ignore geopolitics and cut rates again soon with no side effects. They will take heart from Japanese industrial production -7.2% m-o-m this morning vs. -0.3% consensus. Not so much from China’s PMIs, where manufacturing was up to 50.2 vs. 50.5 consensus, but services leaped from 47.8 to 54.7, also vs. 50.5 consensus. Either all those pictures of empty Chinese streets are fake news, or service centers dealing with emigration inquiries are working triple shifts (as the term ‘runxue’, or running away, massively trends). I-Bear-ian indeed, as we scramble for month- and quarter-end re-positioning. Tyler Durden Thu, 06/30/2022 - 10:05
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[l] at 6/30/22 7:40am
Russia In "Goodwill" Withdrawal From Ukraine's Snake Island To Free Up Grain Exports Russia has taken a major step in trying to demonstrate to Western powers that it's serious about freeing up grain passage off Ukraine's coast and in the Black Sea, with on Thursday its military announcing the complete withdrawal of forces from Ukraine's Snake Island. The Russian Defense Ministry (MoD) said in a statement that the purpose is to free the passage of Ukraine's grain exports in a "goodwill" measure. "On June 30, as a step of goodwill, the Armed Forces of the Russian Federation completed their tasks on the Snake Island and withdrew from the garrison stationed there," the MoD said. Snake Island file, via Ukrinform "Thus, it was demonstrated to the world community that the Russian Federation does not hinder the efforts of the UN to organize a humanitarian corridor for the export of agricultural products from the territory of Ukraine," it stated further. The statement then called on Ukraine's government to clear its mines earlier placed on the sea coast and in ports which the Kremlin says is the major impediment blocking sea transit. The northwest Black Sea island has been under control of the Russian military since the start of the conflict, making the retreat of Russian forces a rare and significant battlefield de-escalation there. However, Ukraine disputed Russia's version of events, rejecting that it was a voluntary "goodwill" withdrawal initiated by the Russian side, instead claiming that it was Ukraine's military that drove the Russians from the island. The head of Ukraine’s army, Valeriy Zaluzhny, stressed his forces had liberated the island. "I thank the defenders of Odessa region who took maximum measures to liberate a strategically important part of our territory," he said on Telegram. Kiev has said its forces mounted a major series of strikes. And a representative of Ukrainian President Volodymyr Zelensky’s office, Andriy Yermak, confirmed that Russian forces have indeed exited the island, writing on Twitter: "KABOOM! No Russian troops on the Snake Island anymore. Our Armed Forces did a great job." Image source: Bloomberg News, June 8, 2022. Bloomberg noted that upon the announcement Chicago wheat futures fell as much as 1.3%, and then pared the loss to trade higher on the day. Russia has consistently claimed it's not responsible for establishing 'safe passage' corridors on Ukraine's coast due to the presence of thousands of Ukrainian sea mines. The crisis has stoked global prices for vital food products from grains to cooking oils, and fertilizer and fuel. As hundreds of millions of people come under threat of near future famine conditions due to Ukraine not exporting its grains, particularly in the Middle East and Africa, the United Nations has scrambled to broker a deal with the help of Turkey, which controls access to Black Sea waters through its straits. Ukraine says that it forced Russia to withdraw from Snake Island on two speedboats Clashes between Ukrainian and Russian forces continue even though Russia claims it left voluntarily to facilitate grain exports — Samuel Ramani (@SamRamani2) June 30, 2022 Meanwhile, hours after the Russian withdrawal announcement, there are emerging conflicting reports that there could still be clashes on Snake Island. Tyler Durden Thu, 06/30/2022 - 09:40
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[l] at 6/30/22 7:20am
Elon Musk Silent On Twitter For A Week Authored by Gary Bai via The Epoch Times, As Elon Musk’s Twitter following sprinted past the 100-million mark this week - a milestone the billionaire shares with Barack Obama, Justin Bieber, Rihanna, Katy Perry, and Cristiano Ronaldo - his followers are noticing atypical behavior: he is not posting. The Tesla and SpaceX CEO, while vocal on some of the most contentious headlines—such as the Clinton campaign’s Spygate scandal, media silence on Jeffrey Epstein’s sex trafficking case, and union influence on the Democratic Party—stayed uncharacteristically quiet on Twitter for a week amid several high profile events his followers would normally expect him to comment on. These events include the most consequential ruling impacting the abortion debate in the United States in half a century, plus other things more relevant to Musk himself—his June 28 birthday and cuts to the Tesla workforce, and the closure of its California office. 145 Tweets Per Week According to Axios, the rocket-and-automotive engineer-in-chief posted an average of 145 tweets and retweets per week over the five weeks leading up to June 16, the day SpaceX employees sent a letter to the company’s executive board complaining about their CEO’s Twitter posts. Musk’s Twitter streak slowed down after June 16, Axios reported. “Elon’s behavior in the public sphere is a frequent source of distraction and embarrassment for us, particularly in recent weeks,” the letter reads, first reported by The New York Times on June 16. Some of the complaining employees were fired a day after the publishing of the New York Times article, reported the news agency. Musk alluded to the firing decision in response to another Twitter user’s post on June 17. ?? — Elon Musk (@elonmusk) June 17, 2022 Musk’s last posts were tweeted on the same day as the Twitter board unanimously approved his 44-billion-dollar offer on June 21. Not long after, Musk told attendees of the Qatar Economic Forum that there were a few “unresolved matters” before he could seal the deal, including fake accounts, shareholder approval, and debt financing. Tyler Durden Thu, 06/30/2022 - 09:20
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[l] at 6/30/22 7:06am
Oil Rebounds As OPEC+ Confirms Expected Supply Hike The OPEC+ coalition ratified an oil-production increase that completes the return of supplies halted during the pandemic, while deferring discussions on its next move for another day. The 23-nation group led by Saudi Arabia rubber-stamped plans to add 648,000 barrels a day in August, restoring the final tranche of the 9.7 million barrels a day that was shuttered just over two years ago But with most members besides the Saudis and their neighbors unable to raise output, the decision is largely symbolic. As a reminder, OPEC+ is falling further and further behind its production goals... Is Macron right and OPEC+ producers are at or near their capacity limits? “Spare capacity is very low, demand is still recovering,” Shell Plc Chief Executive Officer Ben van Beurden said in Singapore on Wednesday. “There is a fair chance we will be facing a turbulent period.” WTI rallied back Full OPEC+ Statement: The 30th OPEC and non-OPEC Ministerial Meeting was held via video-conference on 30 June 2022. In view of current oil market fundamentals and the consensus on its outlook, the OPEC and participating non-OPEC oil producing countries agreed to: Reaffirm the decision of the 10th OPEC and non-OPEC Ministerial Meeting on 12th April 2020 and further endorsed in subsequent meetings including the 19th OPEC and non-OPEC Ministerial Meeting on the 18th July 2021. Reconfirm the production adjustment plan and the monthly production adjustment mechanism approved at the 19th and 29th OPEC and non-OPEC Ministerial Meetings and the decision to adjust upward the monthly overall production for the month of August 2022 by 0.648 mb/d. Reiterate the critical importance of adhering to full conformity and to the compensation mechanism. Compensation plans should be submitted in accordance with the statement of the 15th OPEC and non-OPEC Ministerial Meeting. Hold the 31st OPEC and non-OPEC Ministerial Meeting on 3 August 2022. So given all that, what will the Saudis and Emiratis do next month when Biden visits to beg for more production? Tyler Durden Thu, 06/30/2022 - 09:06
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[l] at 6/30/22 6:57am
Biden Holds Post-NATO Press Conference President Biden will deliver final remarks from Madrid following his trip to Europe to meet with NATO leaders amid Russia's invasion of Ukraine: Watch: Biden and NATO leaders held a highly consequential summit on Thursday aimed at responding to the war in Ukraine, during which they agreed to take steps such as new sanctions against Russia and increased military aid. During today's press conference, Biden is expected to provide an update on the state of the war, after his top spy on Wednesday called the situation "grim." Biden may also address NATO's formal membership invitation to Finland and Sweden, a path which was cleared after Turkey dropped its objections. The alliance has also made major enhancements to NATO's eastern edge forces, increasing the number of high-alert troops sevenfold, while Biden announced rotational deployments of US troops in the baltics and Romania. The US is also sending planes to the UK, and new ships to Spain, and will be establishing a permanent Army garrison headquarters in Poland for the first time. NATO also updated its mission statement to read that Russia now poses the "most significant threat to Allied security," and said that strengthening relations between the Kremlin and Beijing "runs counter to our values." "He wanted less NATO," NATO Secretary General Jens Stoltenberg said earlier in the week. "Now President Putin is getting more NATO on his borders." Tyler Durden Thu, 06/30/2022 - 08:57
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[l] at 6/30/22 6:55am
Watch: Biden Climate Advisor Seems Happy About American Job Losses Authored by Steve Watson via Summit News, One of Joe Biden’s senior advisors bragged this week about how the administration’s forced transition to green energy is causing people working in the fossil fuels industry to lose their jobs. Speaking from the Aspen Ideas Festival, Biden’s climate advisor Gina McCarthy stated “We have opportunities now to transfer to clean energy in a way that grows thousands of jobs. We just had a recent report that is showing that all of the energy and the employment stats from last year. Clean energy is winning. Fossil fuels losing jobs.” Watch: Biden climate advisor Gina McCarthy brags about “fossil fuels losing jobs" under Joe Biden. pic.twitter.com/cHs9zIvw33 — RNC Research (@RNCResearch) June 29, 2022 McCarthy is referring to a Department of Energy (DOE) report that reveals American oil producers lost more than 31,000 jobs last year, while American coal producers lost over 7,000 jobs. McCarthy bragged that jobs had been created in green energy sectors, without explaining that those sectors fulfil less than 20 percent of the country’s energy needs. McCarthy previously called for anyone criticising the green energy transition to be silenced and censored. Top Biden advisor Gina McCarthy says social media companies should censor content that is critical of their green energy "transition" pic.twitter.com/qfh1Cxe7NG — RNC Research (@RNCResearch) June 14, 2022 The administration has spent two years trying to “end” the fossil fuel sector, and is openly bragging about it, meanwhile Biden is threatening oil companies in an effort to try to get them to produce more. Independent Petroleum Association of America spokesperson Jennifer Marsteller reacted to the DOE report by saying it “is not only reflective of the broader pandemic slowdown, but also highlights an Administration that has worked overtime on restricting American natural gas and oil production.” Meanwhile, in the midst of a supply chain crisis, Biden’s climate czar John Kerry is pushing for ‘green shipping’, the infrastructure for which also does not even exist. Biden Climate Czar John Kerry: “We need to spur the transition to green shipping.” pic.twitter.com/hGUkAAd6qt — RNC Research (@RNCResearch) June 29, 2022 Kerry made the comments from a conference in Portugal. Presumably he got there on a private jet as per usual. Kerry has also previously called the loss of jobs in the fossil fuels energy sector a necessary ‘sacrifice’: John Kerry on Joe Biden’s agenda destroying American energy jobs: it's “what needs to be done”https://t.co/1DN7lhenK6 pic.twitter.com/Z2dAgULHFD — RNC Research (@RNCResearch) January 27, 2021 *  *  * Brand new merch now available! Get it at https://www.pjwshop.com/ In the age of mass Silicon Valley censorship It is crucial that we stay in touch. We need you to sign up for our free newsletter here. Support our sponsor – Turbo Force – a supercharged boost of clean energy without the comedown. Also, we urgently need your financial support here. Tyler Durden Thu, 06/30/2022 - 08:55
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[l] at 6/30/22 6:43am
Fed's Favorite Inflation Indicator Dips, US Spending Slows In May The headline-maker from this morning's macro melange is The Fed's favorite inflation indicator - Core PCE Deflator - printed lower than expected at +4.7% YoY (vs +4.9% expected and +4.9% prior). The headline May PCE printed +6.3%, equal to the April data Source: Bloomberg As a reminder, however, this is May data, and gas prices have soared in June. Americans pace of spending slowed significantly in May to just +0.2% MoM (half the expected +0.4%) while incomes rose +0.5% MoM (as expected)... Source: Bloomberg Americans spending rose slower than their incomes for the first time since December. Adjusting for inflation, spending actually dropped 0.4% MoM in May... Source: Bloomberg On the incomes side, private wage growth slowed to 11.9% YoY, the lowest since Dec 2021 while government workers wage growth rose to 5.8% YoY, up from 5.7% in April... On a year over year basis, incomes grew at 5.3% but spending rose at 8.5%... Source: Bloomberg The BEA revised historical data which lifted April's savings rate from 4.4% to 5.2% and May's print upticked to 5.4% - the highest since February... So this is good news - inflation rolling over and Americans pulling back from over-spending? The question is - will the former re-accelerate in June while the latter continues? Tyler Durden Thu, 06/30/2022 - 08:43
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[l] at 6/30/22 6:34am
Initial Jobless Claims At 5-Month Highs As Layoffs Accelerate The number of Americans filing for jobless benefits for the first time was 231k last week (down very modestly from an upwardly revised 233k) leaving the 4-week average at the highest since January 2022. There were 1.328 million continuing claims, very modestly below an upwardly revised 1.331 million last week, but an upward trend remains... Source: Bloomberg As a reminder, Deutsche Bank has noted that continuing claims is the best early recession indicator. In the past week, companies including Netflix Inc. and Tesla Inc. have laid off hundreds of employees amid concerns about the economic outlook. On an unadjusted basis, initial claims rose to 207,421 last week. That reflected large increases in New Jersey and Massachusetts, while applications in Texas and Georgia declined. Tyler Durden Thu, 06/30/2022 - 08:34
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[l] at 6/30/22 6:22am
Don't Rely On Unbridled Optimism To Divine Profits' Path By Simon White, Bloomberg Markets Live Commentator and Reporter Earnings estimates start falling too late and stop falling too early in recessions. Macro-driven indicators are much more reliable indicators of the profit outlook, with the majority currently pointing to much weaker earnings through the rest of this year. In a recent post, I showed that earnings estimates are most wrong in recessions. We can see what actually happens in the chart below. Typically earnings and their forward estimates track each other quite closely in the run up to a recession but, when one starts, things go a bit haywire. Earnings themselves don’t start to fall for several weeks, while forward earnings have one last burst of optimism, jumping higher, before reflecting reality and falling. Earnings estimates cease falling long before the median recession ends, even while trailing earnings have much further to fall. Stock analysts miss recessions as they are not really looking for them. They are experts in their field, and are generally able to intuit when and whether their sector is about to face a pervasive fall in earnings. But recessions are different. A macro-focused strategist or even a housing expert may have been able to tell you the severity of the hurricane about to hit in 2007, but it is unlikely, say, a telcos analyst would have been in a position do do. Today, the macro warnings for a recession are mounting, leaving earnings looking increasingly exposed. China is one clear example, but there are several others. The country has yet to fully open up as it battles with Covid, while there is a continued reluctance to return to “flood-like” stimulus. As a result, liquidity in China is struggling, which has historically posed a significant headwind for US tech earnings (which despite their recent fall are still 43% of S&P 500 earnings). Tyler Durden Thu, 06/30/2022 - 08:22
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[l] at 6/30/22 5:58am
Stocks, Cryptos Tumble To Close Out Catastrophic First-Half It was supposed to be a 7% ramp into month-end on billions in pension fund residual buying. Instead, it ended up being more or less the opposite, with crypto-led liquidations dragging futures and global markets lower, and extending Wednesday losses after central bankers issued warnings on inflation and fueled concern that aggressive policy will end with a hard-landing recession, which increasingly more now see as being 2022 business, an outcome that now appears assured especially after yesterday's disastrous guidance cut from RH, the second in three weeks! Recession fears and inflation woes may be prolonged by today's PCE deflator report. The consumer price gauge favored by the Fed may have picked up to 6.4% last month from 6.3%. Personal income growth probably edged up but Bloomberg Economics highlights an anticipated decline in real personal spending as a major worry. Meanwhile, China’s economy showed further signs of improvement in June with a strong pickup in services and construction, even if the latest Chinese PMI print came slightly below expectations. Also overnight, Russia said it withdrew troops from Ukraine’s Snake Island in the Black Sea after Ukraine said its forces drove Russian troops from the area. In any case, with zero demand from pensions so far (even though the continued selling in stocks and buying in bonds will only make the imabalnce bigger), overnight Nasdaq 100 contracts dropped 1.8% while S&P 500 futures declined 1.3%, and cryptos crumbled, with bitcoin dragged back below $19000 and Ether on the verge of sliding below $1000. The tech-heavy gauge managed to end Wednesday’s trading slightly higher, while the S&P 500 fell for a third straight day. In Europe, the Stoxx Europe 600 Index slid 1.9%. Treasuries gained, the dollar was steady and gold declined and crude oil futures edged lower again. Which brings us to the last trading day of a quarter for the history books: the S&P 500 is set for its biggest 1H decline since 1970 and the Nasdaq 100 since 2002, the height of the dot.com bust. The Stoxx 600 is set for the worst 1H since 2008, the height of the GFC.  Traders have ramped up bets that the global economy will buckle under central bank tightening campaigns -- and that policy makers will eventually backpedal. The bond market shifted to price in a half-point rate cut in the Federal Reserve’s benchmark rate at some point in 2023. On Wednesday, during the annual ECB annual forum, Fed Chair Jerome Powell and his counterparts in Europe and the UK warned inflation is going to be longer lasting. A view that central banks need to act fast on rates because they misjudged inflation has roiled markets this year, with global stocks about to close out their worst quarter since the three months ended March 2020. “Markets are worried about growth as central bankers continue to emphasize that bringing down inflation is their overriding objective, and that it may take time to bring inflation down,” said Esty Dwek, chief investment officer at Flowbank SA. “We still haven’t seen total capitulation in markets, so further downside is possible.” Meanwhile, the cost of insuring European junk bonds against default crossed 600 basis points for the first time in two years on Thursday. And speaking of Europe, stocks are also down over 2% in early trading, with all sectors in the red. DAX and CAC underperform at the margin with autos, consumer discretionary and banking sectors the weakest within the Stoxx 600.  Here are some of the biggest European movers today: Uniper shares slump as much as 23% after the German utility withdrew its outlook and said it was discussing a possible bailout from the German government following Russia’s move to curb natural gas deliveries. SAP sinks as much as 6.5% after Exane BNP Paribas downgraded stock to neutral from outperform, saying it sees risks on demand side in the near term as software spending decisions come under increased scrutiny. Sanofi shares decline as much as 4.5% after the French drugmaker said the FDA placed late-stage clinical trials of tolebrutinib on partial hold in US because of concerns about liver injuries. European semiconductor stocks fell, following peers in the US and Asia lower amid growing concerns that the industry might face a downturn soon as chip stockpiles build. ASML drops as much as 3.4%, Infineon -4.1%, STMicro -3.1% Norsk Hydro shares slide as much as 6% amid metals decline and as DNB cuts the stock to sell from hold, citing concerns about rising aluminum supply. Stainless steel stocks in Europe fall, with Morgan Stanley saying the settlement on the latest ferrochrome benchmark missed its expectations. Outokumpu shares down as much as 6.6%, Aperam -7.2%, Acerinox -4% Saab shares jump as much as 8.4%, after getting an order worth SEK7.3b from the Swedish Defence Materiel Administration for GlobalEye Airborne Early Warning and Control aircraft. Orsted shares rise as much as 2.5%, before paring some of the gains. HSBC raises to buy from hold, saying any further downside for the wind farm operator looks limited. Bunzl shares rise as much as 2.6% after the specialist distribution company said it now expects very good revenue growth in 2022. Grifols shares rise as much as 7.8% after slumping on Wednesday, as the company says that the board isn’t analyzing any capital increase “for the time being.” Earlier in the session, Asian stocks fell for a second day as tech-heavy indexes in Taiwan and South Korea continued to get pummeled amid concerns over the potential for aggressive monetary tightening in the US to rein in inflation.  The MSCI Asia Pacific Index declined as much as 1.2%, dragged down by technology shares including TSMC, Alibaba and Tencent. Taiwan slid more than 2%, while gauges in Japan, South Korea, Australia dropped more than 1%.  Stocks in mainland China rose more than 1% after the economy showed further signs of improvement in June with a strong pickup in services and construction as Covid outbreaks and restrictions were gradually eased. Traders are also watching Chinese President Xi Jinping’s trip to Hong Kong, his first time outside of the mainland since 2020.  Asian stocks are struggling to recover from a May low as the threat of higher US rates outweighs China’s emergence from strict Covid lockdowns and its pledge of stimulus measures. While mainland Chinese stocks led gains globally this month, the rest of the markets in the region -- especially those heavy with technology stocks and exporters -- saw hefty outflows of foreign funds.  “Investors continue to assess recession and also inflation risks,” Marcella Chow, JPMorgan Asset Management’s global market strategist, said in an interview with Bloomberg TV. “This tightening path has actually increased the chance of a slower economic growth going forward and probably has brought forward the recession risks.” Asian stocks are set to post a more than 12% loss this quarter, the worst since the one ended March 2020 during the pandemic-induced global market rout. Japanese stocks declined after the release of China’s data on manufacturing and non-manufacturing PMIs that showed slower than expected improvements.  The Topix Index fell 1.2% to 1,870.82 as of market close Tokyo time, while the Nikkei declined 1.5% to 26,393.04. Sony Group contributed the most to the Topix Index decline, falling 3.4%. Out of 2,170 shares in the index, 531 rose and 1,574 fell, while 65 were unchanged. “Although China is recovering from a lockdown, business sentiment in the manufacturing industry is deteriorating around the world,” said Tomo Kinoshita, global market strategist at Invesco Asset Management China’s Economy Shows Signs of Improvement as Covid Eases. Indian stock indexes posted their biggest quarterly loss since March 2020 as the global equity market stays rattled by high inflation and a weakening outlook for economic growth.  The S&P BSE Sensex ended little changed at 53,018.94 in Mumbai on Thursday, while the NSE Nifty 50 Index dropped 0.1%. The gauges shed more than 9% each in the June quarter, their biggest drop since the outbreak of pandemic shook the global markets in March 2020. The main indexes have fallen for all but one month this year as surging cost pressures forced India’s central bank to raise rates twice and tighten liquidity conditions. The selloff is also partly driven by record foreign outflows of more than $28b this year.  Despite the turmoil in global markets, Indian stocks have underperformed most Asian peers, partly helped by inflows from local institutions, which made net purchases of more than $30b of local stocks. “Investors worry that the latest show of central bank determination to tame inflation will slow economies rapidly,” HDFC Securities analyst Deepak Jasani wrote in a note.  Fourteen of the 19 sector sub-gauges compiled by BSE Ltd. fell Thursday, with metal stocks leading the plunge. The expiry of monthly derivative contracts also weighed on markets. For the June quarter, metal stocks were the worst performers, dropping 31% while information technology gauge fell 22%. Automakers led the three advancing sectors with 11.3% gain. Australian stocks also tumbled, with the S&P/ASX 200 index falling 2% to close at 6,568.10, weighed down by losses in mining, utilities and energy stocks.  In New Zealand, the S&P/NZX 50 index fell 0.8% to 10,868.70 In rates, treasuries advanced, led by the belly of the curve. German bonds surged, led by the short-end and outperforming Treasuries. US yields richer by as much as 5.4bp across front-end and belly of the curve which outperforms, steepening 2s10s, 5s30s by 2bp and 2.8bp; wider bull-steepening move in progress for German curve with yields richer by up to 13.5bp across front-end with 2s10s wider by 3.5bp on the day. US 10-year yields around 3.055%, richer by 3.5bp. Money markets aggressively trimmed ECB tightening bets on relief that French June inflation didn’t come in above the median estimate. Bonds also benefitted from haven buying as stocks slide. Month-end extension flows may continue to support long-end of the Treasuries curve. bunds outperform by 7bp in the sector. IG issuance slate empty so far; Celanese Corp. pushed back plans to issue in euros and dollars, most likely to next week, after deals struggled earlier this week. Focal points of US session include PCE deflator and MNI Chicago PMI.  In FX, the Bloomberg Dollar Spot Index was steady as the greenback traded mixed against its Group-of-10 peers. The yen advanced and Antipodean currencies were steady against the greenback. French inflation quickened to the fastest since the euro was introduced. Steeper increases in energy and food costs drove consumer-price growth to 6.5% in June from 5.8% in May . Sweden’s krona swung to a loss. It briefly advanced earlier after the Riksbank raised its policy rate by 50bps, as expected, signaled faster rate hikes and a quicker trimming of the balance sheet. The pound rose, snapping three days of losses against the dollar. UK household incomes are on their longest downward trend on record, as the nation’s cost of living crisis saps the spending power of British households. Separate figures showed that the current-account deficit widened sharply to £51.7 billion ($63 billion) in the first quarter. The yen rose and the Japan’s bonds inched up. The BOJ kept the amount and frequencies of planned bond purchases unchanged in the July-September period. The Australian dollar reversed a loss after data showed China’s official manufacturing purchasing managers index rose above 50 for the first time since February in a sign of improvement in the world’s second largest economy. Bitcoin is on track for its worst quarter in more than a decade, as more hawkish central banks and a string of high-profile crypto blowups hammer sentiment. The 58% drawdown in the biggest cryptocurrency is the largest since the third quarter of 2011, when Bitcoin was still in its infancy, data compiled by Bloomberg show. In commodities, WTI trades a narrow range, holding below $110. Brent trades either side of $116. Most base metals trade in the red; LME zinc falls 3.1%, underperforming peers. Spot gold falls roughly $3 to trade near $1,814/oz. Bitcoin slumps over 6% before finding support near $19,000. Looking to the day ahead now, data releases include German retail sales for May and unemployment for June, French CPI for June, the Euro Area unemployment rate for May, Canadian GDP for April, whilst the US has personal income and personal spending for May, the weekly initial jobless claims, and the MNI Chicago PMI for June. Market Snapshot S&P 500 futures down 1.2% to 3,775.75 STOXX Europe 600 down 1.8% to 406.18 MXAP down 1.0% to 158.01 MXAPJ down 1.1% to 524.78 Nikkei down 1.5% to 26,393.04 Topix down 1.2% to 1,870.82 Hang Seng Index down 0.6% to 21,859.79 Shanghai Composite up 1.1% to 3,398.62 Sensex up 0.2% to 53,136.59 Australia S&P/ASX 200 down 2.0% to 6,568.06 Kospi down 1.9% to 2,332.64 Gold spot down 0.2% to $1,814.91 US Dollar Index little changed at 105.04 German 10Y yield little changed at 1.42% Euro little changed at $1.0443 Brent Futures down 0.4% to $115.85/bbl Top Overnight News from Bloomberg The surge in the dollar has set Asian currencies on course for their worst quarter since the 1997 financial crisis and created a dilemma for central bankers French Finance Minister Bruno Le Maire said the EU can deliver the global minimum corporate tax with or without the support of Hungary, circumventing Budapest’s veto earlier this month just as the bloc was on the brink of a agreement German unemployment unexpectedly rose, snapping 15 straight months of decline as refugees from the war in Ukraine were included in those searching for work The SNB bought foreign exchange worth 5.7 billion francs ($5.96 billion) in the first quarter of 2022 as the franc sharply appreciated against the euro and briefly touched parity in March The ECB plans to ask the region’s lenders to factor in the economic hit of a potential cut off of Russian gas when considering payouts to shareholders European stocks were poised for their biggest drop in any half-year period since 2008, as investors focused on the prospects for economic slowdown and stubbornly high inflation in the region New Zealand will enter a recession next year that could be deeper than expected, Bank of New Zealand economists said after a survey showed business sentiment continues to slump A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were varied at month-end amid a slew of data releases including mixed Chinese PMIs. ASX 200 was dragged lower by weakness in energy, miners and the top-weighted financials sector. Nikkei 225 declined after disappointing Industrial Production data and with Tokyo raising its virus infection level. Hang Seng and Shanghai Comp. were somewhat mixed with Hong Kong indecisive and the mainland underpinned after the latest Chinese PMI data in which Manufacturing PMI printed below estimates but Non-Manufacturing PMI firmly surpassed forecasts and along with Composite PMI, all returned to expansion territory. Top Asian News NATO Secretary General Stoltenberg said China's growing assertiveness has consequences for the security of allies, while he added China is not our adversary, but we must be clear-eyed about the serious challenges it presents. US blacklisted 5 Chinese firms for allegedly helping Russia in which Connec Electronic, King Pai Technology, Sinno Electronics, Winnine Electronic and World Jetta Logistics were added to the entity list which restricts access to US technology, according to WSJ. Japan's government cut its assessment of industrial production and noted that production is weakening, while it stated that Japan's motor vehicle production declined 8% M/M and that industrial production likely saw the largest impact of Shanghai's COVID-19 lockdown in May, according to Reuters. Tokyo metropolitan government will reportedly increase COVID infections level to the second-highest, according to FNN. It’s been a downbeat session for global equities thus far as sentiment deteriorates further. European bourses are lower across the board, with losses extending during early European hours. European sectors are all in the red but portray a clear defensive bias. Stateside, US equity futures have succumbed to the glum mood, with the NQ narrowly underperforming. Top European News Riksbank hiked its Rate by 50bps to 0.75% as expected, and said the rate will be raised further and it will be close to 2% at the start of 2023. Bank said the balance sheet its to shrink faster than previously flagged, and suggested that policy rate will increase faster if needed. Click here for details. Riksbank's Ingves said inflation over forecast probably not enough for Riksbank to hold extra policy meeting in summer. Ingves added that if the situation requires a 75bps hike, then Riksbank will carry out a 75bps hike. Orsted Gains as HSBC Upgrades With Shares Seen ‘Good Value’ Aston Martin Extends Losses as Carmaker Reportedly Seeking Funds Climate Litigants Look Beyond Big Oil for Their Day in Court Ukraine Latest: Putin Warns NATO on Moving Military to Nordics FX DXY extends on gains above 105.00, but could see more upside on safe haven demand and residual rebalancing flows over fixes - EUR/USD inches towards 1.0400 to the downside. Yen regroups as yields drop and risk sentiment deteriorates to compound corrective price action. Franc unwinds some of its recent outperformance and Loonie lose traction from oil ahead of Canadian GDP. Swedish Crown unable to take advantage of hawkish Riksbank hike in face of risk aversion - Eur/Sek stuck in a rut close to 10.7000. Pound finds some underlying bids into 1.2100 and Kiwi at 0.6200, while Aussie holds above 0.6850 with encouragement from China’s services PMI that also propped the Yuan. Fixed Income Bonds on bull run into month, quarter and half year end - Bunds top 148.00 at best, Gilts approach 113.50 and 10 year T-note just a tick away from 118-00. Debt in demand on safe haven grounds rather than duration as curves steepen on less hawkish/more dovish market pricing. Italian supply comfortably covered to keep BTP futures propped ahead of US PCE data and yet another speech from ECB President Lagarde. Commodities WTI and Brent front-month futures are resilient to the broader risk downturn, and firmer Dollar as OPEC+ member members gear up for what is expected to be a smooth meeting. Spot gold is uneventful but dipped under yesterday's low, with potential support at the 15th June low at USD 1,806.59/oz. Base metals are softer across the board amid the broader risk profile. Dalian and Singapore iron ore futures were on track for quarterly losses. Ship with 7,000 tonnes of grain leaves Ukraine port, according to pro-Russia officials cited by AFP. US Event Calendar 08:30: June Initial Jobless Claims, est. 229,000, prior 229,000 08:30: June Continuing Claims, est. 1.32m, prior 1.32m 08:30: May Personal Income, est. 0.5%, prior 0.4% 08:30: May Personal Spending, est. 0.4%, prior 0.9% 08:30: May Real Personal Spending, est. -0.3%, prior 0.7% 08:30: May PCE Deflator MoM, est. 0.7%, prior 0.2% 08:30: May PCE Deflator YoY, est. 6.4%, prior 6.3% 08:30: May PCE Core Deflator YoY, est. 4.8%, prior 4.9% 08:30: May PCE Core Deflator MoM, est. 0.4%, prior 0.3% 09:45: June MNI Chicago PMI, est. 58.0, prior 60.3 DB's Jim Reid concludes the overnight wrap We’ve just released the results of our monthly EMR survey that we conducted at the start of the week. It makes for some interesting reading, and we’re now at the point where 90% of respondents are expecting a US recession by end-2023, which is up from just 35% in our December survey. That echoes our own economists’ view that we’re going to get a recession in H2 2023, and just shows how sentiment has shifted since the start of the year as central banks have begun hiking rates. When it comes to people’s views on where markets are headed next, most are expecting many of the themes from H1 to continue, with a 72% majority thinking that the S&P 500 is more likely to fall to 3,300 rather than rally to 4,500 from current levels, whilst 60% think that Treasury yields will hit 5% first rather than 1%. Click here to see the full results. When it comes to negative sentiment we’ll have to see what today brings us as we round out the first half of the year, but if everything remains unchanged today we’re currently set to end H1 with the S&P 500 off to its worst H1 since 1970 in total return terms. And there’s been little respite from bonds either, with US Treasuries now down by -9.79% since the start of the year, so it’s been bad news for traditional 60/40 type portfolios. Ultimately, a large reason for that has been investors’ fears that ongoing rate hikes to deal with inflation will end up leading to a recession, and yesterday saw a continuation of that theme, with Fed Chair Powell, ECB President Lagarde and BoE Governor Bailey all reiterating their intentions in a panel at the ECB’s Forum to return inflation back to target. In terms of that panel, there weren’t any major headlines on policy we weren’t already aware of, although there was a collective acknowledgement of the risk that inflation could become entrenched over time and the need to deal with that. Fed Chair Powell described the US economy as in “strong shape”, but one that ultimately requires much tighter financial conditions to bring inflation back to target. Year-end fed funds expectations remained steady in response, down just -0.7bps to 3.45%. However, further out the curve the simmering slower growth narrative continued to grip markets and sent 10yr Treasury yields -8.2bps lower to 3.09%, and the 2s10s another -1.1bps flatter to 4.7bps. In line with a tighter Fed policy path and slower growth, 10yr breakevens drove the move in nominal yields, falling -8.2bps to 2.39%, their lowest levels since January, having entirely erased the gains seen after Russia’s invasion of Ukraine, when it peaked above 3% at one point in April. Along with 2s10s flattening, the Fed’s preferred measure of the near-term risk of recession, the forward spread (the 18m3m – 3m), similarly flattened by -5.7bps, hitting its lowest level in nearly four months at 154bps. And thismorning there’s only been a partial reversal of these trends, with 10yr Treasury yields (+1.3bps) edging back up to 3.10% as we go to press. Over in equities, the S&P 500 bounced around but finished off of its intraday lows with just a -0.07% decline, again with the macro view likely skewed by quarter-end rebalancing of portfolios. The NASDAQ was similarly little changed on the day, falling a mere -0.03%. In terms of the ECB, President Lagarde said on that same panel that she didn’t think “we are going back to that environment of low inflation” that was present before the pandemic. But when it came to the actual data yesterday there was a pretty divergent picture. On the one hand, Spain’s CPI for June surprised significantly on the upside, with the annual inflation rising to +10.0% (vs. +8.7% expected) on the EU’s harmonised measure. But on the other, the report from Germany then surprised some way beneath expectations, coming in at +8.2% on the EU-harmonised measure (vs. +8.8% expected). So mixed messages ahead of the flash CPI print for the entire Euro Area tomorrow. As in the US, there was a significant rally in European sovereign bonds, with yields on 10yr bunds (-10.7bps), OATs (-10.7bps) and BTPs (-16.0bps) all moving lower on the day. Equities also lost significant ground amidst the risk-off tone, and the STOXX 600 shed -0.67% as it caught up with the US losses from the previous session. That risk-off tone was witnessed in credit as well, where iTraxx Crossover widened +21.5bps to a post-pandemic high. At the same time, there were further concerns in Europe on the energy side, with natural gas futures up by +8.06% to a three-month high of €139 per megawatt-hour, which follows a reduction in capacity yesterday at Norway’s Martin Linge field because of a compressor failure. Whilst monetary policy has been the main focus for markets lately, we did get some headlines on the fiscal side yesterday too, with a report from Bloomberg that Senate Democrats were working on an economic package that had smaller tax increases in order to reach a deal with moderate Democratic senator Joe Manchin. For reference, the Democrats only have a majority in the split 50-50 senate thanks to Vice President Harris’ tie-breaking vote, so they need every Democrat Senator on board in order to pass legislation. According to the report, the plan would be worth around $1 trillion, with half allocated to new spending, and the other half cutting the deficit by $500bn over the next decade. Overnight in Asia we’ve seen a mixed market performance overnight. Most indices are trading lower, including the Nikkei (-1.45%) and the Kospi (-0.81%), but Chinese equities have put in a stronger performance after an improvement in China’s PMIs in June, and the CSI 300 (+1.62%) and the Shanghai Comp (+1.31%) have both risen. That came as manufacturing activity expanded for the first time in four months, with the PMI up to 50.2 in June (vs. 50.5 expected) from 49.6 in May. At the same time, the non-manufacturing climbed to 54.7 points in June, up from 47.8 in May, which also marked the first time it’d been above the 50 mark since February. Nevertheless, that positivity among Chinese equities are proving the exception, with equity futures in the US and Europe pointing lower, with those on the S&P 500 (-0.28%) looking forward to a 4th consecutive daily decline as concerns about a recession persist. When it came to other data yesterday, the third estimate of US GDP for Q1 saw growth revised down to an annualised contraction of -1.6% (vs. -1.5% second estimate). Separately, the Euro Area’s M3 money supply grew by +5.6% year-on-year in May (vs. +5.8% expected), which is the slowest pace since February 2020. To the day ahead now, data releases include German retail sales for May and unemployment for June, French CPI for June, the Euro Area unemployment rate for May, Canadian GDP for April, whilst the US has personal income and personal spending for May, the weekly initial jobless claims, and the MNI Chicago PMI for June. Tyler Durden Thu, 06/30/2022 - 07:58
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[l] at 6/30/22 5:20am
The 2022 Market Disaster... More Pain To Come Authored by Matthew Piepenburg via GoldSwitzerland.com, If you think the current market disaster hurts; it’s gonna get worse despite recent dead cat bounces in U.S. equities. The Big 4: Dead Bonds, Rising Yields, Tanking Stocks & Stagflation For well over a year before fantasy-pushers and politicized, central-bank mouth pieces like Powell and Yellen were preaching “transitory inflation,” or hinting that “we may never see another financial crisis in our lifetime,” we’ve been patiently and bluntly (rather than “gloomily”) warning investors of the “Big Four.” That is, we saw an: 1) inevitable liquidity crisis which would take our 2) zombie bond markets to the floor, yields (and hence interest rates) to new highs and 3) debt-soaked nations and markets tanking dangerously south into 4) the dark days of stagflation. In short, by calmly tracking empirical data and cyclical debt patterns, one does not have to be a market timer, tarot-reader or broken watch of “doom and gloom” to warn of an unavoidable credit, equity, inflation and currency crisis, all of which lead to levels of increasing political and social crisis and ultimately extreme control from the top down. Such are the currents of history and the tides/fates of broke(n) regimes. And that is precisely where we are today—no longer warning of a pending convergence of crises, but already well into a market disaster within the worst macro-economic setting (compliments of cornered “central planners”) that I have ever experienced in my post-dot.com career. But sadly, and I do mean sadly, the worst is yet to come. As always, facts rather than sensationalism confirm such hard conclusions, and hence we turn now to some equally hard facts behind this market disaster. The Ignored Hangover For well over a decade, the post-2008 central bankers of the world have been selling the intoxicating elixir (i.e., lie) that a debt crisis can be solved with more debt, which is then paid for with mouse-click money. Investors drank this elixir with abandon as markets ripped to unprecedented highs on an inflationary wave of money printed out of thin air by a central bank near you. In case you still don’t know what such “correlation” looks like, see below: But as we’ve warned in interview after interview and report after report, the only thing mouse-click money does is make markets drunker rather than immune from a fatal hangover and market disaster. For years, such free money from the global central banks ($35T and counting) has merely postponed rather than outlawed the hangover, but as we are seeing below, the hangover, and puking, has already begun in a stock, credit or currency market disaster near you. Why? Every Market Crisis is a Liquidity Crisis Because the money (i.e., “liquidity”) that makes this drunken fantasy go round is drying up (or “tightening”) as the debt levels are piling up. That is, years and years of issuing IOU’s (i.e., sovereign bonds) has made those IOU’s less attractive, and the solution-myth of creating money out of thin air to pay for those IOUs is becoming less believable as inflation rises like a killer shark from beneath the feet of our money printers. The Most Important Bond in the World Has Lost Its Shine As we’ve warned, the UST is experiencing a liquidity problem. Demand for Uncle Sam’s bar tab (IOU’s) is tanking month, after month, after month. As a result, the price of those bonds is falling and hence their yields (and our interest rates) are rising, creating massive levels of pain in an already debt-saturated world where rising rates kill drunken credit parties (i.e., markets). Toward this end, Wall Street is seeing a dangerous rise in what the fancy lads call “omit days,” which basically means days wherein inter-dealer liquidity for UST’s is simply not available. Such omit days are screaming signs of “uh-oh” which go un-noticed by 99.99% of the consensus-think financial advisors selling traditional stocks and bonds for a fee. As the repo warnings (as well as our written warnings) have made clear since September of 2019, when liquidity in the credit markets tightens, the entire risk asset bubble (stocks, bonds and property) starts to cough, wheeze and then choke to death. Unfortunately, the extraordinary levels of global debt in general, and US public debt in particular, means there’s simply no way to avoid more choking to come The Fed—Tightening into a Debt Crisis? As all debt-soaked nations or regimes since the days of ancient Rome remind us , once debt levels exceed income levels by 100% or more, the only option left is to “inflate away” that debt by debasing (i.e., expanding/diluting) the currency—which is the very definition of inflation. And that inflation is only just beginning… Despite pretending to “control,” “allow” and then “combat” inflation, truth-challenged central bankers like Powell, Kuroda and Lagarde have therefore been actively seeking to create inflation and hence reduce their debt to GDP ratios below the fatal triple digit level. Unfortunately for the central bankers in general and Powell in particular, this ploy has not worked, as the US public debt to GDP ratio continues to stare down the 120% barrel and the Fed now blindly follows a doomed policy of tightening into a debt crisis. This can only mean higher costs of debt, which can only mean our already debt-soaked bond and stock markets have much further to go/tank. Open & Obvious (i.e., Deadly) Bond Dysfunction In sum, what we are seeing from DC to Brussels, Tokyo and beyond is now an open and obvious (rather than pending, theoretical or warned) bond dysfunction thanks to years of artificial bond “accommodation” (i.e., central-bank bond buying with mouse-click currencies). As we recently warned, signals from that toxic waste dump (i.e., market sector) known as MBS (“Mortgage-Backed Securities”) provide more objective signs of this bond dysfunction (market disaster) playing out in real-time. Earlier this month, as the CPI inflation scale went further (and predictably) up rather down, the MBS market went “no bid,” which just means no one wanted to buy those baskets of unloved bonds. This lack of demand merely sends the yields (and hence rates) for all mortgages higher. On June 10, the rates for 30-year fixed mortgages in the U.S. went from 5.5% to 6% overnight, signaling one of the many symptoms of a dying property bull as U.S. housing starts reached 13-month lows and building permits across the nation fell like dominoes. Meanwhile, other warnings in the commercial bond market, from Investment Grade to Junk Bonds, serve as just more symptoms of a dysfunctional “no-income” (as opposed to “fixed income”) U.S. bond market. And in case you haven’t noticed, the CDS (i.e., “insurance”) market for junk bonds is rising and rising. Of course, central bankers like Powell will blame the inevitable death of this U.S. credit bubble on inflation caused by Putin alone rather than decades of central bank drunk driving and inflationary broad money supply expansion. Pointing Fingers Rather than Looking in the Mirror Powell is already confessing that a soft landing from the current inflation crisis is now “out of his hands” as energy prices skyrocket thanks to Putin. There’s no denying the “Putin effect” on energy prices, but what’s astounding is that Powell, and other central bankers have forgotten to mention how fragile (i.e., bloated) Western financial systems became under his/their watch. Decades of cramming rates to the floor and printing trillions from thin air has made the U.S. in particular, and the West in general, hyper-fragile; that is: Too weak to withstand pushback from less indebted bullies like Putin. But as we warned almost from day 1 of the February sanctions against Russia, they were bound to back-fire big time and accelerate an unraveling inflationary disaster in the West. The West & Japan: Overplaying the Sanction Hand As we warned in February, Russia is squeezing the sanction-makers with greater pain than history-and-math-ignorant “statesmen” like Kamala Harris could ever grasp. From here in Europe, Western politicians are beginning to wonder if following the U.S. lead (coercion?) in chest-puffing was a wise idea, as gas prices on the continent skyrocket. In this backdrop of rising energy costs, Germany, whose PPI is already at 30%, has to be asking itself if it can afford tough-talk in the Ukraine as Putin threatens to cut further energy supplies. In this cold reality, the geniuses at the ECB are realizing that the very “state of their European Union” is at increasing risk of dis-union as citizens from Italy to Austria bend under the weight of higher prices and falling income. As of this writing, the openly nervous ECB is thus inventing clever plans/titles to “fight fragmentation” within the EU by, you guessed it: Printing more money out of thin air to control bond yields and cap borrowing costs. Of course, such pre-warned and inevitable (as well as politicized) versions of yield curve controls (YCC) are themselves, just well…Inflationary. Even outside the EU, the UK’s Prime Minister is discussing the idea of handing out free money to the bottom 30% of its population as a means to combat inflating prices, equally forgetting to recognize that such handouts are by their very nature just, well…Inflationary. (By the way, such monetary policies are an open signal to short the Euro and GBP against the USD…) Looking further east to that equally embarrassing state of the union in Japan, we see, as warned countless times, a tanking Yen out of a Japan that knows all too well the inflationary sickness that a non-stop money printer can create. Like the UST, the Japanese JGB is as unloved as a pig in lipstick. Prices are falling and yields are rising. As demand for Japanese IOU’s falls, yields and rates are rising, compelling more YCC (i.e., money printing) from the Bank of Japan as the now vicious (and well…inflationary) circle of printing more currencies to pay for more debt/IOUs spins/spirals fatally round and round. By the way, and as part of our continued warning and theme of the slow process of de-dollarizationwhich the sanctions have only accelerated, it would not surprise us to see Japan making a similar “China-like” move to buy its Russian oil in its own currency rather than the USD. Just saying… Don’t Be (or buy) a Dip As indicated above, trying to combat inflation with rate hikes is not only a joke, it creates a market disaster when a nation’s debt to GDP is at 120%. To fight inflation, rates need be at a “neutral level,” (i.e., above inflation), and folks, that would mean 9% rates at the current 8%+ CPI level. That aint gonna happen… At $30T+ of government debt and rising, the Fed can NEVER use rising rates to fight inflation. End of story. The days of Volcker rate hikes (when public debt was $900B not $30T) are gone. But the fickle Fed can raise rates high enough to kill a securities bubble and create “asset-bubble deflation,” which is precisely what we are seeing in real time, and this market disaster is only going to get worse. In short, if you are buying this “dip,” you may want to think again. As June trade tapes remind, the Dow dipped below 30000, and the S&P 500 reported an ominous 3666, already losing more than 20% despite remaining grossly over-valued as it slides officially into bear territory. As for the NASDAQ’s -30% YTD loss, well, it’s embarrassing… Many, of course, will buy this dip, as many forget the data, facts and traps of dead-cat bounces. Toward this end, it’s worth reminding that 12 of the top 20 one-day rallies in the NASDAQ occurred after that market began a nearly 80% plunge between 2000 and 2003. Similarly, the S&P saw 9 of its top 20 one-day rallies following the 1929 crash in which that market lost 86% from its highs. In short: These bear markets are not even close to their bottom, and today’s dip-buy may just be a trap, unless you think you can time a one-day rally amidst years of falling assets. Markets won’t and don’t recover from the bear’s claws until spikes are well above two standard deviations. We are not there yet, which means we have much further to fall. Capitulation in U.S. stocks won’t even be a discussion until the DOW is below 28,400 and the S&P blow 3500. Over the course of this bear, I see both falling much further. As we’ve warned, mean-reversion is a powerful force and we see deeper lows/reversions ahead: Toward that end, we see an SPX which could easily fall at least 15% lower (i.e., to at least 1850) than the “Covid crash” of March 2020. Based upon historic ranges, stocks won’t be anywhere near “fair value” until we see a Shiller PE at 16 or a nominal PE of 9-10. Index bubbles have been driven by ETF inflation which followed the Fed liquidity binge—and those ETF’s will fall far faster in a market disaster than they grew in a Fed tailwind. And if you still think meme stocks, alt coins or the Fed itself can save you from further market disaster, we’d (again) suggest you think otherwise. Looking at historical data on prior crashes from 1968 to the present, the average bear crash is at around -33%. Unfortunately, there’s nothing “average” about this bear or the further falls to come. The Shiller PE, for example, has another 40% to go (down) before stocks approach anything close to “fair value.” In the 1970’s, for example, when we saw the S&P lose 48%, or even in 2008, when it lost 56%, U.S. debt to GDP levels were ¼ of what they are today. Furthermore, in the 1970’s the average consumer savings rate was 12%; today that rate is 4%. Stated simply, the U.S., like the EU and Japan, is too debt-crippled and too GDP-broke to make this bear short and sweet. Instead, it will be long and mean, accompanied by stagflation and rising unemployment. The Fed knows this, and is, in part, raising rates today so that will have something—anything—to cut in the market disaster tomorrow. But that will be far too little, and far too late. And, Gold… Of course, the Fed, the IMF, the Davos crowd, the MSM and the chest-puffing sanction (back-firing) West will blame the current and future global market disaster on a virus with a 99% survival rate and an avoidable war in a corner of Europe that neither Biden nor Harris could find on a map. Instead, and as most already know, the real cause of the greatest market bubble and bust in the history of modern capital markets lies in the reflection of central bankers and politicians who bought time, votes, market bubbles, wealth disparity and cancerous inflation with a mouse-click. History reminds us of this, current facts confirm it. For now, the Fed will tighten, and thereby unleash an even angrier bear. Then, as we’ve warned, the Fed will likely pivot to more rate cuts and even more printed (inflationary) currencies as the US, the EU and Japan engage in more inflationary YCC and an inevitable as well as disorderly “re-set” already well telegraphed by the IMF. In either/any scenario, gold gets the last laugh. Gold, of course, has held its own even as rates and the USD have risen—typically classic gold headwinds. When markets tank and the Fed pivots, yields on the 10Y could fall as global growth weakens—thus providing a gold tailwind. Furthermore, the USD’s days of relative strength are equally numbered, as is the current high demand for US T-Bill-backed collateral for that USD. As the slow trend toward de-dollarization increases, so will the tailwind and hence price of gold increase as the USD’s credibility decreases. In the interim, the fact that gold has stayed strong despite the temporary spike in the USD speaks volumes. In the interim, Gold outperforms tanking stocks by a median range of 45%, and when the inflationary pivot to more QE returns, gold protects longer-term investors from grotesquely (and increasingly) debased currencies. And when (not if) the re-set toward CBDC (central bank digital currencies) finally arrives, that blockchain eYen and eDollar will need a linkage to a neutral commodity not to an empty “faith & trust” in just another new fiat/fantasy with an electronic profile. As we’ve been saying for decades: Gold Matters. Tyler Durden Thu, 06/30/2022 - 07:20
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[l] at 6/30/22 4:55am
Who's Still Buying Fossil Fuels From Russia? Despite looming sanctions and import bans, Russia exported $97.7 billion worth of fossil fuels in the first 100 days since its invasion of Ukraine, at an average of $977 million per day. So, which fossil fuels are being exported by Russia, and who is importing these fuels? The infographic below, via Visual Capitalist's Niccolo Conte and Govind Bhutada, tracks the biggest importers of Russia’s fossil fuel exports during the first 100 days of the war based on data from the Centre for Research on Energy and Clean Air (CREA). In Demand: Russia’s Black Gold The global energy market has seen several cyclical shocks over the last few years. The gradual decline in upstream oil and gas investment followed by pandemic-induced production cuts led to a drop in supply, while people consumed more energy as economies reopened and winters got colder. Consequently, fossil fuel demand was rising even before Russia’s invasion of Ukraine, which exacerbated the market shock. Russia is the third-largest producer and second-largest exporter of crude oil. In the 100 days since the invasion, oil was by far Russia’s most valuable fossil fuel export, accounting for $48 billion or roughly half of the total export revenue.   While Russian crude oil is shipped on tankers, a network of pipelines transports Russian gas to Europe. In fact, Russia accounts for 41% of all natural gas imports to the EU, and some countries are almost exclusively dependent on Russian gas. Of the $25 billion exported in pipeline gas, 85% went to the EU.   The Top Importers of Russian Fossil Fuels The EU bloc accounted for 61% of Russia’s fossil fuel export revenue during the 100-day period. Germany, Italy, and the Netherlands—members of both the EU and NATO—were among the largest importers, with only China surpassing them.   China overtook Germany as the largest importer, importing nearly 2 million barrels of discounted Russian oil per day in May—up 55% relative to a year ago. Similarly, Russia surpassed Saudi Arabia as China’s largest oil supplier.   The biggest increase in imports came from India, buying 18% of all Russian oil exports during the 100-day period. A significant amount of the oil that goes to India is re-exported as refined products to the U.S. and Europe, which are trying to become independent of Russian imports. Reducing Reliance on Russia In response to the invasion of Ukraine, several countries have taken strict action against Russia through sanctions on exports, including fossil fuels.  The U.S. and Sweden have banned Russian fossil fuel imports entirely, with monthly import volumes down 100% and 99% in May relative to when the invasion began, respectively. On a global scale, monthly fossil fuel import volumes from Russia were down 15% in May, an indication of the negative political sentiment surrounding the country. It’s also worth noting that several European countries, including some of the largest importers over the 100-day period, have cut back on Russian fossil fuels. Besides the EU’s collective decision to reduce dependence on Russia, some countries have also refused the country’s ruble payment scheme, leading to a drop in imports. The import curtailment is likely to continue. The EU recently adopted a sixth sanction package against Russia, placing a complete ban on all Russian seaborne crude oil products. The ban, which covers 90% of the EU’s oil imports from Russia, will likely realize its full impact after a six-to-eight month period that permits the execution of existing contracts. While the EU is phasing out Russian oil, several European countries are heavily reliant on Russian gas. A full-fledged boycott on Russia’s fossil fuels would also hurt the European economy—therefore, the phase-out will likely be gradual, and subject to the changing geopolitical environment. Tyler Durden Thu, 06/30/2022 - 06:55
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[l] at 6/30/22 4:30am
Prosecutors Say Prince Andrew 'Next Target' After Ghislaine Maxwell Sentenced To 20 Years Authored by Steve Watson via Summit News, Following the relatively light twenty year sentence Ghislaine Maxwell has received for sex trafficking underage girls for Jeffrey Epstein, prosecutors representing the victims have said that the ‘next target’ should be British Royal Prince Andrew. The lawyers acting on behalf of those alleging abuse requested that the FBI continue investigating the Epstein case and look harder at Andrew and other individuals accused by the victims. “Let’s hope they’re the next target,” Attorney Brad Edwards told reporters. Edwards represented Virginia Roberts Giuffre, who settled a sex abuse civil lawsuit out of court with Andrew, the Duke of York. Attorney Spencer Kuvin, representative of several other alleged victims of Epstein and Maxwell added “Obviously, Andrew is one of the targets they will be looking into. He should definitely be concerned, but if he did nothing wrong, then come forward and tell the full story to the FBI, not the media.” Los Angeles lawyer Lisa Bloom, who is representing several other alleged victims said “We call upon the FBI to fully investigate Prince Andrew. Virginia Giuffre’s civil case should be just the beginning. Everyone associated with Epstein and Maxwell should be carefully investigated.” Bloom previously told reporters that Prince Andrew “should be quaking in his boots.” As we previously reported, the British public have expressed concerns that the money for Andrew’s pay off to Virginia Roberts Giuffre, which will likely run into the millions, will be siphoned from taxpayers. The amount that Andrew will pay Giuffre, and a victims’ rights charity of her choice, has not been disclosed, however it is estimated to be in excess of £12 MILLION, and that won’t even include legal fees. https://t.co/2xF6jNWTD6 It's not just an estimated £12 Million pay-out, its his and hers legal fees he will be paying, god knows how many millions that will add on to it! They have to make public who is paying for all this!!! — Steve Robertson (@ScotsBear1973) February 16, 2022 While not admitting any guilt in the case, a statement read in court noted that “Prince Andrew has never intended to malign Ms. Giuffre’s character, and he accepts that she has suffered both as an established victim of abuse and as a result of unfair public attacks.” The settlement came just days before Andrew would have been made to undergo a deposition, and be questioned under oath by Giuffre’s lawyers, reported the New York Times. No individuals other than Maxwell and Epstein have yet been named in court throughout the case. Maxwell will likely serve her sentence at the Federal Correctional Institution in Danbury, Connecticut, a low security 1000-inmate facility about 55 miles from New York City. The prison is said to be like Disneyland compared to the facility Maxwell has resided for the past two years. *  *  * Brand new merch now available! Get it at https://www.pjwshop.com/ In the age of mass Silicon Valley censorship It is crucial that we stay in touch. We need you to sign up for our free newsletter here. Support our sponsor – Turbo Force – a supercharged boost of clean energy without the comedown. Also, we urgently need your financial support here. Tyler Durden Thu, 06/30/2022 - 06:30
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[l] at 6/30/22 3:45am
Apply Lessons Of Ukraine - Send Weapons To Taiwan "Earlier" In Face Of China Threat: UK's Truss UK Foreign Secretary Liz Truss has made her perhaps most provocative comments yet aimed at both Russia and China. It's sure to result in swift protest and condemnation from Beijing, given she invoked the Taiwan comparison while expressing regret over not sending more weapons to beleaguered Ukraine sooner. She said Wednesday that the West needs to learn the lessons of Putin's Ukraine invasion and apply them to Taiwan: "We should have done things earlier, we should have been supplying the defensive weapons into Ukraine earlier. We need to learn that lesson for Taiwan."  British Secretary for Foreign Affairs Liz Truss, AFP Her words before MPs strongly suggested that Russia's "special operation" in neighboring Ukraine has emboldened Xi Jinping in pursuing a military invasion and occupation of Taiwan. China's government has consistently and forcefully rejected any comparisons between the Ukraine and Taiwan situations. In the briefing she delivered before the Foreign Affairs Committee, Truss continued, "There’s always a tendency, and we’ve seen this prior to the Ukraine war, there’s always a tendency of wishful thinking, to hope that more bad things won’t happen and to wait until it’s too late." Part of her rationale was the lengthy and costly amount time it takes from the moment the decision is made to send in weapons, to the time they can actually get deployed by the Ukrainians on the battlefield: "Every piece of equipment we have sent takes months of training, so the sooner we do it the better," she said. This week UK Prime Minister Boris Johnson appeared to argue something similar, however without wading into the controversy of Taiwan independence:  Speaking to reporters on the plane to the Nato summit in Madrid, Boris Johnson said: “I just think it’s very important that countries around the world should not be able to read across from events in Europe and draw the conclusion that the world will simply stand idly by if boundaries are changed by force. "That’s one of the most important lessons that we pick up from Ukraine." Some Britons on social media angrily sounded off as Truss is apparently eyeing military aid to Taiwan at a moment the UK's own stockpiles are already being shipped overseas in large numbers and depleted, in order to prop up Ukraine's defenses: Boris just Pledged another £496 Million to Ukraine. Now Liz Truss wants the UK Taxpayer to 'Arm Taiwan' in case china invades. These LUNATICS are Destroying this Country as every day passes! pic.twitter.com/mtxIP1P35K — Holly Christmas (@HollyChristma1) June 29, 2022 Like the US, the UK at least officially holds to the 'One China' policy and thus doesn't have diplomatic or defense pacts with Taipei. Beijing officials are more than likely to see these latest ultra-provocative Taiwan comparisons as a severe violation of the spirit of One China. As for the Russia-Ukraine conflict, it remains anything but certain whether if the West armed Kiev earlier this would have made a significant difference in the trajectory of the war. There's lately been increasing acknowledgement among Western pundits and the clear momentum is with Russia as it slowly gobbles up Donbas territory. President Zelensky is asking billions more in aid from the West as a summit of NATO heads gather in Madrid this week. Tyler Durden Thu, 06/30/2022 - 05:45

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