Oct 24

Today’s News 24th October 2022

  • These Global Cities Show The Highest Real Estate Bubble Risk
    These Global Cities Show The Highest Real Estate Bubble Risk

    Housing bubbles are a tricky phenomenon. As a market gathers steam and prices increase, it remains a matter of debate whether that market is overvalued and flooded with speculation, or it’s simply experiencing robust demand.

    Of course, once a bubble bursts, it’s all obvious in hindsight.

    One common red flag is when prices decouple from local incomes and rents. As well, imbalances in the real economy, such as excessive construction activity and lending can signal a bubble in the making.

    Visual Capitalist’s Nick Routley created the map below, based on data from the Real Estate Bubble Index by UBS, to examine 25 global cities, scoring them based on their bubble risk.

    Overinflated Markets

    In the 2022 edition of the Real Estate Bubble Index, nine of the cities covered were classified as having extreme bubble risk (1.5 or higher score).

     

    Canada’s largest city finds itself at the top of a ranking no city wants to end up on. Toronto’s home prices have been rising steadily for years now, and many, including UBS, believe that the city is now firmly in bubble territory.

     

    Vancouver also finds itself in a similar position. Both Canadian cities have a high quality of life and have thriving tech industries.

    Notably, none of the U.S. cities analyzed find themselves in the most extreme bubble risk category. The closest scoring U.S. city was Miami, which sits firmly in overvalued territory (0.5-1.5 range) with a score of 1.39.

    Examining the Trends

    In recent years, low interest rates helped push home prices and incomes further apart.

    For cities in the bubble risk zone, prices have climbed by an average of 60% in inflation-adjusted terms over the past decade, while rents and real incomes increased by just 12%. And, while COVID-19 briefly put a dent in urban demand, rents in the cities analyzed rose at around the same pace as pre-pandemic times.

    As a result, all but three of the cities saw positive price growth over the past year from a nominal price perspective:

    U.S. cities occupy a number of spots at the top of this chart. Miami, in particular, is seeing strong internal migration patterns, as well as renewed interest from foreign investors.

    Hong Kong experienced the biggest one-year nominal drop of all the cities analyzed. The report notes that since around 2019 Hong Kong “has broadly stagnated as the lack of affordability, economic woes, and pandemic restrictions all took a major toll on demand.”

    Prices can’t rise forever. According to UBS, most cities with high valuations, price corrections have already begun, or could be right around the corner.

    Tyler Durden
    Mon, 10/24/2022 – 02:45

  • Germany Could Witness A Cash Renaissance As Its Economy Continues To Deteriorate
    Germany Could Witness A Cash Renaissance As Its Economy Continues To Deteriorate

    By Remix News

    It may already have seemed that inflation in the West is slowly approaching its peak, but that is not the case. Considering the numbers coming from Germany, inflation may be far from peaking.

    Producer prices in Germany increased by a record 45.8 percent year-over-year in September, the same as in August. Energy prices, which rose by 132.2 percent year-over-year, had the most impact on this. The only positive thing about this is that the month-over-month growth slowed a little due to the drop in commodity prices. However, for consumers, it follows that consumer inflation, which lags behind the so-called production inflation, must still climb. We cannot lie about this.

    For Germans, however, the following sentence, which German statisticians added as a comment to the numbers, sounds the most frightening: “Compared to the same period last year, August and September recorded the highest increase in producer prices since the start of the survey in 1949.”

    Germany is extremely sensitive to mentions of inflation or public debt. To understand why, we have to go back in history. The pre-war hyperinflation in Germany was caused by the fact that Germany could not finance the reparations from World War I. It began to pay its reparations with debt and started to monetize this debt, printing uncovered inflationary money and using it to pay off the debt. The result was hyperinflation and total economic disruption. Many historians believe it was this economic undergrowth that brought Hitler to power and marked World War II.

    After the war, Germany, therefore, made a literal 180-degree turn. While before the war it showed enormous fiscal indiscipline, went into debt, printed money, and faced hyperinflation, after the war, on the contrary, it became Europe’s top-of-the-class in fiscal policy. It began scrupulously taking care to keep its public finances under control, not excessively inflating its debt, and not even remotely playing with anything resembling monetization. Jens Wiedmann, former governor of the German central bank, has been the most vocal central banker in Europe when it comes to criticizing the monetization of southern European debt and the policy of negative interest rates that the European Central Bank has begun to commit to in recent years. And it was the German Constitutional Court, through which some of the ECB’s plans of monetizing public debt did not pass.

    So we have to understand that for Germany, the current inflation and debt monetization are much more sensitive topics than for any other European country. So far, consumer inflation in Germany is “only” 10 percent, a drop above the average inflation rate in the entire Eurozone, which reached 9.9 percent. Inflation, however, continues to rise.

    Economics is not mathematics; economics is mainly about psychology. And here, we begin to encounter very sensitive limits of psychological tolerance. At this moment, inflation has several dimensions. In the first place, the Germans are becoming alarmed and irritated, although they are not yet venting such emtions via mass riots.

    Secondly, it is politically very tricky to call a spade a spade. Given the German sensitivities on the mentioned topics, it is simply not politically appropriate to say that inflation is caused by the monetization of European sovereign debt. Rather, they talk about expensive energy, which in turn is linked to the war in Ukraine. They do not directly name the causes. But if we do not identify the causes, we cannot eliminate them, so we cannot solve the problem. The fact that the presidents and prime ministers of the countries of the European Union are trying to find the solution to expensive energy, and talk in particular about the regulation of gas prices, is a testament to this blind stumbling. This is what’s happening instead of admitting the simple facts that, on the one hand, there is more money than goods in circulation and, on the other hand, energy demand is greater than the supply after we voluntarily switched off energy as part of the Green Deal.

    And thirdly, people are increasingly fleeing inflation by going into real assets. They can no longer run to mortgages due to the rapidly rising interest rates. Although gold is in great demand in Europe, having a choice between gold and gold is not enough for somebody. And so the demand for such things as historical weapons, aged alcohol, or Swiss watches is growing. Exports of Swiss watches rose by 19 percent in September and could be a record this year. A time is coming when people will increasingly use cash instead of bank accounts and pour cash into cashable durables.

    Tyler Durden
    Mon, 10/24/2022 – 02:00

  • Why The Censors Fear Information Freedom
    Why The Censors Fear Information Freedom

    Authored b y Jeffrey Tucker via The Epoch Times,

    This is the age of censorship, pushed by government and interests and enacted by wholly captured Big Tech firms.

    If you doubt it, look through the hundred or so pages of emails dug up in court discovery between government agencies and social media firms during the COVID crisis. The relationship is warm and wholly normalized.

    If, for three years, you had a sense that you were being fed a canned line through all major media platforms, that the science was being filtered, that the talking heads were merely telling you what they were told to tell you, that dissent was being crushed, you aren’t wrong. This is exactly what was happening.

    COVID was a major test case, but the model has been rolled out to cover a whole range of other topics, including election fraud, vaccine safety, and climate change. If an issue is important to a powerful interest and prevailing government priorities, the censors are tasked to get to work. The platform you have today could be gone tomorrow, no matter how much of a personal investment you have in it. In fact, large accounts seem more likely to be attacked than small ones.

    We now know about a series of emails between former FDA commissioner and Pfizer board member Scott Gottlieb (now at the American Enterprise Institute) and tech firms concerning the writings of Alex Berenson. Berenson was an early critic of COVID policies and among the first to sound the alarm about vaccine efficacy and safety. Gottlieb targeted Berenson by name and told Twitter and others precisely what needed to happen as soon as possible. Berenson had to be silenced.

    It’s true that Gottlieb wasn’t a government employee at the time, but these things can get murky. We know from many reports inside the White House that Jared Kushner consulted him directly in the days when they were twisting Trump’s arm to approve a lockdown of society. Gottlieb’s connections in and out of government regulatory agencies are vast.

    It’s one case of hundreds, thousands, and countless other cases. People write to me daily to report that LinkedIn has taken down a message without warning, that Facebook has slapped a warning on a post, that Twitter has taken down their account, or that Google’s YouTube has dinged or deleted their account.

    More intense forms are happening in web hosting (Amazon can throw you off) and even finance. PayPal has cut many individuals and institutions from access and even dared floating a fee for “misinformation”—a word we now understand to mean opinions not approved by ruling class censors. If this practice is rolled out further—and there’s no question that many intend to do so—we could find ourselves surrounded in a Chinese-like social credit system.

    This raises serious legal issues which are now being litigated across the country. Governments can’t simply privatize their censorious ambitions to the private sector and pretend that is entirely consistent with the First Amendment. The freedom of speech is a general principle that prohibits government from muscling speech platforms to comply with their edicts. And this is true even with private entities who sign up willingly for the job like earnest members of the Red Guard.

    There’s another reason why censorship is more pervasive than at any time in our lifetime. It’s because we have never had such access to so many varied information portals. Imagine if the whole lockdown scenario had taken place in the early 1970s. There were three television networks. Each offered 30 minutes of news each day; 10 minutes or so were devoted to national and international affairs and the rest to sports and weather. The news anchors all said essentially the same thing, which led most people to believe that this was all they needed to know.

    Why did we have a sense that there was no arbitrary censorship? Probably because there didn’t need to be. The information cartel was fully intact. The ruling class was perfectly positioned to script the prevailing narrative. Not even newspapers were distributed outside their region of influence. The New York Times was for New York, The Washington Post for Washington, and so on.

    There were no websites, podcasts, Substacks, discussion forums, group messages, and not even emails. There was no way to send documents except by government mail because not even the fax machine had yet been invented.

    Yes, there were alternative newsletters and things, but they were often expensive, and you had to know about them to get them. Other than that, the whole population was largely in the dark. Looking back, it’s amazing that there ever were protests for civil rights or against the Vietnam War at all. This is why arts and music were so hugely important to both movements: They were a way to get the message out that the news cartel couldn’t control.

    Maybe many people like that world. It seemed orderly. There was a “national culture” mostly informed by prevailing news control. No one knew a better system. But then came technology. Even by the late 1980s, things were opening up. Ronald Reagan himself credited new information flows for provoking the unrest in Eastern Europe and the Soviet Union that led to so many revolutions.

    By 1995, the end of the orderly and controlled information cartel had been shattered by the web browser and the explosive growth of the internet beyond a few to everyone. It seemed to many at the time to be the beginning of a great and new renaissance. Information is the light, and with the light comes emancipation from old forms and new opportunities for everyone. It seemed like “the end of history,” and those years spawned a kind of wild optimism that humanity would forever escape the despots.

    At the same time, this created a major problem for ruling class elites who once enjoyed complete hegemony over the public mind. Their control was collapsing before their eyes. We loved it.

    The fix has been a quarter century in the making, one step at a time, toward somehow rebuilding what they lost. This is precisely why this is all happening now. In other words, it’s the age of censorship precisely because it’s the age of information. One follows the other.

    Why is information so dangerous to some people? Because information is about ideas, and history is shaped by the ideas we hold. They’re more powerful than armies because ideas are mentally and emotionally powerful, and infinitely reproducible and malleable, and they inspire action. Once an idea takes hold in a population, nothing can stop its forward advance and eventual victory.

    In other words, there’s a strange way in which censorship itself should give us hope simply because elites find it’s so desperately needed right now. Censorship is the tribute that lies pay to truth. If truth were not so powerful, no censorship would be necessary. Also, if the system of information distribution were as highly controlled and narrow as it was in the 1970s and earlier, there would be no real need to silence anyone.

    Tyler Durden
    Mon, 10/24/2022 – 00:00

  • When Can You Expect El Niño And La Niña?
    When Can You Expect El Niño And La Niña?

    The heavy rains recorded earlier this month in the Venezuelan city of Las Tejerías, south of Caracas, led to major flooding and landslides that claimed the lives of dozens and left at least 50 missing.

    The region was hit with more devastating news as at least another 28 people died and thousands more were evacuated when Hurricane Julia made landfall in several Central American countries, including Nicaragua, Guatemala and El Salvador.

    As Statista’s Anna Fleck notes, both tragedies are, to a great extent, a consequence of the phenomenon known as “La Niña.”

    As the map below shows, using data from the International Research Institute for Climate and Society at Columbia University, climatic conditions during La Niña result in increased rainfall in northern South America, Central America, and the Caribbean, and dryer periods in Chile, Argentina, Uruguay and southern Brazil.

    Infographic: When Can You Expect El Niño and La Niña? | Statista

    You will find more infographics at Statista

    El Niño and La Niña are both a part of the global climate cycle known as the El Niño-Southern Oscillation (ENSO).

    El Niño is produced by the warming of the equatorial Pacific waters, while La Niña is what happens in the cooling phase.

    When it comes to El Niño, the extreme south of South America can expect to experience heavier rainfall, leading to higher water levels.

    Meanwhile, in the north of the subcontinent and much of Central America and the Caribbean, the lack of rainfall means droughts and a higher risk of forest fires are far more likely.

    Tyler Durden
    Sun, 10/23/2022 – 23:30

  • The Road To Mediocrity
    The Road To Mediocrity

    Authored by J.A.Frascino via AmericanThinker.com,

    Woke progressivism seeks to strengthen the weak by weakening the strong…

    We are told that the MAGA cult, Trump voters, and Republicans in general are a threat to democracy, who, if not neutralized, will lead the nation into fascism.  In theory, a politically divided nation such as ours could evolve into fascism or socialism, should a political faction gain autocratic control.  In reality, however, we are confronted with the threat of evolving into a much more unique political structure – a Mediocracy.

    A Mediocracy is a social structure in which mediocrity prevails.  Those who would change America pursue mediocrity under the banner of our moral obligation to elevate the status of the underachievers, marginalized, and minorities in our society.  The basic ploy is to lump such individuals into groups and to define them as victims of oppression.  They suffer solely from the oppressive social structure of patriarchal white supremacy, which must be dismantled.  

    To entertain other reasons for the obstacles they might face is hateful, immoral, and racist.  White underachievers are dispensed with as irredeemable deplorables and deserve no further attention.  Our society, based in racism and xenophobia, is deemed illegitimate.  The fact that it has grown to become the most honored and respected on earth does not redeem it.  We must throw out the baby with the bath water and restructure society.

    This message is delivered to the masses via mediacracy, the utilization of the media to control, mislead, and manipulate public thought through ambiguous and deceptive language, analogous to Orwellian newspeak.  Those not adhering to the mediocracy are debased as deniers, haters, or purveyors of disinformation, and need to be silenced.  

    (Cancel culture is a natural extension of political correctness; from “you shouldn’t say that” to “you can’t say that”.)

    To elevate the status of those defined as oppressed, we must embark upon a program of diversity, equity, and inclusivity.  “Diversity is our strength!”  Is it?  The strength of our society lies in its ability to achieve its constitutional purpose, requiring it to align its forces with sufficient magnitude and direction so as to achieve its goals.  In physics, this thrust is referred to as a primary vector.  Diverse forces flying off in all directions only serve to weaken the vector forces.  

    Strength lies in overcoming the diverse forces and aligning them with the primary vector.  In society this is achieved through assimilation.  Woke progressivism thwarts assimilation by dividing social elements into adversarial factions – the oppressors v. the oppressed – via identity politics.  Facilitating diversity, per se, in such a confrontational manner already divides and weakens our nation.

    Equity is the quest of equal outcomes.  A seemingly noble quest, eclipsing that for equal opportunity.  It equates meritocracy with white privilege and mandates that advancement be based instead on race or gender – “checking the boxes”.  Checking the boxes produces a Vice President of the caliber of Kamala Harris.  When universally applied, a major step down the pathway to mediocrity.

    Inclusivity relates to a union of the oppressed and their woke advocates.  Oppressors need not apply, since they are largely incapable of overcoming their white privilege, unconscious bias, and white fragility.  The left, once advocating for assimilation of the disadvantaged into the mainstream, now seeks to demonize and eliminate the mainstream.  They say that we must also legalize drugs, ignore homelessness, family breakdown, depression, suicide, crime, and an influx of unskilled labor – hardly strengthening measures.

    Woke progressivism, under the banner of racism, preaches that our society, solely a product of white supremacy, is irredeemably immoral and unsustainable.  All the products of such a society, its greatness included, must be sacrificed.  The ensuing Mediocracy then will be ripe for control by the ruling elite.

    Tyler Durden
    Sun, 10/23/2022 – 23:00

  • After Xi's 'Crowning', China 'Surprises' World With GDP Growth Beat; Yuan Slides
    After Xi’s ‘Crowning’, China ‘Surprises’ World With GDP Growth Beat; Yuan Slides

    Having delayed the avalanche of macro data just ahead of the Party Congress (with no explanation), and having now ‘crowned’ Xi to his third term, it appears China is more than willing to share what data it decides the rest of the world needs to know now.

    With just two minutes notice, China dumped everything from import/export data to GDP to unemployment at 2130ET… and it will likely surprise no one at all that the data was significantly better than expected (well you can’t start a third term on a down note can you?).

    Chinese GDP grew 3.9% in Q3 – significantly better than the +3.3% expected – and far better than the +0.4% recorded in Q2.

    Chinese Industrial Production also beat expectations in September (+6.3% YoY vs +4.8% exp)

    However, Chinese Retail Sales disappointed in September (+2.5% YoY vs +3.0% YoY exp), as did Fixed Asset Investment (+5.9% YoU vs +6.0% exp) as Property Investment continued to plunge (-8.0% YoY).

    Finally, the Surveyed Jobless Rate rose to 54.5% in September (youth unemployment ticked lower in the month, which is interesting given the increase in broader unemployment. Perhaps there are seasonal issues at play such as the new academic year).

    And all of this in the face of major rolling lockdowns as Zero-COVID policies remain in place.

    Additionally, in dollar terms, China imports and exports were better than expected:

    • China Sept. Exports Rise 5.7% Y/Y in Dollar Terms; Est. 4.0%

    • China Sept. Imports Rise 0.3% Y/Y in Dollar Terms; Est. 0.0%

    Meanwhile real estate blues persist. New-home prices in 70 cities, excluding state-subsidized housing, dropped 0.28% last month from August as September residential property sales tumbled 15.3% YoY.

    Offshore Yuan is falling on the news, despite yet another strong RMB Fix…

    The data (and the Yuan slide) comes after significant changes at the top in China, which were not necessarily good for those hoping for a market-friendly government that’s keen on opening to the world.

    Tyler Durden
    Sun, 10/23/2022 – 22:30

  • Lawyers Prepare To Sue Any State That Requires COVID-19 Vaccination To Attend School
    Lawyers Prepare To Sue Any State That Requires COVID-19 Vaccination To Attend School

    Authored by Zachary Stieber via The Epoch Times,

    Any state that requires COVID-19 vaccination to attend school will face a lawsuit, lawyers said this week.

    The Informed Consent Action Network (ICAN), run by TV host Del Bigtree, has pledged to finance up to 50 lawsuits, Aaron Siri, who frequently represents the group, said.

    “ICAN has told us it will financially support a challenge against any state. So, if all 50 states require it to attend school, ICAN will support challenging the mandate in every single one of those states,” Siri told The Epoch Times.

    The process would require finding parents or others who want to challenge any mandate that arises, but the funding and legal representation for such suits are in place.

    The pledge comes after the Centers for Disease Control and Prevention’s (CDC) advisory panel on Oct. 20 recommended adding COVID-19 vaccines to the child and adolescent immunization schedules.

    The CDC still has to accept the recommendation, but is expected to do so given its stance on vaccines throughout the pandemic. The agency did not respond to a request for comment.

    Some states require most vaccines on the immunization schedules for school and daycare attendance, including Virginia, though none require annual influenza vaccines for school attendance, according to Immunize.org.

    Some governors and gubernatorial hopefuls have vowed to block COVID-19 vaccine mandates for children, including the governors of Florida, Colorado, Tennessee, and Virginia.

    Other states are expected to mandate the vaccines, including California.

    Authorities there were preparing to require the vaccines for schoolchildren but have delayed the statewide mandate until at least July 2023. Some local governments started to mandate the shots, but at least one mandate was blocked due to a legal challenge—from Siri.

    The updated CDC schedules won’t take effect until 2023, and Siri expects any mandates would not take effect until the start of the 2023–2024 school year.

    But the mandates would be announced well before they take effect, to give parents time to vaccinate their children.

    Siri declined to speak about the basis for any challenges.

    “I don’t discuss litigation strategy for potential matters,” he said.

    The basis for the San Diego case was separation of powers. Plaintiffs said the mandate, which lacked religious exemptions, violated state law. Only the state legislature can impose such mandates, San Diego Superior Court Judge John Meyer ruled.

    “In a long-awaited victory by those seeking to retain the right to informed consent and medical decision-making free from coercion, the Court found that it was ‘compelled’ to invalidate the mandate as the school district had no authority to implement or enforce such a requirement,” Siri wrote on his blog at the time. “The basis for this decision, that school boards in California do not have the authority to require a COVID-19 vaccine, would apply to all school boards across California that are seeking to mandate a COVID-19 vaccine.”

    Tyler Durden
    Sun, 10/23/2022 – 22:00

  • Soaring AmEx Bad Loan Provisions Confirm Rot Spreading To Upper-Income Consumers
    Soaring AmEx Bad Loan Provisions Confirm Rot Spreading To Upper-Income Consumers

    Investors may have been ok with banks reporting a jump in bad loan provisions, but when it comes to credit card companies, they are in full-blown “Death Con 3” mode.

    On Friday, American Express – which traditionally targets the upper classes of US society – tumbled the most in four months after the credit card processing giant set aside much more for bad loans than analysts expected, suggesting the fastest ever surge in interest rates is adversely impacting customers’ ability to pay their bills.

    Provisions for souring loans were $778 million in the quarter, worse than the $573 million analysts in a Bloomberg survey were expecting, and the most since Q2 2022 when the US economy was still in lockdown due to covid. The move should probably not have come as a surprise after AmEx warned investors for months that charge-offs would rise as consumers begin borrowing more in the wake of the pandemic. The net write-off rate jumped to 1.1% from 0.8% a year ago.

    “They’re just reverting to somewhat higher levels, exactly as we would have expected,” Chief Financial Officer Jeff Campbell said in an interview.

    The unexpected surge in bad loans came even as the company reported another quarter of year-over-year spending growth and strong credit performance, not to mention an impressive 24% increase in year-over-year revenue growth: the net write-off rate on card-member loans was unchanged from the second quarter, and the rate of card-member loan payments 30-plus-days past due was up to 0.9% from 0.7%. They remain better than many other card-lenders’ metrics, even at big banks that also tend toward an affluent customer base.

    There was more good news: while additional provisions crimped profits, earnings per share still topped estimates. AmEx said it added a record number of Platinum customers in the third quarter, pushing revenue up 24% to an all-time high and prompting executives to boost their profit forecast. The credit-card giant said it now expects per-share profit will be above the $9.25 to $9.65 range it previously expected.

    AmEx also said spending on travel – which generates more lucrative transactions – jumped 57% during the third quarter. But overall volume on the firm’s network increased 19% to $394.4 billion, missing the $401.7 billion average estimate.

    According to the company, Millennial and Gen Z-aged consumers were more than 60% of new proprietary card acquisitions in the quarter. It said that without giving them the option of using revolving debt, that group may have started out with a competitor’s card before later turning to a higher-fee, higher-reward Amex charge card. And these are good customers: Millennial and Gen-Z U.S. consumer spending grew nearly 40% year-over-year in the third quarter, almost twice the rate of Gen X and more than triple the rate of baby boomers.

    For now, AmEx and its rivals are benefiting from historically high prices. That’s because the firm takes a slice of the purchase price each time a consumer uses one of its cards at checkout. But investors are concerned that the Federal Reserve’s efforts to raise interest rates and tamp down inflation may spark a recession and lead to higher card losses even as overall card volumes crater.

    So far though, as the WSJ notes, credit is the dog that has not yet barked, especially for higher-income consumers. But when even the premium spender-targeting AmEx warns that the dam is starting to crack, not even the NBER will be able to avoid the reality of US recession.

    Tyler Durden
    Sun, 10/23/2022 – 21:33

  • Taibbi: Who Blew Up The Nord Stream Pipelines? "Russia, Russia, Russia!"
    Taibbi: Who Blew Up The Nord Stream Pipelines? “Russia, Russia, Russia!”

    Authored by Matt Taibbi via TK News,

    About a month ago, on September 26th, explosions rocked the undersea “Nord Stream” natural gas pipelines connecting Russia to Germany, sending boiling methane rushing to the surface in masses big enough to be seen from space.

    We’ve all seen the video of Joe Biden promising last February, “There will no longer be a Nord Stream 2” and “We will bring an end to it.”

    The history of America’s bellicose threats with regard to Nord Stream were far more expansive than just a clip or two.

    Stopping Nord Stream was a central goal of American foreign policy for nearly a decade, with politicians from both parties pounding the table to stop it, and all that history was disappeared the moment the blasts took place.

    We can’t say yet who blew up the pipelines.

    Matt Orfalea’s video captures three troubling things we already know about the Nord Stream blasts:

    TK News subscribers can read more here…

    Tyler Durden
    Sun, 10/23/2022 – 21:00

  • The Recession In The Productive Sector Is Here
    The Recession In The Productive Sector Is Here

    Authored by Daniel Lacalle via The Mises Institute,

    Governments and central banks have become the lender of first resort instead of the last resort, and this is immensely dangerous. Global debt soars, inflation creeps in, and many of the so-called supply chain disruptions are the result of zombification after years of subsidizing low productivity and penalizing high productivity with increased taxes.

    There are many reasons why nations should not “spend now and deal with the consequences later.”

    • First, the spending is made by politicians that will not be held accountable for the malinvestment and unwise outlay decisions. Furthermore, the cost will always be paid by taxpayers and businesses. Think about the irony of promoting an “Inflation Reduction Act” that means spending more and monetizing more debt. But it is even more ironic to launch an “inflation reduction act” after creating massive inflation with multitrillion-dollar stimulus plans and central bank balance sheet expansion. Government presents itself as the solution to the problems it creates and passes the bill twice to taxpayers.

    • Second, governments are extremely bad at picking winners but even worse at picking losers. Policy nudging, subsidies, and grants are often aimed at obsolete or politically favored sectors which in turn leads to the rise in zombie companies. Government spending to “save” businesses tends to support those who are already highly indebted and with relevant challenges to pay their debts. This is bad, but picking losers is even worse. The world would not have a food and energy crisis because of a disruption from countries that mean less than 10 percent of supply if regulation and laws would not have placed enormous burdens on investment in farming, energy, and trade in general.

    • Third, the negative impact outweighs the positive. I remember a conversation with Judy Shelton in which she mentioned in 2021 how the US economy would be stronger if the stimulus plan had not been implemented. She was right. The enormous spending plans have created an unsurmountable structural deficit, as many programs are consolidated and increased, and the negative impact on growth, inflation, and real wages only a year and a half later are undeniable.

    It is undeniable that economies come out of every crisis with higher debt, lower growth, weaker real wage growth and poorer job creation. Yet, somehow, people think that the next time will be different. They said the same about 2020. And it was different. You had your cheque and paid for it multiple times over with higher inflation and more taxes.

    Critics may say that this is easy to say in a recovery, but how do we explain to citizens that governments should do nothing? Herein lies another of the tricks from interventionists. We have grown accustomed to the idea that if the government does no spend massively in a crisis, then it is doing “nothing.” Enormous demand-side policies are essential even when the problem has nothing to do with demand. Even worse, a trillion-dollar plan must be followed by a two trillion one or it will seem too small, no matter what the problem of the outcome is.

    Policies should not be judged by their intentions, as Milton Friedman said, but by their results. And when the results are so poor as the ones we have witnessed for almost two decades, we must warn about this constant decision to spend more.

    Why is it so dangerous to use central banks and governments as the lender and solution of first resort? Because their main resource to implement those policies is you. Your wealth. Expropriation of wealth is the other side of the “social policy” coin. Taxes and inflation, or both. Some readers might think it is a clever idea to expropriate the wealth of the rich to support the economy, but by now they should know that it is a lie. When you give extraordinary powers to a government based on the idea that stealing from the rich is valid, you are giving power to politicians to steal from you as well. And they do. There is no single example of massive government spending plans financed with higher taxes on the rich that did not end meaning higher taxes for all or more inflation, the tax on the poor.

    When you read “spend now, deal with the consequences later” what you are reading is give me your wallet because you will deal with the credit card balance later.

    The next time you read the dreaded sentence that titles this article, remember: there is nothing that the government gives “for free” that you do not pay one way or the other.

    Tyler Durden
    Sun, 10/23/2022 – 20:35

  • "There Is Too Much Debt In The World, So They Must Inflate It Away, Which They Will. That's The Only Thing You Need To Know"
    “There Is Too Much Debt In The World, So They Must Inflate It Away, Which They Will. That’s The Only Thing You Need To Know”

    By Eric Peters, CIO of One River Asset Management

    “Investors are beginning to come to terms with the fact that many things they believed to be true are myths,” said Sasquatch, his already enormous market footprint having deepened markedly post-pandemic. “They assumed the 60/40 portfolio was robust, and sometimes it is, but other times it is not,” he said, winding our way through the streets of London, crooked, cracked cobblestones in his footsteps. “They assumed inflation would remain low forever, expectations too. That TIPS hedge inflation. Tech outperforms. It turns out these things are not always true.”

    “Real estate, it turns out, is not always a hedge for inflation. Nor is gold. And before this cycle is over, investors will discover things they believed to be true about infrastructure, private equity, and a variety of illiquid investments are also just assumptions,” continued Sasquatch, CEO of one of the world’s largest investment firms, his returns surging. “The portfolio adjustments required are dramatic, and clients need help solving such problems, so it’s unsurprising that our solutions business, like yours, is seeing strong inflows.”  

    “Well it’s obvious isn’t it,” he asked, answering rhetorically, dismissive of my question, almost irritated, which made me laugh. We’d spent a couple hours together and had finally gotten onto markets. “Well, isn’t it?” he repeated, louder. I’d asked what he thinks is the most important thing to focus on. He’s one of the greatest CIOs of our generation, and keeps his macro trades liquid, his risk management tight. “There is too much debt in the world, so they must inflate it away, which they can do. They will. That’s the only thing you need to know.”  

    “Well, we have gotten the inflation we last discussed,” said the Viking, leading tactical asset allocation for one of the mighty Scandinavian pools of assets. I had last visited pre-pandemic, when we had agreed that whenever the next recession arrived, it would spark an aggressive fiscal stimulus, and catapult us into a new inflationary regime. “But the firms that believed their commercial real estate investments would insulate them from this, have not done too well with that I think,” he continued, a beautiful turn of Swedish understatement.

    “If you look at listed commercial real estate companies here on our stock exchange – which is overall down 35% – you find that these names are down 60-80%,” said the same Viking. “Still, you must also consider that inflation has risen by 10% which is a real loss, and the kronor is down 20% against the dollar too.” Stockholm itself was as magnificent as ever, cold but clear, leaves turning. But invisible, its highly leveraged financial architecture sagged, groaned, like everywhere. “And we have not yet seen the private markets marked lower really.”

    “We are 200% funded,” said the chief risk officer for one of the largest private pension plans. “What does that mean?” I asked. “We have twice as many assets as liabilities,” he said, patiently. “Ah, apologies. I am just used to US pensions which in some cases are just 40% funded. I haven’t ever heard of 200%. How are you so well-funded?” I asked. “Good investing, I think, perhaps some good luck too,” he said, smiling. “And so you are well-positioned for the coming distressed selling, by your poorly funded and leveraged peers?” I asked. He smiled.

    “How do we invest for this new environment?” asked a CIO in Stockholm. “I don’t yet know what you currently own, so that’s hard to answer,” I said. “But in general, I think we should all re-underwrite what has worked for the past couple decades of low inflation, low interest rates, financialization, mean-reversion, leverage, globalization, and peace. Ask how such strategies will perform as these dynamics reverse. Ask how your strategies will fare in a long period of financial repression, where central banks inflate away government debt.”

    “Re-underwriting is hard, because we are all anchored to what has been, and the future will look very different,” I continued. “To capitalize on new opportunities and insulate yourself from risks, you’ll need to be quite open-minded. My all-in commitment to digital assets reflects this embrace of change. And systematic trend-following strategies are a highly effective way to capitalize on quantum change in traditional markets. That change has only just started. We combine trend-following with volatility trading. These were unloved strategies for the past decade. I think strategies that struggled then will now work well for years. And vice versa.”

    Tyler Durden
    Sun, 10/23/2022 – 20:10

  • NY Judge Declares 'Vote By Mail' Law Unconstitutional
    NY Judge Declares ‘Vote By Mail’ Law Unconstitutional

    The way New York counts ballots was thrown into chaos on Friday after a judge ruled that several of the state’s recent voting reforms are unconstitutional.

    State Supreme Court Justice Dianne Freestone sided with Republicans in a lawsuit brought in late September, which argued against a law which allows people to vote absentee if they fear contracting a disease like Covid-19. Freestone also ruled that the new process for “canvassing,” or ensuring that absentee ballots are inspected and prepared for counting – violates candidates’ rights in several ways, including by making it more difficult to raise a legal challenge when there are questions over a ballot’s validity.

    “The framers of the Constitution did not intend to grant (and did not grant) the Legislature carte blanche to enact legislation over absentee voting,” she wrote.

    That said, Friday’s 28-page ruling fell just short of invalidating hundreds of thousands of absentee ballots already issued to New York voters, which the Republicans asked the judge to do.

    For now, the ruling means local election officials will have to soon pause the inspection of absentee ballots, which were being processed on a rolling basis prior to Election Day for the first time this year. The Democrat-led state Legislature approved the new process in a 2021 law meant to expedite the state’s notoriously slow procedures for counting mail-in ballots.

    It also means the more than 427,000 New York voters — including more than 187,000 in New York City — who have already requested and received their absentee ballots will still be able to cast their ballots for the Nov. 8 election, regardless of whether they elected to receive mail-in ballots due to fears of spreading illness. Currently, 108,000 New Yorkers have completed and returned their absentee ballots. -Gothamist

    Democratic official immediately responded with a notice that they would appeal the decision.

    According to Freestone, the Democrat-controlled Legislature “appears poised to continue the expanded absentee voting provisions of New York State Election Law … in an Orwellian perpetual state of health emergency and cloaked in the veneer of ‘voter enfranchisement.'”

    The ruling was a blow to the State Board of Elections, with Freestone arguing that there are “uncounted reasons for this Court to second-guess the wisdom of the Legislature.”

    The decision could hurt Gov. Kathy Huchul (D) who has been losing ground to GOP challenger Lee Zeldin in recent polls.

    “The (state) constitution has been on our side and we will continue to fight to uphold the will of the voters and to ensure honest elections in New York,” said plaintiff Nick Langworthy, the state GOP Chairman.

    “Just like their illegal Hochulmander and their non-citizen voting scheme, Democrats’ attempt to rig our elections was slapped down by the courts,” he continued, adding “When I took over as chairman of the New York GOP, I promised to usher in a new, fighting era that took on Democrats’ brazen lawlessness and this victory is another win for election integrity.”

    Another plaintiff, Conservative Party Chairman Gerald Kassar, said, “This decision helps uphold the integrity of the electoral process, a major victory for New York voters and the rule of law.”

    “Absentee-ballot voters have had the right to amend their votes on Election Day for decades, and cynical attempts by Gov. Hochul and the Democrat Party to strip them of those rights were wrong,” he added.

    Last year, state voters rejected a proposed constitutional amendment that would have allowed no-excuse absentee voting in New York.

    But lawmakers subsequently enacted a measure that allowed people to vote by mail if they feared catching COVID-19 by voting in person. That expansion of absentee voting is set to expire at the end of this year. -NY Post

    On Friday, a BOE spokesperson said “Our office is still reviewing the ruling and its impact on the upcoming election.”

    Tyler Durden
    Sun, 10/23/2022 – 19:45

  • Former SAC Portfolio Manager Breaks Down His Trading Day Routine
    Former SAC Portfolio Manager Breaks Down His Trading Day Routine

    In a time of daily market chaos, former SAC PM and founder of DataTrek Research Nick Colas shares a review of his daily market-watching routine. The 3 key events are the open, the trading session itself, and the close. Each has its own dynamics, and collectively they are a conversation between markets and traders/investors. As Colas notes, “even the longest-term “buy and holder” can benefit from a bit of daily market awareness. The year, after all, is 220 trading days strung together. Even if most of them mean nothing to long-run returns, there is always a reason the critical days turn out the way they do.”

    * * *

    “Nicky … Let’s hold hands and watch the open.”

    That odd invitation came from a veteran salesperson just after I started my first sell-side analyst job at the old First Boston in the fall of 1991. He was dead serious. I was, well, confused. Not wanting to offend one of the firm’s top producers, I acceded. Thankfully, the rest of his row on the trading desk joined hands as well. We all stood in line, watching the screens as US markets opened at 9:30am.

    As each symbol came to life, the group cheered or groaned. I was still confused.

    “What’s so important about the open?” I asked. The salesperson, seemingly happy to teach a rookie, responded “It’s the first tick of the day … We are watching our clients’ biggest positions. Once everything opens, we know if they will be in a good mood when we call them to pitch new ideas.”

    I thought this was overly simplistic until, many years later, I started managing a trading book myself. Then I learned that, in fact, not only the open matters a lot. Every trader knows that three things happen every day: stocks open, they trade, and they close. The dynamics of each slice of the day are quite different, and there is money/knowledge to be made/gained in each of them.

    Basically, I think of the trading day as a conversation between the market and investors/traders. There is a beginning, middle, and end of that interaction. It can be a happy interaction, or confusing, or just downright nasty. And every day brings a new conversation based on new information and refreshed market expectations.

    Here are some of the key datapoints I look at every day going into the open, then through the session, and finally at the close:

    8:00 am – 9:30 am

    • The first thing I look at when I wake up is US equity index futures. I also glance at them before I go to bed, and the difference between the two can be instructive in terms of market sentiment when the cash market finally opens.

    • Then I move on to overseas stock and non-equity markets: is anything really breaking down/up? The latter category includes currencies, gold, oil, and European sovereign bonds (mostly the German bund). I don’t really bother to track virtual currency prices, but plenty of smart traders I know do monitor them, especially on Sundays before equity index futures open at 6pm.

    • If there is any pre-open economic news, I look to see how markets respond as those datapoints are released.

    • Watching to see how US Big Tech is trading pre-open is also helpful, since these names make up almost a quarter of the S&P 500. For example, this morning I was very curious to see how Tesla was trading after its earnings call. Specifically, I wanted to see if it would break or hold its 1-year low of $205/share.

    What I am looking for is consistency and, separately, any new 52-week highs and lows. For example, if US Treasury yields are making new highs and stock futures are up, that’s an internal inconsistency that makes me suspicious of any pop at the open. The same idea goes for non-US currencies just now given how relentlessly weak they have been all year.

    9:30am – 4:00 pm

    • Lately I have been watching how the VIX trades intraday. If stocks are selling off and the VIX gets to 32 – 33, I start looking for a reversal higher. If we are not at a +32 VIX, I tend to not trust any intraday rallies.

    • I also look at the 5-day intraday S&P 500 chart throughout the session. This is especially important just now, as many traders are looking for a bounce in US equities. They will want to see a consistent uptrend to hold their courage.

    • I also keep tabs on 2- and 10-year Treasuries and Fed Funds Futures via the CME FedWatch tool throughout the day, as well as intraday US equity sector performance.

    • This may just be an old trader’s superstition, but I tend to discount any large moves between 11:00 am and 2:00 pm unless there is a clear catalyst that explains them.

    • The last 40 minutes of the day matter a lot. This is when human and algorithmic traders start evaluating how much they have left of the day’s buy/sell orders and if/how to get them done by the close.

    4:00pm and after

    • My primary focus is on whether the close is higher or lower than the open as an indicator of how the day really went. If we opened up 2 percent but close only up 0.5 pct, that’s a bad day from a market psychology perspective. If we opened down 2 percent and ended the day up 0.1 pct, that is a very good day. We could use some of those days right now, but they have been thin on the ground.

    • There is an old saying that “retail investors open the market, but institutions close it”. The data we look at suggests that is true, and it provides some context for the previous point. It is more important to overall market direction that institutions be net buyers at the close rather than retail bid up stocks at the open.

    • I finish the day by looking at how any important stocks with market-moving news traded after hours.

    If you are a buy and hold investor, you might rightly ask “why do I need to pay attention to daily moves?”. The short answer is that you don’t. The longer reply is that, in my view, it makes you a better steward of your and (if applicable) your clients’ capital. Over the years I have found that the ability to weather volatility is directly correlated to knowledge about the fundamental drivers of asset prices. A calendar year is 220 consecutive trading days. Even if daily volatility makes most of them irrelevant to annual returns it is still helpful to keep tabs on the issues moving asset prices.

    I will close out with a somewhat related story, this time from my B-school days at the University of Chicago. On the very first day of Corporate Finance/Investments class, the professor announced a pop quiz by unveiling a chalkboard with 10 questions. Each was simple: where did the S&P, 10-year Treasury, yen/$, and other major markets close the prior day. When he collected all our answer sheets and looked at them, he let out a long sigh. They were mostly blank.

    Then he said “Every answer to these questions is in the Wall Street Journal almost all of you have folded up on your desks. If you can’t be bothered to know them, I’m not sure it’s worth my time to teach you anything.” His point, in case it needs clarification, is that keeping close tabs on asset price movements across a wide range of markets is the prerequisite for being able to contextualize future returns.

    I have never forgotten that lesson and, combined with all the years I have spent staring at screens, they all deeply inform everything we write for you each day. Both devils and angels are in the details.

    Tyler Durden
    Sun, 10/23/2022 – 19:20

  • Watch: Pelosi Admits Democrats Need To 'Change The Subject' From Inflation
    Watch: Pelosi Admits Democrats Need To ‘Change The Subject’ From Inflation

    While inflation and the economy are polling as the top concerns among American voters, House Speaker Nancy Pelosi says Democrats need to “change the subject.”

    While appearing on CBS’ “Face the Nation” on Sunday, Pelosi said: “When I hear people talk about inflation… we have to change that subject. Inflation is a global phenomenon,” adding “Face the Nation” with Margaret Brennan. “The EU, the European Union, the UK, the British, have higher inflation rate than we do here… The fight is not about inflation. It’s about the cost of living.“

    So – should we also ignore murders, rapes and home invasions because other countries have it worse?

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    “If you look at what we [Democrats] have done, to bring down the cost of prescription drugs, to bring down the cost of- of energy and the rest in our legislation, you will see that that has been opposed every step of the way by the Republicans, and they have no plan for lowering the cost of living or helping with inflation,” Pelosi continued.

    Tell us more about how Democrats have brought down the cost of energy, Nancy.

    Tyler Durden
    Sun, 10/23/2022 – 18:55

  • Dems' Senate Worries Mount As Arizona Race Now A Dead Heat
    Dems’ Senate Worries Mount As Arizona Race Now A Dead Heat

    Though it was once widely projected as a Democratic Party “hold,” the Arizona Senate seat occupied by Mark Kelly is now in serious jeopardy, as the latest polls show him in a virtual tie with GOP challenger Blake Masters.  

    In early September, Kelly led the RealClearPolitics poll average by 6 points. Now, despite being outspent by Democrats– and abandoned by Mitch McConnell’s super PAC — Masters is within just 2.5 points. 

    However, given pollsters’ well-established tendency to undercount GOP support, the race is likely even tighter than that. In the 2020 election, the RealClearPolitics average ended up overstating Biden’s support in Arizona by 3.7%.

    Applying that adjustment puts Masters ahead by aggregate 1.2%. Note, however, that 2020 Arizona Senate polls were even farther off the mark, overstating Democratic strength by 6.5%. 

    Blake Masters (left) and Mark Kelly (AP Photo/Ross D. Franklin)

    The polling trend has some Democratic political operatives sounding anonymous alarms:  

    “We believe this is a race that’s within a point in either direction, and there’s still a good chance that we would lose,” a person close to the Kelly campaign tells Politico. “And it’s important people understand that.”

    As observed in other tight Senate races — like Nevada’s, where another Democratic-held seat is in great danger of flipping — previously undecided Arizona voters are swinging toward the Republican down the stretch. That’s especially true of a particular demographic, reports Politico: 

    One of the biggest shifts seen since this summer is older voters moving to Masters, said Chuck Coughlin, CEO of HighGround. Just after the Aug. 2 primary — a bitter Republican contest — voters 65 and older “were all over the map,” Coughlin said. In the firm’s most recent poll, many of those voters were committed to the GOP, which is consistent with historic precedent.

    Over the same period, former NASA astronaut Kelly’s lead among women has been slashed in half, from 20 to 10 points. Men favor Masters by 10. 

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    The strength of feisty Republican gubernatorial candidate Kari Lake may also provide a tailwind for Masters. “Between Lake’s rise in popularity and the woeful economic news lately, Blake is seeing his best chance to win just as voting is under way,” Arizona GOP strategist Barrett Marson tells The Wall Street Journal. 

    Surging prices are weighing on Democratic candidates everywhere, and perhaps especially so in Arizona: Phoenix had the country’s highest inflation rate in September.  

    The Masters comeback is happening despite his being outspent by a two-to-one factor since the start of October. As his chances of victory become more apparent, though, Republican spending is now rising sharply. Over the last week, the GOP bought $3.2 million in ads compared to $2.7 million for the Democrats. 

    Back when his prospects looked dim, Senate Majority Leader Mitch McConnell’s Senate Leadership Fund super PAC cancelled $18 million of planned ads in Arizona. However, PACs associated with Donald Trump and with billionaire Peter Thiel have picked up some of the slack. Masters, a venture capitalist, was previously chief operating officer of Thiel’s investment firm and president of the Thiel Foundation.   

    The difference in the candidates’ own campaign fundraising is jarring: Incumbent Kelly has a seven-fold lead, having raised more than $73 million, compared to under $10 million raised by Masters. 

    Despite that, Democrats find themselves with a vulnerable new front in their defense of their 50-seat-plus-the-vice-president hold on the Senate. As Democratic consultant Roy Herrera tells Politico, “There’s a very narrow path to victory for Democrats in Arizona.” It’s getting narrower by the day. 

    Tyler Durden
    Sun, 10/23/2022 – 18:05

  • How Bernanke Broke The World
    How Bernanke Broke The World

    Authored by Porter Stansberry  via Porter & Company,

    • THE BIGGEST BUBBLE IN HISTORY DEFLATES

    • YOUR STANDARD OF LIVING IS GOING TO FALL IN HALF

    Soon, you’ll wake up to hear reports on CNBC and Twitter about ATM machines not working across the country.

    JPMorgan Chase CEO Jamie Dimon will appear on CNBC, to explain that for the good of the country, his bank and all the other banks in the country are buying long-dated Treasury bonds. And, to protect America, it’s important that we all take a pause and stop withdrawing cash from the system, which means a “temporary” shutdown of other banking operations for a week or two.

    It will happen. It’s unavoidable.

    A couple of interesting facts…

    The price of U.S. Treasury bonds is collapsing. Since the end of July, the 10-year Treasury rate has risen sharply, from a yield of 2.65% to over 4.3% now. There haven’t been bigger losses in the U.S. Treasury bond market, EVER.

    [ZH: The 1-year drawdown of US Equity and Treasury Market Cap is $14 Trillion, the largest draw that we have ever seen in absolute terms…]

    Signs of inflation are fading, and the American economy is obviously heading into a severe recession.

    But rather than stabilizing – which is what usually happens – the selloff in longer-dated U.S. Treasury securities is intensifying, and liquidity is at its lowest levels since March 2020.

    That suggests that the market doesn’t trust the dollar anymore. And that means the entire system is at risk.

    Payback’s A Witch

    The sell-off in long-dated Treasuries isn’t because of last year’s inflation. It’s because the market knows that the U.S. Treasury cannot possibly afford a real rate of interest on its massive $31 trillion in debt.

    Think about it: this year’s increase in Social Security benefits payments is 8.7%. At even half that rate of inflation, a 2% real yield on a 10-year U.S. Treasury bond would be well above 6%. If the U.S. government has to pay anything like that rate of interest to roll over its debts (average duration is 5 years) in the coming years, it is already bankrupt.

    There are $24 trillion worth of publicly traded U.S. Treasury securities. At 6% interest, that’s $1.4 trillion a year in payments. That’s roughly 40% of total federal tax receipts.

    This same kind of panic struck last month in the long-dated bonds of Great Britain. Now, along with big declines in long-dated U.S. sovereign bonds, the Japanese yen is falling apart, and the Swiss National Bank is suddenly accessing currency swap loan facilities from the Federal Reserve.

    Most worryingly, liquidity is disappearing in the U.S. Treasury market, the most liquid financial market in the world. Analysts at Bank of America wrote yesterday that “the [U.S. Treasury] market is fragile and potentially one shock away from functioning challenges.” That’s broker-speak for “we’re in uncharted territory here.”

    We are on the cusp of a complete panic in the world’s bond markets. Like we explained last week, a global “Minsky Moment” is looming.

    We think this crisis will be the largest the world has seen since World War II. That brought the end of sterling’s role as the world’s reserve currency. This will end the U.S. dollar’s reign as the world’s reserve currency.

    What’s next is going to be incredibly painful. Most of the developed world is going to see its standard of living decline 30% to 50% over the next 4-6 years. There’s going to be a lot of anger and a lot of violence.

    It’s worth remembering how we got here.

    Lies, Damned Lies, And Printing Presses

    I’m talking about Ben Bernanke. As the Chairman of the Federal Reserve from 2006-2014, he decided in the aftermath of the Global Financial Crisis that the banking system had to be saved, by any means necessary. To finance the massive losses – which were over $10 trillion in the U.S. alone – the world’s central banks began printing money and buying government bonds to finance massive bailouts.

    Like squirrels watching a bank robbery, the members of the Nobel Committee – which recently awarded Bernanke the prize in economics – saw everything that happened and knew nothing about what it meant.

    Printing money doesn’t cure economic problems: it simply skews who pays for them.

    Printing trillions to paper over the financial system’s losses moved the egregious errors of Bank of America, Bear Stearns, Lehman Brothers, Goldman Sachs, AIG, Fannie Mae and Freddie Mac, General Electric, General Motors and others from their balance sheets, onto the balance sheet of the U.S. Treasury and the Federal Reserve.

    Morally these actions are repugnant – much like requiring that taxpayers finance hundreds of billions’ worth of second-rate college educations for 10 million lazy, underachieving students – but on a vastly bigger scale.

    The real problem isn’t financial. Printing money changes societies by giving the government virtually unlimited amounts of power. That warps the ambitions of politicians and gives socialists unlimited budgets. People soon believe every problem can be solved by the government and the printing press. Trade-offs are no longer required. Costs are no longer relevant. In this kind of environment, no problem is too big to solve through politics and the central bank. And if there isn’t a crisis, then one will soon be invented.

    And, sure enough, as soon as the U.S. central bank began to sell assets and return to “normal” policies in 2018 and 2019, a new, even bigger crisis was “found.”

    A novel coronavirus. Never mind that coronaviruses appear all the time and that most people will get and survive the flu a half dozen times in their lives… this time the world went completely nuts.

    Everything was shut down for two years – except politics. Trillions were spent on vaccines – vaccines that don’t prevent you from getting Covid or from transmitting Covid. It was definitely a government vaccine: it cost trillions, everyone was forced to use it, and it didn’t work.

    Nothing else worked during the Covid lockdown either. Kids don’t learn at home. Employees don’t work at home. Flimsy surgical masks don’t prevent you from contracting or spreading Covid – they don’t work, but they were required too. Fauci wore two masks, everywhere. He received four different shots of the “vaccine.” Guess who got Covid anyway?

    Worst of all, the government spent unlimited sums of money on things like the ridiculous “paycheck protection program,” which might as well have been called “Fraud on a Federal Scale For You.”

    The lie that we could print over the mortgage losses led directly to the lie that wearing a paper mask can stop a virus. Or that a vaccine created in a few weeks and tested only on a handful of people could stop a coronavirus that constantly mutates. With a printing press, there’s no problem that appears too big for the government to handle.

    But, much like the “vaccine” and the paper masks, the printing press is just a lie too.

    Altogether, the world’s central banks have printed over $25 trillion over the last 12 years.

    In the United States, the printing was equal to more than 30% of our GDP. In the Eurozone, the printing was twice as large – over 60% of GDP. In Japan, the printing has been equal to over 100% of GDP.

    You can think of these figures as being the size of the mirage we’ve been living in.

    Reality looms.

    Time to Opt-Out of “Money” Entirely

    Our advice? Do everything you can to avoid holding the currency or the bonds of bankrupt western nations that have been trying to print their way to prosperity. And most importantly, do not let the current rally in the U.S. dollar fool you.

    Yes, it’s the basis of the current monetary standard and, as such, in a crisis it is where all the banks will hide. It could continue to strengthen for several more weeks or months. But it has no more legitimacy than the euro or the yen. And it is only a matter of time – maybe only hours – before it will begin printing again, trying to keep the system from coming apart at the seams. Maybe it will work – but only after the value of the dollar (and the rest of the paper money) has fallen by 50% or more.

    What will survive this crisis? Energy. Bitcoin. Land. Timber. Critical metals, like copper. High-quality, capital efficient businesses that aren’t in debt.

    What will fail? Anything that has to refinance debt in the next 5-7 years.

    Tyler Durden
    Sun, 10/23/2022 – 17:40

  • Trump Vows To 'Take Back Our Magnificent White House' In 2024
    Trump Vows To ‘Take Back Our Magnificent White House’ In 2024

    Former President Donald Trump told a packed crowd of supporters on Saturday night that he’ll ‘probably’ have to run again in 2024.

    “In order to make our country successful, safe, and glorious again, I will probably have to do it again,” Trump told the crowd in Robson, Texas.

    He then said “In 2024, most importantly, we are going to take back our magnificent White House…“

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    Trump spent part of the evening comparing his record to the first two years of Joe Biden, suggesting multiple times that Democrats have no plan or competence, Just the News reports.

    “We have people who don’t know what the hell they’re doing,” said the 45th president.

    “They’re against oil, God, and guns, and they say they’re going to do well in Texas. I don’t think so.”

    Tyler Durden
    Sun, 10/23/2022 – 17:15

  • Morgan Stanley Warns Banks Facing "Capital Crunch With Liquidity Squeeze On Top"
    Morgan Stanley Warns Banks Facing “Capital Crunch With Liquidity Squeeze On Top”

    By Vishwanath Tirupattur, Betsy L. Graseck, Morgan Stanley strategist, as excepted from Sunday Start

    After 2Q bank earnings, we wrote about the regulatory capital challenges facing US banks (particularly the large caps) and the implications for risk markets, especially fixed income. Using insights from Betsy Graseck, our banks and consumer finance equity analyst, we noted that banks would need to keep dividends flat, eliminate buybacks, and reduce risk-weighted assets (RWAs) to generate a capital ratio above their required minimums, while making tough choices in their lending books. For the three largest banks (JPMorgan Chase & Co, Bank of America, and Citigroup), it meant lowering their RWAs by more than US$150 billion in aggregate by year end to maintain a 100bp management buffer on top of their regulatory capital minimums. We expected different reactions to RWA pressures across the banks, but in aggregate we looked for lower credit formation, reduced market liquidity and continued pressure on spreads for capital-intensive assets.

    After banks reported 3Q earnings this week, we take a fresh look at bank capital, the banks’ strategies to address these challenges, and their effect on fixed income markets. The good news is that the three largest banks have made notable progress on the RWA front, reducing their RWAs by about $90 billion. With these reductions and other factors such as strong net income, Bank of America has met its RWA reduction needs, JPMorgan Chase & Co and Citigroup have completed two-thirds and one-third, respectively, to maintain a 100bp capital buffer. While JPM management has suggested that it might only run with a 50bp buffer, we view that as thin and see it easily increasing to historical 100bp levels if macroeconomic and FX volatility persist.

    The progress in RWA reduction is not without costs. The Federal Reserve’s H.8 data show a notable deceleration in loan growth across banks in aggregate – the Q/Q change fell from US$454 billion in 2Q to $240 billion in 3Q. The deceleration at the largest three banks was notably greater, and their share of the overall loan market – auto, credit card, HELOC, CRE, residential mortgage and C&I loans combined – dropped, mainly as a result of RWA reductions. In the most recent Senior Loan Officer survey, every question on lending conditions flipped to tightening, further evidence of how US banks are approaching their lending books.

    What about market liquidity in secondary markets?

    Amid the forced selling dynamic in US corporate credit on the back of the volatility in the UK markets, the issue has received much attention. Condensing liquidity to a single measure is hard. Bid-offer spreads in credit are one measure of liquidity. Even though secondary markets in corporate credit have been largely well behaved, bid-offer spreads for credit have widened from the lows of 2021, suggesting deteriorating market liquidity. In our view, RWA pressures on dealer balance sheets have contributed to this widening.

    The deterioration of market liquidity is by no means limited to corporate credit markets. The effects of RWA reduction are more pronounced in securitized product markets, with banks reducing their footprint in trading and their portfolio assets with higher RWAs. Banks have traditionally been major buyers in their portfolios of conventional agency MBS and AAA tranches of securitized products such as CLOs, both of which carry a 20% risk weight. Agency MBS, which are backed by the US government, have virtually no credit risk. Senior tranches of securitized products like CLOs are structured to be credit-risk remote and their structural resilience has been tested over multiple default cycles. Banks are not big buyers of corporate bonds.

    Comparing the moves in corporate credit spreads with agency MBS and CLO AAAs illustrates their relative dependency on bank buying. As shown in Exhibit 1, spreads on agency MBS and CLO AAAs currently sit at or near the wides of their post-Covid ranges, while corporate credit spreads are around the middle of the range. Spreads have widened meaningfully in products that need bank sponsorship – in our view, a direct consequence of RWA reductions.

    What does this mean for investors? First, there is more wood to chop on the RWA front, which means the deceleration in loan growth will likely continue in 4Q. Second, market turbulence (e.g., the recent volatility in UK markets) in one market could magnify the moves in other markets. Thus, low liquidity will likely remain a headwind to the smooth functioning of markets. Third, the incrementally greater widening in certain spread products thanks to bank buyers stepping away could create an opportunity for investors that do not face the same capital pressures. The fundamentals of these instruments have not changed but market valuations are cheaper for reasons that are not grounded in fundamentals.

    Tyler Durden
    Sun, 10/23/2022 – 16:50

  • Russia Warns Of 'Dirty Bomb' False Flag Plot In Flurry Of Rare Calls To Western Leaders
    Russia Warns Of ‘Dirty Bomb’ False Flag Plot In Flurry Of Rare Calls To Western Leaders

    Update(1645ET): A major new and sensational charge of a Ukrainian false flag plot in the making issued by Russia’s defense chief has set off a string of tit-for-tat accusations and statements Sunday.

    Russian Defense Minister Sergei Shoigu claimed in rare phone calls that included his counterparts from the United States, Britain, France, and Turkey that Ukrainian forces are preparing a “provocation” with a radioactive device. A Kremlin statement cited that he conveyed a warning over “possible Ukrainian provocations involving a ‘dirty bomb'”.

    Shoigu’s office said in follow-up that he conveyed the warning to all the above-named countries’ defense chiefs. As for his conversation with Secretary of Defense Lloyd Austin, it was the second phone call in merely three days. The Pentagon in the hours after said Austin told Shoigu he “rejected any pretext for Russian escalation” – which strongly suggests the US perceives that Moscow is about to heighten attacks on Ukrainian cities further:

    Russian authorities repeatedly have made allegations that Ukraine could detonate a dirty bomb in a false flag attack and blame it on Moscow. Ukrainian authorities, in turn, have accused the Kremlin of hatching such a plan.

    The Kremlin is further charging that this low-intensity nuclear provocation is being prepared with the help of Great Britain; however, the Western allies have said no evidence whatsoever was presented in the phone calls alongside the accusations.

    The UK defense ministry said in its statement following Shoigu’s phone call with Secretary Ben Wallace that the Russian side “alleged that Ukraine was planning actions facilitated by Western countries, including the UK, to escalate the conflict in Ukraine.”

    “The Defense Secretary refuted these claims and cautioned that such allegations should not be used as a pretext for greater escalation,” the ministry said.

    Russia is saying that such a ‘dirty bomb’ detonation, which would spread radioactive waste and potentially contaminate large urban areas, would then be blamed on Moscow in order to justify greater Western intervention.

    Ukraine, for its part, blasted what the presidency’s office called an “absolute and quite predictable absurdity” and blatant “lie”. France too agreed with Ukraine’s assessment, and a statement from the French Foreign Ministry has ominously warned that the crisis is “trending towards uncontrollable escalation.” But Macron on Sunday admitted that “peace is possible” – yet it depends on when the Ukrainians “decide it”.

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    Meanwhile, Zelensky’s own rhetoric urging Western military intervention has escalated as well, all of which strongly suggests the war will soon grow hotter.

    * * *

    earlier

    Now much of Western Ukraine, which lies far away from the front lines of fighting with Russia in the east, is without power due to fresh weekend airstrikes across the country. 

    Ukrainian President Volodymyr Zelensky in a Saturday night address said new “massive” strikes targeted Dnipropetrovsk, Khmelnytsky, Kirovohrad, Mykolaiv, Odessa, Rivne, Volyn and Zaporizhia regions.

    “We continue eliminating the aftermath of today’s terrorist attacks on our infrastructure,” Zelensky said. “The geography of this new massive strike is very wide.”

    Thermal power plant on fire following Russian strike, via Reuters.

    The past days have already seen power outages in Kyiv, with energy grid authorities warning of rolling blackouts, and urging residents to take power-saving measures such as the avoidance of running large appliances. 

    On Saturday the national power utility operator Ukrenergo said that damage from the latest round of Russian strikes set a new record. The Saturday air offensive by Russia was bigger than an initial major wave of strikes from earlier this month:

    Over 1.4 million Ukrainian households have lost electricity after a morning of repeated Russian air raids, Ukraine President Volodymyr Zelenskyy’s office says.

    The Ukrainian General Staff reported that 40 cruise missiles and 16 allegedly Iranian-made drones hit Ukraine throughout the day.

    Oleksandr Kharchenko, a Ukrainian energy official, said in an interview with US media that national infrastructure vital for the people is facing “really huge trouble”.

    “When you don’t have electricity in a city, it means you have no water, you have no supply of gas, you have nothing,” Kharchenko said. Days prior to the stepped-up Saturday assault the government said one-third of all power stations had been hit or damaged in Russian strikes. 

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    Most new damage to energy has been recorded in the country’s west, south and center, with some hospitals since reporting they are running on backup generators. Reserves of oxygen and fresh water are also being tapped by hospitals. 

    Ukrenegro has on Sunday introduced phased blackouts to “avoid accidents”, per The Guardian: 

    The blackouts began at 11.13am local time (09.30am BST), with households in Kyiv divided into three groups that will be “disconnected for a certain period of time”, DTEK said.

    It added that the blackouts should last “no more than four hours” but may be longer “due to the scale of damage to the power supply system”.

    According to the latest estimate of the damage reported in Reuters, “Russia has hit at least half of Ukraine’s thermal generation capacity and caused billions of dollars of damage in attacks since Oct. 10, but not all stricken power units have stopped working completely, Ukraine’s energy minister said on Friday.”

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    Further, “Herman Halushchenko told Reuters in an interview that 30-40% of overall national power infrastructure had been hit in attacks that he depicted as intended to destroy Ukraine’s energy system — a goal that he said had not been achieved.”

    Tyler Durden
    Sun, 10/23/2022 – 16:45

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