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Watch: Bill Gates Says It's OK For Him To Use Private Jets Because He's "The Solution" To Climate Change

Watch: Bill Gates Says It's OK For Him To Use Private Jets Because He's "The Solution" To Climate Change

Authored by Steve Watson via Summit News,

In a cringe inducing interview with a BBC reporter, Bill Gates argued that it’s perfectly fine for him to fly around the world on private jets because he’s doing much more than anyone else to combat climate change.

Gates claimed that because he continues to “spend billions of dollars” on climate change activism, his carbon footprint isn’t an issue.

“Should I stay at home and not come to Kenya and learn about farming and malaria?” Gates said in the interview with Amol Rajan.

“I’m comfortable with the idea that not only am I not part of the problem by paying for the offsets, but also through the billions that my Breakthrough Energy Group is spending, that I’m part of the solution,” Gates added.


NEW: A BBC reporter asked Bill Gates directly why his climate activism should be taken seriously, as he continues to fly private all over the world:

Gates tried to assure the reporter that, despite his private jet usage, he is not part of the problem, he’s part of the solution.

— Will Hild (@WillHild) February 7, 2023

Most recently, Gates flew around Australia on board his $70 million dollar luxury private jet lecturing people about climate change.

Bill Gates Flies Around Australia on $70 Million Dollar Private Jet Lecturing People About Climate Change

Gates, who has declared that the energy crisis is a good thing, owns no fewer than FOUR private jets at a combined cost of $194 million dollars.

study carried out by Linnaeus University economics professor Stefan Gössling found that Gates flew more than 213,000 miles on 59 private jet flights in 2017 alone.

Gates emitted an estimated 1,760 tons of carbon dioxide emissions, over a hundred times more than the emissions per capita in the United States, according to data from the World Bank.

Elsewhere during the carefully constructed interview, Gates said he was surprised that he was targeted by ‘conspiracy theorists’ for pushing vaccines during the pandemic.

Bill Gates new interview with the BBC recovering his image over “Conspiracy Theories.” Let’s just ignore the Epstein stuff altogether. Btw, how can he be “accused” of profiteering when that’s exactly what happened?#BillGates #COVID19 #conspiracy #epstien

— Ash Kaira (@ashkairaa) February 3, 2023

Gates again repeated a talking point about it being more important to mass vaccinate humanity than to travel to Mars.

Bill Gates Would Rather Pay For Vaccines Than Travel To Mars

"It's actually quite expensive to go to Mars. You can buy measles vaccines and save lives for $1,000 (£814) per life saved," he told the BBC. "And so [that] just kind of grounds you, as in - don't go to Mars."

— 🔥⭐️Edwin⭐️🔥 (@Edwin07011) February 6, 2023

While the BBC interview was set up to look like Gates was being challenged or grilled, he wasn’t asked about being pally with deceased elitist pedophile Jeffrey Epstein.

Video: Bill Gates Again Acts Weird When Asked Directly About Relationship With Jeffrey Epstein

*  *  *

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Tyler Durden Wed, 02/08/2023 - 15:40

Shrinking Money Supply Undercuts "Soft Landing" Narrative

Shrinking Money Supply Undercuts "Soft Landing" Narrative

Authored by Michael Maharrey via,

The better-than-expected non-farm payroll report for January along with the smaller interest rate hike delivered by the Federal Reserve at its February meeting increased optimism that the central bank can bring price inflation back to 2% without tanking the economy. But the shrinking money supply undercuts this soft landing narrative.

While Fed rate hikes and balance sheet reductions aren’t likely big enough to permanently take down inflation, they are shrinking the money supply and that generally means a recession is looming.

Money supply growth went negative for the first time in 28 years in November and fell again in December.

The money supply grew at an unprecedented rate during the pandemic. As Mises Institute senior editor Ryan McMaken pointed out in a recent article, between April 2020 and April 2021, money supply growth in the United States often climbed above 35% year over year. That was well above the “high” levels experienced from 2009 to 2013.

The last time year-over-year money supply growth went negative was in November 1994. Negative money supply growth continued for the next 15 months.

McMaken explains why this matters.

Money supply growth can often be a helpful measure of economic activity and an indicator of coming recessions. During periods of economic boom, money supply tends to grow quickly as commercial banks make more loans. Recessions, on the other hand, tend to be preceded by slowing rates of money supply growth. However, money supply growth tends to begin growing again before the onset of recession.”

McMaken points out that a declining money supply appears to be connected to yield-curve inversion, another recession signal.

For example, the 3s/10s yield spread often heads toward zero as money supply growth moves in the same direction. This was especially clear from 1999 through 2000, from 2004 to 2006, and during 2018 and 2019, and beginning in 2022. This is not surprising because trends in money supply growth have long appeared to be connected to the shape of the yield curve. As Bob Murphy notes in his book Understanding Money Mechanics, a sustained decline in TMS growth often reflects spikes in short-term yields, which can fuel a flattening or inverting yield curve.”

McMaken emphasized that it is not necessary for money supply growth to turn negative in order to trigger recession, defaults, and other economic disruptions.

With recent decades marked by the Greenspan put, financial repression, and other forms of easy money, the Federal Reserve has inflated a number of bubbles and zombie enterprises that now rely on nearly constant infusions of new money to stay afloat. For many of these bubble industries, all that is necessary for a crisis is a slowing in money supply growth, brought on by rising interest rates or a confidence crisis. 

Numerous indicators now point toward recession along with the falling money supply and the inverted yield curve. The Leading Economic Index is in recession territory. Real wages have fallen for twenty-one months. Homebuilder confidence fell every month of 2022. The Philadelphia Fed’s manufacturing index has been negative since September. Home price growth has been cut in half. The fact that the money supply is actually shrinking serves as just one more indicator that the so-called soft landing promised by the Federal Reserve is unlikely to ever be a reality. 

A SchiffGold analyst made a similar observation, saying, “The Fed may be confident in their rate hikes and the resiliency of the economy, but they are playing with serious fire. They have put the entire economy at risk for a major event as the liquidity has dried up extremely fast.”

The collapse in Money Supply has been sudden and epic. The risk this poses for the market at large cannot be understated. The Fed seems to be oblivious to the potential carnage it could cause. In 2018, it took interest rates of around 2.5% to bring the market to its knees. Rates are now almost double that. How much longer can things go on without a black swan event?”

Tyler Durden Wed, 02/08/2023 - 15:02

We've Got Great News: Wholesale Egg Prices "Collapse"

We've Got Great News: Wholesale Egg Prices "Collapse"

The soaring cost of eggs at grocery stores has been a major pain point for consumers. There's a glimmer of hope that retail egg prices per dozen might have peaked as wholesale prices tumble. 

New data from Urner Barry, a market research firm that tracks wholesale food prices, shows its Urner Barry Egg Index has plunged 57% since peaking at $4.65 per dozen on Dec. 19. Wholesale prices are now at $2.01. 

"Prices have collapsed, "Angel Rubio, senior analyst at Urner Barry, told CNBC. He added:

"That's a big, big adjustment downward."

The plunge in wholesale prices won't immediately reflect in retail prices though prices have likely peaked. This is wonderful news for breakfast lovers.

Recall that the cause of soaring egg prices was the worst avian flu outbreak ever that devastated domestic egg-laying bird populations. Tens of millions of chickens were culled last year to prevent the spreading of the deadly disease. 

In December, retail prices of a dozen large Grade A eggs cost around $4.25, up a mindboggling 200% since Aug. 2020, according to monthly Bureau of Labor Statistics data.

Rubio noted that it takes one month for retail prices to reflect wholesale price action, which means consumers might begin seeing some relief in February. He said prices might go back up ahead of Easter, which falls on Apr. 9 this year. 

The plunge in wholesale egg prices is a promising sign that peak food inflation might have already arrived. Tyson Foods, the largest US meat company, reported Monday that falling meat prices and waning demand led to a profit decline. 

Keep in mind the UN's global food price index peaked one year ago. 

This might be the best news for US consumers who've drained their savings as they battle 21 months of negative real wage growth. 

Tyler Durden Wed, 02/08/2023 - 14:47

A Bigger Picture Look At US Housing Affordability (Or Just How Over-Priced Are American Homes)

A Bigger Picture Look At US Housing Affordability (Or Just How Over-Priced Are American Homes)

Via Political Calculations blog,

What can you discover when you chart median new home sale prices against median household income?

Here's the visualized beginning of the answer to that question, using annual data from 1967 through 2021 and monthly data from December 2000 through December 2022!

What you first see is there are some long running and often linear relationships between these two variables.

And what you find is that when you get to 2000, bubbles begin inflating that break down those relationships.

We've highlighted that region with the red-dashed lines in the chart, so let's zoom in on it in the next chart.

The second chart answers the question of what the relationship between median new home sale prices and household income would have looked like had 2020's coronavirus pandemic not messed up the U.S. Census Bureau's collection of income data for 2019!

Going back to the first chart, you also get the answer to another question: How inflated are house prices today compared to how they were prices before the housing bubbles?

As of December 2022, At just over $450,000, the trailing twelve month average median new home sale price costs around 50% more than what they would had the relationships that existed before 2000 continued to the present day.

Going by most observers, there have been two major housing bubbles in the 21st Century. The inflation phase for the first housing bubble had its origins in August 2000 and peaked in March 2007. Its deflation phase then lasted until December 2009. What we would consider the second housing bubble took off in July 2012. This more recent bubble has had several phases, but using the measure of median new home sale prices, has only begun to deflate in the last several months. That development is only starting to show up in the twelve month moving averages we've presented in these charts.

These bigger pictures provide a little different, but very useful way to look at the underlying data for assessing how affordable housing is within the U.S. We're looking forward to seeing how they evolve during the course of this year.

Tyler Durden Wed, 02/08/2023 - 14:25

Russia Warns Of "Consequences For Entire World" If UK Sends Jets To Ukraine

Russia Warns Of "Consequences For Entire World" If UK Sends Jets To Ukraine

Update (1410ET): Given the UK government clearly said it is "exploring" the possibility of sending fighter aircraft to Ukraine, namely its Typhoon jets, upon a visit by Ukraine's Zelensky to London, Russia has responded fiercely. Prime Minister Sunak earlier explained

“The first step in being able to provide advanced aircrafts is to have soldiers or aviators that are capable of using them. That is a process that takes some time. We’ve started that process today,” Sunak said at a news conference with Ukrainian President Volodymyr Zelenskyy, after announcing Britain would train Ukrainian pilots.

Nothing is off the table and our leadership on this issue is something that we all collectively should be very proud of.”

Russia’s embassy to UK quickly warned of “military and political consequences for the European continent and the entire world” in response.

As for the US, the Pentagon on the same day said it still has "nothing to announce" regarding potential deliveries of fighter jets to Ukraine. Of course, this is all something we heard before regarding tanks, which recently has been approved.

UK to explore possibility of sending fighter jets to #Ukraine, PM Rishi Sunak's Downing Street office said on Wednesday, adding it would only be a "long-term" solution. But #Russia pledged a "response" should that happen. #UkraineRussiaWar️

— Stephen Mutoro (@smutoro) February 8, 2023

* * *

Ukrainian President Volodymyr Zelensky showed up in the United Kingdom on Wednesday, making a surprise visit to the leadership of a country which has been one of Ukraine's biggest backers since the start of the Russian invasion.

It is only Zelensky's second known trip out of Ukraine since the war began, the first being his appearance before US Congress in December. He met with Prime Minister Rishi Sunak at 10 Downing St., just before Sunak announced that Britain will train more Ukrainian troops. Zelensky in a special address to parliament made it no secret what he was there to push for...

During his speech at the UK Parliament President Zelensky gave its speaker a helmet of a 🇺🇦 war pilot with an inscription: "We have freedom, give us wings to protect it."

...and then left thanking the MPs "in advance for powerful English planes."

A bit cryptic, yet inspiring!

— UkraineWorld (@ukraine_world) February 8, 2023

Sunak mentioned training fighter jet pilots, in what appears anticipation of NATO allies' future approval of providing Western jets. It remains that there's still significant European opposition to providing jets, but Sunak in a press release said the training is to "ensure pilots are able to fly sophisticated NATO-standard fighter jets in the future."

Sunak further pledged missiles and weapons systems with "longer range capabilities and vowed Wednesday, "We will continue to support Ukraine to ensure a decisive military victory on the battlefield this year."

"The United Kingdom was one of the first to come to Ukraine's aid," Zelensky said upon arriving in Britain. "Today I'm in London to personally thank the British people for their support and Prime Minister Rishi Sunak for his leadership."

In his special guest address to parliament, Zelensky hailed the UK's unwavering support of Kiev, saying Britain is "marching with us to the most important victory of our lifetime."

And of course, he took the opportunity to renew his appeal for Western combat jets. "Combat aircraft for Ukraine," he said. "Wings for freedom."

"Two years ago, I left Parliament thanking you for the delicious English tea. Today I will leave Parliament thanking all of you in advance for powerful English planes," said Volodymyr Zelensky in an address to MPs. --Axios

Zelensky also was greeted by King Charles III during a visit Buckingham Palace. Apparently allowed an extremely rare exception when it comes to royal protocol, Zelensky was not in suit and tie, but kept his olive green sweatshirt. 

Via Sky News

Later in the day, reporters pressed 10 Downing St on whether this means the UK government has made the decision to send British fighter jets to Ukraine, to which the response was that Britain is "not looking to send Typhoon jets to Ukraine right now."

A Sunak spokesperson further said that any package involving jets would be part of a "long-terms solution" - which suggests this would be done in cooperation with other Western allies, who aren't yet on the same page.

Tyler Durden Wed, 02/08/2023 - 14:10

World's Largest Container Shipper Warns Of Demand Slowdown Amid "Significant Inventory Adjustment"

World's Largest Container Shipper Warns Of Demand Slowdown Amid "Significant Inventory Adjustment"

The world has just a few major shipping companies, and one of the ones we track is A.P. Moller-Maersk A/S, which expects global containerized shipping volumes to slide by as much as 2.5% this year amid "muted" economic growth worldwide. 

Global shipping markets are normalizing after two years of surging demand that catapulted freight rates to the stratosphere because of supply chain snarls. Some spot rates for containers on major shipping routes across the Pacific and from Asia to Europe are down as much as 90%. 

"We've been seeing demand falling from both the US and Europe, and it's a pretty sharp correction," Maersk Chief Executive Vincent Clerc told Bloomberg in an interview. 

Earlier this week, the National Retail Federation published a report that forecasts US container imports would fall by 30% in February from a year earlier. This would be the weakest month since May 2020. NRF expects containerized volumes to remain weak through May. 

Maersk, which handles about one-sixth of all the world's containers, has provided an ominous outlook for the global economy. The World Bank and IMF have all recently warned about recession threats. 

Last month, IMF Managing Director Kristalina Georgieva warned the US might avoid a recession, but the situation looks bleaker in Europe, which has been hit hard by the war in Ukraine, she said. "Half of the European Union will be in recession," she warned. 

And even the world's largest investment manager, BlackRock, recently said a global recession is right around the corner. It added:

"Recession is foretold as central banks race to try to tame inflation. It's the opposite of past recessions," the BlackRock team wrote In their 2023 Global Outlook.

And the days of overconsumption of goods, brought on primarily by fiscal stimulus, are over, and one of the main reasons global shipping lanes are slowing. When Maersk speaks, it's probably worth a listen. 

Tyler Durden Wed, 02/08/2023 - 14:02

Peter Schiff: Inflation Is Going To Get Much Worse

Peter Schiff: Inflation Is Going To Get Much Worse


The mainstream seems more and more convinced that the Federal Reserve can bring inflation back down to 2% without creating any significant problems in the economy. After the February FOMC meeting, Fed chair Jerome Powell even suggested that the economy would avoid dipping into a recession. But in an interview on Fox Business with Liz Claman, Peter Schiff argued that the Fed won’t beat inflation or get a soft landing. He said the looming economic slowdown will fuel the inflation fire.

Natalliance global Fixed income head Andrew Brenner also appeared with Peter and Liz. He took the mainstream view that the Fed is winding down the inflation fight. In fact, he said this would likely be the last rate increase. Brenner said Powell doesn’t need to raise rates any more. “The markets will do the rest for him and the markets do not believe he is going to tighten further.”

Peter said it could be the last rate hike, but not because inflation is coming down.

Inflation is going to get much worse.”

Peter said he heard a lot of economic ignorance coming out of Powell’s mouth, especially when it comes to inflation. He noted that Powell said the Fed welcomed “disinflation.”

That disinflation is transitory. Maybe he doesn’t realize that yet, but it is.”

Powell also said inflation is caused by consumer expectations.

He’s wrong. Expectations don’t cause inflation. Neither do wages and prices. He said he was worried that maybe a wage-price spiral could develop and that’s why the Fed wants to make sure it doesn’t happen. The wage-price spiral was a fiction invented by Keynesians. Inflation is caused by the government. It is caused by the Federal Reserve printing money and then Congress spending money. That’s it. And spending is going up.”

In fact, Powell encouraged Congress to raise the debt ceiling so it can spend even more money.

Ultimately, the Fed is going to monetize that debt, and we’ve only seen the beginning of inflation. In fact, Powell said inflation is creating misery for families. It’s the government that is creating that misery — and the Fed — because they’re the ones creating the inflation.”

Peter noted that the Fed has slowed down the pace of interest rate increases. And even if we get a couple more 25-basis point rate hikes, it’s still not nearly enough. He also said you have to look at the impact higher rates have had on consumer behavior.

Which is pretty much nothing. Credit card debt is at an all-time high. Savings are at an all-time low. So, the higher interest rates have not stopped spending and encouraged saving, which is exactly what has to happen to bring down inflation.”

Meanwhile, the government continues to spend billions of dollars every single month.

Peter said if Powell thinks a slowdown in the economy is going to cool inflation, he’s wrong again.

That’s actually going to fuel the inflation fire. The real risk is that we end up with a financial crisis and a much more severe recession than the Fed recognizes. And then the Fed tries to prop up the economy to try to stimulate, or combat the financial crisis by creating even more inflation.”

Tyler Durden Wed, 02/08/2023 - 13:46

Record Demand For Blockbuster 10Y Auction Sends Yields Tumbling

Record Demand For Blockbuster 10Y Auction Sends Yields Tumbling

After yesterday's horrific 3Y auction printed with some of the ugliest metrics in history, including the biggest tail in at least 7 years, many were incredulous: how is it possible that the mood in the bond market could reverse so fast after a barrage of stellar coupon auctions in January. Some speculated that this was purely due to the auction taking place in the slipstream of Powell's speech which sent yields sharply higher and confused investors in the primary market. As it turns out they were right, because moments ago the Treasury sold $35 billion in 10Y paper as part of refunding week, which was a mirror image of yesterday's catastrophic auction and had some of the strongest metrics in history.

Starting at the top, the high yield printed at 3.613%, which stopped through the When Issued 3.643% by 3bps, which was the second biggest stop through in at least 7 years, and a wild reversal from the record tail hit just two months ago when everyone was selling bonds with the bathwater in December.

While the bid to cover was also a big improvement, coming in at 2.66, up from 2.53 in January and the highest since Feb 22, it was the internals there were truly off the charts: after a series of already elevated Indirect awards in the past years, January's Inidrect takedown soared from 67.0% to 79.5%, which was the highest on record!

And with Directs taking a slightly lower than average 15.2%, vs the six-auction avg of 18.6% and below last month's 17.9%, Dealers were left with a paltry 5.4%, the lowest Dealer award on record!

Needless to say, this was a stupendous, blowout auction, and amid nerves that we could get a repeat of yesterday's horrific 3Y, yields promptly tumbled to session lows across much of the curve with the 10Y plunging as low as 3.63% in kneejerk response, down almost 5bps on the day. Which means that it's another painful day for speculators, because as a reminder, net spec positioning is currently the shorted it has ever been!


Tyler Durden Wed, 02/08/2023 - 13:26

MTG Rips Ex-Twitter Execs New Cloaca As AOC Melts Down With Hysterical Lies

MTG Rips Ex-Twitter Execs New Cloaca As AOC Melts Down With Hysterical Lies

Update (1305ET): Fireworks ensued during today's Congressional grilling of Twitter execs by Republicans on the House Oversight Committee, while AOC had a total meltdown while lying through her teeth.

During one tense exchange, Rep. Marjorie Taylor Greene (R-GA) interrupted an exchange between Rep. Jimmy Gomez (D-CA) and Twitter's former head of Trust and Safety, asking: "Who made you in charge of what’s true and what’s false?"

"You permanently banned my Twitter account but you allowed child porn all over Twitter," she continued.

.@RepMTG to Yoel Roth: "You permanently banned my Twitter account but you allowed child porn all over Twitter."

— Greg Price (@greg_price11) February 8, 2023

MTG: "You can consider your speech canceled during my time, because you canceled mine."

— (@townhallcom) February 8, 2023

Greene was permanently suspended in January 2022 after tweeting VAERS data about Covid-19 vaccine deaths.

Meanwhile, Rep. Alexandria Ocasio-Cortez (D-NY) told outright lies about the Twitter account "Libs of TikTok," stating that Boston Children's Hospital never advertised hysterectomies for children.

AOC says that @libsoftiktok lied about Boston Children's Hospital giving hysterectomys to children.

AOC: "That account is still on the platform isn't it?"

Roth: "Regrettably, yes it is"

— Greg Price (@greg_price11) February 8, 2023

Which they totally did...

The story about Boston Children's Hospital was also not a lie.

Chaya literally posted a video on their YouTube to her Twitter.

— Greg Price (@greg_price11) February 8, 2023

The great irony here is that @AOC is lying. Libs of TikTok has simply reported the facts about what these hospitals have said about their own services. It's all documented. But this is what they do — they use misinformation to smear you as being a source of it.

— Seth Dillon (@SethDillon) February 8, 2023

Important message for @AOC:

— Libs of TikTok (@libsoftiktok) February 8, 2023

She also claimed the NY Post's Hunter Biden laptop story was "alleged," and that the Post should have shared more information about their sourcing for the story (they did).

Rep. @AOC repeatedly refers to @nypost's reporting on Hunter's laptop contents as "alleged," then blames the Post for Twitter censoring them, saying they should have shared more info about their sourcing on this "fake story"

— Tom Elliott (@tomselliott) February 8, 2023

The correlation between AOC's theatrics and her lying is uncanny.

*  *  *

The House Oversight Committee on Wednesday is hearing testimony from three former, top Twitter employees over the company's handling of the Hunter Biden laptop story.

House Oversight Chairman James Comer (R-K), who has launched a broad investigation into the Biden family dealings, is probing the social media giant following revelations from new Twitter owner Elon Musk, who released internal communications from Twitter staff about their censorship efforts.

Twitter, under the leadership of our witnesses today, was a private company the government used to accomplish what it constitutionally cannot: limit the free exercise of speech.@GOPoversight will examine this coordination between the government & Big Tech. @MariaBartiromo

— Rep. James Comer (@RepJamesComer) February 8, 2023


Watch live:

Former FBI official/Twitter counsel Jim Baker can't answer if he talked to the FBI about Hunter's laptop: "I don’t recall speaking to the FBI sitting here today."

— Tom Elliott (@tomselliott) February 8, 2023

In anticipation of today's testimony, White House spokesman Ian Sams blasted the GOP for pulling a "bizarre political stunt."

"This appears to be the latest effort by the House Republican majority’s most extreme MAGA members to question and relitigate the outcome of the 2020 election," he said in a statement, adding "This is not what the American people want their leaders to work on."

"As the president has said and made his focus, the American people expect their leaders to work together in a bipartisan way on the issues that most impact their lives and their families, not attack his family with long-debunked conspiracy theories."

Mr. Biden’s campaign branded the now-authenticated laptop as Russian disinformation, a theory that was peddled by more than 50 former U.S. senior intelligence officials in an open letter to the public.

Rep. Jamie Raskin of Maryland, the top Democrat on the committee, accused Republicans of pursuing “already debunked and hyperpartisan conspiracy theories about President Biden, his family and the so-called deep state.” -Washington Times

The hearing is the first of many focusing on "protecting speech from government interference and social media bias," according to the committee.

"Immediately following the story’s publication, America witnessed a coordinated campaign by social media companies, mainstream news and the intelligence community to suppress and delegitimize the existence of Hunter Biden’s laptop and its contents," Comer will say. "We owe it to the American people to provide answers about this collusion to censor information about Joe Biden’s involvement in his family’s business schemes."

Tyler Durden Wed, 02/08/2023 - 13:12

China's $1.2 Trillion Savings Glut In Focus For Recovery

China's $1.2 Trillion Savings Glut In Focus For Recovery

By Ye Xie, Bloomberg Markets Live reporter and strategist

The exact shape of China’s economic recovery depends on how much consumers pull out of the savings they accumulated during the pandemic (also see "What China Savings Mean For World Consumer Firms").

While the jury’s still out, the pattern of post-lockdown saving rates in developed economies suggests that a spend-it-all approach is unlikely among consumers in China.

With slowing exports and sluggish housing investments, consumer spending is expected to be a key driver of economic growth. China bulls point to a record increase of new bank deposits of 8 trillion yuan ($1.2 trillion) last year as the dry powder that could be unleashed to support spending.

In reality, though, the increase in deposits exaggerates the actual size of precautionary savings. Because of market volatility, households moved money from financial investments, such as wealth management products, into bank deposits. A housing crisis reduced home purchases, leaving money in bank accounts. These funds were set aside for investments purposes and won’t necessarily be drawn upon for buying new cars and jewelry.

The change in the saving rate — how much people save from their annual income — relative to the pre-pandemic trend would be a more reliable measure for “excess savings.”

The saving rate increased to 33% in 2022, from about 30% prior to the pandemic, resulting in extra savings of 3 trillion yuan over the past three years, according to Goldman Sachs’s economists, including Maggie Wei and Hui Shan. It represents about 6% of disposable incomes, a fraction of the US’s 13% and the euro-zone’s 15% at the peak.

Source: Goldman Sachs

Should Chinese consumers spend their excess savings, it would lead to an economic boom. The experience from developed market, however, suggests it’s less likely.

Amid broad reopenings, the saving rate in most developed markets simply returned to pre-pandemic levels — without falling below, according to Goldman’s economists. Consumer behavior in Shanghai and Hubei Providence after the reopening from shutdowns shows a similar pattern.

Source: Goldman Sachs

In addition, JPMorgan’s economist Zhu Haibin and his colleagues pointed out that savings are concentrated among high-income families. In a note published last month, they estimated that the excess savings in urban households were almost 10 times of those in rural areas. The uneven distribution means only a portion of these savings could be tapped.

Consumers reducing the saving rate to pre-pandemic levels alone would be enough to keep the economy humming. Goldman Sachs economist expect consumption to rebound 8.5% this year, assuming consumers won’t touch their extra savings.
It requires a revival of animal spirit for consumers to spending their dry power. After three challenging years, it may be a tall order to ask.

Tyler Durden Wed, 02/08/2023 - 12:45

Nord Stream Sabotage Was CIA, US Navy Covert Op: Seymour Hersh Bombshell Prompts White House Response

Nord Stream Sabotage Was CIA, US Navy Covert Op: Seymour Hersh Bombshell Prompts White House Response

Famed journalist and Pulitzer prize winner Seymour Hersh, who for decades was a star reporter writing for The New York Times and New Yorker, on Wednesday published a new bombshell as his first Substack post, prompting a quick White House response

After conducting his own investigation into who sabotaged the Nord Stream pipelines via a series of underwater blasts on Sept. 26, Hersh has concluded the United States blew up the Russia-to-Germany natural gas pipeline as part of a covert operation under the guise of the BALTOPS 22 NATO exercise.

Famous investigative journalist Seymour Hersh, Image: Institute for Policy Studies

Hersh, relying on unnamed national security sources, describes months of discussions and back-and-forth involving the Biden White House, CIA, and Pentagon. The report says planning was in the works all the way back to December 2021, with a special task force formed under the aegis of US National Security Advisor Jake Sullivan.

"The Navy proposed using a newly commissioned submarine to assault the pipeline directly. The Air Force discussed dropping bombs with delayed fuses that could be set off remotely. The CIA argued that whatever was done, it would have to be covert. Everyone involved understood the stakes," the report, entitled How America Took Out The Nord Stream Pipeline reads.

"The Biden Administration was doing everything possible to avoid leaks as the planning took place late in 2021 and into the first months of 2022," it continues.

As momentum gained to proceed with a covert sabotage attack, "Over the next few weeks, members of the CIA’s working group began to craft a plan for a covert operation that would use deep-sea divers to trigger an explosion along the pipeline," Hersh writes.

But there was significant push back within the intelligence community, but any reservations were overcome in the lead-up and aftermath of the Russian invasion of Ukraine in February 2022. According to the investigative report

Throughout “all of this scheming,” the source said, “some working guys in the CIA and the State Department were saying, ‘Don’t do this. It’s stupid and will be a political nightmare if it comes out.’

Nevertheless, in early 2022, the CIA working group reported back to Sullivan’s interagency group: “We have a way to blow up the pipelines.”

What came next was stunning. On February 7, less than three weeks before the seemingly inevitable Russian invasion of Ukraine, Biden met in his White House office with German Chancellor Olaf Scholz, who, after some wobbling, was now firmly on the American team. At the press briefing that followed, Biden defiantly said, “If Russia invades . . . there will be no longer a Nord Stream 2. We will bring an end to it.”

Twenty days earlier, Undersecretary Nuland had delivered essentially the same message at a State Department briefing, with little press coverage. “I want to be very clear to you today,” she said in response to a question. “If Russia invades Ukraine, one way or another Nord Stream 2 will not move forward.”

Not going to wade into debates over the sourcing and reporting here, but it is without a doubt a bit odd how this whole story quietly went away once it became clear it didn't make any sense as an act of Russian sabotage

— Ishaan Tharoor (@ishaantharoor) February 8, 2023

As for Washington motives in such a risky covert sabotage mission, Hersh writes, "As long as Europe remained dependent on the pipelines for cheap natural gas, Washington was afraid that countries like Germany would be reluctant to supply Ukraine with the money and weapons it needed to defeat Russia."

Biden in February of last year: "There will be no longer a Nord Stream 2, we will bring an end to it."

Norway played a significant logistics and intelligence role in assisting an elite US Navy deep-diving team of divers based out of Panama City to carry out the operation: 

Sometime in March, a few members of the team flew to Norway to meet with the Norwegian Secret Service and Navy. One of the key questions was where exactly in the Baltic Sea was the best place to plant the explosives. Nord Stream 1 and 2, each with two sets of pipelines, were separated much of the way by little more than a mile as they made their run to the port of Greifswald in the far northeast of Germany.

The Norwegian navy was quick to find the right spot, in the shallow waters of the Baltic sea a few miles off Denmark’s Bornholm Island. The pipelines ran more than a mile apart along a seafloor that was only 260 feet deep. That would be well within the range of the divers, who, operating from a Norwegian Alta class mine hunter, would dive with a mixture of oxygen, nitrogen and helium streaming from their tanks, and plant shaped C4 charges on the four pipelines with concrete protective covers. It would be tedious, time consuming and dangerous work, but the waters off Bornholm had another advantage: there were no major tidal currents, which would have made the task of diving much more difficult.

Hersh's sources underscore that the order came directly from President Biden's office:

The C4 attached to the pipelines would be triggered by a sonar buoy dropped by a plane on short notice, but the procedure involved the most advanced signal processing technology. Once in place, the delayed timing devices attached to any of the four pipelines could be accidentally triggered by the complex mix of ocean background noises throughout the heavily trafficked Baltic Sea—from near and distant ships, underwater drilling, seismic events, waves and even sea creatures. To avoid this, the sonar buoy, once in place, would emit a sequence of unique low frequency tonal sounds—much like those emitted by a flute or a piano—that would be recognized by the timing device and, after a pre-set hours of delay, trigger the explosives.

...On September 26, 2022, a Norwegian Navy P8 surveillance plane made a seemingly routine flight and dropped a sonar buoy. The signal spread underwater, initially to Nord Stream 2 and then on to Nord Stream 1. A few hours later, the high-powered C4 explosives were triggered and three of the four pipelines were put out of commission. Within a few minutes, pools of methane gas that remained in the shuttered pipelines could be seen spreading on the water’s surface and the world learned that something irreversible had taken place.

Given that it was Hersh - who broke such well-known stories as the My Lai massacre and Abu Ghraib scandal and has long been known for impeccable insider sources - behind the new bombshell 'whodunnit' report, mainstream media couldn't ignore it this time (in the way MSM ignored Jeffrey Sachs and others).

The mainstream news media is the main source of disinformation today

— Michael Shellenberger (@ShellenbergerMD) February 8, 2023

The allegations were quickly picked up by The Times (UK), Reuters, and others - including Russian state media, prompting the White House to swiftly issue a rebuttal:

The White House said on Wednesday that a blog post by a U.S. investigative journalist alleging the United States was behind explosions of the Nord Stream pipelines "is utterly false and complete fiction."

Russia's Foreign Ministry says the Hersh report reveals new facts that must be answered to, however, with spokeswoman Maria Zakharova stressing, "We have repeatedly stated Russia's position on the involvement of the United States and NATO, noting that they did not hide it, bragging to the whole world about their intention to destroy the civilian infrastructure through which Europe received Russian energy resources."

She added: "We have also regularly underscored the reluctance of Denmark, Germany and Sweden to conduct an open investigation and the opposition to Russia's participation in it. And this is despite the fact that our country has suffered huge costs. Now, the White House should comment on all these facts."

Tyler Durden Wed, 02/08/2023 - 12:32

Elon Musk: "Most Are Oblivious" To The Danger Of World War 3

Elon Musk: "Most Are Oblivious" To The Danger Of World War 3

Authored by Paul Joseph Watson via Summit News,

Tesla founder Elon Musk warned that “most are oblivious to the danger” of World War 3 as the conflict in Ukraine continues to escalate.

The comment was in response to a speech by UN Secretary-General Antonio Guterres to the General Assembly on Monday during which he expressed his fear that humanity was marching toward a “wider war” with its “eyes wide open”.

“Could we please not do WWIII,” asked commentator Luke Rudkowski.

“Most are oblivious to the danger,” responded Musk.

Most are oblivious to the danger

— Elon Musk (@elonmusk) February 6, 2023

Despite Musk providing his SpaceX Starlink satellite internet systems to the Ukrainian government, supporters of prolonging the war have attacked Musk for calling for peace.

Last week, Mikhail Podoliak, an aide to Ukrainian President Vladimir Zelensky, even claimed, without evidence, that Musk was restricting the reach of pro-Ukraine Twitter accounts in order to help spread “Russian propaganda”.

“Maybe a regulator is needed to explain competition rules to the owner?” Podoliak suggested.

The Twitter CEO previously warned that the “relentless escalation” of the conflict in Ukraine was placing the security of the world in jeopardy.

In January, German foreign minister Annalena Baerbock caused consternation after saying “we are fighting a war against Russia.”

This prompted Croatian President Zoran Milanovic to respond by calling the remark “madness” and wishing Germany better luck than with the last war they had with Russia 70 years ago.

As we highlighted last month, the head of the Russian Orthodox Church cautioned that any attempt to “destroy Russia” by “madmen” trying to impose their values will lead to “the end of the world.”

“We pray to the Lord so that he enlightens those madmen and helps them understand that any desire to destroy Russia will mean the end of the world,” said Patriarch Kirill.

Donald Trump recently warned, “We’re on the brink of World War 3,” and in a campaign video last week asserted, “If I were president, the Russia Ukraine war would never have happened … never in a million years.”

“But even now, if I were president, I’d be able to negotiate an end to this horrible and rapidly escalating war within 24 hours,” he added.

President Trump: "We're at the brink of World War 3"

— MAGA War Room (@MAGAIncWarRoom) January 28, 2023

*  *  *

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Tyler Durden Wed, 02/08/2023 - 12:06

Earthquake Death Toll Soars Past 11,000 As US Sanctions On Syria Block Humanitarian Aid

Earthquake Death Toll Soars Past 11,000 As US Sanctions On Syria Block Humanitarian Aid

Health authorities working in Turkey announced Wednesday that the death toll from Monday's 7.8-magnitude earthquake and its aftershocks has soared past 11,000 dead - but more casualties are expected given rescue teams still haven't accessed possibly hundreds or thousands more believed buried under the rubble. 

Additionally, vast swathes of deeply impacted northern Syria still have yet to receive any emergency aid. "Where are the tents, where are food trucks?" one 64-year old woman identified as Melek in Antakya said. She said she'd yet to see any rescue teams in her part of southern Turkey, near Syria. "We survived the earthquake, but we will die here due to hunger or cold here."

An aerial view of collapsed buildings in Hatay, Anadolu Agency

Turkey's president Recep Tayyip Erdoğan vowed that no one will "be left in the streets" during a Wednesday visit a "tent city" in Kahramanmaras. He admitted relief efforts have been slow, but still defended his administration's response.

"The death toll from the huge earthquakes that struck Turkey and Syria has risen to nearly 11,500, as rescuers continued to pull survivors from the freezing rubble and the Turkish president rejected growing criticism of the authorities’ response," The Guardian wrote of his visit to the disaster zone.

The publication suggested that by week's end the number of dead could surpass 20,000. "Experts have predicted the combined tally will rise further, perhaps to more than double, as hundreds of collapsed buildings in many cities have become tombs for people who were asleep when the first quake hit in the early morning," according to The Guardian.

Greek rescuers tried hard to get a young girl out of the ruble alive. They did not manage. Minutes after, they are rescuing her 6 yrs old sister. And they burst into tears. And then applauding. The mystery of life, the power of love. #Turkey, you are not alone! #TurkeyEarthquake

— Makis Mylonas (@MylonasMakis) February 7, 2023

An eyewitness in Hatay told AFP: "They are trapped under the ruins and there is no sign of life. We can’t reach them. We are trying to talk to them, but they are not responding … We are waiting for help. It has been 48 hours now."

Meanwhile, inside Syria not only has Idlib been devastated, but buildings collapsed in Latakia and Aleppo as well, and the quakes were felt as far south as Damascus. But amid talk in the West of putting together an urgent humanitarian response, West-sanctioned Syria is apparently being bypassed and largely forgotten about.

Washington has at the same time shown no interest in living sanctions on Syria for the sake of humanitarian aid getting in at a faster pace.

The New York Times makes it plain: “Syria is not able to receive direct aid from many countries because of sanctions.”

So — unless you’re a monstrous sadist — why not lift the sanctions?

— Aaron Maté (@aaronjmate) February 7, 2023

According to journalists who earlier in the week approached the State Department

State Department spokesman Ned Price said Monday that the US would work with NGOs in the country but wouldn’t engage with the government of Syrian President Bashar al-Assad. He didn’t give any indication that the US would lift sanctions on Syria.

When asked by if the Biden administration was considering lifting sanctions, the State Department referred to Price’s comments about working with NGOs. "In Turkey, we have a partner in the government; in Syria, we have a partner in the form of NGOs on the ground who are providing humanitarian support," Price said.

When pressed on why the US wouldn’t engage with Damascus, Price said it "would be quite ironic, if not even counterproductive, for us to reach out to a government that has brutalized its people over the course of a dozen years now."

Syria has suffered a devastating earthquake; hundreds reported dead. This war-ravaged country is under crippling US sanctions.

In 2019, current senior US official @dstroul bragged that most of Syria is "rubble" and that the US can "hold the line on preventing reconstruction."

— Aaron Maté (@aaronjmate) February 6, 2023

And yet the suffering and devastation seen across southern Turkey is the same just over the border, in Syria. The Biden administration has long confirmed that it is blocking reconstruction of Syria after a decade of war via its sanctions regimen - all the while claiming to be "helping" the "Syrian people". Now their suffering will be compounded after the deadly quakes, and with little relief in sight.

Tyler Durden Wed, 02/08/2023 - 11:45

Alphabet Loses Over $110 Billion Market Cap After AI ChatBot 'Glitch'

Alphabet Loses Over $110 Billion Market Cap After AI ChatBot 'Glitch'

Update (1125ET): Google owner Alphabet  has continued crashing after an underwhelming launch even raised concerns that its new artificial intelligence chatbot Bard may yield inaccurate responses. 

Google was forced to respond after the shares collapsed, saying in a statement that Bard’s response “highlights the importance of a rigorous testing process.”

The company said it will combine external feedback with its own internal testing to ensure Bard’s responses “meet a high bar for quality, safety and groundedness in real-world information.” 

Today's drop has wiped over $110 billion off of Alphabet's market cap...

It's second largest daily market cap decline ever.

As a reminder, Alphabet CEO Sundar Pichai said as he announced the new chatbot this week that "AI is the most profound technology we are working on today."

“The general sentiment is that ChatGPT and the Microsoft Bing announcement have created a narrative that Google’s search business model is under threat,” said Mark Riedl, a professor at the Georgia Institute of Technology.

*  *  *

As we detailed earlier, while every company is rapidly changing its name to XXXX.AI in order to garner some 'fad' multiple expansion, Alphabet shares are showing the downside of some of that over-exuberance.

Reuters reports that Google published an online advertisement in which its much anticipated AI chatbot BARD delivered inaccurate answers.

The tech giant posted a short GIF video of BARD in action via Twitter, describing the chatbot as a "launchpad for curiosity" that would help simplify complex topics.

Here's the ad...

Bard is an experimental conversational AI service, powered by LaMDA. Built using our large language models and drawing on information from the web, it’s a launchpad for curiosity and can help simplify complex topics →

— Google (@Google) February 6, 2023

In the advertisement, BARD is given the prompt:

"What new discoveries from the James Webb Space Telescope (JWST) can I tell my 9-year old about?"

BARD responds with a number of answers, including one suggesting the JWST was used to take the very first pictures of a planet outside the Earth’s solar system, or exoplanets.

This is inaccurate.

The first pictures of exoplanets were taken by the European Southern Observatory’s Very Large Telescope (VLT) in 2004, as confirmed by NASA.

Speaking as someone who imaged an exoplanet 14 years before JWST was launched, it feels like you should find a better example?

— Bruce Macintosh (@bmac_astro) February 8, 2023

This is the first image of an exoplanet, taken with the Very Large Telescope of @ESO, 17 years before JWST was launched. You might want to refine your model (or use another example)

— Leonardo Blanco (@ElLeo_Blanco) February 8, 2023

The falsehood will raise further questions about the accuracy of search engines and of AI-generated answers to humans’ questions.

GOOGL shares have plunged over 6% after this headline hit...

Fears have been raised about inaccuracies generated by artificial intelligence systems which are not easily spotted by humans.


It seems the AI is more A than I for now...

Tyler Durden Wed, 02/08/2023 - 11:32

Tighter Lending Doesn't Bode Well for Soft Landing

Tighter Lending Doesn't Bode Well for Soft Landing

Authored by Simon White, Bloomberg macro strategist,

The outlook for credit is increasingly at odds with the soft(er)-landing scenario that has been gaining credence. Credit markets and retail stocks are among assets that look most vulnerable to downside.

US banks have reported tightening lending standards across the board in the latest Fed Senior Loan Officer Survey released yesterday.

Banks reported tightening their standards on C&I loans to all sizes of firms over the fourth quarter. Many banks also reported tightening loan covenants and collateralization requirements.

This latest survey confirmed the trend that banks want to lend less and borrowers want to borrow less. The chart below shows this will continue, as when banks tighten standards, demand for loans falls.

The survey reported loan-standard tightening in commercial real-estate, residential real-estate and consumer loans, including credit cards. Credit-card lending has surged since the pandemic making up for the shortfall in lower-income households who have likely used up most of their pandemic savings.

The tightening in consumer loans points to continued weakness in retail sales. This leaves the retail sector, one of the best performing this year, looking exposed to correcting lower.

Tyler Durden Wed, 02/08/2023 - 11:26

'Freedom' Vs 'More Government Control': GOP's Alternative Vision For Future Of America

'Freedom' Vs 'More Government Control': GOP's Alternative Vision For Future Of America

Authored by John Haughey via The Epoch Times,

Among reasons why Arkansas Gov. Sarah Huckabee Sanders was selected to deliver the Republican rebuttal to Democrat President Joe Biden’s Feb. 7 State of the Union address was because at 40, she’s the nation’s youngest governor while at 80, Biden’s the oldest president in the history of the United States.

But Sanders in her combative 15-minute response said age is not the only difference between the two. In a searing juxtaposition, she said the vision offered by a “new generation of Republican leadership” of America today and tomorrow is vastly different from that presented by Biden and the Democratic Party.

“The dividing line in America is no longer between right or left. The choice is between normal and crazy,” she said, noting, “Americans want common sense leadership” while in Washington “the Biden administration is doubling down on crazy.”

“Tonight, let us reaffirm our commitment to a timeless American idea: that government exists not to rule the people, but to serve the people. Democrats want to rule us with more government control, but that is not who we are,” she said.

Sanders said she is a vanguard of that “new Republican leadership,” while Biden is “too weak” to stand up to progressives who control the Democratic Party.

“His administration has been completely hijacked by the radical left, by a woke mob who can’t even tell what a woman is,” she said. Biden wants “to rule with more control. That is not who we are. I am for freedom, he is for more control.”

Sanders, elected Arkansas’ first woman governor in November and sworn into office in January, is the daughter of former three-term Arkansas Gov. Mike Huckabee and served as former President Donald Trump’s press secretary for two-and-a-half years.

She said during Trump’s administration, the United States was energy independent, the economy was robust, and the “world was at peace.”

Now, Americans are contending with empty grocery store shelves, high energy prices, rising crime, “children taught to hate one another” because of their race, and a world that appears increasingly spiraling toward war, Sanders said.

“In the last two years, Democrats destroyed it all,” she said.

Offering a Different Vision

Biden’s “weakness puts world order at risk,” Sanders said, claiming he has failed to “stand up to China—a dangerous and unacceptable failure to defend our borders, defend our skies, and defend our people. He is unfit to serve as commander-in-chief.”

She said that Biden has made concessions to progressives who want to “defund the police … while violent criminals roam the streets,” and to “collude with ‘Big Tech’ to strip away our freedom of speech.”

“We now have the worst border crisis in American history,” Sanders said, noting,

“As a Mom, my heart breaks for every parent who has lost a child to addiction” to drugs laced with fentanyl that are on the nation’s streets because “Biden has failed to  secure the border and save American lives.”

She said the “new generation of Republican leadership” will ensure that “a quality education is the civil rights issue of the day” by spearheading an educational reform movement that provides parents with “a real choice” that will “end the cycle of trapping kids in failing schools. We will educate, not indoctrinate.”

Sanders vowed, “Republicans will not surrender this fight. We will do what is right, not what is convenient or politically correct. Under the leadership of Senate Republicans and [House] Speaker McCarthy, we will hold Biden accountable.”

Republicans are being galvanized by a “new generation brimming with passion,” ready to offer “new ideas to solve age-old problems,” and “find a better way forward,” she said. “A new generation of Republican leadership are stepping up, not to be caretakers of the status quo but to be change-makers.”

Sanders said under the GOP’s vision, “America will again be the land of the free and home of the brave.”

The vision offered by the Biden administration is starkly different, she said.

“Today our freedom is under attack. The America we love is under attack. It is not normal. It is crazy and it is wrong,” she said. “Biden and the Democrats have failed you. They know it. You know it. It is time for a change.”

Tyler Durden Wed, 02/08/2023 - 10:48

WTI Slides After Across-The-Board Inventory Builds, Crude Production Hike

WTI Slides After Across-The-Board Inventory Builds, Crude Production Hike

Oil prices extended gains overnight after API reported a surprise crude draw which was supported by growing confidence in demand from China's reopening (as Aramco increased its selling prices for shipments to Asia).

“In the grand scheme, essentially you have contrasting forces of rising inventories and a bullish outlook on demand,” said Daniel Ghali, a commodity strategist at TD Securities.

Additionally, Iran’s liaison to OPEC said on the sidelines of the India Energy Week conference in Bengaluru this morning that oil prices may rise to $100 a barrel in the second half of the year as China’s economy emerges from anti-virus lockdowns

“We have some constraints in the market that could put pressure on prices,” Afshin Javan said. “I think oil prices could go to $100 per barrel.”

So with all eyes on inventories, it appears (given the API prints) that the effects of the nationwide deep freeze have finally rolled out of the data.



Unlike API, the official EIA data showed a bigger than expected crude inventory build (the 7th weekly build in a row) and in fact saw builds across the board (with gasoline stopcks soaring)

Source: Bloomberg

Bloomberg's Lucia Kassia reports that we are entering the thick of the refinery turnaround season in the US. In the past decade, refineries reduced runs to an average of 87.6% of utilization countrywide on a seasonal basis. Two of the biggest fuelmakers, Marathon and Phillips 66, expect to run their refineries at the high-80% and mid-80%, respectively, during the first quarter due to planned maintenance. That points to overall lower utilization rates in the country.

Cushing stocks surged to the highest since July 2021...

Source: Bloomberg

This is the biggest increase in Cushing stocks to start a year ever...

Source: Bloomberg

Total US Crude stocks are at their highest since June 2021...

Source: Bloomberg

Despite a notable rollover in rig counts, US Crude production increased to its highest since April 2020...

Source: Bloomberg

WTI was hovering around $78 ahead of the official data print and slipped lower after the builds...

Finally, we note that Fed Chair Powell reassured investors that the central bank will not turn more hawkish despite strong economic reports.

"Powell stayed away from turning significantly more hawkish after the bumper jobs report last Friday. Meanwhile, demand outlook continues to improve as signalled by Saudi Aramco's price increases, and API also suggested a draw in US crude stocks," Saxo Bank noted.

Supply is also returning to the market, as Bloomberg reported the Ceyhan export terminal in Turkey serving the one-million barrel per day BTC pipeline reopened following Monday's deadly earthquake in the region.

Tyler Durden Wed, 02/08/2023 - 10:38

JPMorgan Says Epstein Accuser's Claims Are "Unsupported"

JPMorgan Says Epstein Accuser's Claims Are "Unsupported"

JPMorgan responded to a Jeffrey Epstein accuser's claim that former executive Jes Staley "personally observed" Epstein's abuse, calling the claim "unsupported" and "conclusory."

On Tuesday night the bank asked a federal judge to dismiss an amended lawsuit filed in January by Epstein victims who say that since Staley witnessed abuse, the bank therefore facilitated and had "direct and actual knowledge of Epstein's sex-trafficking venture," Bloomberg reports.

According to JPMorgan, the unsupported allegation that Staley observed Epstein's abuse couldn't be used to impute knowledge to the bank.

"Actual knowledge of Plaintiff’s battery cannot be established by the unsupported assertion that, at an unspecified time, Staley ‘observed [Plaintiff] in circumstances indicating sexual abuse and trafficking,'" reads the response.

Staley, who is not named as a defendant in the suit, has consistently denied knowledge of Epstein’s abuse. He left JPMorgan in 2013 and was later appointed chief executive officer at Barclays Plc. He stepped down in 2021 following a UK Financial Conduct Authority probe into his ties to Epstein.

The amended complaint alleges that Staley, who was JPMorgan’s head of private banking at the time, frequently visited Epstein’s properties, including his New York townhouse massage room, a “stash house” apartment on Manhattan’s Upper East Side and a US Virgin Islands estate. He met many of Epstein’s trafficking victims and witnessed the financier “sexually grabbing” some of them, the suit claims. -Bloomberg

JPMorgan argues that while Epstein's grabbing was "odious," it doesn't establish that the plaintiff was a victim of sex-trafficking, much less that Staley knew that she was, and that the crime of sex-trafficking only applies to children or adults who are forced or coerced.

"Without that crucial detail, Plaintiff alleges nothing more than that a JPMC employee developed a bond with a wrongdoer customer," reads the filing.

The woman, Jane Doe 1, made the new allegations in an amended complaint in mid-January. In it, she claims that Staley was a frequent visitor to Epstein's properties - including his New York townhouse 'massage room,' a 'stash house' apartment on Manhattan's Upper East Side, and of course, pedo island in the US Virgin Islands.

While hanging out at Epstein's properties, the former JPMorgan exec "personally observed the sexual abuse of young women, including Jane Doe 1," according to the filing.

"As a result of Staley’s direct and actual knowledge of Epstein’s sex-trafficking venture, JP Morgan had direct and actual knowledge of Epstein’s sex-trafficking venture," read the amended complaint.

Also hit with class action suits over Epstein is Deutsche Bank, which became Epstein's primary bank after 2013. The suits claim the banks knowingly benefitted and received things of value while supporting and assisting Epstein's sex-trafficking scheme.

Deutsche Bank has also sought dismissal of the claims. In a late-Tuesday filing, the bank argued that the accuser added "few new factual allegations" within the 60 pages added to her original complaint - calling the additions "conclusory" and "unsupported." The bank also noted that it recently learned from the woman's lawyer that she entered into a settlement with the dead pedophile's estate which included a "broad release" of claims against any entity that ever did business with the financier - meaning, she had waived her claims against Deutsche, the company's lawyers wrote.

Tyler Durden Wed, 02/08/2023 - 10:25

"The Irony Is If Higher Rates Mean Higher Wage Growth, And Higher Inflation"

"The Irony Is If Higher Rates Mean Higher Wage Growth, And Higher Inflation"

By Michael Every of Rabobank


Our Fed watcher Philip Marey has responded to Fed Chair Powell’s chat yesterday with a 50bps upward shift in his Fed Funds call for 2023. Rather than pausing at 5.00% after a 25bps hike next month, Philip now sees the Fed raising rates to 5.50% via an additional two hikes over the year – and he is flagging upside risks that Fed Funds may need to go as high as 6%. (See ‘Long Road Ahead’.) I know markets have the memory of goldfish, and everybody was always right, but 12 months ago that view would have been seen as science fiction.

This forecast revision, clearly sign-posted by Philip in advance, was not driven by Powell’s comments on goods disinflation (though notice the 2.5% m-o-m January surge in US used car prices on one industry measure). Rather it was because the Fed Chair stated the current US labor market dynamic “feels more structural than cyclical,” and his biggest worry is inflation in core services ex-housing as well as possible new exogenous shocks.

“Structural”. There’s a difficult word for markets to deal with. They can cope with the idea that there has been a nasty cyclical shock, because of ‘exogenous events nobody foresaw’, so rates had to go higher; but the idea there might be a permanent change in the economy so rates have to STAY HIGHER, is something nobody is contemplating. Including the Fed. How else do they project inflation coming back down to 2% by 2024, and only a moderate increase in unemployment at the same time? Do structural changes on the endogenous and exogenous fronts simultaneously resolve themselves in 18 months? How?

[ZH: here's how, as we explained last year "3.9 Trillion Reasons Why The Fed Will Raise Its Inflation Target"]

Relatedly, oligopoly specialist @matthewstoller tweets: “If the Fed doesn't continue to tighten financial conditions I worry inflation could re-accelerate. Auto industry giants have gotten used to high mark-ups and are not increasing production to meet demand.” He isn’t alone in that view.

In May 2022, the Boston Fed concluded: “The US economy is at least 50% more concentrated today than it was in 2005… Our findings suggest that the increase in industry concentration over the past two decades could be amplifying the inflationary pressure from current supply-chain disruptions and a tight labour market.” In April 2022, the Economic Policy Institute argued ‘Corporate profits have contributed disproportionately to inflation. How should policymakers respond?’, lobbying for an excess profits tax not rate hikes, by showing contributions to growth in unit prices in the US corporate sector for 1979-2019 being corporate profits (11.4%), non-labour input costs (26.8%), and labour costs (61.8%) vs.  Q4/2020–Q4/2021’s corporate profits (53.9%), non-labour input costs (38.3%), and labour costs (7.9%). In other words, a supply shock and ‘costs-plus’ price increases in a concentrated corporate sector led US prices higher (after loose fiscal policy). Now we might have a structurally tight labour market on top!

That’s as President Biden will reportedly say in his State of the Union address that he is building a “blue-collar America” where “no one is left behind”. (Apart from the white-collar workers who are easily replaced with ChatGPT?) Wage pressures much! On the other hand, Biden’s appointment of Lina Khan at the FCC is seeing a slow, grinding reversal of the Borkian revolution that led to such high levels of corporate concentration – but that will take far longer to take effect, if at all, than a third consecutive ‘blue-collar’ White House.

Indeed, imagine if powerful firms pay out higher interest costs, and higher wages, yet can raise prices to cover them? I think that used to be called a wage-price spiral.

Plus we have endogenous issues encapsulated in China refusing to take a phone call from the Pentagon to discuss balloons, Saudi Arabia to issue non-US dollar debt despite its currency being pegged to it, and Belarus’s president boasting, “The world will soon see new powerful monetary unions with a new reserve currency.” (Again, I don’t see these attempts working, or offering global peace or stability, but that doesn’t mean they won’t try, and that they don’t limit Western central banks’ room for policy manoeuvre.)

But don’t worry: inflation goes back to 2% anyway. Everywhere. Because reasons.

Of course, this is not just a US issue.

For example, yesterday’s other central bank action, where the RBA 25bps rate hike to 3.35% as expected, saw an accompanying statement that further rate increases will be needed in the coming months. In other words, local housing-obsessed analysts saying rates would not go close to 4% were wrong – and they may be even more wrong than that.

Albeit anecdotally, what we are seeing unfold in parts of Australia is that as mortgage rates reset higher, those carrying investment rental properties are not selling off their holdings. Instead, they are raising rents to ensure they feel no pain; and given there is a housing shortage, and less homes will be built as rates rise, renters either have to pay, or go live in the streets.

That might mean a deflationary collapse in demand as more money flows from the bottom, rent-paying strata of society up into the hands of the propertied class – which is the neo-feudal political-economy asset-based policies logically converge towards. (And why Henry George’s ideas about a land value tax are logical, as Martin Wolf argued in the Financial Times recently.) Or it might mean Aussie renters insist that they won’t live like serfs, and need much higher wages - which given the very tight labor market, they can get.

The irony would then be higher rates mean higher wage growth, and then higher inflation.

Of course this is not a forecast. Yet it underlines that if you don’t understand the structure of the political-economy then you can’t accurately forecast ‘just’ the economy. That’s the same argument we made in the geopolitical modelling exercise we just did for the UK and Eurozone regarding balance of payments and balance of power crises.

Quite literally, structure your arguments better if you want to be able to differentiate between economic science fiction and what is now economic science fact, i.e., Fed Funds heading for 5.5%, with a risk of a 6% peak.      

Tyler Durden Wed, 02/08/2023 - 10:05

Tesla Delivers 66,051 China-Made Vehicles In January, Up 18.4% From December

Tesla Delivers 66,051 China-Made Vehicles In January, Up 18.4% From December

After promising preliminary numbers, it now appears final that Tesla deliveries in China continued to buck the larger national trend of sales for January. The American EV manufacturer reported 66,051 China-made cars delivered for the month of January, up 18.4% from December 2022, according to final data from China's Passenger Car Association. 

The data indicates 26,843 vehicles sold in China and 39,208 vehicles exported from China for the month. The spike in delivered vehicles was likely helped by price cuts that Tesla put into place during the end of 2022.  

Tesla's numbers continue to buck a broader trend in China. Recall we reported yesterday that preliminary data showed overall sales of passenger vehicles in China were down 43% from December, at just 1.24 million units. The decline can be attributed to some customers pulling forward demand in order to take advantage of subsidies before the end of the year.  

As we wrote, Tesla is now reportedly planning to increase output at its Shanghai plant - bringing its run rate back toward where it was in September 2022 - in order to continue meeting the demand from price cuts on its best selling models. 

Meanwhile, looking at the broader scope of EV sales in China, preliminary data we wrote about days ago showed domestic names like Nio, Xpeng and Li Auto all recorded monthly and YOY sales declines in January, per Jalopnik

SCMP reported this week: 

The report notes that almost all manufacturers suspended operations and sales during the Lunar New Year holiday, which ran from January 21 to January 27. 

Gao Shen, an independent analyst in Shanghai: “Apparently, Tesla’s huge discounts [on its Model 3 and Model Y vehicles] siphoned off drivers’ buying interest in the Chinese-developed smart EVs. Overall demand for expensive EVs appears to be weak, which could lead to price wars in the premium EV segment this year.”

Tyler Durden Wed, 02/08/2023 - 09:45

Turkish Stock Market Closed For Another Week After Quake Devastation

Turkish Stock Market Closed For Another Week After Quake Devastation

Update (0941ET):

Turkey's stock exchange will lift a trading halt on Feb. 15, according to a statement released by Borsa Istanbul.

Following Monday's devastating quakes, the trading suspension came after a $35 billion wipeout of market value in main equities. 

Meanwhile, in New York, iShares MSCI Turkey Exchange Traded Fund, the largest ETF concentrated on Turkish stocks, is down nearly 6% this morning. 

Turkish stocks can still be traded -- just through US ETFs. 

And somehow, the Turkish lira is magically supported through the worst quake devastation in decades.  

*   *   *  

Turkey's stock exchange halted trading of equities and derivatives Wednesday (for the first time in two decades) after a multi-day selloff wiped tens of billions of dollars from the value of its main equities following Monday's powerful quakes that killed more than 11,000 in the quake-stricken areas of southern Turkey and Syria.

"Our stock exchange has decided to halt trading in equities, futures, and options markets," Borsa Istanbul wrote in a statement Wednesday. There was no timeline on when trading would resume. 

The Borsa Istanbul 100 index plunged by 7.1% in today's trading as traders fear widespread damage to infrastructure, logistical problems, and a partial shutdown of the economy could severely impact economic growth in the months ahead. Since the quake, the leading equity index has lost 16.24%. The index has also tumbled into a bear market after peaking in January. 

The week-to-date loss of 16% puts the index on track for the worst week since October 2008. 

In New York, iShares MSCI Turkey Exchange Traded Fund, the largest ETF concentrated on Turkish stocks, tumbled 5.2% in premarket trading. 

Meanwhile, the Turkish lira was stable against the dollar as its tightly managed by the central bank. 

"At times of catastrophes like this, suspending trading in the stock market is a better decision in order to protect investors," Haydar Acun, managing partner of Marmara Capital in Istanbul, told Bloomberg. 

The latest death toll figures from the NYTimes topped 11,000 in quake-stricken areas of Turkey and Syria. 

Drone shows quake devastation in Turkey

— DE La Roca (@guildo_jose) February 8, 2023

Kahraman Maraş southern Turkey, before and after the #Earthquake

— Asaad Sam Hanna (@AsaadHannaa) February 7, 2023

Rescue crews have so far pulled out more than 8,000 people from collapsed buildings. The quake severely damaged 11,000 buildings -- many of which are multi-family structures. 

Tyler Durden Wed, 02/08/2023 - 09:41

Biden SOTU Post-Mortem: Inflation, Inflation, Inflation, & Tax Hikes

Biden SOTU Post-Mortem: Inflation, Inflation, Inflation, & Tax Hikes

Authored by Mike Shedlock via,

President Biden delivered his State of the Union speech far better than I expected. The problem was content, not delivery.

Please consider the Full transcript of Biden’s 2023 State of the Union Address.

25 Paragraph Synopsis: Inflation, Inflation, Inflation and Tax Hikes 

  1. Now we’re coming back because we came together to pass the Bipartisan Infrastructure Law, the largest investment in infrastructure since President Eisenhower’s Interstate Highway System. Already, we’ve funded over 20,000 projects, including at major airports from Boston to Atlanta to Portland. And we’re just getting started. I sincerely thank my Republican friends who voted for the law.

  2. I promised to be the president for all Americans. We’ll fund your projects.

  3. We’re making sure that every community has access to affordable, high-speed internet. 

  4. Tonight, I’m also announcing new standards to require all construction materials used in federal infrastructure projects to be made in America. American-made lumber, glass, drywall, fiber optic cables.

  5. For example, too many of you lay in bed at night staring at the ceiling, wondering what will happen if your spouse gets cancer, your child gets sick, or if something happens to you. Will you have the money to pay your medical bills? Will you have to sell the house? I get it. 

  6. A record 16 million people are enrolled under the Affordable Care Act. Thanks to the law I signed last year, millions are saving $800 a year on their premiums. But the way that law was written, that benefit expires after 2025. Let’s finish the job, make those savings permanent, and expand coverage to those left off Medicaid.

  7. We’re building 500,000 electric vehicle charging stations installed across the country by tens of thousands of IBEW workers.

  8. And helping families save more than $1,000 a year with tax credits for the purchase of electric vehicles and energy-efficient appliances.

  9. The climate crisis doesn’t care if your state is red or blue. It is an existential threat. We have an obligation to our children and grandchildren to confront it. I’m proud of how America is at last stepping up to the challenge.

  10. I’m a capitalist. But just pay your fair share. And I think a lot of you at home agree with me that our present tax system is simply unfair.

  11. You may have noticed that Big Oil just reported record profits. Last year, they made $200 billion in the midst of a global energy crisis. It’s outrageous. They invested too little of that profit to increase domestic production and keep gas prices down.

  12. Some of my Republican friends want to take the economy hostage unless I agree to their economic plans. All of you at home should know what their plans are.

  13. I’m so sick and tired of companies breaking the law by preventing workers from organizing. Pass the PRO Act because workers have a right to form a union. And let’s guarantee all workers a living wage.

  14. Let’s also make sure working parents can afford to raise a family with sick days, paid family and medical leave, and affordable child care that will enable millions more people to go to work.

  15. Let’s also restore the full Child Tax Credit, which gave tens of millions of parents some breathing room and cut child poverty in half, to the lowest level in history.

  16. If you want America to have the best-educated workforce, let’s finish the job by providing access to pre-school for 3- and 4-year-olds.

  17. Let’s give public school teachers a raise.

  18. And we’re making progress by reducing student debt and increasing Pell Grants for working- and middle-class families.

  19. Let’s finish the job, connect students to career opportunities starting in high school and provide two years of community college, some of the best career training in America, in addition to being a pathway to a four-year degree.

  20. More than 1 million Americans have lost their lives to COVID. We still need to monitor dozens of variants and support new vaccines and treatments. So Congress needs to fund these efforts and keep America safe.

  21. Give law enforcement the training they need, hold them to higher standards, and help them succeed in keeping everyone safe.

  22. We also need more first responders and other professionals to address growing mental health and substance abuse challenges.

  23. Let’s do more on mental health, especially for our children. When millions of young people are struggling with bullying, violence, trauma, we owe them greater access to mental health care at school.

  24. No one should be homeless in this country, especially not those who served it.

  25. Let’s end cancer as we know it and cure some cancers once and for all.

[ZH: Additionally, Goldman Sachs' Jan Hatzius notes that there were no significant policy announcements that weren’t already previewed in Monday’s White House fact sheet, and no major changes to our policy outlook for the Administration this year.]

The main points in their opinion were as follows: 

1. Debt ceiling: Biden urged Congress to “commit here tonight that the full faith and credit of the US will never, ever be questioned.” House Speaker McCarthy delivered a speech on the debt limit Monday night in anticipation, stating that “cuts to Medicare and Social Security, they are off the table.” President Biden’s speech, and the Republican reaction to it in the chamber, took cuts to those programs even further out of consideration. That said, the President welcomed budget negotiations not directly linked to raising the debt limit. We continue to expect the final debt limit increase will include some type of policy concessions, but that any spending cuts would be a fraction of the size of cuts in the 2011 debt limit deal. 

2. Manufacturing and “Buy American” policies: As previewed by the White House’s fact sheet released Monday, Biden announced domestic content rules that already apply to some materials in the IRA will now go further, noting “new standards to require all construction materials used in federal infrastructure projects to be made in America…lumber, glass, drywall, fiber optic cables” and that American roads, bridges, and highways “will be made with American products.” He also emphasized the importance of rebuilding domestic supply chains by highlighting recent semiconductor investments related to the CHIPS Act, as well as the healthcare and energy provisions from the Inflation Reduction Act, while reiterating his promise to veto any attempts to repeal the IRA. We continue to expect that for the next two years, it is extremely unlikely that Congress will make substantive changes to the IRA or expand the availability of IRA subsidies to foreign-produced equipment or vehicles.

3. Healthcare, consumer reforms, taxes: Also as previewed, Biden called on Congress to make the IRA’s ACA subsidies permanent, highlighted the administration’s planned regulation and proposed legislation regarding “junk fees”, and reiterated his support for legislation to quadruple the 1% tax on corporate stock buybacks. He also called on Congress to “strengthen antitrust enforcement” to prevent big tech platforms from self-preferencing their products, but we view the odds of substantial antitrust legislation passing as low.

4. China: Biden’s China rhetoric appeared consistent with both past remarks and the competition strategy advanced by his Administration in recent months. He addressed the balloon incident but dedicated little time to the US-China relationship in the speech compared to many other issues. 

5. Energy: Biden briefly addressed energy, though with less emphasis than we might have expected given the political salience of gasoline prices over the past year. He reiterated, “Big Oil just reported record profits” and “invested too little of that profit to increase domestic production and keep gas prices down” before highlighting his proposal to quadruple the buybacks tax. 

6. Immigration: Biden urged Congress to pass comprehensive immigration reform. However, we continue to expect that while there is a small chance of narrow legislation raising visa caps for some specific skills, we think the odds lean against this materializing – and we view broad immigration reform as very unlikely anytime soon.

Biden Proposes More Inflation

If you are looking for more inflation, then look no further than President Biden's wish list of ideas in his state of the union address.

Regarding point 11 and record oil profits: Record profits happened because the President is doing everything in his power to drive them out of business. Refining capacity is down. Why should they invest with a president so hostile? Oil prices are high because of Biden's policies. 

Everything else is self explanatory:

Free education, more tax credits, living wages, teacher raises, mandatory sick days, affordable child care, climate change nonsense, charging stations built by unions, and Medicaid expansion

*  *  *

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Tyler Durden Wed, 02/08/2023 - 09:26

Alibaba Shares Rise As It Tests ChatGPT-Like AI Bot

Alibaba Shares Rise As It Tests ChatGPT-Like AI Bot

Shares of Alibaba trading in New York are higher in premarket after a report from the Chinese news publication Securities Times specified the Chinese tech giant is developing its own artificial intelligence "version of the chat robot ChatGPT."

Securities Times company news, on February 8, the reporter learned from Alibaba that the Alibaba version of the chat robot ChatGPT is under development and is currently in the internal testing stage. Ali sources said: "If there is more information in the follow-up, it will be synchronized as soon as possible."

The news of Alibaba's version of Microsoft-backed ChatGPT -- which can write jokes, poetry, and even articles -- has been an internet sensation for the last several months. 

Shares of Alibaba are up 2.5% on the news. 

Reuters asked Alibaba about the newspaper report and how it might integrate the technology with its group's communication app DingTalk. A spokesperson for the company declined to comment on that. 

"Frontier innovations such as large language models and generative AI have been our focussed areas since the formation of DAMO in 2017," stated the Alibaba spokesperson.

"As a technology leader, we will continue to invest in turning cutting-edge innovations into value-added applications for our customers as well as their end-users through cloud services," the spokesperson added.

Earlier this week, Bank of America analysts noted that the AI race has been heating up since ChatGPT was launched in November. 

"The AI race is clearly on for the tech sector, with multiple new competitive AI products launching and search integration in a short period of time post-ChatGPT's launch on 11/30/22. Speed may be important for scale as the models are learning models," the analysts said. 

It's also sparked an AI frenzy as traders pile into AI companies.

And the Securities Times article was published just one day after shares of Baidu jumped 13% in Hong Kong after the company said it would launch its own AI chatbot. 

This seems about right. 


Tyler Durden Wed, 02/08/2023 - 08:46

Soft Landing Or Recession?

Soft Landing Or Recession?

Authored by Michael Lebowitz via,

The stock market is betting on a Goldilocks scenario. Jerome Powell doesn’t foresee a recession, instead he forecasts a soft landing. Apollo is bettering the soft landing scenario with an optimistic “no-landing.” Regardless of which description you choose, all three are bets that a recession will not occur.

Assuming the markets, Apollo, and Powell are right, stocks may have already bottomed with a new high not too far away. Accordingly, investors buying into a soft or no landing should ignore numerous recession warnings and load up on stocks.

However, suppose the soft landing crowd is wrong and recession warnings, such as the yield curve and most national and regional manufacturing surveys, prove prescient, as they reliably have. In that case, 2023 may be a rough year for the stockholders.

While a soft landing may be good for stocks, recessions and stock prices are not the best of bedmates. Therefore to better appreciate what a recession is and how we can better track the odds of a recession, we lean on the arbiter of recessions, the National Bureau of Economic Research (NBER).

Recession Rule of Thumb

Before discussing the NBER, it is worth looking back a year. In 2021, real GDP declined in the first and second quarters. Quite a few economists and investors following a popular recession rule of thumb, declared the economy was in a recession. The recession rule of thumb states that two consecutive quarters of negative real GDP growth constitute a recession. Investors shying away from stocks because of that rule of thumb may have missed an 18% gain in the year’s first six months.

The official determiner of recessions, the NBER, does not consider two consecutive quarters of negative growth a recession. We will discuss their approach shortly.

The graph below compares NBER declared recessions to the two consecutive negative quarters rule of thumb. As we see to the right, the rule of thumb-2022 recession was never an official NBER recession. Further, the rule of thumb didn’t see the recession in 2001 or 1961. In 1970 it was slightly early in calling a recession, and it was late in 2008, 1990, and a few other instances.

Getting a recession forecast right and early is essential. As shown below, stocks tend to decline three to six months before a recession starts. Being late on a recession call or failing to forecast a recession can prove costly.  

NBER Cycle Dating

The NBER provides a succinct summary of how they determine whether the economy is in a recession. Per Business Cycle Dating, the NBER considers a recession a “significant decline in economic activity that is spread across the economy and lasts more than a few months.”

The definition is vague, given the massive amount of economic data they parse to assess the economy. However, there is a shortcut we can model to help predict when the NBER will make its recession call.

The first hint to finding this shortcut is the graph pasted at the top of the NBER’s aforementioned article.

The NBER chose to graph unemployment and place it just below the article’s headline. The clear intention is to show the strong correlation between higher unemployment rates and recessionary periods.

Employment and Wages Matter Most

The second hint is in the following paragraph:

The determination of the months of peaks and troughs is based on a range of monthly measures of aggregate real economic activity published by the federal statistical agencies. These include real personal income less transfers, nonfarm payroll employment, employment as measured by the household survey, real personal consumption expenditures, wholesale-retail sales adjusted for price changes, and industrial production.

This paragraph provides a rundown of what they consider the most critical factors to determine the state of economic activity. Three of the six indicators are based on wages and employment. Another, real personal consumption expenditures, heavily depend on employment and wages.

Reading on, the NBER seemingly provides the secret formula as follows:

In recent decades, the two measures we have put the most weight on are real personal income less transfers and nonfarm payroll employment.

NBER Modelling

Armed with the two data points the NBER considers most valuable, we created an NBER recession model. The model helps us ascertain if we are or are not in a recession, but more importantly, if the economy is trending toward one.

Before sharing our model, we review the two measures on which the NBER puts the most weight.

Real Personal Income Less Transfers is the total amount of personal income adjusted for inflation, less any income from government subsidies and benefits. Government transfers include Social Security, Medicare & Medicaid, unemployment assistance, special covid benefits, and many other items.

As we show, real personal income less transfers tend to decline during recessions, but it has also dropped outside of recessions on multiple occasions. It is not a perfect indicator.

Nonfarm Payroll Employment measures the number of employees excluding farm workers and a few other job classifications. The graph below shows that negative employment growth for two quarters or more coincides with NBER recessions. A few negative readings did not correspond with recessions, but they all happened shortly after a recession.

With the two measures the NBER puts “the most weight on” we created a model that has proven to be accurate and relatively timely.

NBER Proxy Model

The graph below compares the proxy model recession indicator in orange to the NBER recessions. The indicator is often accurate within three months. Only once, in 2007, did it provide an early warning. However, it produces false signals during the recovery period following a recession.

The indicator is the light blue line. The dotted one-year moving average helps see the recent trend. As it shows, a recession is not imminent. The movement has generally been declining toward recession, but it resides at levels in line with economic expansion over the last decade.

Understanding the two pieces allows us to use this proxy model and, more importantly, follow employment, income, and inflation to provide potential early warnings that a recession may occur soon.

Staying Ahead of our Model

Now that we know two crucial recession indicators, we must ask how else we can stay ahead of a recession. The obvious answer is to understand when incomes and employment will decline.  

The ISM Manufacturing Index has an excellent track record of signaling recessions. Furthermore, as shown below, it tends to lead employment by about nine months.

The graph above shows that every time ISM has fallen below 45, employment has declined on a quarterly basis. The following chart shows that nine of the last ten recessions were accompanied by ISM below 45. The only time such did not occur was in 2020.

Given the unprecedented and immediate impact of covid, it’s not surprising a survey of manufacturing executives did not foresee trouble. That said, it was in decline and possibly heading for 45, even if the pandemic never occurred.

ISM is currently at 47.4 and in economic contraction territory. It has been trending lower for over a year, albeit from very high levels. The trend and recent readings warn that a sub-45 level may not be that far off.


The model we created above can lag the NBER by a few months. While that may seem like a risk, understand that the NBER waits nine to twelve months for revised economic data before ruling a recession. Therefore, while the model may be a little late, it will still be early compared to the NBER. Further, we can use tools like ISM and other leading indicators to help stay ahead of income and employment trends.


This model is just one of many tools we use to help guide our investments. It is not perfect, but it provides more than a rule of thumb that has previously hoodwinked investors.

Tyler Durden Wed, 02/08/2023 - 08:25

Futures Dip On Profit Taking After Post-Powell Delta Squeeze

Futures Dip On Profit Taking After Post-Powell Delta Squeeze

US futures dipped after Tuesday’s furious last hour reversal rally sparked by Powell's "disinflation" commentary which refrained from pushing back against investor optimism, even as stocks in Europe and Asia were still buoyant, with the FTSE 100 posting a new record high. S&P 500 eminis slipped 0.4% at 7:45 a.m. while Nasdaq futures were 0.2% lower. The underlying benchmarks jumped 1.3% and 2.1%, respectively, in the latest session as investors brushed off Fed chief Jerome Powell’s comments that borrowing costs may need to peak higher than previously expected, choosing to focus instead on his outlook that 2023 will be a year of significant declines in inflation. The dollar slid,  Treasuries reversed some of Tuesday’s losses, and an index of commodities rose a second day.

In premarket trading, Chipotle dropped after its results missed estimates. Microsoft gained, with its market value poised to breach $2 trillion, as analysts raised price targets after it unveiled plans to use artificial intelligence tools to improve online search and browsing. Fortinet soared after the cybersecurity company gave a better-than-expected revenue forecast for 2023. Meanwhile, VF Corp. edged higher as it delivered some positives in its fiscal third-quarter earnings, though analysts say these are masking some weaker areas and a tough outlook for the Vans and North Face owner. Oak Street Health rose 30% to $33.68 after CVS agreed to acquire the elder-care provider for deal an enterprise value of about $10.6 billion. Alibaba surged premarket on news it too was developing a Chat GPT-like robot and currently conducting internal testing on the AI-tool. Here are some other notable premarket movers:

US stocks extended their 2023 rally as traders turn more optimistic about the path of the economy and expect a Fed pivot soon. The rally has been boosted by the stubborn pessimism of noted sellside strategists such as JPM’s Marko Kolanovic, Goldman’s David J. Kostin and Morgan Stanley's Mike Wilson who have been skeptical of the rally for the last 400 points and are warning of limited upside. At some point they will be right. The outperformance of tech stocks, specifically, is at risk as the Nasdaq 100 Index approaches a bull market and earnings estimates trend lower, with valuations swelling to expensive levels compared with real bond yields.

“I think we need to be careful with how we interpret the market rally we have been seeing,” said Madison Faller, global strategist at JPMorgan Private Bank. “To me it’s not a rally based upon incrementally dovish messaging — I think it’s actually more so that Powell’s message wasn’t incrementally hawkish,” she said in a Bloomberg TV interview. “In the short term, markets are perhaps running a little ahead of themselves in the sense that valuations are starting to look a little stretched.”

During his SOTU speech last night, Joe Biden said he is announcing new standards to require all construction materials used in federal infrastructure projects to be made in America and said the tax system is unfair, while he called for Congress to pass a minimum billionaire tax and proposed to quadruple the tax on corporate stock buybacks. Biden noted he is committed to working with China where it can advance American interests and benefit the world but if China threatens US sovereignty, the US will act to protect the country and also said the US is in the strongest position in decades to compete.

“Another hawkish speech goes unheard,” Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said of Powell’s comments. “Investors focused on the fact that he appeared just as hawkish as he has always been, that he didn’t promise a 50bp hike at next meeting, and that he said that the Fed won’t actively shrink its balance sheet for at least a few years.”

European stocks rose to their highest level since April, tracking Tuesday’s rally on Wall Street as investors welcomed a balanced tone from Fed Chair Powell. The Stoxx 600 rose 0.8% as corporate earnings also provide support after positive updates from Equinor ASA, Akzo Nobel N.V and ABN AMRO Bank N.V. S&P and Nasdaq futures are both down 0.4%. Here are some of the most notable premarket movers:

Asian stocks edged higher as traders parsed comments by Federal Reserve Chair Jerome Powell that were seen as dovish, even after he reiterated that further interest rate hikes are needed to curb rising inflation. The MSCI Asia Pacific Index gained as much as 0.6%, driven by rate-sensitive technology shares. Benchmarks in Taiwan and South Korea advanced, while Japanese, Hong Kong and Chinese shares fluctuated. The Fed chair’s remarks at the Economic Club of Washington offered traders some relief, who were bracing for a more hawkish recalibration of rate expectations. While interest rates in the US will likely continue to rise, “in Asia, China’s recovery and reopening has just happened recently,” Ken Peng, head of Asia Pacific investment strategy at Citi Global Wealth Investments, said in a Bloomberg TV interview. “That momentum is there, it’s fairly strong.” Still, the stellar rally in Chinese shares over the past three months has stalled as traders take profit and await fresh catalysts. Meituan led Chinese technology stocks lower Wednesday after a report that short-form video service Douyin would make forays into the food-delivery business.

Japanese stocks fell, with investors assessing disappointing tech earnings and as the yen continued to strengthen.  The Nikkei 225 declined 0.3% to 27,606.46 as of the market close in Tokyo, while the Topix Index was little changed at 1,983.97. Among the 2,163 stocks in the Topix, 1,138 rose, 886 fell and 139 were unchanged.  SoftBank Group shares tumbled 5.1% after the company reported further steep losses in the latest quarter and CEO Masayoshi Son skipped the results call.  Nintendo shares slid 7.5% after the electronics maker missed quarterly profit estimates and trimmed its full-year outlook as sales of its Switch game console missed targets. “The yen’s appreciation is offsetting the positive impact of higher U.S. stock prices,” said Tomo Kinoshita, global markets strategist at Invesco. “Earnings are also having a strong impact on the market, as the results seem to confirm that inventory and production adjustments are not completed yet.”

In FX, the Bloomberg Dollar Spot Index fell 0.2%, adding to Tuesday’s 0.4% drop, as the greenback weakened against all of its Group- of-10 peers. Scandinavian currencies and the pound were the best performers.

In rates, treasuries are richer across the curve, with gains led by intermediates, steepening the 5s30s spread by 1.5bp on the day and the US 10-year yield down 2bps. US 10-year yields are near middle of day’s range at 3.645% in the early US session, richer by 3bp on the day and outperforming bunds and gilts by 3.5bp and 1bp in the sector Core European markets are underperforming slightly as traders digest the European Central Bank decision Tuesday to introduce a new remuneration ceiling for deposits from May 1. The bund curve bear steepens with 2s10s widening 3.2bps. The US session focus is on the 10-year note auction, following Tuesday’s poor 3-year results. The treasury auction cycle resumes with a $35b 10-year sale at 1 p.m. in New York, and concludes with a $21b 30-year offering on Thursday; they follow a poor 3-year auction on Tuesday, which tailed by 4bp. WI 10-year at 3.625% is 5bp cheaper than January’s stop-out, which traded 0.5bp through the WI level.

Crude futures advance with WTI adding 1.2% to trade near $78.10. Nat gas futures diverge once again while TotalEnergies writes that The tensions on European gas prices seen in 2022 are expected to continue into 2023, as the limited growth in global LNG production is supposed to meet both higher European LNG demand to replace Russian gas received in 2022 and higher Chinese LNG demand. Spot gold rises roughly 0.4% to trade near

Looking to the day ahead now, we’ll hear from several central bank speakers including the Fed’s Williams, Cook, Barr, Bostic, Kashkari and Waller, as well as the ECB’s Knot. Otherwise, data releases include Italian retail sales for December, and earnings releases include Disney and Uber.

Market Snapshot

Top Overnight News from Bloomberg

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were indecisive and failed to sustain the momentum from Wall St where markets whipsawed as attention centred on Fed Chair Powell before the major US indices eventually closed at session highs as Powell’s two-sided comments proved not to be as hawkish as some feared.  ASX 200 was underpinned by strength in financials and with the mining-related industries benefitting from the rebound in underlying commodity prices. Nikkei 225 underperformed with sentiment in Japan pressured by weak earnings reports from the likes of SoftBank, Sharp and Nintendo. Hang Seng and Shanghai Comp. were indecisive amid lingering tensions from the spy balloon incident and after China denied a US request for a phone call between defence officials.

Top Asian News

European bourses are firmer across the board, Euro Stoxx 50 +0.7%, taking advantage of the firmer Wall St. close and shrugging off indecisive APAC trade. Sectors are similarly bid with Energy outperforming given benchmark activity and post-Equinor, though upside is capped by TotalEnergies. Stateside, futures are in modest negative territory paring some of the post-Powell upside ahead of key speakers incl. Fed's Williams. BIS' Carstens says a re-think is needed on regulating big tech activities in the financial sector. Adding, it is time to consider tangible operations for direct regulation. Tesla (TSLA) China January deliveries 66.05k, +18% MM, via CPCA; adding, China sold 1.3mln passenger vehicles, -37.9% YY.

Top European News

Fixed Income




US Event Calendar

Fed speakers

DB's Jim Reid concludes the overnight wrap

Morning from Paris where I'm staying at a hotel I last stayed in 3.5 years ago. All I can say is that the room service menu has soared in price since I was last here. As such after a cancelled dinner and a long day of no food I roamed the back streets of the Arc De Triomphe searching for something suitable. I gambled on a bagel shop. I got it back to my room and it was disgusting. The glamour of international business travel. I have a client breakfast, lunch and dinner today so I'm expecting much better!

Yesterday was all about the wait for Powell’s speech at the Economic Club of Washington, and then the interpretation of it. It’s a bit of a generalisation, and my views were scarred by 2 horrible bagels, but I would say the more the FOMC press conference went on last Wednesday the more dovish Powell sounded. However, last night’s speech was a little bit of the reverse. When all was said and done though, relative to pre-Powell levels terminal didn’t move much, rates moved a bit higher and equities saw an impressive climb (+1.29%). There was a fair bit of vol during the speech with the S&P trading in a wide 1.8pp range, while 10yr Treasuries traded in a 6bps range. The key market theme was that equities seemed to breathe a big sigh of relief that he didn't choose this moment to notably change the script post payrolls. There was some fear that he would.

To review his comments, Powell continued to repeat last week's FOMC mantra that further rate hikes were needed in order to rein in inflation and that policy would have to stay tight for some time. While directly addressing last week’s report he said it “shows you why we think this will be a process that takes a significant period of time ... the labour market is extraordinarily strong". He then spent a good deal of time referencing back to his comments from the FOMC press conference. These opening remarks caused the market to initially turn risk on with the S&P up 1.2% and 2yr yields moving -9bps lower after the first 30 minutes of the interview. However, Powell then pointed out that if the labour market remains strong “it may well be the case that we have to do more.” This seemed to signal to markets that a further 50bps of hikes is the floor for fed funds with risks to the upside on labour or inflation data coming out higher than expected. This caused a quick reversal with the S&P 500 dropping nearly -2% and 2yr yields climbing +8bps in the span of a half hour.

However, once Powell had wrapped up, both moves were retraced throughout the rest of the US afternoon with the S&P finishing near the highs of the day, and higher than during the peak of Powell’s interview, at +1.29%. Meanwhile the policy-sensitive 2yr yield sold off with yields finishing flat at 4.46% and 10yr yields +3.4bps higher at 3.67% (although -2.2bps lower this morning in Asia). Even with Powell raising the spectre of a higher terminal rate than the Fed had previously signalled, fed future pricing actually dropped ever so slightly with the July meeting closing at an implied fed funds rate of 5.153%, down 0.05bps. We've actually dipped -2.5bps this morning.

Digging into the market reaction more, it was a very risk-on rally with 70% of the S&P 500 higher on the day, with technology the leader once again. Semiconductors (+3.2%), Media (+3.1%), Energy (+3.1%) and Software (+2.6%) were the best performing sectors, while the only laggards were defensives like Telecoms (-1.2%), Household Goods (-0.7%) and Food & Beverage (-0.5%). The VIX volatility index finished near the lows of the day at 18.6pts.

There was also a larger risk on move in commodities with Brent crude oil up +3.33% to $83.69/bbl and WTI up +4.09% to $77.37/bbl following news that Saudi Aramco is increasing the prices of fuel shipments to Asia starting in March on the back of heightened demand. The move took another leg higher following the general risk-on sentiment following Powell’s remarks. The rise in oil and copper (+1.13%) due to China’s reopening meant that the Bloomberg Commodity index (+1.35%) rose by its largest amount since December 13.

Before Powell, markets had extended the hawkish shift seen since payrolls. First, the other central bankers we heard from continued to lean towards further rate hikes, with Minneapolis Fed President Kashkari saying that “right now I’m still at around 5.4%” on where rates needed to go. That would imply the Fed needs to do another 25bp move on top of current market pricing. Separately, Bundesbank President Nagel said that “more significant rate increases will be needed”, and pushed back on an imminent pause in saying that “I don’t see that our work is done with this rate hike in March.”

On top of those remarks, various pieces of data signalled that the battle against inflation was far from over. For instance, Manheim’s index of US used-vehicle prices was up by +2.5% in January, marking its strongest monthly increase since November 2021. Bear in mind that used cars and trucks make up over 4% of core CPI, and we’ve seen 6 consecutive monthly declines in that component, so any reversal there would help push up the overall numbers. Back in Europe, we also had the ECB’s latest Consumer Expectations Survey for December. That showed 12-month expectations for inflation remaining unchanged at 5.0%, and 3yr expectations moved back up a tenth to 3.0%, so still a full point above their target even at a medium-term horizon. And finally on the growth side, the recent strong data in the US saw the Atlanta Fed’s GDPNow tracker increase its Q1 growth estimate to an annualised +2.1%, up from +0.7% previously. A month ago many had a flat or negative quarter pencilled in for Q1.

Ahead of Powell, the more hawkish newsflow had led European sovereigns to lose ground for a 3rd consecutive day, with yields on 10yr bunds (+5.3bps), OATs (+4.7bps) and BTPs (+7.1bps) all moving higher. Those movements accelerated into the close after we heard that the ECB were adjusting the remuneration on government deposits, which would now have a ceiling of the euro short-term rate (€STR) minus 20bps. Previously, it had been whichever was lower of the deposit rate or the €STR. The aim is to encourage an orderly reduction in these deposits, which they said is “in order to minimise the risk of adverse effects on market functioning and ensure the smooth transmission of monetary policy”. Otherwise, European equities were pretty subdued yesterday, with the DAX (-0.16%) and the CAC 40 (-0.07%) posting small losses, whilst the STOXX 600 (+0.23%) saw a modest advance. This was all pre-Powell.

Asian equity markets are mixed overnight. As I type, the KOSPI (+1.39%) is leading gains with the Hang Seng also trading in positive territory. Meanwhile, the Nikkei (-0.43%) is lagging its peers following disappointing quarterly earnings from Nintendo, Softbank and Sharp Corp. Elsewhere, Chinese stocks are muted with the CSI (+0.01%) and the Shanghai Composite (-0.05%) fluctuating between gains and losses.

Outside of Asia, US stock futures are wavering with contracts tied the S&P 500 (-0.03%) fractionally lower and those on the NASDAQ 100 (+0.06%) just above flat.

President Biden delivered his State of the Union address last night, in which he promised that the US would not hit the debt ceiling and default on its debts. As expected President Biden called for increased taxes on stock buybacks as well as billionaires, while also touting efforts to near-shore American manufacturing that is aligned to critical supply chains. It probably wasn't the most dramatic State of the Union address which might be partly due to US political gridlock.

Finally back to yesterday and it was another quiet day on the data front, but the US trade deficit came in at $67.4bn in December (vs. $68.5bn expected). Elsewhere, German industrial production for December underwhelmed with a -3.1% contraction (vs. -0.8% expected).

To the day ahead now, and we’ll hear from several central bank speakers including the Fed’s Williams, Cook, Barr, Bostic, Kashkari and Waller, as well as the ECB’s Knot. Otherwise, data releases include Italian retail sales for December, and earnings releases include Disney and Uber.

Tyler Durden Wed, 02/08/2023 - 08:12

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