Bonds Earthquake. Stocks Tsunami?

 Baltic Dry Index. 1700 -09 Brent Crude 66.09

Spot Gold 1763

Coronavirus Cases 02/04/20 World 1,000,000

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Coronavirus Cases 26/02/21 World 113,550,915

Deaths 2,519,328

“Every victory is only the price of admission to a more difficult problem”

 Henry Kissinger

A bond earthquake shook the markets yesterday, rattling the Fed’s NY team of market manipulators too.

But will it unleash a tsunami of stock selling, as increasingly confused gamblers in the casinos fret more and more that the Great Buy Everything, Central Bankster Free Money Bubble, is now in the process of self destructing? 

If this latest central bankster fuelled bubble is in the process of bursting, Goldie’s new commodity Supercycle starting, posited last week, will turn into the shortest commodity Supercycle in history.

Can Fed Chairman Powell’s NYC team of Plunge Protection market riggers really stop a bond rout the way they can rig the stock market?  We are about to find out later today and more importantly, next week. 

Somehow I get the impression that Henry Kissinger was right.

American Homeowners Are Adding Fuel to Bond Market Sell-Off

By Christopher Maloney and Liz McCormick

25 February 2021, 11:00 GMT Updated on 25 February 2021, 19:14 GMT

MBS investors protecting portfolios exacerbating rate move

·         Higher yields have knock-on effect on stocks, credit and more

There comes a point in any big selloff in Treasury bonds when the move becomes so pronounced that it starts to feed on itself. Increases in yields force a crucial group of investors to sell Treasuries, which in turn leads to further increases in yields.

Two months into this rout, that moment appears to have arrived, and it’s beginning to send shudders throughout all corners of U.S. financial markets.

The forced sellers are investors in the $7 trillion mortgage-backed bond market. Their problem is that when Treasury yields -- which strongly influence home-loan rates -- suddenly rise sharply, many Americans lose interest in refinancing their old mortgages. A reduced stream of refinancings means mortgage-bond investors are left waiting for longer to collect payments on their investments. The longer the wait, the more financial pain they feel as they watch market rates climb higher without being able to take advantage of them.

Their answer: unload the Treasury bonds they hold with long maturities or adjust derivatives positions -- a phenomenon known as convexity hedging -- to compensate for the unexpected jump in duration on their mortgage portfolios. The extra selling just as the market is already weakening has a history of exacerbating upward moves in Treasury yields -- including during major “convexity events” in 1994 and 2003.

For a QuickTake explainer on convexity hedging, click here

This go around, the Federal Reserve’s massive presence in the mortgage-bond market -- it’s adding about $40 billion of the securities each month to its balance sheet -- has created something of a stabilizing force that has kept the market’s hedging needs in check. Even so, waves of mortgage investors adjusting their portfolios could still have an outsized impact on rates that reverberates across asset classes, market watchers say.

“Everyone -- except the Fed -- is a convexity hedger at some point because as your portfolio keeps getting longer with the rise in rates it will become increasingly painful,” said Joshua Younger, head of U.S. interest-rate derivatives strategy at JPMorgan Chase & Co. “There’s more flexibility now for those who need to hedge so rates rising won’t cause the train to go off the rails. But even a train on the rails can be difficult to stop.”

----For Peter Chatwell, head of multi-asset strategy at Mizuho International, the spike in five-year rates is a warning signal that the selloff is going beyond a repricing, toward a convexity move, suggesting U.S. stocks and credit spreads will suffer further. The Nasdaq 100 fell as much as 3.7% Thursday, its biggest intraday drop since October.

More

https://www.bloomberg.com/news/articles/2021-02-25/convexity-hedging-haunts-markets-already-reeling-from-bond-rout?cmpid=BBD022521_BIZ&utm_medium=email&utm_source=newsletter&utm_term=210225&utm_campaign=bloombergdaily

Asian markets roiled as bond rout turns 'lethal'

February 26, 202112:40 AM  By Wayne Cole, Echo Wang

SYDNEY/MIAMI (Reuters) - Asian stocks skidded to one-month lows on Friday as a rout in global bond markets sent yields flying and spooked investors amid fears the heavy losses suffered could trigger distressed selling in other assets.

The scale of the selloff prompted Australia’s central bank to launch a surprise bond buying operation to try and staunch the bleeding, helping yields there come off early peaks.

Yields on the 10-year Treasury note eased back to 1.494% from a one-year high of 1.614%, but were still up a startling 40 basis points for the month in the biggest move since 2016.

“The fixed income rout is shifting into a more lethal phase for risky assets,” says Damien McColough, Westpac’s head of rates strategy.

“The rise in yields has long been mostly seen as a story of improving growth expectations, if anything padding risky assets, but the overnight move notably included a steep lift in real rates and a bringing forward of Fed lift-off expectations.”

Markets were hedging the risk of an earlier rate hike from the Federal Reserve, even though officials this week vowed any move was long in the future.

Fed fund futures are now almost fully priced for a rise to 0.25% by January 2023, while Eurodollars have it discounted for June 2022.

Even the thought of an eventual end to super-cheap money sent shivers through global stock markets which have been regularly hitting record highs and stretching valuations.

MSCI’s broadest index of Asia-Pacific shares outside Japan slid 2.4% to a one-month low, while Japan’s Nikkei shed 2.5%.

Chinese blue chips joined the retreat with a drop of 2.5%.

NASDAQ futures fell 0.5% after a sharp drop overnight, while S&P 500 futures eased 0.1%. EUROSTOXX 50 futures lost 1.2% and FTSE futures 1.1%.

EMERGING STRAINS

Overnight, the Dow had shed 1.75%, while the S&P 500 lost 2.45% and the Nasdaq 3.52%, the biggest decline in almost four months for the tech-heavy index.

Tech darlings all suffered, with Apple Inc, Tesla Inc, Amazon.com Inc, NVIDIA Corp and Microsoft Corp the biggest drags.

All of that elevated the importance of U.S. personal consumption data due later on Friday, which includes one of the Fed’s favoured inflation measures.

Core inflation is actually expected to dip to 1.4% in January which could help calm market angst, but any upside surprise would likely accelerate the bond rout.

More

https://www.reuters.com/article/us-global-markets/asian-markets-roiled-as-bond-rout-turns-lethal-idUSKBN2AQ028

Charlie Munger says it’s ‘really stupid to have a culture which encourages [so] much gambling in stocks’

Last Updated: Feb. 24, 2021 at 5:07 p.m. ET First Published: Feb. 24, 2021 at 4:20 p.m. ET

“The frenzy is fed by people getting commissions and other revenues out of this new bunch of gamblers, and, of course, when things get extreme, you have things like that short squeeze … and it’s really stupid to have a culture which encourages [so] much gambling in stocks by people who have the mindset of racetrack bettors and, of course, it will create trouble, as it did.”

So says Charlie Munger, Warren Buffett’s longtime business partner and vice chairman of Berkshire Hathaway, in a Wednesday interview with Yahoo Finance.

The famously plain-spoken Munger made his comments in reference to the GameStop short selling chaos that gripped Wall Street a month ago, as an army of individual investors congregating on social-media platforms like Reddit and Discord, rattled the broader market by upending the short bets of professional investors.

The episode resulted in a hearing last week before the House Financial Services Committee, where the head of the popular trading platform Robinhood defended a decision in late January to temporarily restrict trading in so-called “meme stocks,” including GameStop GME, +103.94% and AMC Entertainment Holdings AMC, +18.05%. GameStop exploded back into the news Wednesday as trading in the stock, which doubled in value on the day, was repeatedly halted.

Markets eventually bounced back from the late January saga, but the epic short squeeze momentarily rattled their bullish demeanor, sending the Dow Jones Industrial Average DJIA, +1.35%, the S&P 500 SPX, +1.14% and the Nasdaq Composite COMP, +0.99% indexes to their sharpest weekly declines since October.

https://www.marketwatch.com/story/buffett-righthand-man-munger-says-its-really-stupid-to-have-a-culture-which-encourages-so-much-gambling-in-stocks-11614201627?mod=home-page

 

 

Year of the SPAC: Blank check IPOs are on track to complete more than 1,000 offerings in 2021

February 25, 2021

2021 is shaping up to be the “Year of the SPAC.”

So far this year, 176 SPACs have raised $49.5 billion, a huge leap from the 10 that raised $2.6 billion by this time last year. SPACs are outpacing traditional IPOs at a rate of three-to-one, and averaging 3.1 deals per day. At that rate, blank check IPOs would surpass 2020’s total by the end of the 1Q, and complete more than 1,000 offerings by year end.

SPACs have seen a meteoric rise in popularity since the start of 2020. Historically focused on distressed industries, SPACs have recently shifted their targets to hot areas like disruptive tech, fintech, electric vehicles, and sustainability, boasting superior returns in the process. The IPO alternative has proven to be a viable way for a variety of other companies to enter the public market as well, from biotech to consumer goods.

Year-to-date, 56 companies have announced plans to list via SPAC merger, right in line with the number of traditional IPOs. Including the deals on file, an additional 500+ blank checks are looking for targets to acquire with more than $180 billion in combined cash; with SPACs regularly representing 8-20% of post-merger equity, these could to market companies worth $2+ trillion. In light of historic levels of demand from investors and rising returns, SPAC mania is alive and well in 2021.
https://www.renaissancecapital.com/IPO-Center/News/78302/Year-of-the-SPAC-Blank-check-IPOs-are-on-track-to-complete-more-than-1000-o

Finally, are London and the UK going Chinese?

Hong Kongers snap up UK homes and do what they excel at: being landlords

February 25, 20216:11 AM  By Clare Jim, William James

HONG KONG (Reuters) - Hong Kong residents are buying more houses and apartments to lease out for income in Britain, property agents say, a trend that coincides with what many expect to be a wave of emigration after China passed a national security law last year.

Hong Kongers became the fifth largest foreign investors in central London as of last August and have been driving up prices in some popular districts outside the UK capital.

But the new wave of buying also includes some Hong Kong residents who are pooling money to invest, a trend property agents expect to continue as more middle-class Hong Kong residents consider leaving for Britain and look to establish a source of revenue in advance.

“It’s become much more of a trend in the past six months or so,” Guy Bradshaw, head of London Residential at Sotheby’s International Realty told Reuters. “I’ve certainly been involved in a lot more conversations and Zoom calls with people in Hong Kong and funds in Hong Kong.”

The UK government is offering a new visa to Hong Kong holders of British National Overseas (BNO) passports that gives them a chance to become British citizens – a change it made after China’s national security law for Hong Kong.

A steady rental income would be useful in applying for the citizenship, as the BNO holders need to prove they can provide financial support for themselves for at least six months.

London estimates that over 300,000 Hong Kong residents could emigrate over the next five years, and Bank of America expects Hong Kong residents moving to Britain could trigger capital outflows of $36 billion in 2021.

While Hong Kong residents have long been active buyers of homes in Britain, real estate agents say more recently there has been increasing interest in older apartments and houses as rental assets.

Hong Kongers have an affinity for real estate investment, with property prices in the Asian financial hub among the most expensive in the world.

Alan Wan, 38, who owns 13 residential properties in Britain, launched classes in Hong Kong two years ago – at the height of anti-government protests in Hong Kong – aimed at potential investors in properties in and around Manchester.

So far, his “UK Property Owner Association” class has attracted around 1,500 students. Enrolment spiked in the second half of last year after Beijing imposed the national security law.

More

https://www.reuters.com/article/uk-hongkong-britain-property/hong-kongers-snap-up-uk-homes-and-do-what-they-excel-at-being-landlords-idUSKBN2AP0JB?feedType=mktg&feedName=&WT.mc_id=Newsletter-UK&utm_source=Sailthru&utm_medium=email&utm_campaign=Workday%20Q1%202021%202018%20Template:%20UK%20MORNING%20DIGEST%20-%202/25%20-%20the%20Netherlands&utm_term=NEW:%20UK%20Morning%20Digest

“The issues are too important to be left for the voters.”

Henry Kissinger

Covid-19 Corner                       

This section will continue until it becomes unneeded.

FDA says single-dose shot from J&J prevents severe COVID

By LAURAN NEERGAARD and MATTHEW PERRONE February 24, 2021

WASHINGTON (AP) — Johnson & Johnson’s single-dose vaccine offers strong protection against severe COVID-19, according to an analysis released Wednesday by U.S. regulators that sets the stage for a final decision on a new and easier-to-use shot to help tame the pandemic.

The long-anticipated shot could offer the nation a third vaccine option and help speed vaccinations by requiring just one dose instead of two. Food and Drug Administration scientists confirmed that overall the vaccine is about 66% effective at preventing moderate to severe COVID-19, and about 85% effective against the most serious illness. The agency also said J&J’s shot is safe.

The analysis is just one step in the FDA’s evaluation. On Friday, the agency’s independent advisers will debate if the evidence is strong enough to recommend the shot. With that advice, the FDA is expected to make a final decision within days.

The COVID-19 death toll in the U.S. topped 500,000 this week, and the vaccination drive has been slower than hoped, hampered by logistical and weather delays. So far, about 44.5 million Americans have received at least one dose of vaccine made by Pfizer or Moderna, and nearly 20 million of them have received the second dose required for full protection.

Tests showed the Pfizer and Moderna vaccines were 95% effective at protection against symptomatic COVID-19.

More

https://apnews.com/article/fda-j-and-j-vaccine-shot-prevent-covid-6928a9a08526d036a9f8197149c80f06

COVID-19 patients protected from reinfection for 3 months after recovery

Feb. 24, 2021 / 11:02 AM

Feb. 24 (UPI) -- Prior COVID-19 infection provides immunity against the virus for at least three months in the vast majority of patients, a study published Wednesday by JAMA Internal Medicine found.

In the analysis of nearly 3.3 million people, fewer than 1% of those with antibodies -- cells created by the immune system to fight off infection -- had evidence of the virus in their system after 90 days or more, the data showed.

The findings support the idea that people whose immune systems already have produced antibodies in response to the virus are at decreased risk for future COVID-19 infection, researchers from the National Institutes of Health said.

"As expected from other small studies, prior infection provides protection, though maybe not complete, from subsequent infection," infectious disease specialist Dr. Donald Forthal told UPI.

RELATED Three-quarters of people with COVID-19 test positive for antibodies, study finds

Recovered patients have some level of protection "for at least the time period of this study, or about three months," said Forthal, chief of the division of infectious diseases at the University of California, Irvine, who was not part of the NIH research.

People infected with the coronavirus who recover have at least some protection against future reinfection because their immune systems already have produced antibodies against the virus, researchers have found.

How long this protection lasts remains unknown, however, and there have been cases of "reinfection," or instances in which patients get sick, recover and get infected a second time.

RELATED One dose of COVID-19 vaccine may be good for recovered patients

Still, researchers have been looking at how antibodies against the coronavirus collected from the blood of recovered patients or created in a lab and packaged as a drug can be used to treat infected people.

For this study, NIH researchers analyzed data on roughly 3.3 million patients screened for antibodies against COVID-19.

After their initial antibody screening, the participants were tested for the virus every 30 days over at least a 90-day period.

RELATED Study: Most with severe COVID-19 develop a 'robust' antibody response

About 12%, or 380,000, of the patients in the study were positive for COVID-19 antibodies at the start of the study.

Of these, just over 11% were still positive for the virus 30 days later, suggesting that some of its cells remained in their systems.

After 31 to 60 days, this number fell to just under 3%, and it dropped even further, to 1.1%, between 61 and 90 days after recovery.

At 90 days or more, 0.3% of those who had tested positive for antibodies still had evidence of the virus.

Some of these may be cases of reinfection, while others may be "false positives," researchers said.

"Since this study only goes out 90 days, it doesn't go far in addressing [the duration of COVID-19 immunity]," Forthal said.

"However, it is consistent with other studies, suggesting immunity lasts at least for three months," he said.

https://www.upi.com/Health_News/2021/02/24/COVID-19-patients-protected-from-reinfection-for-3-months-after-recovery/7851614176246/

Coronavirus Update 123: COVID 19 Vaccines vs. Variants

https://www.youtube.com/watch?v=9ymKocjsmUo

Approx. 10 minutes.

 

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Next, some vaccine links kindly sent along from a LIR reader in Canada. The links come from a most informative update from Stanford Hospital in California.

World Health Organization - Landscape of COVID-19 candidate vaccines. https://www.who.int/publications/m/item/draft-landscape-of-covid-19-candidate-vaccines

NY Times Coronavirus Vaccine Tracker. https://www.nytimes.com/interactive/2020/science/coronavirus-vaccine-tracker.html

Stanford Website. https://racetoacure.stanford.edu/clinical-trials/132

Regulatory Focus COVID-19 vaccine tracker. https://www.raps.org/news-and-articles/news-articles/2020/3/covid-19-vaccine-tracker

Some other useful Covid links.

Johns Hopkins Coronavirus resource centre

https://coronavirus.jhu.edu/map.html

Rt Covid-19

https://rt.live/

Covid19info.live 

https://wuflu.live/

Centers for Disease Control Coronavirus

https://www.cdc.gov/coronavirus/2019-ncov/index.html

The Spectator Covid-19 data tracker (UK)

https://data.spectator.co.uk/city/national

Technology Update.

With events happening fast in the development of solar power and graphene, I’ve added this section. Updates as they get reported.

Aqua Aerem to extract water from desert air and convert it to hydrogen

By Loz Blain  February 24, 2021

A new project in the Australian Outback will trial an innovative technique for converting solar energy into hydrogen by capturing moisture from the air and splitting it via hydrolysis, making it possible for hot, arid areas to become energy exporters.

Tennant Creek is a three-pub, 3,000-person town on the northern rim of Australia's famous red center, a colossal expanse of rocky desert. A brisk 1,000-kilometer (620-mile) drive south will get you to the great famous rock of Uluru, or you could head about the same distance north and find yourself in Darwin, with not a whole lot interrupting either trip. It's proper Crocodile Dundee territory, with what's described as a warm desert climate.

Like much of Australia's Northern Territory, it's got a lot of sun, but not a ton of water to spare for exports. So as Australia moves to set itself up as a green hydrogen-based energy exporter, Tennant creek is a good place to try out a new technology that doesn't require large volumes of municipal water, or a connection to the local power grid, to produce hydrogen.

New startup Aqua Aerem has signed a testing deal with the NT government for a 12-week trial of its solar + air to hydrogen system. Energy will be captured through a concentrator photovoltaic system with dual-axis tracking, which the company says will capture energy twice as efficiently as a regular silicon panel.

The next step is to convert that energy into transportable hydrogen via electrolysis, which needs only electricity and water as inputs. Here Aqua Aerem deploys its secret sauce: an atmospheric water capture system that sucks moisture out of the air. It works more efficiently in warmer climates, says the company, requires little in the way of maintenance and produces no waste other than air. The trial will mainly be focused on the water capture process, the other elements being fairly mature technologies at this point.

"This trial is the first stage of a pilot renewable hydrogen project," says a statement from the NT Government, "that will ultimately produce renewable hydrogen for Territory Generation’s Tennant Creek Power Station to generate green energy as part of the electricity mix for the Tennant Creek community."

Aqua Aerem's proposed system going forward involve the installation of a 15-megawatt electrolyzer that it estimates would produce around 912 tonnes of green hydrogen per year, providing about half the energy the Tennant Creek community uses.

But the endgame is much larger in scale. The company says the technology can be scaled up to much larger installations to create hydrogen in bulk export volumes for the Asian markets to the north. An interesting project, for sure. It'll be interesting to see how the economics of this system work out given that once it's set up, it has no ongoing energy or water costs.

Source: Aqua Aerem via Renew Economy

https://newatlas.com/energy/aqua-aerem-air-to-hydrogen-outback/

Another weekend and a weekend of worry for bond holders, mortgage securities, and stocks. Is this the beginning of the end or just the end of the beginning of Magic Money Tree free money forever? Have a great weekend everyone.

“Poor old Germany. Too big for Europe, too small for the world”

Henry Kissinger