Bond Yields Up. Banksters & Stocks Down.

Baltic Dry Index. 4962 +245 Brent Crude 77.98

Spot Gold 1738

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

Deaths 53,100

Coronavirus Cases 29/09/21 World 233,558,660

Deaths 4,778,872

Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.

Winston Churchill.

With no disrespect intended to Winston Churchill, yesterday’s action and the action in the stock casinos since the start of September, look to this old dinosaur market watcher, like the beginning of the end. 

The end of the everything bubble. Dying rapidly under the arrival of what looks to be permanent inflation, aggravated by far too much unrepayable debt accumulated in the everything bubble fueled by all the trillions of Magic Money Tree fiat money poured out since the discovery of the Magic Money Tree forest back in March 2020.

Adding to the arrival of what looks like stagflation, the dearth of political leadership throughout the G-7 West. 

Since being run out of Afghanistan in a rout, America, Canada, and Germany have all entered a political leaderless gridlock. France has been sunk by the arrival of AUKUS.  GB run off the road by a lack of petrol, sky high natural gas prices, an unusually cloudy August and September, plus unusually low winds in the North Sea.

Prime Minister Johnson can huff and puff up a great storm of hot air about leading the world into a new carbonless age of new energy utopia right around the corner, but right now GB, the EU, China, and India, are all facing a bleak energy winter ahead. 

In the USA, it all comes down to how bad the coming winter turns out. Sky high energy pricing will test the winter budgets of many.

Below, what looks to me like the beginning of the end of Easy Street.

Japan’s Nikkei 225 falls more than 2%; Evergrande’s shares surge 10%

Published Tue, Sep 28 2021 7:43 PM EDT

SINGAPORE — Asia-Pacific stocks fell in Wednesday trade following an overnight tumble on Wall Street, with the Nasdaq Composite plunging nearly 3% as bond yields rise.

In Japan, the Nikkei 225 slipped 2.45% while the Topix index dropped 2.47%. South Korea’s Kospi declined 1.87%.

Mainland Chinese stocks also saw sizable losses as the Shanghai composite shed 1.79% and the Shenzhen component fell 1.412%.

Hong Kong’s Hang Seng index declined 0.45% by the afternoon. Hong Kong-listed shares of China Evergrande Group, however, surged 10.11% after the developer announced it will sell a $1.5 billion stake in Shengjing Bank to a state-owned asset management firm.

The S&P/ASX 200 in Australia fell 1.2%.

MSCI’s broadest index of Asia-Pacific shares outside Japan shed 1.23%.

Investors watched the 10-year Treasury yield, which crossed the 1.5% mark on Monday and has continued rising and was last sitting at 1.5375%. Yields move inversely to prices.

The rising yields hit tech stocks overnight on Wall Street, with the Nasdaq Composite falling 2.83% to 14,546.68 for its worst day since March. Tech stocks are hit in an environment of rising yields as the rise in rates makes their future cash flows less valuable, and in turn makes the popular stocks appear overvalued.

Tech stocks in Asia slipped in Wednesday trade, with shares of Japanese conglomerate Softbank Group falling 2.33% and South Korea’s Samsung Electronics dropping 3.01%.

Chinese tech shares in Hong Kong also declined, with Tencent plunging 2.72% and Alibaba slipping 2.52%. The Hang Seng Tech index fell 2.21%.

On Wall Street, the S&P 500 declined 2.04% overnight to 4,352.63 while the Dow Jones Industrial Average slipped 569.38 points to 34,299.99.

 

Oil prices were lower in the afternoon of Asia trading hours, with international benchmark Brent crude futures down 1.48% to $77.92 per barrel. U.S. crude futures shed 1.55% to $74.12 per barrel.

 

https://www.cnbc.com/2021/09/29/asia-markets-overnight-wall-street-drop-us-treasury-yields-currencies-oil.html

Evergrande to sell $1.5 billion stake in Chinese bank, as it faces another bond interest payment

Published Tue, Sep 28 2021 10:50 PM EDT

Ahead of another interest payment deadline, Chinese developer Evergrande announced it will be selling off a $1.5 billion (9.99 billion yuan) stake in Shengjing Bank to a state-owned asset management firm.

The property giant, which is buckling under the weight of more than $300 billion in debt, has been struggling to raise funds as it faces a $47.5 million bond interest payment deadline on Wednesday. The embattled real estate giant also owes payments to banks and suppliers.

In a filing to the Hong Kong exchange on Wednesday morning, Evergrande said that it has entered an agreement to sell the 1.75 billion shares it owns in Shengjing Bank to the Shenyang Shengjing Finance Investment Group, at 5.70 yuan per share. Those shares amount to 19.93% of the issued share capital of the bank.

Evergrande had earlier already disposed of 1 billion yuan worth of shares in Shengjing Bank.

In the statement, Evergrande said that its liquidity problems have already “adversely affected” Shengjing Bank “in a material way.” Introducing the purchaser – the state-owned Shenyang Shengjing Finance Investment Group – will “stabilise the operations” of the bank, Evergrande said.

Evergrande’s shares in Hong Kong jumped nearly 10% in early trading on Wednesday morning.

Another bond interest payment due Wednesday

The troubles of Evergrande came to the fore after it warned twice in September that it may default on its debts. Fears over whether the firm would default roiled global markets – although U.S. stocks rebounded by the end of last week.

The world’s most indebted real estate company already missed one key $83.5 million coupon payment last week, on an offshore March 2022, $2 billion 5-year bond. Dollar bonds are typically held by foreign investors.

Evergrande has remained silent on the payment due last week, with no announcement made thus far.

However, the company will not technically default unless it fails to make that payment within 30 days of the due date.

Markets are closely watching to see if the firm will meet its next interest payment of $47.5 million due Wednesday for a $1 billion dollar bond that will mature in March 2024.

With investors exiting Evergrande bonds and as prices tumble, yields on this 7-year bond have shot up to 90%, from just around 14% in the beginning of this year. Yields move in the opposite direction from prices.

For the rest of the year, Evergrande has interest payments due each month in October, November and December.

Analysts have said the firm may prioritize domestic investors, who are the main holders of onshore bonds – over foreign investors, who mostly hold the offshore debt.

https://www.cnbc.com/2021/09/29/evergrande-debt-crisis-to-sell-stake-in-bank-faces-bond-payment.html

Fitch downgrades Evergrande and subsidiaries Hengda and Tianji

September 29, 2021 5:08 AM By Reuters Staff

Sept 29 (Reuters) - Rating agency Fitch said on Wednesday it had downgraded the long-term foreign-currency issuer default ratings (IDRs) of Chinese homebuilder China Evergrande Group and its subsidiaries, Hengda and Tianji.

The downgrades to ‘C’, from ‘CC’, reflect that Evergrande is likely to have missed interest payment on its senior unsecured notes and entered the consequent 30-day grace period before non-payment constitutes an event of default, Fitch said.

https://www.reuters.com/article/china-evergrande-debt-ratings-fitch/fitch-downgrades-evergrande-and-subsidiaries-hengda-and-tianji-idUSFWN2QU0N7

China Keeps Cash Engine Running in Ninth Day of Injections

By Tania Chen

29 September 2021, 04:16 BST

Central bank seeks to boost liquidity before week-long break

·         Policy makers may deliver another RRR cut before holiday: ANZ

China’s central bank injected liquidity into the financial system for a ninth day in the longest run since December as it sought to meet a surge in seasonal demand for cash. 

The People’s Bank of China pumped in 100 billion yuan ($15.5 billion) of cash with 14-day reverse repurchase agreements, resulting in a net injection of 40 billion yuan. The move may also have been aimed at calming jitters fueled by China Evergrande Group’s debt crisis.

More

https://www.bloomberg.com/news/articles/2021-09-29/china-keeps-cash-engine-running-in-ninth-day-of-injections?srnd=premium-europe

Finally, it was a bad day too for US central banksters. Did some Fed members front run the Fed? They wouldn’t do that, would they?  Something about smoke and fires comes to mind.

“Kaplan insisted he had done nothing wrong.” 

As someone more famous than me once said about a very British government sex scandal, involving the UK Defence minister, (Secretary of State for War, in the good old days,)  the Soviet Embassy naval attaché, some shared ladies of dubious repute, Cliveden sex parties, and an establishment cover up by Lord Denning, Court of Appeal, Master of the Rolls, (a non-catering judicial position,) “well he would say that, wouldn’t he?”

The next afternoon the two parties reconvened at the pool, joined by Ivanov, who had arrived that morning. There followed what Lord Denning described as "a light-hearted and frolicsome bathing party, where everyone was in bathing costumes and nothing indecent took place at all."

https://en.wikipedia.org/wiki/Profumo_affair

Well, if you say so, Mi’Lud.

Dallas Fed President Kaplan to retire early on Oct. 8, citing trading disclosure ‘distraction’

Published Mon, Sep 27 2021 3:59 PM EDT Updated Mon, Sep 27 2021 5:56 PM EDT

Dallas Federal Reserve President Robert Kaplan became the second regional central bank leader to resign Monday, saying he was stepping down early following a recent controversy over stock market trades he made.

Kaplan’s early retirement follows an announcement earlier in the day from Boston Fed President Eric Rosengren, who said he will leave as well but cited health concerns and not the issue over his investment portfolio activity.

“The Federal Reserve is approaching a critical point in our economic recovery as it deliberates the future path of monetary policy. Unfortunately, the recent focus on my financial disclosure risks becoming a distraction to the Federal Reserve’s execution of that vital work,” Kaplan said in a statement.

His retirement takes effect Oct. 8. The resignations come a day before Fed Chair Jerome Powell is to spend two days on Capitol Hill updating legislators on the central bank’s efforts to combat the economic impact of the Covid-19 pandemic.

Controversy had swirled over the issue after disclosures that Kaplan in particular had been executing large-dollar trades in big-name companies such as Amazon, Apple and Delta Air Lines. The Wall Street Journal first reported the trades.

Subsequent to the disclosures, both Kaplan and Rosengren said they would be selling their stocks to avoid the appearance of conflict. Questions were raised because the Fed has conducted trillions of dollars in asset purchases aimed at helping markets function, and has bought corporate bonds from mega-cap companies including Apple.

Kaplan insisted he had done nothing wrong.

---- “We need to make changes, and we’re going to do that as a consequence of this,” Powell said last week. “This will be a thorough going and comprehensive review. We’re going to gather all the facts and look at ways to further tighten our rules and standards.”

Powell vowed that changes would be made.

“I want to be able to look back on this years from now and know that we rose to meet this challenge and handled the situation well and that what we did made a lot of sense and protected the public’s interest and the institution that we’re all a part of,” he said.

Powell on Monday wished Kaplan well and praised his work at the Dallas Fed.

More

https://www.cnbc.com/2021/09/27/dallas-fed-president-kaplan-to-retire-early-on-oct-8-citing-trading-disclosure-distraction.html

In central banking as in diplomacy, style, conservative tailoring, and an easy association with the affluent count greatly and results far much less.

John Kenneth Galbraith.

 

Global Inflation Watch.

Given our Magic Money Tree central banksters and our spendthrift politicians,  inflation now needs an entire section of its own.

Today, the law of unintended consequences.

Climate Policy Meets Cold Reality in Europe

The rush to renewables causes severe energy price spikes and shortages. Biden’s policies would do the same in the U.S.

Sept. 27, 2021 12:40 pm ET

European leaders at the United Nations last week applauded themselves as they doubled down on their pledges to slash CO2 emissions. And Prime Minister Boris Johnson said the U.K. “will lead by example, keeping the environment on the global agenda and serving as a launch pad for a global green industrial revolution.” Such vows of carbon chastity are, to say the least, ironic as Europe grapples with a severe energy shortage and surging prices wrought by its green industrial revolution.

In the past decade the U.K. and Europe have shut down hundreds of coal plants, and Britain has only two remaining. Spain shut down half of its coal plants last summer. European countries have spent trillions of dollars subsidizing renewables, which last year for the first time exceeded fossil fuels as a share of electricity production.

But renewables don’t provide reliable power around the clock, and wind power this summer has waned across Europe and in the U.K., forcing them to turn to gas and coal for backup power. Yet demand for these fossil fuels is also surging across Asia and South America, where drought has crimped hydropower. Manufacturers there are also consuming more energy to supply Western countries with goods.

Japan has become especially dependent on liquefied natural gas imports since it shut down most of its nuclear power plants after Fukushima in 2011. Even China has been forced to ration electricity to energy-hungry aluminum smelters because of a coal power shortfall. This has sent global aluminum prices soaring.

Increased global demand has caused the price of coal to triple and the price of natural gas to increase fivefold over the past year. Europe’s cap-and-trade scheme has pushed prices even higher. Under the program, manufacturers and power suppliers must buy carbon credits on an open trading market to offset their emissions. The price of credits has spiked this year as demand for them from coal plants and other manufacturers has increased while government regulators have tightened supply.

----Europe has become ever more dependent on Russia—the world’s second largest gas producer, after the U.S.—for energy because the U.K. and Germany have banned hydraulic fracturing, letting their rich gas shale resources go to waste. Meantime, the Netherlands is shutting down Europe’s biggest gas field.

In short, all of Europe’s green chickens are coming home to roost. Several U.K. retail electricity providers have collapsed in recent weeks because of the surging price of gas. Energy experts warn that some German power suppliers are in danger of going insolvent. Germany’s electricity prices, which were already the highest in Europe because of heavy reliance on renewables, have more than doubled since February.

More

https://www.wsj.com/articles/climate-policy-reality-europe-energy-costs-gas-coal-11632754849?mod=mhp

"The trade doesn’t get the respect it deserves. It’s a hard job": What truckers say about the supply chain crisis

17:45, 27 SEP 2021   Updated21:54, 27 SEP 2021

"Everything you own, everything in your house, everything you’re standing up in was on the back of a lorry at some point."

Claudiu Filipescu is sat in his cab at Birch services on the M62 waiting for the details of his next job to come through.

As a Romanian HGV driver with experience of working in this country he's exactly the type of person the Government is hoping to entice with a temporary visa scheme that will see 5,000 foreign truckers allowed into the UK on three-month contracts up to Christmas Eve.

But Claudiu, who spends nine months of every year working out of Waterford in Ireland and the rest of the time at home with his family in the city of Bacua in eastern Romania, won't be taking up the offer.

"When you are new it costs a lot to get set up," he said.

There’s a lot of hoops to jump through.

"You see these stories about drivers earning all the money. It’s the same stories in Ireland and Romania.

"But the companies aren’t paying any more than they used to.

"For me it’s not worth it. At Christmas I’ll be at home with my family in Romania."

----Paul, a long distance lorry driver from Newcastle, who asked us not to use his surname, said a lot of older drivers who left the industry after the CPC (certificate of professional competence) qualification was introduced in 2009 had never been replaced.

"You have to sit for 35 hours while someone tells you how to do the job you’ve been doing for 30 years," he said.

"It’s a load of twaddle. A lot of the older end just said 'l’m not doing that'.

“But I’ve got no intention of leaving the industry. It’s what I’ve always wanted to do and the company’s always looked after me."

More

https://www.manchestereveningnews.co.uk/news/greater-manchester-news/the-trade-doesnt-respect-deserves-21688090?utm_source=men_newsletter&utm_campaign=daily_newsletter2&utm_medium=email

Joy for landlords as renter demand causes stock surplus to evaporate

Tuesday 28 September 2021 10:52 am

A stock surplus in properties available to rent has started to disappear, as demand from tenants is on the up.

The rental market stock surplus is now at a lower level than before Covid hit, according to research from buy-to-let specialist, Sequre Property Investment.

The level of stock surplus climbed when the pandemic hit in 2020, hitting a high of 171,080 properties listed to let across 21 major UK cities, at the end of 2020. This was a 77 per cent year on year increase.

Renters left cities in waves as city life became less desirable during the Covid outbreak and employees were instructed to work from home where possible.

Now, there is good news for landlords as the number of properties available has slowly declined since the start of 2021. There were just 57,382 properties available on the market, latest data showed. 

This represents a 66 per cent drop on the pandemic high and is also 41 per cent lower than the levels seen before the pandemic.

In London, the surplus hit 102,240 available properties at the end of 2020. It dipped to just 35,292 available rental properties in the third quarter of 2021.

There had been a “slow but steady” reduction in the level of rental properties available this year, sales director at Sequre Property Investment, Daniel Jackson, said.

“However, the latest data suggests that with restrictions all but gone, this trickle has turned into a strong and consistent stream and available rental stock is now lower than pre-pandemic levels. 

“This will be welcome news for those landlords who will no longer need to lower their rental income expectations in order to secure a tenant and we should now see a far greater level of stability remain for the remainder of the year.”

https://www.cityam.com/joy-for-landlords-renter-demand-causes-stock-surplus-to-evaporate/

Commodity Price Surge Deals Stagflationary Blow to World Economy

By Catherine Bosley

28 September 2021, 17:57 BST

Crude pushed past $80 for the first time in three years

·         Rising prices have hit consumer sentiment in U.K. and U.S.

The world economy is facing a buildup in stagflationary forces as surging energy prices boost inflation and slow the recovery from the pandemic recession.

Oil’s climbed to more than $80 a barrel for the first time in three years, natural gas for October delivery traded at the costliest in seven years and the Bloomberg Commodity Spot Index rose to the highest level in a decade. 

More

https://www.bloomberg.com/news/articles/2021-09-28/commodity-price-surge-deals-stagflationary-blow-to-world-economy

 

Covid-19 Corner

This section will continue until it becomes unneeded.

With a Pfizer tweak here and a Pfizer tweak there, pretty soon Pfizer hopes to come up with Ivermectin two, but at a much higher price of course. Industry wags have already dubbed it “Pfizermectin.”

Please, at what is likely to be its release price, don’t start giving it to horses, cattle, sheep or dogs.

Pfizer begins study of oral drug for prevention of COVID-19

September 27, 202111:21 PM BST

Sept 27 (Reuters) - Pfizer Inc (PFE.N) said on Monday it has started a large study testing its investigational oral antiviral drug for the prevention of COVID-19 infection among those who have been exposed to the virus.

The drugmaker and its rivals, including U.S.-based Merck & Co Inc (MRK.N) and Swiss pharmaceutical Roche Holding AG (ROG.S), have been racing to develop an easy-to-administer antiviral pill for COVID-19. read more

The mid-to-late-stage study will test Pfizer's drug, PF-07321332, in up to 2,660 healthy adult participants aged 18 and older who live in the same household as an individual with a confirmed symptomatic COVID-19 infection.

In the trial, PF-07321332, designed to block the activity of a key enzyme needed for the coronavirus to multiply, will be administered along with a low dose of ritonavir, an older medication widely used in combination treatments for HIV infection.

To date, Gilead Sciences Inc's (GILD.O) intravenous drug remdesivir is the only approved antiviral treatment for COVID-19 in the United States.

Pfizer has also started another study of PF-07321332 in non-hospitalized, symptomatic adult patients.

Merck and partner Ridgeback Biotherapeutics recently launched a late-stage trial of their experimental drug molnupiravir for prevention of the COVID-19 infection. read more

Molnupiravir is also being studied in a late-stage trial in non-hospitalized patients to see if it reduces the risk of hospitalization or death.

https://www.reuters.com/business/healthcare-pharmaceuticals/pfizer-begins-study-covid-19-antiviral-drug-2021-09-27/

Sanofi ditches mRNA COVID-19 vaccine amid rivals' success

September 28, 2021 7:30 AM  By Reuters Staff

PARIS (Reuters) -Sanofi is dropping plans for its own mRNA-based COVID-19 vaccine because of the dominant role of the BioNTech-Pfizer alliance as well as Moderna in the fight against the pandemic, the company said on Tuesday.

The move highlights the challenges of competing in particular with pioneer BioNTech, which rose from obscurity through its alliance with pharma major Pfizer last year. The pair have delivered close to 1.5 billion doses so far, making them the western world’s largest COVID-19 vaccine maker.

French healthcare group Sanofi will instead focus on efforts with British partner GlaxoSmithKline to bring another COVID-19 vaccine candidate to market based on the more conventional protein-based approach, where mass trials are ongoing.

The decision to drop clinical development of a shot based on mRNA, or messenger RNA, acquired as part of its takeover of Translate Bio, came despite positive Phase I/II study interim results here announced on Tuesday where participants' blood readings showed a strong immune reaction.

But Sanofi said the read-out encouraged it only to pursue the technology as a potential vaccine against influenza and other diseases, giving up on the area of COVID-19 because of the strong market presence of the two approved mRNA shots.

“These results will clearly help inform the path forward for our mRNA development programs,” said Jean-Francois Toussaint, global head of research and development at Sanofi Pasteur.

---- “The decision to end RNA looks to be interpreted as positive since they will save development costs and concentrate on other products and ventures,” said Ion-Marc Valahu, a fund manager at Geneva-based investment firm Clairinvest.

The company said it started testing an mRNA shot against seasonal influenza in humans in June and will launch follow-on clinical studies next year.

The development of RNA flu shots is already shaping up to be a tight race as drugmakers hope they can more quickly adjust the vaccine to ever-changing strains in circulation.

Pfizer said this week it started testing an mRNA flu vaccine. Moderna has several influenza vaccine candidates in development, including combinations that include a COVID-19 booster.

More

https://www.reuters.com/article/health-coronavirus-sanofi/update-5-sanofi-ditches-mrna-covid-19-vaccine-amid-rivals-success-idUSL1N2QU0BI

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

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/

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.

Bitcoin Miners Eye Nuclear Power as Environmental Criticism Mounts

Some cryptocurrency miners are striking deals with operators of struggling nuclear plants, which are carbon-free and have excess power capacity to spare

Sept. 26, 2021 7:01 am ET

Bitcoin miners, under fire for their sizable environmental footprint, are forging partnerships with owners of struggling nuclear-power plants with electricity to spare.

The matchups have the potential to solve key issues facing each industry, executives and analysts say: Electricity-hungry bitcoin miners want stable and carbon-free power, while nuclear plants facing competition from cheaper power sources need new customers.

Talen Energy Corp. has entered into a joint venture with bitcoin-mining company TeraWulf Inc., which has started land development for a mining facility the size of four football fields next to its Pennsylvania nuclear plant. Nuclear generator Energy Harbor Corp. will provide power to a Standard Power mining center in Ohio starting in December.

“We are building demand adjacent to the existing nuclear plant,” said Talen Energy President Alex Hernandez, who heads the subsidiary jointly developing the mining project near the Susquehanna Steam Electric Station.

New nuclear projects are eyeing cryptocurrency miners as well: Startup Oklo Inc., which plans to build a small-scale fission power plant that can run on used nuclear fuel, has signed a 20-year supply deal with hardware and hosting firm Compass Mining.

“Both industry’s challenges are the other industry’s positives,” said Sean Lawrie, partner at consulting firm ScottMadden Inc.

Mining bitcoin is an energy-intensive process. To unlock more of the currency, miners must solve mathematical puzzles that become increasingly complex, which means they require more computing power—and electricity. Mining a decade ago required only a person with a PC, but rising bitcoin prices and a limited supply have created a race. The way to boost the odds of figuring out the puzzle is to put more machines to work.

“At the core of bitcoin mining is energy and energy infrastructure,” said Paul Prager, chief executive of TeraWulf.

The rise of vast mining operations has fueled criticism from environmentalists and others that growing use of fossil-fuel electricity for cryptocurrency could waste resources and worsen climate change. A tweet from Tesla Inc. Chief Executive Elon Musk expressing concern over the environmental impact of mining operations briefly caused bitcoin prices to fall in May.

More

https://www.wsj.com/articles/bitcoin-miners-eye-nuclear-power-as-environmental-criticism-mounts-11632654002?mod=markets_minor_pos1

"In economics, hope and faith coexist with great scientific pretension."

John Kenneth Galbraith.