Baltic Dry Index. 2289 +04 Brent Crude 79.88
Spot Gold 1804
Coronavirus Cases 02/04/20 World 1,000,000
Deaths 53,100
Coronavirus Cases 06/01/22 World 298,289,922
Deaths 5,482,253
Don’t fight the Fed.
Wall Street saying.
Forget soaring omicron infections, global stock casinos were jolted back towards reality by the release of the minutes of last month’s Fed meeting.
But talk is cheap. Does the Powell Fed really intend to turn from chicken into bear?
If it does, prepare for the Great Stocks Comeuppance of 2022. Prepare for the Great Slaughter of Democrats in the 2022 mid-term elections. Prepare for the massive corporate debt distress of 2022. Prepare for the Great Biden Bust.
In short, if the Fed turns Volker bear, prepare for the end of the Greenspan-Bernanke-Yellen-Powell stock market put. The end of the 30+ year bull market in bonds. The end of Easy Street!
For now, my
money is on the Powell Fed growling but remaining chicken. Still, it might be time to buy a few precautionary put options.
Japan’s Nikkei 225 drops nearly 3% as Asia-Pacific markets largely fall; oil declines more than 1%
SINGAPORE — Shares in Asia-Pacific declined in Thursday trade following losses overnight that saw the Dow Jones Industrial Average notching its first decline of 2022.
In Japan, the Nikkei 225 slipped 2.6% while the Topix index dipped 1.88%. Australian stocks also saw heavy losses as the S&P/ASX 200 fell 2.77%, with shares of Afterpay plunging nearly 11%.
Hong Kong’s Hang Seng index shed 0.36%. Hong Kong-listed shares of debt-ridden developer China Evergrande Group fell 0.63%. Reuters reported that the firm will seek a six month delay in making payments on an onshore bond.
The Shanghai composite in mainland China declined 0.16% while the Shenzhen component slipped 0.537%.
South Korea’s Kospi fell 0.86%.
In Southeast Asia, the Straits Times index outperformed the broader region as it gained 0.52%.
MSCI’s broadest index of Asia-Pacific shares outside Japan traded 1.31% lower.
Minutes from the U.S. Federal Reserve’s December meeting released Wednesday showed officials are ready to aggressively dial back policy help.
Major indexes on Wall Street fell sharply following the release of the minutes, with the S&P 500 dropping 1.94% to 4,700.58. The Dow Jones Industrial Average fell 392.54 points to 36,407.11 while the tech-heavy Nasdaq Composite plunged 3.34% to 15,100.17.
Meanwhile, the 10-year U.S. Treasury yield touched 1.7% on Wednesday, last sitting at 1.6981%. Yields move inversely to prices.
Oil prices were lower in the afternoon of Asia trading hours, with international benchmark Brent crude futures slipping 1.36% to $79.70 per barrel. U.S. crude futures shed 1.3% to $76.84 per barrel.
More
Federal Reserve puts wheels in motion for balance sheet reduction
The Federal Reserve at its December meeting began plans to start cutting the amount of bonds it is holding, with members saying that a reduction in the balance sheet likely will start sometime after the central bank begins raising interest rates, according to minutes released Wednesday.
While officials did not make any determination about when the Fed will start rolling off the nearly $8.3 trillion in Treasurys and mortgage-backed securities it is holding, statements out of the meeting indicated that process could begin in 2022, possibly in the next several months.
“Almost all participants agreed that it would likely be appropriate to initiate balance sheet runoff at some point after the first increase in the target range for the federal funds rate,” the meeting summary stated.
The minutes also indicated that once the process begins, “the appropriate pace of balance sheet runoff would likely be faster than it was during the previous normalization episode” in October 2017.
The size of the Fed’s balance sheet is significant because the central bank’s bond purchases have been considered a key element in keeping interest rates low while boosting financial markets by keeping money flowing.
Wall Street reacted negatively to the news, with stocks falling and government bond yields rising on the prospect of a tighter Fed in 2022.
Fed officials said repeatedly during the meeting that they believe ultra-easy policies instituted in the early days of the Covid-19 pandemic were no longer warranted or justified. Addressing the key pillars of their dual goals, committee members expressed concern over surging inflation while saying they see the jobs market at close to full employment.
“They did more than talk about this. Obviously, there was a fairly lengthy discussion. This was a pretty serious conversation,” Kathy Jones, chief fixed income strategist at Charles Schwab, said of the minutes, which had a special section titled “Discussion of Policy Normalization Considerations.”
“The fact that almost all participants agreed that it was appropriate to initiate the balance sheet runoff after the first increase in the target range for the fed funds rate implies that there’s not a big appetite for ‘let’s wait and see.’” Jones added. “Last time, they waited two years. This time, it looks like they’re ready to go.”
More
https://www.cnbc.com/2022/01/05/fed-minutes-december-2021.html
Bitcoin Tanked After the Fed Minutes Were Released. Here’s Why.
By Daren Fonda Updated Jan. 5, 2022 4:30 pm ET
Bitcoin slid sharply after the Federal Reserve released minutes of its December meeting, with policy makers indicating growing unease over inflation and the potential for interest rates to start rising as soon as this March.
Bitcoin was down more than 4% to $44,200, falling from around $46,000 soon after the Fed made the minutes public.
Fed officials indicated that inflation readings and tight labor conditions could warrant an interest-rate increase “sooner or at a faster pace than participants had earlier anticipated.” The minutes, from the Dec. 14-15 meeting of the bank’s monetary-policy committee, also indicated that the Fed may start to pare back its $8.8 trillion balance sheet “relatively soon” after raising its benchmark federal-funds rate.
----Bitcoin wasn’t the only cryptocurrency falling hard on prospects for higher interest rates and tighter financial conditions. Ether was off 4.6% to $3,640. Many other “alt-coins” were faring worse with Solana down 6.3% to $158, Cardano off 5.4% to $1.25, and Terra falling 7.4% to around $80.
The selloff in Bitcoin is another sign that it is acting more like a tech stock than an inflation-fighting store of value–or digital gold, as its proponents argue.
Bitcoin’s limited supply of 21 million coins means that it can’t be depreciated like fiat currencies that are vulnerable to inflation and loss of purchasing power, Bitcoin’s fans argue. But it has failed to hold up, at least in the short term, coming under pressure as the Fed and other central banks pare back on excess-liquidity measures and prime the markets for higher rates this year.
Other cryptos also appear to be performing more like emerging-tech bets than alternative assets, correlating with the performance of the Nasdaq in the near term.
Higher interest rates and tighter financing conditions are designed to prevent inflation from spiraling further. A side effect, though, is that they tend to hit speculative assets as investors opt for safer investments. Tech gets hit hard as investors rotate into value, energy, and other sectors that could do better in an inflationary climate.
Indeed, Bitcoin’s slide has coincided with the 10-year Treasury yield surging from 1.52% on December 31 to 1.71% currently.
If Bitcoin and other cryptos aim to be viewed as true alternative assets, they will need to start performing that way. So far, the markets are treating them like speculative, high-growth bets, vulnerable to the same financial conditions now pushing tech stocks into a tailspin.
https://www.barrons.com/articles/bitcoin-fed-minutes-cryptocurrencies-51641416716?siteid=yhoof2
Finally, so you really, really, really, want to travel in winter in an electric vehicle.
Opinion: Imagine Virginia’s icy traffic catastrophe — but with only electric vehicles
January 4, 2022
Sometime after 3 a.m. Tuesday, as an epic 48-mile winter traffic jam on Interstate 95 in Virginia dragged on, a long-haul trucker from Canada heard a knock at the door of his cab. It was one of the hundreds of other motorists stuck in subfreezing temperatures with no food or water.
The supplicant was “driving a Tesla,” recounted the trucker, who told the story on Twitter under the handle My World Through A Windshield, “and he’s worried about running out of power in the cold. [It’s] 19°F or -7°C. He’s a nice guy who was worried about his kids. I gave him some water, a spare blanket and [a] thermal/mylar blanket.”
My World Through A Windshield did not report what eventually happened to this driver, but the anecdote illustrates an important point: If everyone had been driving electric vehicles, this mess could well have been worse.
The not-so-unprecedented event — essentially a repeat of what happened on a wintry night in the D.C. area 11 years ago this month — therefore provides a reality check on the push by government and business to electrify cars and trucks.
It is a scientific fact that batteries of all kinds lose capacity more rapidly in cold weather, and that includes the sophisticated lithium-ion ones used by Teslas and other EVs. Carmakers can, and do, mitigate cold-weather “range anxiety” through various technologies; Tesla is touting a new “heat pump” to extend winter range. Drivers can save battery power by, say, turning off the heat. The issue cannot be eliminated, however, as Tesla acknowledges on its corporate website.
It’s a hassle in ordinary winter situations but potentially much worse than that on a night like Monday.
Any EV driver stuck on I-95 was right to be anxious — not only about a rapidly dying battery but also about recharging it. Cold would make that process much more time-consuming, assuming there was a charging station nearby, and that the electric power system hadn’t gone out (as it did in parts of Virginia on Monday).
A gas-powered Toyota RAV4, say, can go 440 miles between fill-ups, under ideal conditions; a fully charged Tesla Model X has a 351-mile range (and a much higher price). Of course, cold also affects the performance of gas-powered vehicles; many were left stranded in Virginia after they ran out of fuel or their batteries died.
All else being equal, though, cars and trucks with internal combustion engines (ICE) would have the advantage in coping with a sudden challenge such as the I-95 fiasco. It is much easier to rehabilitate a disabled ICE vehicle. Rescuers can deliver gallons of gas in convenient jugs; gas stations are still far more numerous than EV charging stations; and ICE car batteries can be jump-started in minutes.
Absent some breakthrough in mobile charging technology, out-of-juice EVs in out-of-the-way places will need a tow. If Monday’s nightmare had been an all-electric affair, they might have littered the highway for miles.
More
NBC reporter among hundreds stranded on icy Virginia highway says drivers are turning off their cars to conserve fuel and walking their dogs on the frigid road
Tue, January 4, 2022, 3:12 PM
· A reporter trapped on Virginia's I-95 highway said drivers are turning off their cars to save fuel.
· NBC Correspondent Josh Lederman said people are also walking their dogs on the frigid road.
· As of Tuesday morning, drivers in northern Virginia have been trapped for at least 15 hours.
An NBC reporter who is trapped with hundreds on Virginia's I-95 highway said drivers are turning off their cars to conserve fuel and walking their dogs on the frigid road.
"People — once it got into about five hours — that people were stuck in their cars, started turning their cars off because, frankly, people wanted to conserve gas," Correspondent Josh Lederman said on Morning Joe early Tuesday morning.
More
https://www.yahoo.com/news/nbc-reporter-among-hundreds-stranded-151246453.html
Global Inflation/Stagflation Watch.
Given our Magic Money Tree central banksters and our spendthrift politicians, inflation now needs an entire section of its own.
Record U.S. quits, hiring slowdown may show Omicron's impact on labor supply
By Howard Schneider January 5, 2022 1:28 AM GMT
WASHINGTON, Jan 4 (Reuters) - Record numbers of U.S. workers leaving their jobs and a slowdown in hiring at front-line businesses may show that the latest COVID-19 wave is denting labor supply, possibly pushing the Federal Reserve further toward concluding that employment is nearing its practical limits.
Hiring data tracked by business payroll managers Homebase and UKG showed employment edging down through December, coinciding with a record outbreak of coronavirus infections driven by the Omicron variant.
Data from both firms showed larger seasonal dips this year than in 2020, with employment in Homebase's sample of smaller businesses falling around 15% in the last days of 2021 compared to a roughly 10% drop last year.
UKG saw shift work across a variety of industries fall 1.7% in December versus a 0.3% decline in the same period last year and a 0.8% drop in December 2019.
---- At the same time, new government data for November showed workers walking away from jobs in record numbers, particularly from lower-paid and often front-line service-sector positions where health risks are considered more acute and work-from-home options less available.
With job openings still near record levels and consumer demand holding up despite the wave of infections, economists say it could mean more pressure on companies to raise wages - and more pressure on the Fed to declare that its goal of "maximum employment" was close to being met, if not exceeded already.
---- In an essay published on the website Medium, Minneapolis Fed President Neel Kashkari, prominent among Fed officials who have wanted to delay interest rate increases in hopes of encouraging more job growth, said that as of last month's meeting he had penciled in two rate hikes for 2022 in part because of doubts about how many people will be willing to return to work soon.
"Wages are now climbing rapidly across various income categories," Kashkari wrote in explaining the sharp change in his policy outlook. "The labor market has not fully recovered from the COVID-19 shock ... But how long it is going to take for all prior workers to return is unclear. For now, at least, it appears demand for workers exceeds the supply." read more
The U.S. Labor Department is due to release its December employment report on Friday.
More
Europe’s Energy Crisis Is a Warning Sign for the U.S., Citi’s Morse Says
(Bloomberg) -- The energy crisis roiling markets in Europe is a preview of what the U.S. will face over the next 10 years as it shifts to cleaner power sources, according to Ed Morse, Citigroup’s global head of commodities research.
“We are in the first crisis of the energy transition,” Morse said in an interview on Bloomberg Television. Switching away from fossil fuels is an “event that is going to be disruptive, dislodging and it’s going to create disharmony at home and internationally -- and it is also going to make superb advances.”
Extremely volatility has made European natural gas prices impossible to predict, Morse said. Prices soared to records in December, plunging later in the month after the rally lured a flotilla of U.S. gas tankers. The market has since rebounded as Russia curbs supplies.
https://www.yahoo.com/news/europe-energy-crisis-warning-sign-170445582.html
Covid-19 Corner
This section will continue until it becomes unneeded.
What is ‘flurona’? Coronavirus and influenza co-infections reported as omicron surges.
January 5, 2022
Many people around the world kicked off 2022 by searching for more information about “flurona,” after Israel reported that two young pregnant women had tested positive for both the coronavirus and the flu.
Doctors have long been concerned about the potential impact of a “twindemic” — with influenza cases rising as covid-19 cases threaten to overwhelm hospitals — and called on people to get flu shots and coronavirus vaccinations. On the other hand, “flurona” refers to when one person has both respiratory infections at the same time — which health officials say is a possibility as cases of the highly contagious omicron variant of the coronavirus surge this winter across the world.
Here’s what we know so far.
Are cases of flurona new?
After two young pregnant women tested positive for both the coronavirus and influenza in Israel, many local and global media outlets dubbed it “flurona” in headlines. The Sun, a British tabloid, swiftly branded the co-infection “double trouble.”
While the word is relatively new and rising in popularity, cases of flu and coronavirus co-infections are not. And flurona is not a distinct disease but refers to when a person has been infected with both viruses. Flurona instances have been detected in countries including the United States, Israel, Brazil, the Philippines and Hungary, some even before the term was coined.
Instances of the co-infection were reported in the United States almost two years ago, according to a report from the Atlantic. In February 2020, a man entered a New York hospital with a severe cough and fever. At the time, the city had not officially reported any cases of the coronavirus. The patient tested positive for influenza and was then tested for the coronavirus. Weeks later, results confirmed that he, along with three family members, had contracted both viruses.
More
Carson Jerema: Forget lockdowns — the pandemic endgame is already here
It may not look like the future we hoped for, as quickly as we hoped for it, but this is it
Jan 04, 2022
What if we won but we were too scared to admit it? Two years into this COVID nightmare, governments are still relying on rising case counts to justify closing businesses, shutting schools and trying to regulate what people do in their own homes, despite growing evidence that even though cases are soaring, hospital admissions are not rising at previous rates.
This is what the end looks like. It isn’t some line we cross from pandemic hell into pre-COVID normalcy, where we burn our masks and relish our newfound freedom to touch unfamiliar doorknobs without hesitation. It may not look like the future we hoped for, as quickly as we hoped for it, but this is it.
The widespread availability of vaccines to all who want them remains the goal, and it is a goal that has largely been achieved. It will be a grind to reach the point where the virus becomes truly endemic, but it can be accomplished without lockdowns.
This is why the framing of the pandemic as a “war” has always been wrong. It was language used to justify intrusions into our daily lives, but it also set up the false idea that the virus would somehow surrender and we would be able to claim victory. The language of war also serves to justify ongoing assaults on civil liberties because the fight continues ever onward, and the promised return to regular life is always just out of reach.
If our leaders had simply laid out the case for getting vaccinated, without embellishing or making predictions they had no business making, there might be less frustration, less panic and less reliance on restrictions. The vaccines work well enough that they make their own argument. Instead, anxious to promise an end to the “war,” politicians oversold and continue to oversell what would be accomplished with widespread vaccination, dismissing new waves as “a pandemic of the unvaccinated.”
A typical example comes from U.S. President Joe Biden, who falsely said in July that, “You’re not going to get COVID if you have these vaccinations.”
More
https://nationalpost.com/opinion/carson-jerema-forget-lockdowns-the-pandemic-endgame-is-already-here
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
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.
Startup ONE says battery prototype delivered 750-mile range
January 5, 2022 5:14 AM GMT
DETROIT, Jan 5 (Reuters) - Our Next Energy (ONE), a two-year-old Michigan startup, said on Wednesday it had tested a prototype of its new battery in a Tesla Model S, driving 752 miles (1,210 kilometers) before recharging.
ONE aims to begin producing battery packs that will deliver similar range — about double that of most existing electric vehicles — by late 2023, according to Mujeeb Ijaz, ONE’s founder and chief executive.
“We plan to build (batteries) in North America, and believe it can be done economically,” Ijaz said in an interview.
ONE has focused on developing an advanced long-range battery that uses safer and more sustainable materials, while packing more energy into a smaller, less expensive package. read more
Ijaz, a 30-year industry veteran, is a former senior executive at Apple and A123 Systems, where he led teams developing battery systems for electric vehicles.
For ONE’s Gemini battery, Ijaz said: “We want to eliminate both nickel and cobalt, but we don’t want to give up energy density. We aim to re-invent battery chemistry as well as the cell architecture” in order to provide at least 750 miles of range between charges.
“If you put that much energy on board, you are ready for anything the customer asks – a round trip from Detroit to Chicago, or towing a trailer.”
ONE’s range target is well beyond even the best of current electric vehicles, including the Lucid (LCID.O) Air, which offers just over 500 miles of range in the top version.
Ijaz said ONE chose a Tesla (TSLA.O) Model S to showcase its prototype battery because “it has fairly high efficiency and a fairly large battery pack” which provided enough space to fit ONE’s battery.
The testing was done in a road test across Michigan in late December, at an average speed of 55 miles per hour, ONE said.
My daughter asked me when she came home from school, "What's the financial crisis?" and I said, it's something that happens every five to seven years.
Jamie Dimon, CEO JP Morgan.
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