Baltic Dry Index. 3344 +55 Brent Crude 112.55
Spot Gold 1847
A society that chooses between capitalism and socialism does not choose between two social systems; it chooses between social cooperation and the disintegration of society.
Ludwig von Mises.
It may not quite meet the usual accepted definition of a bear market, but yesterday the S&P 500 gave as good an impression as it gets.
Besides with stagflation in America and Europe, more interest rate hikes to come along with rampant food price inflation, and a new global recession looming for late 2022 or at best early 2023, our new bear stock market could easily get confirmation next week or in early June.
In stock market manias, getting out first always beats getting carried out last.
This bear market though, we have something new to watch. Cryptocurrencies, stablecoins and non-fungible tokens.
Totally useless probable frauds, I expect to see absolute carnage as billions get wiped out as, like all manic illusions when reality sets in, the market comes to price them at intrinsic value.
But for this weekend, one last weekend(?) enjoy one more weekend with the bear still knocking at the door.
Stocks close flat in wild session Friday that saw the S&P 500 briefly fall into a bear market
Rising recession fears pushed U.S. stocks briefly into a bear market on Friday with the S&P 500′s decline from its all-time high in January reaching 20% at one point. A dramatic late-day reversal pushed the benchmark slightly into the green for the day at the closing bell.
The S&P 500 finished 0.01% higher to 3,901.36 on Friday after falling as much as 2.3% earlier in the session. At the day’s lows, the S&P 500 was 20.9% below its intraday high in January. The index closed about 19% below its record.
There’s no official bear market designation on Wall Street. Some will count Friday’s decline at the intraday lows as confirmation of a bear market, whereas some strategists may say it’s not official until it closes 20% off its high. Regardless, it’s the biggest downturn of this magnitude since the rapid bear market in March 2020 at the onset of the pandemic.
“Stocks are still liberally priced and the psychology that drove them upward for a decade has turned negative,” wrote George Ball, chairman at investment firm Sanders Morris Harris. “The average bear market lasts a year (338 days, more precisely). This downturn has run for only one-third of that, so it probably has more downside room to run, albeit punctuated by interim rallies.”
The Dow Jones Industrial Average rose 8.77 points to 31,261.90 after being down more than 600 points at the day’s lows. The Nasdaq Composite fell 0.3% and is already deep in bear market territory, 30% off its highs.
For the week, the Dow lost 2.9% for its first eight-week losing streak since 1923. The S&P 500 lost 3% for the week, while the Nasdaq shed 3.8% — with both posting seven-week losing streaks.
“This week’s decline felt as if the market was starting to recognize that earnings growth and S&P 500 profitability may be in jeopardy as inflation will continue to be higher throughout the year,” wrote David Wagner, portfolio manager at Aptus Capital Advisors.
More
https://www.cnbc.com/2022/05/19/stock-market-futures-open-to-close-news.html
Finally, a good read. Why the last remnants of Lehman Brothers, which collapsed in 2008, still linger on. Plus, to no one’s great surprise, Wall Street at its finest, forever separating fools from their money.
The Last of Lehman Brothers
The bank whose collapse marked the beginning of the 2008 financial crisis is only mostly dead. These are the people attending to its last remains ahead of its final court cases.
By Lucca De Paoli and Jeremy Hill 18 May 2022, 00:01 BST
Daryl Rattigan arrived at Lehman Brothers 18 years ago for a three-month assignment from his law firm. Eventually the bank gave him a full-time job at its real estate finance arm in London.
Then the bank suddenly collapsed.
And he’s still there, almost 14 years later.
It turns out that when global financial institutions die, it can take a while. These deaths require caretakers. The spirit of a bank, even in life, is debt, and debts don’t settle easily into a grave. Most of the assets banks own are the debts of others: the mortgages, commercial loans, and IOUs payable to the bank. On the other side, of course, banks owe—to their bond- and note holders, counterparties in financial trades, and a long list of other creditors. Banks such as Lehman topple over when they suddenly can’t wring enough cash from their assets to meet their liabilities.
But even after the funeral, all the debts on both sides of the ledger are still there, and professionals are needed to sort out who has to pay up and who should be paid—professionals such as Rattigan, who’s spent years working to eke out value from property assets the bank held when it went under. On the morning of Sept. 15, 2008, in the hours after his employer filed for bankruptcy, Rattigan had no idea if he still had a job. He came into the office in London’s Canary Wharf, unsure of whether the doors would even be unlocked, to at least get his Rolodex. “In the back of your mind, you are also aware that there’s sometimes scope for people to be retained and help” with the cleanup, Rattigan says. “But if I was going to be retained, I had to get back in there and get my face shown.”
He got his wish. PricewaterhouseCoopers accountants, who had been brought in to pick up the pieces of Lehman’s UK arm, needed to tap a few people who knew where the documents were, where the value was, and how best to maintain it. Years after almost all of Lehman’s 5,000-strong London workforce has moved on—the line in their résumés becoming a talking point at job interviews—Rattigan is still making a living from the bank whose fall ushered in the greatest financial crisis since the Great Depression.
----Two court cases, one in London and the other in New York, are probably the last substantial issues that need to be resolved. They could linger for several more years, depending on appeals. But before the last contract is signed and the last rented office key is turned in, somebody might want to foot the bill for a goodbye cake and prosecco for Rattigan and others in a loose network of lawyers, accountants, consultants, and money managers. They’ve performed one of the weirdest jobs in finance: laying Lehman Brothers, finally, to rest.
----“Lehman is the largest bankruptcy filing ever. Because of that, it offered the biggest investment opportunity of nearly any company we could look at,” he says. A specialist in so-called distressed investments, Värde was interested in Lehman from the moment it all fell apart. “It’s a long time working on one thing,” Hartman says. “There’s probably some element of fatigue, but I’ll look back on this fondly.”
And then there are the lawyers. So many lawyers. Holders of Lehman debts don’t just wait around to get paid; they often have to fight in court over their claims. At the beginning of one trial last year, Lord Justice Kim Lewison of the UK’s Court of Appeal remarked that he had expected, after years of Lehman-related cases being heard at almost every level of Britain’s legal system, that all the questions around insolvency would have already been answered. “My Lord,” replied Mark Phillips, a lawyer who’s worked on bust companies for more than three decades. “If every question on insolvency had been answered, it would be a very sorry day.”
More
Allianz Fund Managers’ Paydays Could Be Followed by Prison
By Neil Weinberg and David Voreacos17 May 2022, 23:09 BST Updated on18 May 2022, 07:04 BST
He was a hedge-fund manager supposedly under the watchful eye of a “master cop” -- an Allianz SE unit that policed his every move.
Instead, U.S. authorities say, Greg Tournant sold lies to investors that cost customers, and now Allianz, billions of dollars, and resulted in a guilty plea to federal charges of securities fraud by Allianz Global Investors US.
News on Tuesday that the U.S. unit of the German insurance giant was admitting guilt over the collapse of its Structured Alpha group of hedge funds leaves many questions unanswered, including a big one: Will Tournant, who’d told investors Structured Alpha would do well whether markets went up or down, end up in prison?
For Allianz SE, Tuesday’s development brought an end to legal headaches that have engulfed the German insurer since the funds imploded in March 2020, when financial markets reeled during the early days of the pandemic.
The demise of the Structured Alpha funds is just the latest illustration of the outsized damage an obscure trading operation can wreak on an A-list financial institution. Think Archegos, Long-Term Capital Management and the hedge funds whose collapse led to the demise of Bear Stearns.
Tournant, 55, now faces charges that are upending his career and could send him to prison for a decade or more if he’s convicted. Former colleagues have turned on him, as has Allianz.
Tournant turned himself in to authorities in Colorado, where he lives, and faces trial in federal court in New York. His attorneys said the charges are an “ill-considered attempt by the government to criminalize the impact of the unprecedented, COVID-induced market dislocation of March 2020.” While regrettable, the losses “are not the result of any crime,” they said.
Prosecutors say that while Tournant assured big investors safety was his top priority, he secretly took huge, undisclosed risks. The result was a massive fraud that cost investors $7 billion, they say.
Tournant, the chief investment officer at Miami-based Structured Alpha, spent years “smoothing” performance data, lying about hedges against market downturns, and pretending risk managers at Allianz Global Investors US were carefully monitoring his every move, prosecutors charged in an indictment.
Two of his top lieutenants, Stephen Bond-Nelson and Trevor Taylor, agreed to plead guilty and are cooperating with prosecutors. They face long prison terms but could get far less time for their cooperation. All three men were also sued by the Securities and Exchange Commission.
More
Global Inflation/Stagflation Watch.
Given our Magic Money Tree central banksters and our spendthrift politicians, inflation now needs an entire section of its own.
The central element in the economic problem of money is the objective exchange-value of money, popularly called its purchasing power.
Ludwig von Mises.
Japan April consumer inflation beats BOJ target for 1st time in 7 years
May 20, 2022 4:51 AM GMT+1
TOKYO, May 20 (Reuters) - Japan's core consumer inflation in April exceeded a central bank target of 2% for the first time in seven years, but only thanks to rising import costs, not the strong domestic demand that the central bank has been trying to kindle.
Still, the 2.1% rise in the core consumer price index (CPI) announced on Friday reinforces market scepticism that the Bank of Japan (BOJ) will maintain its ultra-loose monetary policy, especially since households are suffering rising costs without substantial wage growth.
The core CPI data excludes prices of volatile fresh food but not energy, which has galloped higher because of the war in Ukraine. So have costs of other commodities, which affect prices of non-fresh food, another driver of the lift in inflation.
Before April, the index had not risen so fast since 2015 or, excluding a mid-decade period affected by a hike in sales tax, not since 2008.
For years, inflation has generally struggled to reach even 1%, despite efforts by the BOJ to get it to 2.0%.
But analysts said that finally beating the target now was no great cause for celebration, because costs of foreign energy and other commodities had driven the upward shift.
"The current price rises stem from higher import costs. If you look at the overall situation, this means inflation is a burden on companies and households," said Taro Saito, executive research fellow at NLI Research Institute.
"If wages rose, households could hope for higher real incomes, but they aren't rising, so households are being impacted negatively."
More
Inflation crimps Indian firms as rural millions cut spending
May 20, 2022 8:12 AM GMT+1
NEW DELHI, May 20 (Reuters) - Surging inflation is forcing many poor Indians to rein in spending, threatening a slowdown for companies such as Godrej Appliances which saw bumper sales as recently as March and April after a brutal heatwave spiked demand for its cooling products.
The Ukraine crisis and global supply chain disruptions have stoked prices worldwide, but people in developing countries such as India are more vulnerable to even small cost increases that can wreck their meagre budgets.
"From May we started seeing a drop in demand," Kamal Nandi, the business head of Godrej Appliances, one of India's largest makers of home appliances, told Reuters. "These are early signs of inflationary impact on discretionary spends."
The fall came swiftly after demand from the mass segment had "zoomed up" in March, and stayed good in April, he added.
April saw India's wholesale and consumer prices accelerate at their fastest in years, prompting the central bank to hike interest rates at an unscheduled policy meeting this month, with another likely next month. read more
Godrej, which made India's first domestic refrigerator in 1958, aims to raise prices when possible to offset commodity costs, but worries that could erode demand in the countryside home to two-thirds of India's population of nearly 1.4 billion.
"Going forward, every quarter there has to be a price hike and that will impact demand down the line," added Nandi, who said hikes in the prices of commodities had far outstripped sticker prices.
More
Below, why a “green energy” economy may not be possible, and if it is, it won’t be quick and it will be very inflationary, setting off a new long-term commodity Supercycle. Probably the largest seen so far.
The “New Energy Economy”: An Exercise in Magical Thinking
https://media4.manhattan-institute.org/sites/default/files/R-0319-MM.pdf
Mines, Minerals, and "Green" Energy: A Reality Check
https://www.manhattan-institute.org/mines-minerals-and-green-energy-reality-check
"An Environmental Disaster": An EV Battery Metals Crunch Is On The Horizon As The Industry Races To Recycle
by Tyler Durden Monday, Aug 02, 2021 - 08:40 PM
Covid-19 Corner
This section will continue until it becomes unneeded.
US experiments ‘may have contributed to emergence of Covid’
Fri, May 20, 2022, 2:14 PM
US experiments may have contributed to the emergence of Covid-19, leading economist Prof Jeffrey Sachs has warned, as he called for an independent inquiry into whether the virus leaked from a lab.
Prof Sachs, who has twice been named in Time magazine’s 100 most influential people in the world, called for universities and research institutions to open up their databases for scrutiny, amid fears labs were genetically modifying viruses.
Covid-19 first began spreading from a wet market in Wuhan, about eight miles from the Wuhan Institute of Virology (WIV).
US experiments may have contributed to the emergence of Covid-19, leading economist Prof Jeffrey Sachs has warned, as he called for an independent inquiry into whether the virus leaked from a lab.
“Research proposals make clear that the collaboration was involved in the collection of a large number of so-far undocumented Sars-like viruses and was engaged in their manipulation….raising concerns that an airborne virus might have infected a laboratory worker,” he said in a joint article with Prof Neil Harrison, of Columbia University.
The authors said that before the pandemic, work on Sars-like coronaviruses was being carried out as part of a ‘highly collaborative US–China scientific research program’ funded by the US government via the The National Institutes of Health (NIH).
This project, known as PREDICT, sought to identify viruses which had the potential to leap from animals to humans.
----China has failed to reveal much of the work that was happening, and removed a database of viral sequences shortly before the pandemic erupted.
But experiments were also taking place in the US which have also never been disclosed for independent analysis, the authors argue.
“The precise nature of the experiments that were conducted, including the full array of viruses collected from the field and the subsequent sequencing and manipulation of those viruses, remains unknown,” wrote Prof Sachs and Prof Harrison.
The pair also point out that the same group of Chinese/US scientists had submitted proposals to insert a specialist feature into Sars-like viruses called the furin cleavage site (FCS).
Covid-19 is unique in having a FCS, and it is the reason the virus is so infectious to humans. No other coronaviruses have the feature, and some scientists believe it is evidence the virus was man-made. Others think it occurred naturally through evolution.
More
https://www.yahoo.com/news/economist-calls-inquiry-whether-covid-131435143.html
Australian Prime Minister Supports Extended WHO Powers
By May 20, 2022 Updated: May 20, 2022
Prime Minister (PM) Scott Morrison has shown support for granting the World Health Organisation (WHO) greater powers to assist countries in managing pandemics.
However, minor parties have expressed concerns that this would amount to compromising Australia’s health sovereignty.
This comes after the World Health Assembly, consisting of 194 member countries, agreed in December 2021 to set up a global process to draft and negotiate a convention or treaty under the Constitution of the World Health Organisation to strengthen pandemic prevention, preparedness, and response.
Included in the potential framework of the convention is to “mobilize collective international efforts necessary to prevent, rapidly detect and effectively respond to outbreaks of disease with pandemic potential” and “support global coordination through a stronger WHO, as ‘the directing and coordinating authority on international health work,’ including for pandemic preparedness and response”.
More
Next, why this lunatic, “leader” couldn’t be more wrong and needs to be tossed out today. Approx. 8 minutes.
This pandemic treaty is the greatest power grab any of us has seen in our lifetime, says Neil Oliver
https://www.youtube.com/watch?v=gafV6YhhnAQ
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 more useful Covid links.
Johns Hopkins Coronavirus resource centre
https://coronavirus.jhu.edu/map.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.
This weekend, something different. Why green energy, if it’s even possible, is likely to be slow in arriving.
The History of Energy Transitions
April 7, 2022
Over the last 200 years, how we’ve gotten our energy has changed drastically.
These changes were driven by innovations like the steam engine, oil lamps, internal combustion engines, and the wide-scale use of electricity. The shift from a primarily agrarian global economy to an industrial one called for new sources to provide more efficient energy inputs.
The current energy transition is powered by the realization that avoiding the catastrophic effects of climate change requires a reduction in greenhouse gas emissions. This infographic provides historical context for the ongoing shift away from fossil fuels using data from Our World in Data and scientist Vaclav Smil.
Coal and the First Energy Transition
Before the Industrial Revolution, people burned wood and dried manure to heat homes and cook food, while relying on muscle power, wind, and water mills to grind grains. Transportation was aided by using carts driven by horses or other animals.
In the 16th and 17th centuries, the prices of firewood and charcoal skyrocketed due to shortages. These were driven by increased consumption from both households and industries as economies grew and became more sophisticated.
Consequently, industrializing economies like the UK needed a new, cheaper source of energy. They turned to coal, marking the beginning of the first major energy transition.
As coal use and production increased, the cost of producing it fell due to economies of scale. Simultaneously, technological advances and adaptations brought about new ways to use coal.
The steam engine—one of the major technologies behind the Industrial Revolution—was heavily reliant on coal, and homeowners used coal to heat their homes and cook food. This is evident in the growth of coal’s share of the global energy mix, up from 1.7% in 1800 to 47.2% in 1900.
The Rise of Oil and Gas
In 1859, Edwin L. Drake built the first commercial oil well in Pennsylvania, but it was nearly a century later that oil became a major energy source.
Before the mass production of automobiles, oil was mainly used for lamps. Oil demand from internal combustion engine vehicles started climbing after the introduction of assembly lines, and it took off after World War II as vehicle purchases soared.
Similarly, the invention of the Bunsen burner opened up new opportunities to use natural gas in households. As pipelines came into place, gas became a major source of energy for home heating, cooking, water heaters, and other appliances.
More
https://elements.visualcapitalist.com/the-history-of-energy-transitions/
This weekend’s musical diversion. It’s not often we get treated to a solitary drum cadenza in classical music. Here we get two. A composer marching to a different drumbeat. Approx. 14 minutes.
Johann Carl Fischer (c.1780)= Symphony with Eight Obbligato Timpani. - Soloist: Diego Montes.
https://www.youtube.com/watch?v=zIbOkLSE-hM
But for better sound quality. The same but better.
https://www.youtube.com/watch?v=t_p5ElRpoEE
This weekend’s chess update. Approx. 17 minutes.
No Way You Guess Who Wins This
https://www.youtube.com/watch?v=v__NgvnEdGc
This week’s maths update. Approx. 26 minutes.
Heron’s formula: What is the hidden meaning of 1 + 2 + 3 = 1 x 2 x 3 ?
https://www.youtube.com/watch?v=IguNXoCjBEk
Finally. Strawberries. Well why not? Approx. 13 minutes.
The Unbelievable History of Strawberries
https://www.youtube.com/watch?v=mGPteoCKfWo
Credit expansion can bring about a temporary boom. But such a fictitious prosperity must end in a general depression of trade, a slump.
Ludwig von Mises.
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