Baltic Dry Index. 2320 -22 Brent Crude 122.10
Spot Gold 1826 US 2 Year Yield 3.40 +0.34
Coronavirus Cases 02/04/20 World 1,000,000
Deaths 53,100
Coronavirus Cases 14/06/22 World 541,033,990
Deaths 6,332,482
Hayek observed that interest rate stimulus interfered with economic calculations, causing managers to invest in projects that would not otherwise have appeared profitable. Losses can subsequently materialise as customer demand fails to meet forecasts that were, in retrospect, optimistic. Long-term projects are highly sensitive to interest rates and are therefore more susceptible to such distortions. Pension obligations and long-term, capital-intensive projects are at high risk of miscalculation based on artificially low rates.
https://www.ft.com/content/2838c142-a560-11df-a5b7-00144feabdc0
Boom, and just like that the stock casino bubble burst, bond yields soared and reality started to return to the casinos and the cryptocurrency Ponzi Schemes. But we have much further to travel yet.
The Arthur Burns Powell led Fed now faces a disastrous
choice. Fight inflation seriously and bring a new US recession into 2022,
destroying the ruling Democrats in the November mid-term elections, or let inflation
rip even more, even as the new bear market in the casinos evaporates the phony
wealth effect boost to the economy.
If Powell opts for letting inflation rip, buy gold and silver fast. The dollar reserve standard will quickly become compromised.
Stick around, we will all know at some point tomorrow.
Given this bubble was started deliberately after Bear Sterns and Lehman blew up in 2008, and put on steroids after the central banks discovered the Magic Money Tree forests back in March 2020, we have a whole lot of misinvestment and malinvestment now to uncover.
That this has been coming for months has been obvious to all, except to anyone in the central banks or governments of the G-7.
Asia-Pacific stocks continue to slide; Alibaba drops more than 4%
SINGAPORE — Shares in Asia-Pacific fell in Tuesday morning trade after the S&P 500 fell overnight and closed in bear market territory.
The Nikkei 225 in Japan fell 2% as shares of conglomerate SoftBank Group declined more than 3%, while the Topix index declined 1.55%.
In Hong Kong, the Hang Seng index slipped 0.98% in early trading as Hong Kong-listed shares of Alibaba plunged 4.77%.
Mainland Chinese stocks also declined as the Shanghai Composite fell 1.09% and the Shenzhen Component slipped 1.974%.
South Korea’s Kospi dipped 1.37%.
Australia’s S&P/ASX 200, which returned to trade Tuesday following a holiday yesterday, tumbled 4.78% — and was one of the worst performers in the region. MSCI’s broadest index of Asia-Pacific shares outside Japan traded 1.61% lower.
On Wall Street overnight, the S&P 500 fell nearly 4% overnight to 3,749.63, closing in bear market territory, or down more than 20% from its January peak.
Other major indexes stateside also saw big declines. The Dow Jones Industrial Average dropped 876.05 points, or 2.79%, to 30,516.74. The tech-heavy Nasdaq Composite lagged, plunging 4.68% to around 10,809.23.
The losses on Wall Street came as investors braced for a potentially faster pace of interest rate hikes by the U.S. Federal Reserve following Friday’s hotter-than-expected consumer inflation report.
Fed policymakers are now contemplating the idea of a 75-basis-point rate increase later this week, according to CNBC’s Steve Liesman. That’s bigger than the 50-basis-point hike many traders had come to expect. The Wall Street Journal reported the story first.
“I think the simple way of explaining it is that, if [the Fed] don’t get inflation under control now, they may have a 10-year inflation problem and we go back to you know, the economic circumstances of the 70s,” Eric Robertsen, global head of research at Standard Chartered Bank, told CNBC’s “Squawk Box Asia.”
The stock markets are now starting to “reconcile” with that prospect, Robertsen said.
“Risk assets have plummeted with recession risk rising given the surge in yields and expectations of the Fed doing a Volcker,” Tapas Strickland, director of economics at National Australia Bank, said in a note on Tuesday.
In the early 1980s, former Fed Chief Paul Volcker helped tame inflation by raising benchmark interest rate to close to 20% and sent the economy into recession.
“If the Fed hikes by 75bps that will be a true Volcker moment and underscore front loading, a 50bp hike in contrast would cement the likelihood of 50bp hikes at every meeting for the rest of the year,” Strickland said.
The yield on the benchmark 10-year Treasury note recently saw its biggest move since March 2020, and last stood at 3.37%. The 2-year rate also saw a big jump and is currently trading at 3.415%. Yields move opposite to prices.
The 2-year rate now sits higher than the 10-year Treasury yield, representing an inversion – a measure closely watched by traders and often viewed as a potential indicator of recession.
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Hot inflation dims likelihood Fed can achieve ‘soft landing’
WASHINGTON (AP) — For months, Chair Jerome Powell has held out hope that the Federal Reserve will be able to raise interest rates high enough to throttle rampant inflation without tipping the economy into recession.
Yet with the Fed set to announce another sharp interest rate hike after it meets this week, days after the government issued a scorching inflation report, the likelihood that the central bank can engineer a so-called “soft landing” appears to be dimming.
With inflation at a four-decade high of 8.6%, Fed officials are likely this year to boost borrowing rates even higher than was expected just weeks ago. The central bank may also signal, when its policy meeting ends Wednesday, the possibility of raising rates to a level that could weaken growth — elevating the risk of a recession.
Some economists now even think the Fed may decide to surprise the financial markets this week by raising its benchmark short-term rate by three-quarters of a point, for the first time since 1994, rather than the half-point that Powell had signaled last month. Wall Street traders have priced in a 30% likelihood of such a drastic move, according to the CME Group.
Even if an economic downturn can be avoided, it’s almost inevitable, analysts say, that the Fed will have to inflict some pain — most likely in the form of higher unemployment — as the price of defeating stubbornly high inflation.
“They need to accept the fact that you can’t fight inflation without imposing some pain on the markets and the economy,” said Ethan Harris, head of global economic research at Bank of America. “They shouldn’t coddle the markets by kind of implying that there’s no major issue here, we’re going to have a soft landing for the economy, I think it’s too late for that. We have to have a hard landing.”
The prospect that the Fed will accelerate its credit tightening, further raising borrowing costs for households and businesses, drove the stock market sharply lower Monday. The broad S&P 500 index fell into bear-market territory, having lost more than 20% of its value since its peak at the beginning of the year.
Fed officials, as a group, were slow last year to recognize how persistent inflation would be, believing instead that widespread price spikes would likely prove temporary. They are now acting forcefully to try to make up for their initial delay.
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The Clues You Missed: 5 Super-Obvious Signs We Were in a Financial Bubble
We should have seen it coming. At least that’s what a lot of investors (big-time ones and Robinhood speculators alike) are telling themselves right now with financial assets of all sorts in freefall this year. More than ten years of a bull market, a flood of money from the Federal Reserve, and a new world of technology in everything from money to cars and even art made the future seem limitless. Only now are some people finding out — many of them for the first time — that the laws of the market have not been repealed. Inflation, the war in Ukraine, and rising interest rates are pummeling the markets, and no one knows when it will end.
The S&P 500 — the stock index that most likely is in your 401(k) — is down 19 percent this year to date. That is perilously close to the official definition of a bear market: 20 percent or more from the peak. Meanwhile, the NASDAQ, where the lofty tech names trade, is down 28 percent this year, SPACs and crypto have collapsed, and private markets are seizing up.
Small wonder that searching for the market-top signals most people missed has become a favorite pastime among the financial mavens looking for black humor as a salve for their losses. This list is far from comprehensive, but from crypto to meme stocks to SPACs and beyond, here are some of the tells that are making the rounds among investors.
More
Finally, it never rains but it pours. What else could possibly go wrong in the reign of “Calamity Joe”?
(OFFICIAL) S.Korean truckers' strike disrupts shipment of key chipmaking material
June 14, 2022 5:33 AM GMT+1
22. REUTERS/Byungwook Kim/File Photo
SEOUL, June 14 (Reuters) - A week-long strike by truck drivers in South Korea has disrupted shipments to China of a key material used in the production of semiconductors, the Korean International Trade Association (KITA) said on Tuesday.
It is the first concrete sign that the week-long strike is impacting the global supply chain of chip production, having already cost South Korean industrial sectors more than $1.2 billion in lost production and unfilled deliveries. read more
KITA said a Korean company that produces isopropyl alcohol (IPA), a raw material for cleaning chip wafers, is facing complications in shipping to a Chinese company that in turn supplies wafers to chipmakers.
KITA said in a statement that about 90 tonnes, or a week's worth of shipments have been delayed.
KITA corrected an earlier statement saying production had been disrupted. It clarified that the Chinese company does not supply wafers to Samsung Electronics Co Ltd's (005930.KS) chip production in China.
Samsung Electronics did not immediately comment. It produces NAND flash memory chips, used for data storage in data centres, smartphones and other tech gadgets, at its plant in Xian, China.
The trucker union said in a statement on Tuesday it will continue its general strike and condemned the transport ministry for being "neither willing to talk nor capable of resolving the current situation".
The union is protesting against soaring fuel prices and demanding minimum pay guarantees. Four rounds of negotiations with the government have failed to find a compromise.
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"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."
Ludwig von Mises.
Global Inflation/Stagflation Watch.
Given our Magic Money Tree central banksters and our spendthrift politicians, inflation now needs an entire section of its own.
UK economy shrinks 0.3 per cent amid recession worries
Monday 13 June 2022 7:11 am
The UK economy shrank in April, for the second month in a row, amid fears of a recession.
Gross domestic product (GDP) declined by 0.3 per cent in April, following a 0.1 per cent drop in March, according to figures published by The Office for National Statistics on Monday morning.
The drop was fuelled by a significant reduction in NHS Test and Trace activity, which had driven a decrease of 5.6 per cent in human health and social work.
Services were down by 0.3 per cent and was the main contributor to the fall in GDP.
Production fell by 0.6 per cent while construction was also down by 0.4 per cent. Businesses have struggled in the face of rapidly increasing supply and labour costs.
It was the first time that all main sectors had contributed negatively to a monthly GDP estimate since January 2021.
It comes as the country’s biggest business group has warned a recession is looming if the government does not step in and intervene further.
In the absence of a fresh package of measures before the summer parliamentary recess to boost business confidence, a recession will be “a very live concern,” according to Tony Danker, director general of the Confederation of British Industry (CBI).
Consumers are expected to cut spending from the current quarter through to the first three months of next year in response to real incomes falling 2.3 per cent in 2022, the fastest rate on record, CityA.M. reported on Monday.
Speaking on BBC Breakfast on Monday morning, environment minister George Eustice said the figures were “disappointing”.
“We’re seeing inflationary pressure, we’re seeing it in the US, we’re seeing it in Europe,” he said. “And yes, we’re seeing it here, too, of course. And what we need to do is to work to try to get that inflation under control.”
Alice Haine, personal finance analyst at investment platform Bestinvest, said the contraction was “no surprise”, given that it was the month consumer energy prices were hiked 54 per cent and taxpayers saw an increase in National Insurance while pension allowances were also frozen.
“April also tied in with the damaging effects of Russia’s invasion of Ukraine on the UK’s cost of living, with the fallout coming just as the economy was picking itself up from the coronavirus pandemic,” she added.
Haine said the data “intensifies the likelihood of the UK heading for a prolonged period of stagflation.”
Global food prices are soaring. Rice could be next
Published Sun, Jun 12 2022 7:51 PM EDT Updated Sun, Jun 12 2022 8:26 PM EDT
Food prices have been on the rise in the past few months. And rice, a staple food in much of Asia, could be next, industry watchers said.
The prices of many foods, ranging from wheat and other grains to meat and oils, have shot up. That’s been driven by a slew of factors, including the rising cost of fertilizer and energy in the past year as well as the Russia-Ukraine war.
Food export bans or serious disruptions have included those from India (wheat), Ukraine (wheat, oats and sugar, among others) and Indonesia (palm oil).
Rice could be next in line. The United Nations’ Food and Agriculture Organization Food Price Index already shows international rice prices creeping up for the fifth straight month to reach a 12-month high, according to the latest May data published last week.
To be sure, rice production is still bountiful, experts said. But rising wheat prices, and the generally higher costs of farming, would make rice prices worth monitoring next.
“We need to monitor rice prices going forward, because rising wheat prices could lead to some substitution towards rice, increasing demand and lowering existing stocks,” said Sonal Varma, chief economist at Japanese bank Nomura.
Risk of protectionism
Protectionist measures “actually worsen price pressures at a global level for various reasons,” she told CNBC’s “Street Signs Asia.” Feed and fertilizer costs for farming are already rising, and energy prices are adding to freight costs, she added.
---- “Right now, I will be much more worried by India slapping an export ban on rice in the coming weeks — as they were thinking about after wheat and sugar,” David Laborde, senior research fellow at the International Food Policy Research Institute, told CNBC.
India and China are the world’s top two producers of rice, accounting for more than half of the global total, according to the World Economic Forum. Vietnam is the fifth-largest, while Thailand is in sixth place.
India imposed export bans on wheat in May, citing a need “to manage the overall food security of the country.” It also slapped restrictions on sugar just days after the wheat ban.
More
https://www.cnbc.com/2022/06/13/rice-prices-are-rising-amid-rising-food-inflation-export-bans-.html
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.
China calls COVID ‘lab leak’ theory a lie after WHO report
BEIJING (AP) — China on Friday attacked the theory that the coronavirus pandemic may have originated as a leak from a Chinese laboratory as a politically motivated lie, after the World Health Organization recommended in its strongest terms yet that a deeper probe is needed into whether a lab accident may be to blame.
Foreign Ministry spokesperson Zhao Lijian also rejected accusations that China had not fully cooperated with investigators, saying it welcomed a science-based probe but rejected any political manipulation.
He also reiterated calls for an investigation into “highly suspicious laboratories such as Fort Detrick and the University of North Carolina” in the United States where China has suggested, without evidence, that the U.S. was developing the coronavirus as a bioweapon.
“The lab leak theory is totally a lie concocted by anti-China forces for political purposes, which has nothing to do with science,” Zhao said at a daily briefing.
“We always supported and participated in science-based global virus tracing, but we firmly opposed any forms of political manipulation,” he said, repeating China’s long-standing explanation for delaying or rejecting further investigations into the virus’s origins.
----The WHO’s stance in a report released Thursday is a sharp reversal of the U.N. health agency’s initial assessment of the pandemic’s origins. It comes after many critics accused WHO of being too quick to dismiss or underplay a lab-leak theory that put Chinese officials on the defensive.
Following a tightly controlled visit to China last year, the WHO concluded that it was “extremely unlikely” the coronavirus might have spread to humans from a lab in the city of Wuhan. Many scientists suspect the coronavirus jumped from bats to people, possibly via another animal.
However, in the Thursday report, WHO’s expert group said “key pieces of data” to explain how the pandemic began were still missing. The scientists said the group would “remain open to any and all scientific evidence that becomes available in the future to allow for comprehensive testing of all reasonable hypotheses.”
Identifying a disease’s source in animals typically takes years. It took more than a decade for scientists to pinpoint the species of bats that were the natural reservoir for SARS, a relative of COVID-19.
The expert group also noted that since lab accidents in the past have triggered some outbreaks, the theory could not be discounted. They said China has not presented any studies to WHO that assessed the possibility of the coronavirus resulting from a laboratory leak.
The new report is indicative of a more confrontational relationship between China’s authoritarian Communist leadership and the WHO, which had initially been accused of being overly deferential to Beijing, particularly by the former U.S. Trump administration.
The coronavirus has killed more than 6.3 million people worldwide, forced dozens of countries into lockdown and upended the world economy. It was first detected in the central Chinese city of Wuhan in late 2019 and was initially linked to a traditional market where wild animals were sold for food.
China was accused of responding slowly and covering up the extent of the outbreak, before it locked down the entire city of Wuhan and surrounding areas in the first of a series of draconian measures labeled “zero-COVID” which continue today as much of the rest of the world is opening up again.
Last month, the WHO called “zero-COVID” unsustainable, pointing to increased knowledge of the virus and the cost to the economy and civil rights. China rejected the criticism as “irresponsible.”
More
But, about that WHO whitewash
report. Approx. 17 minutes.
Lab leak latest report
https://www.youtube.com/watch?v=1xy9BAbH2BA
Next, some vaccine links kindly sent along from a LIR reader in Canada.
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
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, among other things, I’ve added this section. Updates as they get reported.
Researchers run a gas turbine on pure hydrogen in world first
Loz Blain June 10, 2022
Gas turbines are found in aircraft, trains, ships, generators, pumps, compressors and all sorts of other places. They can run on a variety of fuels, but some 90 percent of them currently run on natural gas, a fossil fuel that produces carbon dioxide when you burn it, while also escaping into the atmosphere everywhere you pull it out of the ground, to create greenhouse conditions some 80 times worse than CO2 over a 20-year time frame.
In the race to zero emissions by 2050, gas turbines will need to adapt or die, and several organizations, including General Electric, have been looking into transitioning them to burn green hydrogen as a clean fuel source. GE has more than 100 turbines running on at least 5 percent hydrogen fuel by volume, and it says it's on the path to 100 percent.
Researchers at the University of Stavinger in Norway say they've beaten everyone to the punch, claiming that they've had a 100 percent hydrogen-burning gas turbine running since mid-May this year. The university runs its own micro gas power plant, and its gas turbine produces heat, electricity and hot water for hydronic heating.
"We have set a world record in hydrogen combustion in micro gas turbines. No one has been able to produce at this level before," says Professor Mohsen Assadi, leader of the research team. "The efficiency of running the gas turbine with hydrogen will be somewhat less. The big gain though, is to be able to utilize the infrastructure that already exists." The team's research not only focused on tuning the combustion chamber for hydrogen, but on adapting the fuel system and the existing natural gas infrastructure to handle this very different gas.
Eventually, these kinds of projects will lead to conversion kits that can keep old turbine equipment alive while moving it to zero-emissions fuel sources. But before these kinds of things become economically viable, the price of green hydrogen needs to come down substantially as carbon taxes are applied to cheaper fossil fuel solutions.
Source: University of Stavanger
Hayek observed that “clusters of errors” tended to happen after monetary stimulus sparked an investment boom. When boom turned to bust he urged quick recognition of losses to free capital trapped in bad investments so markets could redeploy it to better uses. Any further rounds of monetary stimulus to cushion the bust would only prolong the inevitable adjustment and distort economic calculation anew.
https://www.ft.com/content/2838c142-a560-11df-a5b7-00144feabdc0
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