Dollar Soars, GBP and Stocks Fall.

 Baltic Dry Index. 1813 -03    Brent Crude 84.57

Spot Gold 1632         US 2 Year Yield 4.27 +0.07

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

Deaths 53,100

Coronavirus Cases 27/09/22 World 620,693,157

Deaths 6,541,661

I did exactly the wrong thing. The cotton showed me a loss and I kept it. The wheat showed me a profit and I sold it out. Of all the speculative blunders there are few greater than trying to average a losing game. Always sell what shows you a loss and keep what shows you a profit.

Jesse Livermore

Following the stock casino carnage of the last few days, we’re probably due a dead cat bounce today, but the trend is now definitely down.

The oil market has now joined the US Treasury yield curve in predicting a recession or worse ahead.

There are reports of US retailers already cutting back on planned seasonal hirings for this coming Christmas retailing season.

If ever there was a time to be cautious and out of leveraged stock or commodity positions, this is it. In many years of trading commodities since 1968, I have never seen the future look this dangerous and bleak.

Adding misery on top of the economic uncertainty, the US Gulf of Mexico coast, most likely Florida, is about to get hit with a strong hurricane later in the week.

S&P 500 notches new closing low for 2022, Dow falls into bear market as dollar surges

UPDATED MON, SEP 26 2022 5:27 PM EDT

The S&P 500 notched a new closing low for 2022 and the Dow Jones Industrial Average slipped into a bear market as interest rates surged and turmoil rocked global currencies.

The S&P 500 declined 1.03% to 3,655.04, falling below the June closing low of 3,666.77. At one point during the day, the index dipped to 3,644.76, less than eight points away from its intraday low of 2022: 3,636.87.

The Dow dropped 329.60 points, or 1.11%, to 29,260.81 — accelerating losses in the final moments of trading. The 30-stock index is down about 20.4% from its Jan. 4 closing high. The Nasdaq Composite fell 0.6% to 10,802.92.

The British pound dropped to a record low on Monday against the U.S. dollar, falling 4% at one point to an all-time low of $1.0382. The pound has since come off its worst levels on speculation that the Bank of England may have to raise rates more aggressively to tamp down inflation.

The Federal Reserve’s aggressive hiking campaign, coupled with the U.K.’s tax cuts announced last week has caused the U.S. dollar to surge. The euro hit the lowest versus the dollar since 2002. A surging greenback can hurt the profits of U.S. multinationals and also wreak havoc on global trade, with so much of it transacted in dollars.

“Such U.S. dollar strength has historically led to some kind of financial/economic crisis,” wrote Morgan Stanley’s Michael Wilson, chief U.S. equity strategist, in a note. “If there was ever a time to be on the lookout for something to break, this would be it.”

Bond yields leapt on Monday, with the 10-year Treasury yield topping 3.9% at one point during the day. That marks its highest level since 2010.

The yield also jumped on the 2-year Treasury, which is especially sensitive toward Fed policy. The rate on the note surpassed 4.3%, the highest level since 2007.

West Texas Intermediate crude settles at lowest level since January

West Texas Intermediate crude, the benchmark for U.S. oil, ended the day at $76.71, slipping 2.58%. It’s the lowest settle for the commodity since Jan. 3.

Brent crude slipped 2.43% to settle at $86.06. Earlier, it traded as low as $83.81, the lowest level since Jan. 13.

Oil prices ran up earlier in the year, fueled by Russia’s invasion of Ukraine, but recent declines for the commodity have sharply trimmed its gains for 2022. WTI is up only 1.99% for the year, while Brent is up 8.07%.

S&P 500 notches new closing low for 2022, Dow falls into bear market as dollar surges (cnbc.com)

Asia-Pacific markets mixed following negative start to the week

UPDATED TUE, SEP 27 2022 12:17 AM EDT

Shares in the Asia-Pacific were mixed on Tuesday after sharp falls on Monday.

The Nikkei 225 in Japan rose 0.61%, and the Topix index gained 0.7%. In Australia, the S&P/ASX 200 added 0.25%. The Shanghai Composite in mainland China rose 0.26% and the Shenzhen Component was 0.314% higher.

South Korea’s Kospi struggled for direction and last lost 0.62%, while the Kosdaq shed 0.74%. In Hong Kong, the Hang Seng index lost 1.06%, with the Hang Seng Tech index down 1.7%.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.29%. China’s industrial profits for January to August fell 2.1% from the same period a year ago, official data showed.

Overnight in the U.S., major stock indexes dropped. The S&P 500 slipped 1.03% to 3,655.04, a new closing low for 2022. The Dow Jones Industrial Average fell into a bear market after it lost 329.60 points, or 1.11%, to 29,260.81. The Nasdaq Composite shed 0.6% to 10,802.92.

“The sell-off in bonds and equities continued as sterling’s weakness highlighted the fragility of markets to policy uncertainty,” ANZ Research analysts wrote in a Tuesday note, a day after the pound hit a record low.

Asia markets: Stocks trade higher after negative start to the week (cnbc.com)

European markets head for higher open after choppy start to the week

UPDATED TUE, SEP 27 2022 12:29 AM EDT

European markets are heading for a higher open as stocks attempt to rally after choppy trade at the start of the week.

Shares in Asia-Pacific were mixed on Tuesday after sharp falls on Monday, while U.S. stock futures were higher on Tuesday morning after the market started the week by continuing its dramatic September decline.

Fed’s Mester says it is better to act ‘aggressively’ against high inflation

U.S. inflation is “unacceptably high” and uncertainties make monetary policy decisions “not trivial,” said Cleveland Fed President Loretta Mester in prepared remarks at the Massachusetts Institute of Technology.

“When there is uncertainty, it can be better for policymakers to act more aggressively,” she said. “Aggressive and pre-emptive action can prevent the worst-case outcomes from actually coming about.”

She said she will be “very cautious” when assessing inflation data.

“I will need to see several months of declines in the month-over-month readings,” she said. “Wishful thinking cannot be a substitute for compelling evidence.”

European markets open to close, earnings, data and news (cnbc.com)

Stock futures rise after S&P 500, Dow close at lowest levels since 2020

UPDATED TUE, SEP 27 2022 12:25 AM EDT

Stock futures were higher on Tuesday morning after the market started the week by continuing its dramatic September decline.

S&P 500 futures gained 0.68% and Nasdaq 100 futures rose 0.74%. Those tied to the Dow Jones Industrial Average advanced 182 points, or about 0.62%.

The move in futures comes after five straight days of losses for stocks, with the S&P 500 Monday closing at its lowest level of 2022. The Dow dropped more than 300 points on Monday, putting it in a bear market after falling more than 20% below its record high.

Technical indicators show that the selling has been historic. According to Bespoke Investment Group, the 10-day advance decline line for the S&P 500 has hit a record low, meaning market breadth is at its worst level in at least 32 years.

The latest round of selling appears to have several catalysts, including an aggressive Federal Reserve and surging interest rates, which in turn have roiled currency markets. On Monday, the British pound slid to a record low against the dollar, unnerving investors on both sides of the Atlantic.

“Typically, US investors wouldn’t care too much about something like this, and especially more recently. And so this to me says that now there is this fear that is gripping investors a lot more than it did before. That in turn will lead to a capitulation moment where we really are at a bottom,” said Max Gokhman, CIO at AlphaTrAI.

On Tuesday, investors will get several new pieces of economic data, including September consumer confidence, August durable goods orders and July home prices. Wall Street has grown increasingly concerned that the Fed’s six-month-long inflation fight will push the economy into a recession.

Stock futures rise after S&P 500, Dow close at lowest levels since 2020 (cnbc.com)

Next, what bond and currency traders are thinking, though the BOE has denied an emergency interest rate change is coming.

Emergency 150 basis point rate hike this week needed to save pound from record low – City economists

MONDAY 26 SEPTEMBER 2022 9:40 AM

The Bank of England needs to hike interest rates by the greatest amount in its independence this week in an emergency meeting to drag the pound from its record low.

Economists at consultancy Capital Economics said in an emergency note to clients this morning that Bank governor Andrew Bailey and co should lift borrowing costs as much as 150 basis points to stem the pound’s losses.

“Tough talk supported by a large and immediate interest rate hike [would show] the markets the Bank is writing the script not responding to it,” Paul Dales, chief UK economist at Capital Economics, said.

“The UK will face higher interest rates, continuing concerns about long-term fiscal sustainability and the gradual realisation that period of tighter fiscal policy will be needed further down the line. And all of that will weigh on the economy,” he added.

Threadneedle Street has never hiked rates in an emergency meeting since it was created 25 years ago.

The City thinks UK rates will climb to six per cent next year. But, the Bank may have to front-load rises, with traders baking in 175 basis points worth of hikes by November.

Bets on rapidly rising rates have ramped up significantly since Kwarteng’s mini-budget last week.

Markets have ditched sterling in response to chancellor Kwasi Kwarteng last week launching the biggest tax cuts since 1972, unleashing a short-term borrowing splurge.

More

Bank of England emergency hike needed to save pound from record low (cityam.com)

Despite the article above, the Bank of England was actually founded in 1694.  The BOE was granted operational independence from HMG over monetary policy in 1997.

Next, my two cents worth.

On Friday our new Chancellor delivered his mini budget going for growth and lower taxes. I think he and HM Treasury are completely misreading the current situation. 

That worked for Reagan because the USA was coming out of a big Fed created double dip recession that killed off inflation, allowing for sharply falling interest rates. In addition, nations, corporations and individuals weren't saddled with massive debt. The world economy was still running on relatively cheap energy, plus China was taking its first steps away from the economic madness of communism, in effect adding to global demand It also helped that the Unions were shocked in 1981 when Reagan fired some 11,000 PATCO workers.

That's nothing like today's world where Germany is probably already in recession, the UK too.  US rising interest rates are making the dollar soar against all currencies including the managed Yen. Most other central banks are also raising interest rates but are mostly further behind their inflation rates than the USA.

Unions across the UK and Europe are demanding double digit wage rises to keep up with inflation.

Our food inflation can't really end until next year's crops harvest, starting with Australia and South America followed later in the year with the northern hemisphere. Sadly, Putin has already said he won't renew the Ukraine grain shipments deal, due to end next month, because the ABCD "grain mafia,” ADM, Bunge, Cargill and Dreyfus, are shunning Russian grain leaving it piling up in Russia.

The global economy is going into recession.

In these very different circumstances, I doubt that the Chancellor's and HMT's plan will work. My guess is that the Pound will fall below parity.

Global Inflation/Stagflation/Recession Watch.

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

Cost of charging an electric car surges by 42% - almost the same as petrol prices

26 September 2022

The cost of charging an electric car using public charge points on a pay-as-you-go basis has risen by 42% in just four months, according to the RAC.

The motoring group said the average price for using the chargers has increased by 18.75p per kilowatt hour (kWh) since May, reaching 63.29p per kWh.

The latest figures show a driver exclusively using rapid or ultra-rapid public chargers pays around 18p per mile for electricity, compared with roughly 19p per mile for petrol and 21p per mile for diesel.

The rise has been blamed on the soaring wholesale costs of gas and electricity.

RAC spokesman Simon Williams said: "It remains the case that charging away from home costs less than refuelling a petrol or diesel car, but these figures show that the gap is narrowing as a result of the enormous increases in the cost of electricity.

"These figures very clearly show that it's drivers who use public rapid and ultra-rapid chargers the most who are being hit the hardest."

An AA survey of 12,500 drivers showed that rising domestic energy prices are putting many people off from switching to an electric car.

Some 63% of respondents said the increase in home electric bills is contributing to them sticking with petrol or diesel models, while 10% stated it was the "main reason".

More

Cost of charging an electric car surges by 42% - almost the same as petrol prices (msn.com)

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

https://www.zerohedge.com/markets/environmental-disaster-ev-battery-metals-crunch-horizon-industry-races-recycle

Covid-19 Corner

This section will continue until it becomes unneeded.

With Covid-19 starting to become only endemic, this section is close to coming to its end. 

Northern Europe: Covid-19 Cases, Hospitalizations Rising Again Raising Concerns Of New Wave

Sep 26, 2022,01:22am EDT

Things are looking up again in Northern Europe, but not in a good way. As the weather has been getting cooler and drier in that part of the world, something not so cool has been happening with reported Covid-19 cases and hospitalizations. Over the past few weeks, these numbers have been rising, as Helen Colis recently reported for POLITICO. For example, from about the second to the third week in September, Belgium has had a 17 percent jump in reported Covid-19 cases and a four percent rise in reported Covid-19-related hospitalizations. Meanwhile, Denmark had a six percent bump up in reported Covid-19 hospitalizations, and the United Kingdom has had a 13 percent upswing in the number of reported new Covid-19 cases and a 17 percent upswing in the number of reported Covid-19 hospitalizations.

Will this be another here we go again moment, in the words of The Weeknd? Throughout the course of the pandemic, nearly every Covid-19 upswing in Europe has been like a trailer for the movie Grown Ups, a preview of bad things to come in the U.S. Increases in Covid-19 cases and hospitalizations in Europe have typically been followed by similar increases in the U.S. several weeks later. And there are several big reasons why the upticks in Northern Europe may be much more than temporary blips.

One reason is about to Fall into place, so to speak. Fall should bring colder and drier weather. As I’ve covered for Forbes previously, evidence suggests that transmission of the severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) may increase under such conditions. Such conditions could be a lot more virus-friendly, which, in turn, won’t be human friendly, allowing the SARS-CoV-2 to survive longer. Drier air could decrease the amount moisture in and thus the size of virus-carrying respiratory droplets. That, in turn, could mean higher virus concentrations in each droplet, and even smaller and lighter droplets that could float further and more easily get down your respiratory tract. Additionally, your respiratory tract’s defenses which rely a lot of moisture and mucous could get weaker under colder and drier conditions. Moreover, in the Fall and Winter, activities tend to move indoors where it’s a whole lot harder to maintain social distancing and good ventilation. Therefore, it’s not super surprising that some of the Northern European countries in colder climes have already been experiencing Covid-19 upticks.

Northern Europe: Covid-19 Cases, Hospitalizations Rising Again Raising Concerns Of New Wave (forbes.com)

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.

This solar power news from America. I think the system is different in the UK and Europe.

Solar Panels Don’t Power Your Home and Other Insights From an Energy CEO

Sept. 26, 2022 3:00 am ET

Powering a home is getting more complicated as outages rise and options—such as solar panels, generators, and batteries—proliferate. Sorting it all out isn’t easy.

Just take solar roofs.

“The power you generate on your rooftop with a solar system, you don’t use a single watt of that in your house,” says Generac GNRC +3.21%  CEO Aaron Jagdfeld.

Say what? That might be a little confusing to potential solar customers—or any homeowner. And it leads to a question: Where does the power go?

“Solar is nothing more than a distributed power plant for the utility,” Jagdfeld said. “100% of [the power] goes back to the grid.”

That is why, in an outage, the lights go out for a homeowner with solar panels, just like they do for everyone else.

 

Jagdfeld runs the largest provider of home standby power in the country. Generac (ticker: GNRC) is the largest by a mile with roughly 75% market share, according to Baird analyst Mike Halloran. It is a very good business. Generac has a market capitalization of $11 billion and is expected to earn about $11.80 a share in 2022, up from $9.63 in 2021.

Investors might assume Jagdfeld has it in for solar. Far from it, he loves the business and relayed his factoid from the Solar Power International conference in Los Angeles. Jagdfeld is just explaining how the grid works, noting three things.

First, with solar, customers get paid for delivering power back to the grid. That power is typically netted out against total power consumption.

Second, utilities will lock out solar roofs from the grid during outages to protect utility line workers. Power flowing out from the home can shock, too.

Third, Jagdfeld points out that homes with solar power can keep running if they have battery backup power.

More

Solar Panels Don't Power Your Home and Other Insights From an Energy CEO | Barron's (barrons.com)

I learned early that there is nothing new in Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again. I’ve never forgotten that.

Jesse Livermore.