Baltic Dry Index. 1837 -34 Brent Crude 92.90
Spot Gold 1620 US 2 Year Yield 4.62 +0.07
Coronavirus
Cases 02/04/20 World 1,000,000
Deaths 53,100
Coronavirus Cases 21/10/22 World 632,055,653
Deaths 6,579,814
If all else fails, immortality [and
the shortest UK Premiership] can always be assured by spectacular error.
With apologies
to John Kenneth Galbraith.
No need to open with the casinos this Friday, as we have entered into a new era of higher interest rates, financial consequences and in all likelihood, a new era of “Next Lehmans.”
Tomorrow, will not be like today which was like yesterday. Look away from that very scary US yield curve now!
Easy Street crashed and burned back on September 23rd in London. What comes next is probably closer to Skid Row as we get to find out who can’t service their debts in our new age of higher interest rate and an arriving recession.
Getting out of high risk “assets” early, always trumps getting carried out last.
As the coming Biden Bust rolls out in the
weeks and months ahead, London September 23rd is about to get
repeated from Berlin to Boston, from New York to New Zealand.
Truss implosion shows big change in financial climate
October 20, 2022
The astonishing political demise of British Prime Minister Liz Truss shows what can happen when ambitious plans collide with a new financial market reality that places the fight against inflation above all else.
Truss resigned Thursday after just 45 days in office, a casualty of the market turmoil triggered by her plans to increase government borrowing and cut taxes despite an annual inflation rate above 10 percent.
The Truss implosion was fueled by
distinctly British considerations. But the market upheaval — which at one point
saw investors judge Britain a worse credit risk than notoriously profligate
Italy — ignited unexpected difficulties in British pension funds and started a
search for the next financial domino that could topple as interest rates climb.
Bond mutual funds, pensions,
corporate debt and government finances all are being scrutinized for hidden
weak spots, analysts said, as the Federal Reserve continues raising interest
rates at the fastest pace in 40 years. Investors expect the central bank to
lift rates several times in the coming months in a bid to cool off rising
consumer prices, including at its next meeting in November.
“The Fed will just keep hiking until
something breaks,” said Eric Robertsen, global head of research and chief
strategist for Standard Chartered Bank in Dubai. “I think it’s more likely that
there will be a financial market crack before there’s an economic crack.”
After years of
easy money policies, the Fed is
leading central banks in tightening credit to battle painfully high inflation.
Interest rates have moved sharply higher in the United States, United Kingdom,
Europe, Canada and dozens of smaller countries in the broadest such campaign to
hit the global economy in
a quarter-century.
Bond market
volatility this month hit its highest level since early March 2020, when the
Fed was forced to step in to buy $1 trillion in U.S. treasury securities.
Sluggish trading in treasuries — normally the most liquid market on Earth — now
has Treasury Secretary Janet L. Yellen considering buying back some government
securities from traders to ease market functioning.
Globally,
stocks have lost roughly $30 trillion in value so far this year while bonds
have suffered one of their worst years ever.
The
financial reset is occurring as international risks are multiplying, with the
war in Ukraine and the souring of U.S.-China relations roiling markets.
Unpredictable
linkages between finance and geopolitics have flared in earlier eras, such as
in 1998 when the hedge fund Long-Term Capital Management collapsed during the
Russian financial crisis, requiring a U.S. government-led bailout.
“There
is a risk of a disorderly tightening of financial conditions that may be
amplified by vulnerabilities built over the years,” the International Monetary
Fund warned this month in a report, which said financial stability risks had
grown since April and are “significantly skewed to the downside.”
For
more than a decade, while interest rates were low and the Fed actively
purchased government and mortgage securities, it was easy for investors to sell
most assets.
Now as
the Fed and other central banks tighten monetary policy, normally liquid
markets are becoming more congested. Investors who want to unload, say, a
Treasury bond, encounter delays or wide gaps between their asking price and
what buyers will pay.
More
Truss implosion shows big change in financial climate (msn.com)
In other news, is GB about to get a lucky
break this winter?
Gas tanker backlog
spreads to UK but could benefit British energy security
October 19, 2022
A backlog of tankers carrying liquefied natural gas (LNG) has spread from the coast of Spain to the UK but should not threaten British energy security and could even be beneficial, according to industry analysts.
Dozens of ships have been circling Spanish ports for days due to the lack of facilities to unload them and the queue is not expected to clear for several more weeks. The backlog of boats has spread to other jurisdictions.
“We have also seen a few tankers waiting offshore the UK in recent weeks,” said Alex Froley, LNG analyst at energy information provider, ICIS. “The Methane Mickie Harper has been waiting offshore the UK since late September.” The ship is expected to deliver its cargo to a Welsh port on October 22.
European countries have increased
purchases of LNG in response
to restrictions on gas sales from
Russia, causing the bottleneck.
This has centred around Spain due to its higher capacity, with the most LNG
terminals in Europe – albeit insufficient to clear the backlog.
“Spain has six LNG terminals
and the lowest storage of natural gas in the EU so there is always a steady
stream of deliveries to Spain and lying off Spain ports,” says John McKay,
editor of LNG Journal.
The ships
have few options to unload elsewhere as other high-value markets also lack
capacity. Demand in the UK has been low due to warmer
weather. Sellers may be hedging their bets.
“Some traders are waiting to see if they can deliver into a
better market, or waiting for demand and prices to pick back up later in the
winter,” said Mr Froley.
The
backlog could work in the UK’s favour, he adds, as LNG is readily on hand in
case of need. But the continent-wide picture could quickly change depending on
climate conditions.
“In
the very short-term, Europe’s gas storage is quite full and
there’s a lot of LNG offshore, so the position is quite comfortable,” says the
analyst. “But if the weather turns very cold for a prolonged period of time,
those stocks could start to get rapidly used up.”
Mr
McKay agreed that UK energy supplies look relatively secure, but
suggested more could be done to build capacity.
“We
have ample pipeline gas supplies from Norway and privileged LNG deliveries from
Qatar and the US as well as Algeria and Trinidad,” he told i.
“However, the gas prices will always rise when the freezing weather comes. The
UK has also been slow to reopen the Rough Gas storage off the East Coast.”
Germany
has taken further steps to protect its energy supplies by ordering police to
guard LNG terminals, Reuters reported on Wednesday, ahead of
new legislation intended to improve protection of critical infrastructure.
The
move follows suspected sabotage attacks on the German rail networks and the Nord Stream gas pipeline.
Gas tanker backlog spreads to UK but could benefit British energy security (msn.com)
Finally, is the great inflation ending?
Undone by consumers finally cutting back or starting to run out of money,
savings and credit.
In
Depth: The Sudden Reversal of the Global Chip Shortage
By Zhai
Shaohui, Liu
Peilin and Denise
Jia Oct 20, 2022 07:50 PM
Remember the global semiconductor shortage a few months
ago? It’s over.
Now quickly shrinking demand for consumer
electronics is causing canceled orders and unsold stockpiles at makers of
integrated circuits including Taiwan Semiconductor Manufacturing Co. (TSMC),
Advanced Micro Devices Inc. (AMD) and Nvidia. It’s a stark contrast with the
disruptions that chip shortages caused for makers of autos, smartphones,
computers and other goods relying on the advanced electronic devices.
“This
round of business sentiment is reversing so fast that chip designers were
struggling to find production capacity only last year, but now they find chips
won’t sell,” said Xie Ruifeng,
analyst at semiconductor industry market research institute ICwise.
More. Subscription required.
In Depth: The Sudden Reversal of the Global Chip Shortage (caixinglobal.com)
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.
US
heating worries mount amid growing costs, uncertainty
October
20, 2022
JAY, Maine (AP) — Across the U.S., families are looking
to the winter with dread as energy costs soar and fuel supplies tighten.
The Department of Energy is
projecting sharp price increases for home heating compared with last winter and
some worry whether heating assistance programs will be able to make up the
difference for struggling families. The situation is even bleaker in
Europe, with Russia’s continued curtailment of natural gas pushing
prices upward and causing painful shortages.
In Maine, Aaron Raymo saw the
writing on the wall and began stocking up on heating oil in 5-gallon increments
over the summer as costs crept upward. He filled a container with heating oil
as he could afford it, usually on paydays, and used a heating assistance
program to top off his 275-gallon oil tank with the arrival of colder weather.
His family is trying to avoid
being forced into a difficult decision — choosing between food or heating their
home.
----A number of factors are converging to create a bleak
situation: Global energy consumption has rebounded from the start of the
pandemic, and supply was barely keeping pace before the war in Ukraine further
reduced supplies.
The National Energy Assistance Directors Association says
energy costs will be the highest in more than a decade this winter.
The Energy Department projects heating bills will jump
28% this winter for those who rely on natural gas, used by nearly half of U.S.
households for heat. Heating oil is projected to be 27% higher and electricity
10% higher, the agency said.
That comes against inflation rates that accelerated last
month with consumer prices
growing 6.6%, the fastest such pace in four decades.
The pain will be especially acute in New England, which
is heavily reliant on heating oil to keep homes warm. It’s projected to cost
more than $2,300 to heat a typical home with heating oil this winter, the
energy department said.
Across the country, some are urging utilities to
implement a moratorium on winter shut-offs, and members of Congress already
added $1 billion in heating aid. But there will be fewer federal dollars than
last year when pandemic aid flowed.
More
US
heating worries mount amid growing costs, uncertainty | AP News
Brazil’s economy
minister warns world of stagflation and ‘very rough times ahead’
David
Trulio, Peter Aitken – October 19, 2022.
Brazil’s economy minister, Paulo Guedes,
condemned state-driven centrally planned economies as a path to "misery," explained how Brazil
got on the "road to prosperity" through market economics, and he
warned that much of the world will suffer in the coming years from
"stagflation, high interest rates, inflation, [and] low growth."
In an exclusive interview
with Fox News Digital, Guedes described Brazil as coming out of "the road
to misery" in the "last 30 to 40 years." Successive governments
delivered "low growth" and "high corruption" under a
"statist economy" that was "centrally planned."
By contrast, Guedes
attributes Brazil’s current prosperity to "market economies." This
consists of decentralized decision-making and "opening the Brazilian
economy." Guedes said, "We are reducing taxes. We are stimulating the
increase of private investments. We are privatizing. So, we are [on] the road
to prosperity — a classical recipe for growth."
Brazil’s economy has enjoyed solid
growth as the country
continues its recovery from the coronavirus pandemic in spite of the impact
from Russia’s invasion of Ukraine. The Ministry of Economy in September revised
growth projections from 2% to 2.7% due to "widespread expansion in various
sectors," with similar projections in 2023. Private economists project
that 2.39% growth this year and 0.5% next year remain more realistic targets,
Reuters reported.
Guedes studied economics at the University of Chicago in the
1970s, learning from Nobel Prize-winning economist Milton Friedman, an
influential figure in South America primarily due to the "Chicago
Boys," a group of Chilean economists who studied under Friedman or
identified with the economic theories then taught at the University of Chicago.
The Chicago Boys implemented consequential free market policies in Chile during
the military dictatorship of Augusto Pinochet.
Guedes
was given the opportunity to implement Friedman’s teachings when he was named
to lead the Ministry of Economy in Brazilian President Jair Bolsonaro’s
government in 2019.
Among Guedes’ areas of emphasis is privatization of state-run
companies, which he said have been "stealing" from the Brazilian
people. He described "private pirates and bureaucratic robbers and
political creatures of the swamp" who permeated these companies —
resulting in "political power feeding economic power, and then … buying
back political support with corruption."
In
recent years, Brazil has been rocked by corruption scandals reaching
the highest levels of government. Then-President Dilma Rousseff was impeached
in 2016 for her alleged mishandling of the federal budget. Critics said she
used accounting tricks to hide ballooning deficits and bolster an embattled
government.
More
Brazil’s economy
minister warns world of stagflation and ‘very rough times ahead’ (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
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.
COVID-19 is still a
global health emergency, WHO says
Thu,
October 20, 2022 at 1:56 AM
The World Health Organization
said Wednesday that the COVID-19 pandemic continues to be classified as a Public Health
Emergency of International Concern (PHEIC), almost three years after it was
first recognized as such back in January 2020.
The determination was made last
week at a meeting by the Emergency Committee on COVID-19, according to Dr.
Tedros Adhanom, director-general of WHO.
"The committee emphasized
the need to strengthen surveillance and expand access to tests, treatments and
vaccines for those most at risk," Adhanom said in a briefing. "And for all countries to update their national
preparedness and response plans."
The committee acknowledged that
the pandemic has gotten better, but believes the world must remain vigilant as
the COVID-19 virus has proven unpredictable.
"While the global situation
has obviously improved since the pandemic began, the virus continues to change,
and there remain many risks and uncertainties," Adhanom said. "This
pandemic has surprised us before, and very well could again."
WHO defines a PHEIC as "an extraordinary event" that
could harm other countries through the spread of a disease. A PHEIC could
require a coordinated international response effort, and is often
"serious, sudden, unusual or unexpected."
Last week, meanwhile, Dr. Anthony
Fauci, President Biden's chief chief medical adviser, described the spread of the new COVID variant known as BQ.1 as
"pretty troublesome." The strain, and a descendant called BQ.1.1,
have already grown to make up more than 10% of new infections across the U.S.
COVID-19 is still
a global health emergency, WHO says (yahoo.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.
In a
surprise, global greenhouse gas emissions seem to be on the decline
Global greenhouse gas emissions are improving, but the world depends heavily on fossil fuels.
Oct.
19 (UPI) -- The increase in global emissions of carbon dioxide could've
been triple what it was from last year if not for major deployments of
renewable energy technologies and electric vehicles, the International Energy
Agency said Wednesday.
The
Paris-based IEA estimated that global CO2 emissions are on pace to reach 33.8
billion tons this year, an increase of nearly 300 million tons should forecasts
prove accurate. That's substantially lower than the 2-billion-ton increase from
2020 levels last year.
Some of
that can be attributed to the move toward electric vehicles. The agency has estimated that nearly 7 million electric vehicles were
sold in all of 2021. In just the first quarter of 2022 alone, however, that
reached 2 million, a 75% increase year-over-year.
U.S.
consumers were awarded heavy subsidies that would support the purchase of an
electric vehicle under President Joe Biden's Inflation
Reduction Act. The Energy Department, meanwhile, estimated that gasoline
consumption is trending lower because of efficiency improvements for
conventional vehicles.
For
renewables, the IEA said solar and wind power are on pace to hit a record in
terms of capacity this year. Without those gains, global CO2 emissions would be
600 million tons higher than 2021 levels.
Fatih
Birol, the executive director of
the IEA, said the global energy crisis triggered by the Russian invasion
of Ukraine has caused
major economies to keep looking for fossil fuels. Russia is a major supplier of
crude oil and natural gas and importers are searching desperately for
alternatives.
The
encouraging news, he said, is that some of the Russian void is getting filled
by wind and solar energy.
"This
means that CO2 emissions are growing far less quickly this year than some
people feared -- and that policy actions by governments are driving real
structural changes in the energy economy," he said.
All this suggests that some of the momentum for clean energy technology
that was lost during the worst of the COVID-19 pandemic is starting to return. Nevertheless, the IEA
said oil demand is on pace to accelerate more than any other fossil fuel this
year, contributing some 180 million tons to global CO2 emissions.
In a surprise, global greenhouse gas emissions seem to
be on the decline - UPI.com
Another weekend and a weekend of
political horse trading in the UK among the Not the Conservative Party. The Truss “government” had been dead to the
new reality of inflation, rising interest rates, rising social unrest and the
return of “the next Lehman,” with it’s car crash budget of September 23rd.
His Majesty’s UK Government mistook 2022
for a repeat of 1982. What alternative universe were they living in? Have a
great weekend everyone. We have entered a new era of higher interest rates.
Interest rates are the most important prices in the economy,
according to Nobel laureate F.A. Hayek, because they reflect the collective
time preference of individuals to consume either now or later. Accordingly,
interest rates co-ordinate allocation of capital across the economy by
signalling to businesses whether they should invest. Distortions in interest
rates can cause “clusters of errors” in which large swathes of businesses
unwittingly miscalculate at the same time.
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
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