Saturday 22 October 2022

Special Update 22/10/22 Exit Rally. Recession. Drought.

 Baltic Dry Index. 1819 -18   Brent Crude 93.50

Spot Gold 1658       U S 2 Year Yield 4.49 -0.13

Covid-19 cases 02/04/20 World 1,000,000

Deaths 53,100

Covid-19 cases 22/10/22 World 632,460,581

Deaths 6,581,568

Never believe anything in politics until it has been officially denied.

Count Otto von Bismarck.

In the stock casinos, more exit rallies based on misplaced hopium.

Dow climbs more than 700 points on Friday as Wall Street clinches its best week since June

UPDATED FRI, OCT 21 2022 4:59 PM EDT

Stocks climbed on Friday as Wall Street closed a volatile week on a high note despite some disappointing earnings reports.

The Dow Jones Industrial Average gained 748.97 points, or 2.47%, to close at 31,082.56. The S&P 500 rose 2.37% to 3,752.75. The Nasdaq Composite added 2.31% to 10,859.72.

Friday’s moves extended the market’s gains for the week. The S&P 500 and Dow gained 4.7% and 4.9%, respectively, while the Nasdaq rose 5.2%. It was the best week since June for all three major averages.

The advance came despite the 10-year Treasury yield surging to its highest level since 2008 and a mixed bag of corporate earnings reports.

“I think at the end of last week market’s got a little bit oversold technically. And as we’ve seen so many times in the past, when things get negative enough it becomes some sort of a contrarian indicator for a bounce,” said Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research.

“But like every other bounce we’ve had, it hasn’t been very well sustained. ... A bounce today doesn’t necessarily mean it’s going to continue into next week. If it does, I suspect it won’t be more than a day or two,” Frederick added.

Bank stocks were a bright spot on Friday, with Goldman Sachs gaining 4.6% and JPMorgan Chase adding 5.3%.

Earnings reports limited gains for the market. Dow components American Express and Verizon fell about 1.6% and 4.5%, respectively, after their quarterly reports. In tech, social media company Snap fell 28% after reporting a quarterly revenue of $1.13 billion, below expectations.

Treasury yields fell from their highs on Friday morning after a report from the Wall Street Journal that some Fed officials are concerned about overtightening with large rate hikes. That report appeared to boost equities as well.

The central bank’s aggressive rate hikes have been a major factor in stocks falling into a bear market this year, and traders have continued raising their estimates of where the Fed will stop.

“We really need a Fed pause. Not so much that they would just outright disavow future rate hikes, but that they would just say every meeting is live, and if the data go our way then after the first half of ’23 we don’t have to do more,” said Stifel chief equity strategist Barry Bannister on CNBC’s “Squawk on the Street.”

Dow climbs more than 700 points on Friday as Wall Street clinches its best week since June (cnbc.com)

Inflation is not becoming 'embedded' in economy, Yellen says

HERNDON, Virginia, Oct 21 (Reuters) - Inflation is not becoming a permanent part of the U.S. economic picture, Treasury Secretary Janet Yellen told reporters Friday, addressing a growing concern that high prices could be here to stay for Americans.

"I don't believe it's becoming embedded in the U.S. economy," she said, when asked about recent consumer and producer price reports which showed persistent price gains.

"The way inflation would become embedded is if you saw expectations of inflation over the medium term rising to levels that are inconsistent with 2% inflation, and then those higher inflation expectations being built into wages and prices."

Yellen said while recent data showed more needs to be done to bring inflation down, she did not believe it was entrenched. That was one of the reasons why she "continues to believe that there is a path to lowering inflation while maintaining a strong labor market," she said.

Yellen added that she saw some costs, including production and shipping costs, coming down.

Inflation is not becoming 'embedded' in economy, Yellen says | Reuters

U.S. budget deficit cut in half for biggest decrease ever amid Covid spending declines

The U.S. budget deficit was sliced in half for fiscal 2022, the biggest drop in history following two years of huge Covid-related spending.

Though still large in historical terms, the budget shortfall declined to $1.375 trillion, compared to the 2021 deficit of $2.776 trillion.

The decline would have been steeper had it not been for the Biden administration’s student loan forgiveness program. Education spending totaled $639.4 billion for the fiscal year, $408 billion higher than estimated.

The 2022 fiscal year saw $4.896 trillion in revenue against $6.272 trillion in outlays. The outlays number represented about a $550 billion decline in spending but an $850 billion increase in revenue. The revenue total is by far the highest ever for the U.S. government.

Deficits in the previous two years soared as Congress shelled out massive sums to combat the pandemic.

The shortfall hit a record $3.13 trillion in 2020 due to more than $5 trillion in CARES Act spending and other outlays. In 2019, the deficit was $983.6 billion. Prior to 2020, the highest deficit ever was $1.41 trillion in 2009 as the financial crisis came to a close. The U.S. briefly ran a surplus from 1998 to 2001.

In fiscal 2021, legislators passed the American Rescue Plan, a $1.9 trillion spending package that the White House said helped get the nation through a severe health and economic crisis, but which critics say was unnecessary and helped fuel the highest inflation rate in more than 40 years.

President Joe Biden, however, placed the deficit blame on Republicans for approving the 2017 tax cut bill.

More

U.S. budget deficit cut in half for biggest decrease ever (cnbc.com)

Elon Musk says a global recession could last until the spring of 2024

Tesla founder and CEO Elon Musk thinks the global economic decline could last for another year and a half.

In a Twitter exchange early Friday morning Eastern time, the mercurial electric car executive and world’s richest man said a recession could continue “until spring of ’24.”

The remarks came in response to a tweet from Shibetoshi Nakamoto, the online name for Dogecoin co-creator Billy Markus, who noted that current coronavirus numbers “are actually pretty low. i [sic] guess all we have to worry about now is the impending global recession and nuclear apocalypse.”

“It sure would be nice to have one year without a horrible global event,” Musk replied.

Tesla Owners Silicon Valley, a Twitter account with nearly 600,000 followers, then asked Musk how long he thought the recession would last, to which he replied, “Just guessing, but probably until spring of ’24.”

Global GDP grew 6% in 2021 but is expected to decelerate to 3.2% this year and 2.7% in 2023, according to the International Monetary Fund. That would mark the weakest pace of growth since 2001 outside of the financial crisis in 2008 and the brief plunge in the early days of the Covid pandemic. The Federal Reserve projects GDP in the U.S. to grow just 0.2% this year and 1.2% in 2023.

Musk becomes the latest corporate titan to express reservations about the economy.

In a tweet Wednesday, Amazon founder Jeff Bezos said it’s time to “batten down the hatches” in preparation for rough economic waters ahead. That tweet accompanied a video of Goldman Sachs CEO David Solomon, who said in a CNBC interview that he thinks there’s a “good chance” of a recession in the U.S.

JPMorgan Chase CEO Jamie Dimon also has been warning of economic turmoil ahead.

More

Elon Musk says a global recession could last until the spring of 2024 (cnbc.com)

In food inflation news, relief may not be coming in 2023.

Column: Unease ahead of 2023 grain harvest as record U.S. dryness spreads

NAPERVILLE, Ill., Oct 20 (Reuters) - More than 80% of the United States faces abnormally dry conditions, the biggest portion so far this century, and the recent escalation of dryness across several key grain states raises risks for the 2023 harvest.

Extreme fall dryness is more concerning for the U.S. winter wheat crop since there is less recovery time. Excellent U.S. corn crops have coincided with drought in the previous fall, though spring replenishment is critical for a successful harvest.

Unusually dry fall weather has accelerated drought conditions in central U.S. states. In the Midwest, September-October may contend for top 10 driest ever, helping the Mississippi River reach historically low levels and severely disrupting grain movement along the waterway.

According to the U.S. Drought Monitor, a record-large 82% of the country is experiencing abnormal dryness, slightly more than 2012’s high of 81%. Some 59% of the country has earned official drought designation, a share seen in just a handful of other weeks, mostly in late 2012.

U.S. government forecasters said Thursday that the river situation might not improve during the winter with drier than normal weather possible in the South. However, chances for above-average precipitation in the eastern Midwest could provide relief there.

The Drought Monitor data goes back only to 2000, but some years in that period, like 2012, offer a good comparison. Crop yields were horrendous that year amid one of the worst-ever U.S. droughts, and although dryness covers a larger expanse today than in 2012, the severity in the grain belt is luckily lower now.

Some 15% of the crop-heavy Midwest is in severe drought or worse, the most since August 2021 but well below the 34% observed the same week in 2012. However, the recent spread of dryness is alarming, as Midwest drought coverage was just 10% in mid-September versus 43% this week.

The Drought Monitor’s Drought Severity and Coverage Index, or DSCI, is measured from 0 to 500, with 0 representing complete lack of dryness and 500 the worst possible drought at 100% coverage. Midwestern DSCI is at 141 this week, the most for any week since early 2013.

DSCI readings are unsettling in top winter wheat state Kansas, where sowing for the 2023 harvest is in progress. The latest value of 355 is topped only by a 2012-2013 stretch, and that number would need to plummet significantly in the coming months for the 2023 crop to separate itself from bad company.

Whenever DSCI was above 150 in April, Kansas had a terrible wheat harvest. There are eight such instances since 2000, and wheat yields ended anywhere from 14% to 37% below the long-term trend. Even if winter months are dry there, exceptional rainfall in March could right the ship.

More

Column: Unease ahead of 2023 grain harvest as record U.S. dryness spreads | Reuters

Analysis: India rice export curbs to end a decade of price stability

MUMBAI/NEW DELHI, Oct 21 (Reuters) - India's recent curbs on rice exports could trigger a rally in global prices after more than a decade of stability, traders said, as New Delhi's protectionist move coincides with falling output in other major producers and rising global demand.

Uneven monsoon rains hit rice planting in India, prompting the export restrictions in September, and floods have cut output in Pakistan even as consumption has grown in top importers such as Bangladesh and the Philippines. That's why forecasters are saying global demand will outstrip production in 2022/23.

This is bad for Asian and African countries that use rice as a staple, some of which import as much as 60% of their supply.

Since India - the world's biggest rice exporter - banned exports of broken rice and slapped a 20% export tax on some non-basmati varieties, global rice prices have jumped more than 10%. Last month, the Food and Agriculture Organization's global rice price index rose 2.2% to hit an 18-month high.

 

"The international market has gone up and it will go up further," said Nitin Gupta, vice president for Olam India's rice business.

Governments worldwide had already been struggling to tame food inflation because of COVID-19 disruptions to production and supply chains, and then Russia's invasion of Ukraine removed millions of tonnes of foodstuffs from global markets, pushing inflation to a record earlier this year.

More

Analysis: India rice export curbs to end a decade of price stability | Reuters

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.

Japan's inflation hits 8-year high in test of BOJ's dovish policy

October 21, 2022

TOKYO (Reuters) -Japan's core consumer inflation rate accelerated to a fresh eight-year high of 3.0% in September, challenging the central bank's resolve to retain its ultra-easy policy stance as the yen's slump to 32-year lows continue to push up import costs.

The inflation data highlights the dilemma the Bank of Japan faces as it tries to underpin a weak economy by maintaining ultra-low interest rates, which in turn are fuelling an unwelcome slide in the yen.

The increase in the nationwide core consumer price index (CPI), which excludes volatile fresh food but includes fuel costs, matched a median market forecast and followed a 2.8% rise in August. It stayed above the BOJ's 2.0% target for the sixth month, and was the fastest pace of gain since September 2014, data showed on Friday.

The broadening price pressures in Japan and the yen's tumble below the key psychological barrier of 150 to the dollar will likely keep alive market speculation of a tweak to the Bank of Japan's dovish stance over coming months.

"The current price rises are driven mostly by rising import costs rather than strong demand. Governor Kuroda may maintain policy for the rest of his term until April, though the key is whether the government will tolerate that," said Takeshi Minami, chief economist at Norinchukin Research Institute.

The data heightens the chance the BOJ will revise up its consumer inflation forecasts in new quarterly forecasts due at next week's policy meeting, analysts say.

The yen's decline has been particularly painful for Japan due to its heavy reliance on imports for fuel and most raw material, forcing companies to hike prices for a wide range of goods including fried chicken, chocolates to bread.

The so-called 'core-core' index, which strips away both fresh food and energy costs, rose 1.8% in September from a year earlier, accelerating from a 1.6% gain in August and marking the fastest annual pace since March 2015.

The rise in the core-core index, which the BOJ closely watches as a key gauge of the underlying strength of inflation, toward its 2% target casts doubt on the central bank's view that recent price rises will prove temporary.

More

Japan's inflation hits 8-year high in test of BOJ's dovish policy (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.

Rise in Covid-19 patients in England may have levelled off

It is too soon to know if the latest wave of the virus has peaked.

20 October, 2022

The current rise in the number of people in hospital in England with Covid-19 may have levelled off, new figures suggest.

Health experts described the news as “encouraging” and said it could reflect the impact of the autumn booster campaign, which has now seen around six in 10 over-75s receive a fresh dose of vaccine.

But the rate of increase has slowed in recent days, with the latest figures showing the first week-on-week fall since September 18.

It is too soon to know for sure if the numbers have peaked.

Covid-19 hospital data is published once a week on a Thursday, so it will be some time before enough data is available to see evidence of a clear trend.

Patient numbers topped 14,000 in mid-July of this year at the peak of the wave of infections caused by the Omicron BA.4 and BA.5 subvariants of the virus.

This was well below the levels seen during the early waves of the pandemic.

Separate figures from the UK Health Security Agency (UKHSA) show Covid-19 hospital admissions in England have also fallen.

The rate of admissions stood at 11.8 per 100,000 people for the seven days to October 16, down from 12.5 in the previous week.

This is the first weekly fall since early September.

Rates remain highest among people aged 85 and over, at 141.0 per 100,000, though this is down week-on-week from 148.9.

Around two-thirds of patients in hospital who test positive for Covid-19 are being treated primarily for something else.

More

Rise in Covid-19 patients in England may have levelled off | The Independent

World Health Organization - Landscape of COVID-19 candidate vaccineshttps://www.who.int/publications/m/item/draft-landscape-of-covid-19-candidate-vaccines

NY Times Coronavirus Vaccine Trackerhttps://www.nytimes.com/interactive/2020/science/coronavirus-vaccine-tracker.html

Regulatory Focus COVID-19 vaccine trackerhttps://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.

Directa Plus to supply graphene for 250 km Italian motorway road surfacing contract

Using the Gipave asphalt ‘supermodifier’ for the A4 Torino-Milano motorway section is designed to increase the lifespan of road surfaces as well as reducing energy consumption and CO2 emissions compared to standard asphalt

07:44 Fri 21 Oct 2022

Directa Plus PLC (AIM:DCTA, OTC:DTPKF) has said that its patented G+ graphene will be used in the asphalt for a 250 kilometre (km) motorway section in Italy, along with selected recycled hard plastics such as toys, fruit crates and litter bins, to make a product called Gipave.

The contract to use the Gipave asphalt ‘supermodifier’ in the road surfacing of the A4 Torino-Milano motorway section was won by the AIM-listed company's Italian partner Iterchimica with motorway management and infrastructure specialist ASTM Group.  

Gipave uses Directa's graphene to improve resistance and life span for road surfaces.

Giulio Cesareo, founder and chief executive of the AIM-listed company, said the contract “is a significant validation of our product with no significant impact on 2022 sales but a supply of several tons of material in 2023/2024”.

The asphalt used for the resurfacing of this motorway section by ASTM will re-use 70% of milled material from existing pavement, the company said, reducing the use of new natural aggregates to only 30%, while using Gipave will also reduce energy consumption by 90mln kilowatt hours and CO2 emissions by 18.4mln kgs compared to standard asphalt.

The Torino-Milano contract follows a series of demonstration projects in Italy and the UK to prove the benefits of Gipave, and one kilometre of paving of the new Ponte San Giorgio bridge in Genova.

Demonstration projects in the UK included the re-surfacing of two sections of road in Oxfordshire, with the first in 2019 showing that Gipave increased the lifespan of the surface by up to 70% compared to conventional resurfacing methods, with reduced risk of rutting under loads from heavy goods vehicles.

Gipave was developed by Directa Plus and Iterchimica and patented in 2017, with an agreement signed by the two companies in 2020 that provides for the exclusive supply of the G+ graphene product to Iterchimica in the asphalt and bitumen sector worldwide for an initial duration of three years.

ASTM is an Italy-headquartered industrial group focused on motorway management, infrastructure engineering and construction projects, according to its website, and is the second largest toll road operator in the world, with concessions in Italy, Brazil and the UK.

Directa Plus PLC to supply graphene for 250 km Italian motorway road surfacing contract (proactiveinvestors.co.uk)

 

This weekend’s music diversion. Telemann again. Approx. 10 minutes.

G. Ph. Telemann: Sonata in D major, TWV 44:1 – Bremer Barockorchester

G. Ph. Telemann: Sonata in D major, TWV 44:1 – Bremer Barockorchester - YouTube

This weekend’s chess update. Approx. 12 minutes.


Youngest Ever Player To Defeat Magnus Carlsen!

Youngest Ever Player To Defeat Magnus Carlsen! - YouTube

This week’s maths update. Approx. 14 minutes.

Dungeon Numbers – Numberphile

Dungeon Numbers - Numberphile - YouTube

Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some.

The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become ‘profiteers’, who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.

Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and it does it in a manner which not one man in a million is able to diagnose.

John Maynard Keynes.

 

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