Baltic Dry Index. 1944 -17 Brent Crude 95.73
Spot Gold 166 3 US 2 Year Yield 4.30 Fri.
Coronavirus
Cases 02/04/20 World 1,000,000
Deaths 53,100
Coronavirus Cases 11/10/22 World 627,018,251
Deaths 6,562,045
JPMorgan Chase & Co. JPM,
Asked by CNBC about where he expects stocks to bottom,
Dimon said he couldn’t say for sure, but that it’s easy to imagine the S&P
500 falling by another 20% as volatile markets become even more “disorderly” as
rates continue to climb.
“It may
have a ways to go. It really depends on that soft-landing, hard-landing thing
and since I don’t know the answer to that it’s hard to answer…it could be
another easy 20%,” Dimon said.
Little need for me to comment this morning, the articles speak loudly for themselves, especially about the near financial meltdown in today’s inflation/recession section
A new global recession is arriving and has probably already arrived in Europe and the UK.
Things
can get ugly very fast from here. Stocks take the escalator up but the elevator
down.
Taiwan stocks
down more than 4% in mixed Asia trade as TSMC plunges 8%
UPDATED TUE, OCT 11 2022 12:47 AM
EDT
Shares in the Asia-Pacific were mixed on
Tuesday, while Taiwan’s benchmark index dropped more than 4% on its return to
trade after a holiday, as
investors weighed the impact of new U.S. rules on chipmaker TSMC.
Japan and South Korea’s markets
also resumed trading after a holiday on Monday. The Nikkei 225 fell
2.6% and the Topix lost 1.9%. In South Korea, the Kospi fell
2.35% and the Kosdaq shed 4.3%.
Hong Kong’s Hang Seng index fell
1.56% and the Hang Seng Tech index dropped 2.96%. In Australia, the S&P/ASX 200 gave
up earlier gains and was about flat.
The Shanghai Composite in
mainland China gained 0.4% and the Shenzhen
Component rose
0.876%. MSCI’s broadest index of Asia-Pacific shares outside Japan fell nearly
2%.
“Equities continue to sell off as
the impact of tighter monetary policy spooks investors,” ANZ Research analysts
wrote in a note Tuesday.
Overnight on Wall
Street, the Nasdaq Composite closed at its lowest since July 2020, down 1.04%
at 10,542.10, dragged lower by a slump in semiconductor stocks.
The S&P 500
also slipped 0.75% to 3,612.39, while the Dow Jones Industrial Average shed
93.91 points, or 0.32%, to close at 29,202.88.
Taiwan
stocks down more than 4% in mixed Asia trade as TSMC plunges 8% (cnbc.com)
European markets
head for lower open as global growth concerns persist
UPDATED TUE, OCT 11 2022 12:48 AM EDT
European markets are heading for a lower open on
Tuesday as concerns persist over the global growth outlook and the prospect of
more monetary policy tightening from central banks.
The region’s markets closed lower
on Monday as volatility continued to rattle sentiment. Along with concern over
interest rate hikes from central banks and their impact on economic growth,
markets in Europe were also watching developments in Ukraine after
multiple explosions hit the center of Ukraine’s capital Kyiv.
European shares initially
followed negative global sentiment as investors bet that last week’s U.S. jobs
data will keep the Federal
Reserve on an aggressive path of interest rate hikes. However,
opening losses were all but erased by late morning.
Global markets are looking ahead
to a key U.S. inflation print on Thursday and the beginning of corporate
earnings season.
U.S.
stocks fell on Monday, with the Nasdaq Composite index falling
to the lowest level in two years as tech shares continue to be hit the hardest
in this bear market because of spiking interest rates.
European
markets open to close, earnings, data and news (cnbc.com)
‘This is
serious’: JPMorgan’s Jamie Dimon warns U.S. likely to tip into recession in 6
to 9 months
JPMorgan
Chase CEO Jamie Dimon on
Monday warned that a “very, very serious” mix of headwinds was likely to tip
both the U.S. and global economy into recession by the middle of next year.
Dimon, chief executive of the
largest bank in the U.S., said the U.S. economy was “actually still doing well”
at present and consumers were likely to be in better shape compared with the
2008 global financial crisis.
“But you can’t talk about the
economy without talking about stuff in the future — and this is serious stuff,”
Dimon told CNBC’s Julianna Tatelbaum on Monday at the JPM Techstars conference
in London.
Among the indicators ringing alarm bells, Dimon
cited the impact of runaway inflation, interest rates going up more than
expected, the unknown effects of quantitative tightening and Russia’s
war in Ukraine.
“These are very, very serious
things which I think are likely to push the U.S. and the world — I mean, Europe
is already in recession — and they’re likely to put the U.S. in some kind of
recession six to nine months from now,” Dimon said.
His comments come at a time of
growing concern about the prospect of an economic recession as the Federal
Reserve and other major central banks raise interest rates to combat soaring
inflation.
Speaking to CNBC last month,
Chicago Federal Reserve President Charles Evans said he’s
feeling apprehensive about the U.S. central bank going too far, too fast in its
bid to tackle high inflation rates.
More
JPMorgan:
Jamie Dimon warns U.S. likely to tip into recession soon (cnbc.com)
US headed to recession
that was ‘totally avoidable,' chief economist says
October 9, 2022
(The Hill) – Mohamed El-Erian, Allianz's chief economic adviser, said on Sunday
that the U.S. is heading toward a recession that was "totally
avoidable" amid ongoing concerns about inflation and economic stability.
"I fear that we
risk a very high probability of a damaging recession that was totally
avoidable," El-Erian told CBS' "Face the Nation," arguing that the
Federal Reserve has made mistakes that will "go down in the history
books."
"One is
mischaracterizing inflation as transitory. By that, they meant it is temporary,
it’s reversible, don’t worry about it. That was mistake number one. And then
mistake number two, when they finally recognized that inflation was persistent
and high. They didn’t act. They didn’t act in a meaningful way," El-Erian
said.
The Federal Reserve has
been raising interest rates to try to tamp down inflation as worries about a potential recession grow.
The United Nations last
week warned of a global recession as international economies
take action to curb inflation. A survey released last week found that nearly 9 in 10 global
CEOs expect a recession in the next year.
"Even
[Federal Reserve] Chair Powell has gone from looking for a soft landing to
soft-ish landing to now talking about pain. And that is the problem. That is
the cost of a Federal Reserve being late. Not only does it have to overcome
inflation, but it has to restore its credibility," El-Erian said of the economic
institution.
US headed to recession that was ‘totally avoidable,' chief economist says (msn.com)
Finally,
so you really, really, really want to drive an Electric Vehicle.
Flooded
Tesla EVs From Hurricane Ian Exploding All Over Florida
October 9. 2022.
In the aftermath of the devastating Hurricane
Ian in Florida, things are going from bad to worse. The destruction is massive,
and also ongoing. That’s because even though the hurricane occurred over a week
ago, its after-effects are mounting. These include the instances of Tesla EVs exploding
into flames around the state. The mixture of electricity and salt water leads
to these latent fires.
Florida State Fire Marshal
Jimmy Patronis on Twitter wrote, “There’s a ton of EVs disabled from lan. As
those batteries corrode, fires start. That’s a new challenge that our
firefighters haven’t faced before. At least on this kind of scale”. In Naples,
Florida alone, there have been four reports of Tesla fires since Hurricane Ian struck.
EV fires have always posed
problems for firefighters. The energy stored in the batteries doesn’t dissipate
over time. “So you have the stored energy in the batteries,” Stephen Gollan
with Fort Lauderdale Fire Rescue told News Nation. “Just because the vehicle is submerged doesn’t mean the
energy is discharged in any way. Anytime you mix electrical components and salt
water together, it is a recipe for disaster.”
This has been a known problem for some time, and Florida isn’t the first instance of
it happening. In 2018, Italy’s Port of Savona became flooded. Stored there were
Maserati hybrids for export. A number of them caught fire when the salt water
leaked into the lithium-ion batteries.
“This is an issue many fire departments across
southwest Florida are experiencing right now,” North Collier Fire District
states. “These vehicles have been submerged in salt water, they have extensive
damage and can potentially be serious fire hazards. No one was injured in the
fire, traffic interruption was minimal, and the crews remained on scene with
the vehicle for hours to ensure it was extinguished.”
How long does it take to put
these fires out?
To put out these very hot fires can take thousands of gallons of
water to put out. Tesla’s emergency response guide says between 3,000 to 8,000
gallons of water are necessary to extinguish an EV fire.
For gas-powered vehicles, it takes on average around 1,000 gallons of water to
put out a fire.
There
have been many instances when after a few days the EV will catch on fire a
second time. “It takes special training and understanding of EVs to ensure
these fires are put out quickly and safely,” Patronis said.
Florida
has 95,000 registered EVs according to the Department of Energy. It comes in
second for the amount of EVs in each state only to California, with
563,000.
Flooded Tesla EVs
From Hurricane Ian Exploding All Over Florida (msn.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.
Today,
something different. Or is it?
How
a botched mini-budget in London on September 23rd, blew up UK
interest rates, the UK bond market, quaintly called “gilts” because at one time
long, long ago, in a faraway land, the paper government bonds issued by
the UK government had a gilded edge to distinguish them from ordinary bonds, and
very nearly blew up the Liability-driven investments “under-pinning” much of
the UK pension sector, fooling around in leveraged derivatives they barely
understood.
Where
have I heard of a similar story before? 1987 portfolio insurance anyone?
Liability-driven investment: the “doom loop” in the bond market
by: Simon Wilson 7 OCT 2022
Following
the Truss-Kwarteng mini-Budget of 23
September, which was widely deemed fiscally incontinent, the market for UK
government bonds (gilts) took fright. Demand for long-dated gilts fell sharply
and rapidly, meaning their price slumped and gilt yields (which move inversely
to prices) soared.
The consequences for the mortgage market were severe: fixed rate mortgages soared and some
lenders withdrew from the market altogether in order to reprice. The political
consequences have been turbulent, with the weeks-old Truss government looking
painfully unstable.
But what has received less attention – in the melee of recriminations,
infighting and policy U-turns – is the role of one particular investment
strategy, liability-driven investment (LDI), in forcing the Bank of England to step in and stabilise
the gilt markets by buying UK debt.
What is liability-driven investment (LDI)?
LDI is a risk-management strategy used by pension funds, in particular “defined-benefit” funds (final-salary
schemes or similar). Obviously, all pension funds have to manage their assets,
whether bonds or stocks or other holdings, to ensure that they can always meet
future liabilities, namely the monthly payouts to pensioners.
LDI is an increasingly popular investment strategy that uses derivatives to
help pension funds match assets and liabilities, in order to minimise the risk
of an unforeseen shortfall. In effect, the derivatives (such as interest-rate
swaps and other contracts) are intended to hedge the movements in liabilities
caused by changes in inflation and interest rates.
Is LDI a bit dodgy?
It’s not some outré tactic, no. Typically, big-name
financial institutions including BlackRock, Legal & General and Schroders
manage LDI strategies on behalf of pension clients. In addition, there are
specialist firms, like Cardano and Insight Investments.
According to the Investment Association, the amount of pension-fund
liabilities hedged by LDI strategies was worth about £400bn in 2011, but had
quadrupled to £1.6trn by 2021. Even so, there have been warnings of the risks
if the era of ultra-low rates should end abruptly.
So what went wrong?
The way LDI works is that to arrange coverage, funds put up collateral –
and if yields rise, they have to top up that collateral because the underlying
asset, the gilt, is worth less. Normally, funds can easily meet this margin call: they have liquid assets and
cash, and usually have days or weeks to make the payments.
What went wrong was that “yields rose so sharply that managers had to come
up with the cash in a number of hours”, says Huw Jones on Reuters. Many funds
didn’t have enough spare cash, so to meet the calls they “went to their next
most liquid assets: gilts, with funds typically holding a lot of the
longer-term, inflation-linked variety”.
But
this is where the so-called “doom loop” comes in. Because so many funds were
simultaneously selling gilts to meet payment demands, yields were pushed
higher. And that in turn increased the collateral payments they had to make.
And so on, through days of wild rumours about the scale of liabilities, and
fears of contagion to other asset classes – until the Bank of England stepped
in to stop the cycle.
How did it do that?
By promising to spend up to £5bn every day until 14 October – that’s 13
business days and a potential outlay of £65bn – on buying UK long-dated gilts,
if needed, to stabilise the market by keeping yields down. So the bank has
restarted its quantitative easing (QE) programme,
whereby it buys bonds with printed money.
More
Liability-driven
investment: the “doom loop” in the bond market | MoneyWeek
Bank
of England rolls out liquidity measures to shore up gilt market
MONDAY 10 OCTOBER 2022 7:57 AM
The Bank of England has rolled out a raft of
measures to help shore up the UK gilt market this morning in a bid to prevent
it descending into turmoil again when the Bank stops its bond-buying programme
on Friday.
Threadneedle Street was forced to intervene with a
bond-buying programme of up to £65bn two weeks ago when the government’s
so-called mini-budget shook the UK gilt market and sparked a liquidity squeeze
on some UK pension funds.
Bond-buying by the Bank will cease from this Friday
but it said it would now increase the size of its daily auctions to give
further headroom for gilt purchases as well as launch a Temporary Expanded
Collateral Repo Facility (TECRF).
“To date, the Bank has carried out 8 daily
auctions, offering to buy up to £40bn, and has made around £5bn of bond
purchases,” the Bank said in a statement.
“The Bank is prepared to deploy this unused
capacity to increase the maximum size of the remaining five auctions above the
current level of up to £5bn in each auction.”
The TECRF is designed to help the liability-driven
investment (LDI) funds at the heart of the crisis two weeks ago to shore up
their liquidity through insurance policies.
The Bank said it will also “stand ready” through
its regular Indexed Long Term Repo operations each Tuesday to support further
easing of liquidity pressures facing LDI funds.
“In line with the Bank’s financial stability
objective and in order to avoid dysfunction in core funding markets, the
purpose of these operations is to enable liability driven investment (LDI)
funds to address risks to their resilience from volatility in the long-dated
gilt market,” it said.
“LDI funds have made substantial
progress in doing so over the past week.”
Bank of England
rolls out liquidity measures to shore up gilt market (cityam.com)
Demands building for independent inquiry into pensions turmoil which left several funds just hours from collapse
·
Politicians and industry
experts call for probe into meltdown
·
Chaos showed how exposed
pensions industry is to sharp bond market sell-off
·
Shone light on Liability
Driven Investment strategies
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.
Other
SARS-CoV-2 proteins are important for disease severity, aside from the spike
OCTOBER
7, 2022
Although
people typically think of the spike protein that forms the structural
"crown" as the driving factor behind each new variant of COVID-19,
research findings also show that mutations in these other
"accessory" genes also play a role in how the disease progresses.
Because of this, researchers believe these accessory proteins warrant further
study as their mutations increasingly may become more significant as newer
variants arise.
Their findings
were published in Proceedings of the National Academy of Sciences.
The BA.4
variant of omicron, which circulated earlier this year, was overtaken by the
latest BA.5 variant of the virus circulating now. Both of these variants seem
to evade the immune
system due to mutations in
the spike protein. Because of these spike mutations, the researchers say the
previous vaccines are not as effective in preventing disease.
"What
is interesting is that both BA.4 and BA.5 variants have the same genetic
sequence for the spike protein," said Matthew Frieman, Ph.D., Alicia and
Yaya Foundation Professor of Viral Pathogen Research in The Department of
Microbiology & Immunology at UMSOM. "This means it's the other genes,
the non-spike protein genes, that seem to affect the way the virus copies
itself and causes disease. So, mutations in these other accessory genes are
what has allowed variants like BA.5 to outcompete the earlier versions of the
virus."
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.
Scientists discover they can
pull water molecules apart using graphene electrodes
7
October 2022
Writing
in Nature Communications,
a team led by Dr Marcelo Lozada-Hidalgo based at the National Graphene Institute (NGI)
used graphene as an electrode to measure both the electrical force applied on
water molecules and the rate at which these break in response to such force.
The researchers found that water breaks exponentially faster in response to
stronger electrical forces.
The researchers believe that this fundamental understanding of
interfacial water could be used to design better catalysts to generate hydrogen
fuel from water. This is an important part of the UK’s strategy towards
achieving a net zero economy. Dr Marcelo Lozada-Hidalgo said: “We hope that the
insights from this work will be of use to various communities, including
physics, catalysis, and interfacial science and that it can help design better
catalysts for green hydrogen production”.
A water molecule consists of a proton and a hydroxide ion. Dissociating
it involves pulling these two constituent ions apart with an electrical force. In
principle, the stronger one pulls the water molecule apart, the faster it
should break. This important point has not been demonstrated quantitatively in
experiments.
Electrical forces are well known to break water molecules, but stronger
forces do not always lead to faster water dissociation, which has puzzled
scientists for a long time. A key difference with graphene electrodes is that
these are permeable only to protons. The researchers found that this allows
separating the resulting proton from the hydroxide ion across graphene, which
is a one-atom-thick barrier that prevents their recombination. This charge
separation is essential to observe the electric field acceleration of water
dissociation. Another key advantage of graphene is that it allows evaluating
the electric field at the graphene-water interface experimentally, which allows
for quantitative characterisation of the field effect.
More
Scientists use graphene to pull water molecules apart
(manchester.ac.uk)
There can be few fields of human endeavour in which history
counts for so little as in the world of finance. Past experience, to the extent
that it is part of memory at all, is dismissed as the primitive refuge of those
who do not have the insight to appreciate the incredible wonders of the
present.
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