Tuesday 1 November 2022

All Rise! Doom Ahead.

 Baltic Dry Index. 1463 -71      Brent Crude 94.83

Spot Gold 1643           US 2 Year Yield 4.41 +0.15

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

Deaths 53,100

Coronavirus Cases 01/11/22 World 635,707,647

Deaths 6,594,730

"This first stage of the inflationary process may last for many years. While it lasts, the prices of many goods and services are not yet adjusted to the altered money relation. There are still people in the country who have not yet become aware of the fact that they are confronted with a price revolution which will finally result in a considerable rise of all prices, although the extent of this rise will not be the same in the various commodities and services. These people still believe that prices one day will drop. Waiting for this day, they restrict their purchases and concomitantly increase their cash holdings. As long as such ideas are still held by public opinion, it is not yet too late for the government to abandon its inflationary policy.

Ludwig von Mises.

Australia raised its key interest rate by 25 points.

On to today’s day one of the Fed’s two day meeting where it’s widely expected that they will raise their key interest rate by another 75 basis points.

After that, on Thursday the Bank of England is expected to raise their key interest rate by another 75 points, although some think the might surprise the markets with a rise of 1 percent.

With UK and EU inflation running above 10 percent and US inflation running above 8 percent, no central bank is anywhere near bringing inflation under control.

To this old dinosaur market follower since 1968, stocks are headed for a crash.

Stock futures rise as indexes exit winning month and investors look to Fed meeting

UPDATED TUE, NOV 1 2022 12:22 AM EDT

Stock futures are higher on Tuesday morning as traders leave behind a winning month and look ahead to the Federal Reserve’s interest rate decision on Wednesday.

Futures tied to the Dow Jones Industrial Average were up 104 points, or 0.32%. Futures tied to the S&P 500 and Nasdaq 100 both added 0.35%.

Monday’s trading marked the end of what was the best month for the Dow since 1976, ending up 13.95%, as investors rotated out of technology and hedged hopes on stalwarts like banks. The S&P 500 and Nasdaq Composite added about 8% and 3.9%, respectively.

Big Tech was in the spotlight last week as giants saw shares slide on disappointing earnings, weighing on the Nasdaq at times. Meanwhile, strong performances in earnings from Dow members such as Caterpillar and McDonald’s sent the index on an upward ascent over the course of the week.

Earnings season continues Tuesday with Uber, Pfizer and Fox before the bell and Advanced Micro Devices and Airbnb after.

Tuesday also brings the start of the Fed’s November meeting, which many market participants expect to result in a 75 basis point interest rate hike. Many will look to the central bank’s statement and Fed Chair Jerome Powell’s question and answer segment for clues around policymakers’ battle against inflation.

“We’re pretty confident that the market participants seem to be pricing in a 75 basis point increase,” said Jason Ray, founder of Zenith Wealth Partners. “But looking ahead, how they’re going to address [it] and see if they change their language on inflation or the pace of rate increases in the future will be something that we keep a keen eye on.”

Investors will also be watching for economic releases on Tuesday, including job openings data and construction spending for September, as well as the ISM  manufacturing report for October.

Stock futures rise as indexes exit winning month and investors look to Fed meeting (cnbc.com)

 

Australia raises 25 bps as expected, Hong Kong stocks lead gains in Asia-Pacific markets

UPDATED TUE, NOV 1 2022 1:12 AM EDT

The Reserve Bank of Australia raised interest rates by 25 basis points for the second consecutive time, in line with expectations. The S&P/ASX 200 rose 1.3%, continuing to rise after the central bank’s announcement.

Stocks in Hong Kong led gains in the Asia-Pacific session after concluding the month of October with a more than 14% loss, hovering around the lowest levels that it’s seen since April 2009.

The Hang Seng index in Hong Kong rose more than 3%, with Hang Seng Tech up 5%. Mainland China’s Shanghai Composite gained 0.86% and the Shenzhen Component added around 1.62% after the Caixin manufacturing PMI for the country came in at 49.2, slightly better than expected.

The Nikkei 225 in Japan was 0.15% higher while the Topix rose 0.26%.The Kospi in South Korea also rose 1.29%. MCSI’s broadest index of Asia-Pacific shares outside Japan was 1.75% higher.

Overnight in the U.S., stocks dipped, but the Dow posted its best month since 1976 and all the major averages ended the month in positive territory after two months of losses.

The Federal Reserve’s meeting begins on Tuesday stateside, where traders are widely expecting a hike interest rates by 75 basis points this week.

Toyota earnings miss estimates, stock falls sharply

Japan-listed shares of Toyota fell sharply after it reported a 25% drop in its second-quarter operating profit.

The company reported 562.7 billion yen ($3.79 billion) in operating profits for the quarter ending on September 30, a significant miss from an average estimate of 772.2 billion yen ($5.2 billion) from a Refinitiv poll and nearly a 25% drop from the same period last year.

Shares of Toyota dropped more than 2% shortly after the earnings release, as the wider Nikkei 225 index lost some of its earlier gains in the afternoon session.

Asia markets: Stocks higher ahead of RBA decision; Caixin PMI below 50 (cnbc.com)

 

Asia's factory output weakens on global slowdown, China COVID curbs

TOKYO, Nov 1 (Reuters) - Asia's factory output weakened in October as global recession fears and China's zero-COVID policy hurt demand, business surveys showed on Tuesday, adding to persistent supply disruptions and darkening recovery prospects.

Further U.S. interest rate hikes are also expected to force most Asian central banks to prevent sharp capital outflows by tightening their own monetary policies, even if it means cooling already soft economies, analysts say.

Manufacturing activity shrank in South Korea, Taiwan and Malaysia in October, and expanded at the slowest pace in 21 months in Japan, highlighting the pain from slowing Chinese demand and stubbornly high import costs.

China's Caixin/S&P Global manufacturing purchasing managers' index (PMI) stood at 49.2 in October, up from 48.1 in September but remaining below the 50-point mark that separates growth from contraction.

The private sector survey was in line with an official PMI survey released on Monday that showed China's factory activity unexpectedly fell in October.

More

Asia's factory output weakens on global slowdown, China COVID curbs | Reuters

In other news, buy food now for Christmas.

 

Black Sea deal suspension will drive up grain and meat prices in Asia-Pacific

Asia-Pacific could face higher prices of grains and meat after Russia suspended a U.N.-brokered deal that had allowed safe grain shipments out of the Black Sea.

Over the weekend, the Russian foreign ministry said it “can no longer guarantee the safety of civilian dry cargo ships participating in the Black Sea Grain Initiative and will suspend its implementation from today for an indefinite period.” This followed an Ukrainian attack on its fleet in Sevastopol.

Meat production and consumption are key in Asia and for many Asian countries, grains such as wheat, corn, and soybeans are needed for animal feed to produce beef, pork, poultry as well as fish, authors Genevieve Donnellon-May and Paul Teng wrote in a research note published by Singapore think tank RSIS.

Major Black Sea exporters Russia and Ukraine account for about a third of the world’s wheat exports, 15% of the world’s corn exports and about 2.1% of the world’s soybean exports, the pair said, adding that Asian countries are particularly hit because many import from the region.

“For consumers in Asia, expect to pay even higher prices for food, including for meat, due to the prolonged conflict alongside rising energy costs and inflation,” Donnellon-May told CNBC.

“It’s going to get worse in Asia-Pacific with countries impacted by higher [priced] fertilizer, fuel, and food prices, further exacerbating Covid-related disruptions to the supply chains and climate change-induced extreme weather events, which have impacted agricultural production and food security.”

“Consumers throughout Asia-Pacific should expect to pay more for basic foodstuffs and also for meat.”

Before Russia halted its participation, the Black Sea Grain initiative had unlocked 9 million metric tons of grain worth $3 billion, said Maximo Torero, chief economist of the United Nation’s Food and Agriculture Organization.

“In practical terms, it means that 1 million metric tons less of cereals in the market could create an increase in prices of around 0.5%. So, the short-term impact shouldn’t be too big,” Torero told CNBC’s “Squawk Box Asia” on Monday, adding that the longer the situation prevailed the higher prices would rise. 

Describing the situation in the Black Sea, Torero said there were 97 loaded vessels waiting to depart, 15 inbound vessels waiting for inspection and another 89 which had applied to join the initiative. 

The latest update of the FAO’s food price index indicated global food prices had fallen for the sixth month in a row in September. Cereal prices fell too but leapt in September on fears about the Black Sea Grain Initiative’s continuation beyond November.

More

Black Sea deal suspension will drive up grain and meat prices in Asia-Pacific (cnbc.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.

Higher Interest Rates Fuel Losses at the Federal Reserve

The central bank is now paying out more in interest expenses than it earns in interest income

Oct. 31, 2022 5:30 am ET

The Federal Reserve’s aggressive interest-rate rises to fight inflation are leading the central bank to do something it has never consistently done before: lose money.

The central bank’s operating losses have increased in recent weeks because the interest it is paying banks and money-market funds to keep money at the Fed now exceeds the income it earns on some $8.3 trillion in Treasury and mortgage-backed securities it accumulated during bond-buying stimulus programs over the past 14 years.

The losses don’t interfere with the Fed’s ability to conduct monetary policy, and they follow years in which the central bank earned profits of around $100 billion, which it sent to the U.S. Treasury. Those remittances reduced federal deficits, and as they end, the federal government could face marginally higher borrowing needs.

If the Fed runs sustained losses, it won’t have to turn to Congress, hat in hand. Instead, it will simply create an IOU on its balance sheet called a deferred asset. When the Fed runs a surplus again in future years, it would first pay off the IOU before sending surpluses to the Treasury.

The arrangement is akin to an institution facing a 100% tax rate and offsetting current losses with future income, said Seth Carpenter, chief global economist at Morgan Stanley.

The losses stem from some obscure monetary plumbing. The Fed’s $8.7 trillion asset portfolio is full of mostly interest-bearing assets—Treasury and mortgage securities—with an average yield of 2.3%. On the other side of the ledger—the liability side of the Fed’s balance sheet—are bank deposits held at the Fed known as reserves and overnight loans called reverse-repurchase agreements.

Before the 2008 financial crisis, the Fed kept its portfolio relatively small, at less than $1 trillion. Its main liability was the amount of currency in circulation. The Fed shifted reserves up and down in incremental amounts if it wanted to lower or raise short-term interest rates.

After the crisis, the Fed cut interest rates to zero and purchased large quantities of bonds to provide additional economic stimulus. Those purchases flooded the banking system with reserves. To maintain control over interest rates with a larger balance sheet, the Fed revamped the way it manages rates. The new system, which was already in use by many other central banks, controlled short-term rates by paying interest on bank reserves.

For the past decade, relatively low short-term interest rates meant the Fed earned more on its securities than it paid out as interest on reserves or other overnight loans. After covering its expenses, the Fed last year handed back about $107 billion to the government.

“We’ve returned close to $1 trillion to the Treasury over the last 10 years. We did not keep that revenue in the Fed,” St. Louis Fed President James Bullard told reporters last month. “Now, with the rising rates, the situation is changing.”

In September, when the Fed raised its benchmark rate to a range between 3% and 3.25%, it began earning less on its assets than it pays out on liabilities. The central bank is expected to raise rates by 0.75 point after its two-day meeting ends Wednesday.

“The losses can grow over time if they keep raising short-term interest rates, which it seems like they will, because the mismatch between interest income and interest expense will rise,” said Mr. Carpenter, a former senior Fed economist.

More

Higher Interest Rates Fuel Losses at the Federal Reserve - WSJ

Euro zone inflation soars past forecasts to new record high

October 31, 2022

FRANKFURT (Reuters) - Euro zone inflation surged past expectations yet again this month to hit a record high, pointing to further interest rate hikes from the European Central Bank as price pressures appear to be broadening.

Consumer price growth in the 19 countries sharing the euro accelerated to 10.7% in October from 9.9% a month earlier, beating expectations in a Reuters poll for 10.2% as inflation in Germany, Italy and France all rose more than forecast, data from Eurostat, showed on Monday.

Energy prices continued to drive inflation but food and imported industrial goods all pushed prices sharply higher even as services played only a marginal role this time.

The ECB has raised rates a combined 200 basis points in the past three months and promised further tightening as soon as December. But markets have started to anticipate a slowdown in rate hikes as a recession looms and gas prices have come down from record highs.

But policymakers are likely to be concerned that underlying price growth, which filters out volatile food and fuel prices, continued to accelerate, pointing to broadening price pressures, which raises the risk that high inflation will get entrenched.

Indeed, inflation excluding unprocessed food and energy accelerated to 6.4% from 6.0%, while an even narrower measure that also filters out alcohol and tobacco rose to 5.0% from 4.8%.

Markets priced out some rate hikes last week after ECB chief Christine Lagarde provided a sombre outlook for economic growth but a string of grim price data since then turned investor sentiment around at least partially.

More

Euro zone inflation soars past forecasts to new record high (msn.com)

 All eyes on the EU as ECB faces ‘nightmare scenario’ of record inflation and need to hike rates again

MONDAY 31 OCTOBER 2022 7:18 AM

Last week was the fourth successive week of gains for equity markets in Europe as well as the US, despite some high-profile earnings misses.

It’s been particularly notable that while there were some notable earnings misses, especially in the tech sector, by and large the more traditional areas of the market have performed better.

“While equity markets have been rebounding strongly, we’ve seen the US dollar, as well as bond yields start to go in the opposite direction, with sharp falls in both in recent days, begging the question as to why the sudden about turn,” CMC Markets’ chief market analyst Michael Hewson said this morning.

“We’ve seen evidence that inflation may be starting to slow in the US, while at the same time there is increasing concern that the rate rises seen so far are starting to act as a drag on certain parts of the economy, the housing market more noticeably.”

----There also seems to be a similar debate amongst other central banks about the balancing act or trade-offs between hiking aggressively and the longer-term impact on the growth glide path of the economy, with last week’s ECB meeting a case in point, where the decision to raise rates by 75bps was not unanimous, with the hawks winning out on this occasion.

---- While US inflation appears to be showing signs of slowing, the same can’t be said for inflation in Europe which appears to be continuing to rise, after last week’s hot German inflation numbers for October.

“The sharp rise seen here is likely to manifest itself in today’s final EU CPI numbers for October which are expected to push up above 10 per cent to 10.3 per cent,” Hewson noted.

“Core prices are also expected to rise, from 4.8 per cent to 5 per cent, which in turn could continue to exert upward pressure on rates across Europe,” he said.

“This is the nightmare scenario for the ECB, as the pressure to hike further will only increase at the same time as the economy continues to slow,” Hewson pointed out.

All eyes on the EU as ECB faces 'nightmare scenario' of record inflation and need to hike rates again (cityam.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. 

Shanghai Disney shuts over Covid, visitors unable to leave

Shanghai’s Disney Resort abruptly suspended operations on Monday to comply with Covid-19 prevention measures, with all visitors at the time of the announcement directed to stay in the park until they return a negative test for the virus.

The resort said at 11:39 a.m. local time (03:39 GMT) it would immediately shut the main theme park and surrounding areas including its shopping street until further notice to comply with virus curbs.

The Shanghai government said on its official WeChat account the park was barring people from entering or exiting and that all visitors inside the site would need to await the results of their tests before they could leave.

Anyone who had visited the park since Oct. 27 would need to test for Covid-19 three times in three days, it said.

The theme park continued to operate rides for visitors stuck in the park during the closure on Monday, social media users reported.

A Shanghai Disney Resort spokesperson said the resort was still operating “limited offerings” and that they were following measures in line with guidelines from Chinese health authorities.

More

Shanghai Disney shuts over Covid, visitors unable to leave (cnbc.com)

Fearing Covid, workers flee from Foxconn’s vast Chinese iPhone plant

After enduring days of lock-in at Foxconn’s vast facility in central China with 200,000 other workers, Yuan finally climbed the fences on Saturday night and escaped the complex, joining others fleeing what they feared was a widening Covid outbreak.

He walked through the night, keeping to a northerly route, towards his hometown of Hebi, every step taking him farther away from iPhone maker Foxconn’s Zhengzhou plant, the Taiwan-based group’s largest in mainland China.

“There were so many people on the road,” Yuan told Reuters on Monday, declining to give his full name because of the matter’s sensitivity.

Since mid-October, Foxconn has been wrestling with a Covid-19 outbreak at its facility in Zhengzhou, the capital of Henan province in central China. Workers were locked in to stop the spread of the coronavirus to the outside world. Foxconn has repeatedly refrained from disclosing the caseload.

“We were shut in on Oct. 14, and we had to do endless PCR tests, and after about 10 days, we had to wear N95 masks and were given traditional Chinese medicine,” said Yuan.

Whenever a positive or suspected case was found at a production line, there would be a public broadcast, but work would continue, he told Reuters.

“People would be called away in the middle of work, and if they don’t show up the next day, that would mean they had been taken away,” Yuan said.

Around 20,000 workers had been put in quarantine on-site, Yuan had heard, but he could not be sure how many were infected, as management did not publicize that information.

China typically isolates vast numbers of people considered close or even potential contacts of an infected person.

The world’s second-largest economy continues to wage war on Covid with disruptive lockdowns, mass testing and quarantines while many other countries have chosen to live with the disease.

More

Fearing Covid, workers flee from Foxconn's vast Chinese iPhone plant (cnbc.com)

More on Boston University playing Russian Roulette with Covid-19. What could possibly go wrong?

Playing With Fire: A Lab-Made Frankenstein COVID-19 Virus by Boston University

Are we trying to prove the lab-leak theory by doing it for real in the United States? Weren’t the lessons from the COVID-19 pandemic serious enough?

Oct 29 2022

The creation of a new recombinant COVID-19 virus at Boston University, viewed as a “Frankenstein virus” by many, has raised a public uproar. This is not merely a risky gain-of-function experiment on “enhanced potential pandemic pathogens (ePPPs)”, it is a creation of an enhanced pandemic pathogen.  NO “potential” here.  

 

What is the rationale for this statement? What is the chimeric virus that we talk about here? 

A team of researchers at Boston University’s National Emerging Infectious Diseases Laboratories posted a paper on October 14, 2022, on BioRxiv, a preprint server for biology, revealing that they had created a lab-made COVID-19 chimeric virus with reverse genetics technology. 

 

Specifically, they’ve swapped the S gene of the spike protein in the original SARS-CoV-2 Wuhan strain with the corresponding S gene from the Omicron variant.  So, the lab-made Chimeric virus (Wuhan-Omi-S chimeric virus) has all the genes from the Wuhan strain, which is much more pathogenic than the Omicron strain, except the S gene, which is from the highly transmissible yet relatively mildly pathogenic Omicron strain. 

 

According to the preprint paper, the Omicron spike-bearing virus is able to effectively and robustly escape vaccine-induced humoral immunity just like the Omicron variant. In addition, unlike the naturally occurring Omicron variant, the Wuhan-Omi-S chimeric virus efficiently replicates in cell lines and primary-like distal lung cells. 

Furthermore, it has killed at least 80 percent of infected K18-hACE2 mice (a type of transgenic mice expressing human ACE2 receptors), whereas the mortality rate of the Omicron variant was zero while the Wuhan strain caused 100 percent death in two weeks in control experiments in the same transgenic mice. This 80 percent mortality in the mice model by the Wuhan-Omi-S chimeric virus was observed in a two-week period.  The paper did not provide any further observations on whether the surviving 20 percent of mice eventually died faster than the control mice group infected with Omicron variants.  

The defenders for this risky study stated that the chimeric virus product showed reduced pathogenicity (100 versus 80 percent mortality) when compared to Wuhan strains, so it is not a gain-of-function study.  However, this is an unjustifiably optimistic statement. The study did not provide any detailed or comprehensive pathology exam of different organs in the transgenic mice infected with the Wuhan-Omi-S virus. For example, do we know that this chimeric virus has the same neuropathogenesis as the Omicron or Wuhan viruses?  This study did not provide any data on that. 

More

Playing With Fire: A Lab-Made Frankenstein COVID-19 Virus by Boston University (theepochtimes.com)

Next, some vaccine links kindly sent along from a LIR reader in Canada.

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 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.

Going, going….

Multi-billion pound North East battery gigaplant facing collapse 'within days'

Mon, 31 October 2022 at 11:12 am

The multi-billion pound vision of a vast battery plant near Northumberland with thousands of jobs could be close to collapse.

Britishvolt has refused to deny reports today that its vast Gigaplant project has run out of time and money and may have to go into administration within the next few days.

Sources told the Financial Times that the company has been unable to bring together the vital bailout it had been asking for and that there is no one left to turn to.

A company statement this morning would only say "We are aware of market speculation. We are actively working on several potential scenarios that offer the required stability. We have no further comment at this time.”

Only a few weeks ago the company pledged to stick to its vision of creating thousands of jobs in Northumberland after we reported it was holding talks with a number of potential investors after market turmoil led to potential supporters getting nervous and reining in their plans.

Company spokesman Ben Kilbey said then: “The Board of Directors supports the company's latest business plan which has been refocused and sharpened given the negative global economic situation and continues to have full confidence in the senior management team.

---- The £3.8bn project on a 93-hectare site at the former Blyth Power Station in Cambois is a major boost for the whole region, and as well as 3,000 direct highly-skilled jobs, another 5,000 will be created in the associated supply chains.

Government funding believed to be around £100million was followed by a long-term partnership with Trixtax and abrdn that will deliver £1.7bn in private funding to help propel the UK’s energy transition on the road to net zero.

Then a partnership was announced with Aston Martin but now the exit of the co-founder, delayed deadlines and nervous investors is casting a dark shadow over the region.

The collapse of the company will mean uncomfortable questions about the Government investment from then Business Secretary Kwasi Kwarteng, who said at the time "In this global race between countries to secure vital battery production, this Government is proud to make the investment necessary to ensure UK’s retains its place as one of the best locations in the world for auto manufacturing.

The future of the Government's bold Net Zero targets may also be affetced, with such a large-scale source of batteries taken out of the picture.

Multi-billion pound North East battery gigaplant facing collapse 'within days' (yahoo.com)

"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.

 

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