Thursday 3 November 2022

The Hard Landing Or A Crash Landing?

Baltic Dry Index. 1321 -56      Brent Crude 95.88

Spot Gold 1637           US 2 Year Yield 4.61 +0.07

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

Deaths 53,100

Coronavirus Cases 03/11/22 World 636,453,766

Deaths 6,599,291

"It's strange that men should take up crime when there are so many legal ways to be dishonest. “

Al Capone,

In the stock casinos, reality returns. Higher interest rates hurt. Prepare for a hard landing if not a crash landing.

Later today, the Bank of England is expected to join in the Great Global Interest Rate Hike Festival with its biggest interest rate hike in 33 years.

Bunker time. Bad thigs lie directly ahead. Look away from the inverted US yield curve now.

We are shortly about to find out who has unserviceable debt and worse, unrepayable debt.

“Terrain, terrain! Pull up! Pull up! Terrain, terain !! Pull up, Pull up!! Terrain, terrain!!! Pull up, Pull up!!!

Terrain, Terrain-Pull up, Pull Up!! (sound effect)

Terrain, Terrain-Pull up, Pull Up!! (sound effect) - Bing video


Hong Kong stocks lead losses in Asia-Pacific session after Fed signals more hikes ahead

UPDATED THU, NOV 3 2022 1:18 AM EDT

Shares in the Asia-Pacific dropped on Thursday after the U.S. Federal Reserve Chairman Jerome Powell signaled further hikes ahead after raising rates by 75 basis points as expected and called discussions on pausing the tightening cycle “premature.”

Hong Kong’s Hang Seng index fell 2.65%, leading losses in the wider Asia-Pacific trading session. Hang Seng Tech fell 3.4%. Mainland China’s Shanghai Composite lost 0.64% and the Shenzhen Component was down 0.7%.

In Australia, the S&P/ASX 200 was down 1.84%. The Kospi was flat and the Japanese market was closed for a holiday Thursday. The MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 1.58%.

Overnight on Wall Street, the Dow Jones Industrial Average dropped 505.44 points, or 1.55% to 32,147.76, and the S&P 500 shed 2.5% to 3,759.69. The Nasdaq Composite tumbled 3.36% to 10,524.80.

The indexes rose earlier in the session on a line in the Fed statement that said “the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”

Asia markets: Stocks drop after the Fed signals more hikes ahead (cnbc.com)

 

Fed approves 0.75-point hike to take rates to highest since 2008 and hints at change in policy ahead

The Federal Reserve on Wednesday approved a fourth consecutive three-quarter point interest rate increase and signaled a potential change in how it will approach monetary policy to bring down inflation.

In a well-telegraphed move that markets had been expecting for weeks, the central bank raised its short-term borrowing rate by 0.75 percentage point to a target range of 3.75%-4%, the highest level since January 2008.

The move continued the most aggressive pace of monetary policy tightening since the early 1980s, the last time inflation ran this high.

Along with anticipating the rate hike, markets also had been looking for language indicating that this could be the last 0.75-point, or 75 basis point, move.

The new statement hinted at that policy change, saying when determining future hikes, the Fed “will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”

Economists are hoping this is the much talked about “step-down” in policy that could see a rate increase of half a point at the December meeting and then a few smaller hikes in 2023.

This week’s statement also expanded on previous language simply declaring that “ongoing increases in the target range will be appropriate.“

The new language read, “The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.”

Stocks initially rose following the announcement, but turned negative during Chairman Jerome Powell’s news conference as the market tried to gauge whether the Fed thinks it can implement a less restrictive policy that would include a slower pace of rate hikes to achieve its inflation goals.

On balance, Powell dismissed the idea that the Fed may be pausing soon though he said he expects a discussion at the next meeting or two about slowing the pace of tightening.

He also reiterated that it may take resolve and patience to get inflation down.

“We still have some ways to go and incoming data since our last meeting suggests that the ultimate level of interest rates will be higher than previously expected,” he said.

---- The chairman also expressed some pessimism about the future. He noted that he now expects the “terminal rate,” or the point when the Fed stops raising rates, to be higher than it was at the September meeting. With the higher rates also comes the prospect that the Fed will not be able to achieve the “soft landing” that Powell has spoken of in the past.

“Has it narrowed? Yes,” he said in response to a question about whether the path has narrowed to a place where the economy doesn’t enter a pronounced contraction. “Is it still possible? Yes.”

However, he said the need for still-higher rates makes the job more difficult.

“Policy needs to be more restrictive, and that narrows the path to a soft landing,” Powell said.

More

Fed approves 0.75-point hike to take rates to highest since 2008 and hints at change in policy ahead (cnbc.com)

 

Interest rates UK - latest: Bank of England expected to confirm biggest rise in 33 years

3 November, 2022

 

Economists are expecting the Bank of England today to announce a 0.75 percentage-point rise in the base rate – to 3 per cent – in what would be the biggest hike for 33 years.

The move could push up by hundreds of pounds the amount that mortgage holders have to pay every month.

It would be the biggest single increase since 1989, and would also be the eighth time in a row that the Bank has hiked interest rates. Less than a year ago the rate was 0.1 per cent.

The Bank is trying to curb inflation by raising rates. However, the decision-makers could be divided over the size of the hike, with some possibly opting for a 0.5 percentage-point increase.

The Bank’s monetary policy committee meets eight times a year to decide interest rate policy. The announcement, which will be at noon, will be welcomed by savers if any increase in base rates is passed on.

The Bank of England began selling its massive gilt holdings on Tuesday, following a tumultuous two months for financial markets after former prime minister Liz Truss and ex-chancellor Kwasi Kwarteng sparked a rout in gilts and sent the pound tumbling to an all-time low against the US dollar.

Interest rates UK - latest: Bank of England expected to confirm biggest rise in 33 years (msn.com)

In other news, Russia re-joins the Ukraine grain deal. Sky high energy prices have Europe closing down. Maersk warns.

 Russia says it resumes participation in Ukraine grain deal

ANKARA/MYKOLAIV, Ukraine, Nov 2 (Reuters) - Russia said on Wednesday it would resume its participation in a deal to free up vital grain exports from war-torn Ukraine after suspending it over the weekend in a move that had threatened to exacerbate hunger across the world.

The Russian defence ministry said it had received written guarantees from Kyiv not to use the Black Sea grain corridor for military operations against Russia.

"The Russian Federation considers that the guarantees received at the moment appear sufficient, and resumes the implementation of the agreement," the ministry statement said.

Turkish President Tayyip Erdogan said earlier that Russian Defence Minister Sergei Shoigu had told his Turkish counterpart that the July 22 grain deal brokered by Turkey and the United Nations would continue to operate as of midday on Wednesday.

"The grain transports will continue as agreed before as of 12 (pm) today," Erdogan said.

Russia suspended its involvement in the deal over the weekend, saying it could not guarantee safety for civilian ships crossing the Black Sea because of an attack on its fleet there. Ukraine said that was a false pretext.

Ships have continued to carry Ukrainian grain on the route despite the suspension, but that had been unlikely to continue for long because insurance companies were not issuing new contracts due to Russia's move, industry sources told Reuters.

Ukrainian President Volodymyr Zelenskiy said earlier that the world should respond firmly to any Russian attempts to disrupt Ukraine's export corridor across the Black Sea, which was blocked after Moscow invaded Ukraine on February 24.

More

Russia says it resumes participation in Ukraine grain deal | Reuters

Energy crisis chips away at Europe's industrial might

LONDON, Nov 2 (Reuters) - Europe needs its industrial companies to save energy amid soaring costs and shrinking supplies, and they are delivering - demand for natural gas and electricity both fell in the past quarter.

It is far too early to rejoice, though. The drop is not just because industrial companies are turning down thermostats, they are also shutting down plants that may never reopen.

And while lower energy use helps Europe weather the crisis sparked by Russia's war in Ukraine and Moscow's supply cuts, executives, economists and industry groups warn its industrial base may end up severely weakened if high energy costs persist.

Energy-intensive industries, such as aluminium, fertilisers, and chemicals are at risk of companies permanently shifting production to locations where cheap energy abounds, such as the United States.

Even as an unusually warm October and projections of a mild winter helped drive prices lower, natural gas in the United States still costs about a fifth what companies pay in Europe.

"A lot of companies are just quitting production," Patrick Lammers, management board member at utility E.ON (EONGn.DE) told a conference in London last month. "They actually demand destruct."

Euro-zone manufacturing activity this month hit its weakest level since May 2020, signaling Europe was heading for a recession.

The International Energy Agency estimates European industrial gas demand fell by 25% in the third quarter from a year earlier. Analysts say widespread shutdowns had to be behind the drop because efficiency gains alone would not produce such savings.

"We are doing all we can to prevent a reduction in industrial activity," an European Commission spokesperson said in an email.

But a survey released on Wednesday showed companies in Europe's industrial powerhouse Germany were already scaling back because of energy costs.

More than one business in four in the chemicals sector and 16% in the auto sector said they were being forced to cut production, a survey of 24,000 businesses by the German chambers of commerce and industry (DIHK) showed. Moreover 17% of auto sector companies said they were planning to move some production abroad.

"The effects are clearly visible: energy-intensive producers of intermediate goods in particular are cutting back on production," said DIHK Managing Director Martin Wansleben, referring to critical semi-finished products, such as chemicals and metals.

More

Energy crisis chips away at Europe's industrial might | Reuters

World’s largest container shipping firm Maersk, a barometer for global trade, warns of ‘dark clouds on the horizon’

PUBLISHED WED, NOV 2 2022 3:30 AM EDT

Maersk, the world’s largest container shipping firm, on Wednesday posted record profit for the third quarter on the back of high ocean freight rates, but noted a slowdown in demand.

The Danish giant, widely seen as a barometer for global trade, reported earnings before interest, taxes, depreciation and amortization (EBITDA) of $10.9 billion for the quarter, above consensus analyst projections of $9.8 billion and up around 60% from the same period a year ago.

The company confirmed its full-year guidance for underlying EBITDA of $37 billion and free cash flow above $24 billion.

CEO Soren Skou said the “exceptional results” this year were driven by a continued rise in ocean freight rates, but said it was clear that these have peaked and will begin to normalize in the fourth quarter amid falling demand and an easing of supply chain congestion. Skou flagged that earnings in Maersk’s ocean operations will come down in the coming months.

“With the war in Ukraine, an energy crisis in Europe, high inflation, and a looming global recession there are plenty of dark clouds on the horizon,” Skou said in a statement Wednesday.

“This weighs on consumer purchasing power which in turn impacts global transportation and logistics demand. While we expect a slow-down of the global economy to lead to a softer market in Ocean, we will continue to pursue the growth opportunities within our Logistics business.”

In its second-quarter report, Maersk flagged an impending slowdown in global shipping container demand amid weakening consumer confidence and supply chain congestion.

More

Shipping firm Maersk, a barometer for trade, warns of 'dark clouds on the horizon' (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.

Expensive bites for millions of Brits as food inflation soars to record 11.6 per cent

WEDNESDAY 02 NOVEMBER 2022 7:46 AM

With even basics such as tea bags, milk and sugar seeing significant price rises, food inflation has soared to a record 11.6 per cent in October.

Overall shop prices are now 6.6 per cent higher than they were this time last year – also a record – but food inflation jumped well above September’s 10.6 per cent and the three-month average rate of 9.7 per cent, according to the British Retail Consortium (BRC)-Nielsen Shop Price Index.

Fresh food prices are now 13.3 per cent more than last October, up from 12.1 per cent in September.

 

Non-food inflation accelerated to 4.1 per cent, up from 3.3 per cent in September.

BRC chief executive Helen Dickinson said: “It has been a difficult month for consumers who not only faced an increase in their energy bills, but also a more expensive shopping basket.

“Prices were pushed up because of the significant input cost pressures faced by retailers due to rising commodity and energy prices and a tight labour market.

Mike Watkins, head of retailer and business insight at NielsenIQ, said: “External factors are keeping shop price inflation at record highs and the challenging economic conditions are significantly impacting consumer confidence and retail spend.

“With pressure growing on discretionary spend across both non-food and food retail, delivering good value is the table stake in the battle for shopper loyalty over the next eight weeks.”

Which? head of food policy Sue Davies said: “Soaring food prices are a real concern, and our research shows millions of consumers are already skipping meals or struggling to put healthy meals on the table due to the cost-of-living crisis. It is vital that households get the support they need from the government and businesses.

“Supermarkets have a crucial role to play in helping their customers navigate the tough months ahead. Budget lines for healthy and affordable essential items need to be widely available across their stores and they should ensure shoppers can easily compare the price of products to get the best value. Promotions should be targeted at supporting those most in need.”

Expensive bites for millions of Brits as food inflation soars to record 11.6 per cent (cityam.com)

This may be the year to dine out for Thanksgiving, Wells Fargo says

NOV. 1, 2022 / 4:35 PM

Nov. 1 (UPI) -- A report compiled by Wells Fargo has analyzed the cost of eating at home versus the cost of eating out this Thanksgiving.

By comparing data from last year's Consumer Price Index Wells Fargo calculated that food prices for a home cooked meal have increased by 9.81% since last year while food prices for a meal away from home have increased by 5.79%.

The disparity in price increases means that a meal away from home is comparatively more affordable than in years past.

The increased cost of basic commodities like eggs (+32.5%), butter (+25.8%), and flour (+17.1%), have driven up the cost of an average Thanksgiving basket. Meanwhile, Turkey prices are expected to increase 23% since last year, partially due to the effects of highly pathogenic avian influenza.

Environmental and agricultural factors played a significant role in dictating food costs in American homes this year.

Dry conditions on the East Coast forced cranberry farmers to increase irrigation, which will likely lead to increased prices for fresh cranberries.

Extreme heat in the Northwest also has affected potato crops, with farmers experiencing a lower than average yield for the second year in a row. Meanwhile, a surplus is expected to make sweet potatoes more affordable than many other traditional options.

Meal prices at limited-service restaurants, establishments where you pay before eating, have increased at a much slower rate than grocery prices and the price of a meal at a full-service restaurant, making them the most attractive option for many Americans this Thanksgiving.

This may be the year to dine out for Thanksgiving, Wells Fargo says - UPI.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. 

Covid-19 and life expectancy: France fares well as vaccination rate proves key

The international comparisons published in the journal 'Nature Human Behaviour' put into perspective the virulent criticisms made during the pandemic against France's public health organization.

Published on November 2, 2022 at 10h25

By causing a decline in life expectancy unprecedented since World War II in Western Europe, the Covid-19 pandemic has tragically served as an indicator not only of the fragility of health progress, but also of the uneven effectiveness of political and health systems. The spectacular results of the international population study published on October 17 in the journal Nature Human Behaviour provide much-needed insight into the lessons to be learned from a disaster that caused more than 6.6 million deaths worldwide, including 2 million in Europe.

By drawing up a comparative assessment of two years of Covid-19 in 27 European countries as well as in the United States, demographers highlight profound inequalities. While the years 2020 and 2021 were marked by a decline in life expectancy in a large majority of European countries, this loss over two years was very limited in France (1.2 months) and its neighbors (5.7 months in Germany, 7.4 months in Spain and Italy), while in the countries of the former Soviet bloc the drops were dizzying: 3.5 years in Bulgaria and 2.8 years in Poland.

In the United States, the results were dismal. Not only was the rate of death from Covid-19 faster, but the victims were also younger than in other comparable countries. In two years, the country recorded an estimated excess of more than 1 million deaths, and life expectancy fell by 2.7 years, the largest decline in this indicator since 1920. This figure, half of which is related to the scale that the pandemic took there, and the other half to the overconsumption of opiates, is explained in particular by record obesity rates, a deficient social protection system and a very low vaccination recall rate, 30%, which was half that of France.

A major lesson from the Nature Human Behaviour study is that the correlation between vaccination and a lower loss of life expectancy is clearly established by demographers. The countries with the least vaccinated populations are also those with the highest life expectancy deficits.

The inequalities also concern the ability to return to a positive trajectory after the 2020 decline. Some countries, such as Belgium, France, Switzerland and Spain, have regained several months of life expectancy. Others, such as Bulgaria, Greece and the United States, have continued to lose life expectancy in 2021.

More

Covid-19 and life expectancy: France fares well as vaccination rate proves key (lemonde.fr)

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.

Synthesizing Many “White Graphene” Nanotubes Simultaneously

Nov 1 2022

A team of engineers from the Massachusetts Institute of Technology (MIT) and the University of Tokyo has created centimeter-scale structures that are composed of hexagonal boron nitride (hBN) and loaded with hundreds of billions of hollow aligned fibers (nanotubes). These centimeter-scale structures are large enough for the naked eye to see.

hBN is a single-atom-thin material, which has been called “white graphene” due to its transparent look and resemblance to carbon-based graphene in molecular structure and strength. It can endure higher temperatures than graphene and is electrically insulating instead of conductive. When hBN is rolled into nanoscale tubes (or nanotubes), its remarkable properties are considerably improved.

The team’s findings, published recently in ACS Nanooffer a path toward making aligned boron nitride nanotubes (A-BNNTs) in bulk. The scientists aim to utilize the method to produce large volumes of these nanotubes, which can then be integrated with other materials to create sturdier, more heat-resilient composites, for instance, to protect hypersonic aircraft and space structures.

As hBN is electrically insulating and transparent, the researchers also intend to integrate the BNNTs into transparent windows and employ them to insulate sensors inside electronic gadgets electrically.

The researchers are also examining methods to knit the nanofibers into membranes for water filtration and “blue energy,” a novel idea for renewable energy wherein electricity is generated from the ionic sifting of salt water into fresh water.

Brian Wardle, professor of aeronautics and astronautics at MIT, compares the team’s outcomes to researchers’ decades-long, ongoing quest of manufacturing mass carbon nanotubes.

Wardle is the study’s senior author. The study also comprises lead author and MIT research scientist Luiz Acauan, former MIT postdoctoral researcher Haozhe Wang, and co-workers at the University of Tokyo.

Similar to graphene, hBN has a molecular structure akin to chicken wire. In graphene, this chicken wire formation is composed of carbon atoms organized in a repeating pattern of hexagons.

For hBN, the hexagons are made up of alternating atoms of nitrogen and boron. In the last few years, scientists have learned that two-dimensional (2D) sheets of hBN display excellent stiffness, strength, and resilience properties at elevated temperatures.

When sheets of hBN are rolled into nanotube structures, these properties are additionally improved, mainly when the nanotubes are aligned, like miniature trees in a tightly packed forest.

More

Synthesizing Many “White Graphene” Nanotubes Simultaneously (azonano.com)

"From a strictly economic point of view, buying gold in a major inflation and holding it probably presents the least risk of capital loss of any investment or speculation."

Henry Hazlitt. 

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