Wednesday, 16 November 2022

When It All Goes Wrong.

 Baltic Dry Index. 1300 -25     Brent Crude 93.36

Spot Gold 1773          US 2 Year Yield 4.37 +0.03

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

Deaths 53,100

Coronavirus Cases 16/11/22 World 641,049,738

Deaths 6,618,226

The UK National Health Service has an unenviable statistic. On a long enough timeline, it loses 100 percent of its patients!

In the stock casinos, worry that NATO’s proxy war against Russia in Ukraine is about to widen out.

While no one wants a wider war, let alone a nuclear war with Russia, wars usually take on an uncontrollable existence of their own.

After “Russian” missiles hit Poland, NATO scrambles to walk back on war.


European markets set to open lower as geopolitical tensions rise after Poland missile incident

UPDATED WED, NOV 16 2022 12:28 AM EST

European markets are set to open lower on Wednesday as political instability gripped the region after a missile hit Polish territory, raising tensions between Russia and NATO.

Ukraine experienced a wave of missile strikes across the country on Wednesday and in the evening Poland said a Russian-made missile had struck Polish territory, killing two people. Moscow denied responsibility for the strike. President Andrzej Duda described it as “an isolated incident,” adding an investigation is underway.

Shares in the Asia-Pacific were mostly lower on Wednesday as world leaders gathered in Bali, Indonesia, for a second day of the Group of 20 summit. U.S. stock futures fell in overnight trading as investors weighed another lighter-than-expected inflation report and looked ahead to U.S. retail sales data due out Wednesday.

Biden says it’s ‘unlikely’ the missile that killed two people in Poland was fired from Russia

U.S. President Joe Biden said it’s “unlikely” a missile that killed two people in Poland was fired from Russia, citing the trajectory of the rocket.

Asked by a reporter if the missile was fired from Russia, Biden said: “There is preliminary information that contests that, I don’t want to say that until we completely investigate.”

He went on to say: “It’s unlikely... in the minds of the trajectory, that it was fired from Russia. But, we’ll see.”

Biden reiterated that the leaders of the Group of 7 agreed to support an ongoing investigation into the explosion.

“We agreed to support Poland’s investigation into the explosion in rural Poland near the Ukrainian border. And I’m going to make sure we figure out exactly what happened,” he told reporters on the sidelines of the G-20 summit in Bali, Indonesia.

European markets: geopolitical tensions rise after Poland missile hit (cnbc.com) 

In global recession news, the end of ZIRP and NIRP free money is only just starting to have serious consequences for many firms who seem to have thought the Magic Money Tree forests went on forever.


‘We will see spectacular failures’: CEOs and investors on what the end of cheap money means for tech

PUBLISHED TUE, NOV 15 2022 4:07 AM EST

LISBON, Portugal — Once high-flying tech unicorns are now having their wings clipped as the era of easy money comes to an end.

That was the message from the Web Summit tech conference in Lisbon, Portugal, earlier this month. Startup founders and investors took to the stage to warn fellow entrepreneurs that it was time to rein in costs and focus on fundamentals.

“What’s for sure is that the landscape of fundraising has changed,” Guillaume Pousaz, CEO of London-based payments software company Checkout.com, said in a panel moderated by CNBC. 

Last year, a small team could share a PDF deck with investors and receive $6 million in seed funding “instantly, ” according to Pousaz — a clear sign of excess in venture dealmaking.

Checkout.com itself saw its valuation zoom nearly threefold to $40 billion in January after a new equity round. The firm generated revenue of $252.7 million and a pre-tax loss of $38.3 million in 2020, according to a company filing.

Asked what his company’s valuation would be today, Pousaz said: “Valuation is something for investors who care about entry point and exit point.”

“The multiples last year are not the same multiples than this year,” he added. “We can look at the public markets, the valuations are mostly half what they were last year.”

“But I would almost tell you that I don’t care at all because I care about where my revenue is going and that’s what matters,” he added.

Private tech company valuations are under immense pressure amid rising interest rates, high inflation and the prospect of a global economic downturn. The Fed and other central banks are raising rates and reversing pandemic-era monetary easing to stave off soaring inflation.

That’s led to a sharp pullback in high-growth tech stocks which has, in turn, impacted privately-held startups, which are raising money at reduced valuations in so-called “down rounds.” The likes of Stripe and Klarna have seen their valuations drop 28% and 85%, respectively, this year.

“What we’ve seen in the last few years was a cost of money that was 0,” Pousaz said. “That’s through history very rare. Now we have a cost of money that is high and going to keep going higher.”

Higher rates spell challenges for much of the market, but they represent a notable setback for tech firms that are losing money. Investors value companies based on the present value of future cash flow, and higher rates reduce the amount of that expected cash flow.

Pousaz said investors are yet to find a “floor” for determining how much the cost of capital will rise.

More

Tech leaders reckon with higher interest rates, down rounds and layoffs (cnbc.com)

The cracks in the US Treasury bond market

The meltdown in UK gilts exposed the vulnerability of large bond markets. Could the biggest of them survive a wave of selling?

15 November, 2022

Buying and selling in the world’s biggest bond market is supposed to be easy. However, for most of this year, says Gregory Whiteley, a bond portfolio manager at DoubleLine Capital, it has been anything but straightforward. Whiteley says a trader used to be able to get hold of $400mn of US Treasury bonds — not an outsize quantity in this $24tn market — as a routine matter.

But now that typically involves breaking up the order into smaller chunks; perhaps doing $100mn of the trade electronically, he explains, and then picking up the phone to see if they can prise the rest of the debt from the hands of Wall Street’s trading desks over the course of a day. The US Treasury bond market suffered a huge scare at the start of the coronavirus pandemic when fears about a collapse in the global economy led to a sudden slump in prices and liquidity. Now as the Federal Reserve battles to rein in inflation, a recession looms and most asset prices have faced a dramatic sell-off, the world’s most important bond market is creaking once again.

Liquidity in the market — one crucial measure of how well it is functioning — is at its worst levels since March 2020 after a dramatic decline in the past year. Market depth, a measure of liquidity which refers to the ability of a trader to buy or sell Treasuries without moving prices, is also at its worst level since March 2020, according to Jay Barry at JPMorgan. “Markets are in a much more fragile place, with terrible liquidity,” says Greg Peters, co-chief investment officer at PGIM Fixed Income. “The way I think about fragile market function is that the odds of a financial accident are just higher.”


All this was happening even before the recent meltdown in UK government debt, which has added to the anxiety about the vulnerability of the world’s large bond markets.

While investors are not concerned about an exact replay of the UK crisis, in which pension funds placed leveraged bets on the direction of bonds at a large scale, many fear that an unforeseen wave of selling could quickly overwhelm the US bond market’s shaky infrastructure.

More

The cracks in the US Treasury bond market | Financial Times (ft.com)

Chemicals industry warns that rail strike will shut plants and cost economy billions

The U.S. chemical manufacturing industry is one of the largest users of freight rail, shipping more than 33,000 carloads per week, and it is forecasting billions of dollars in economic damage if a labor deal isn’t reached between rail companies and unions before a potential strike in December.

A new economic analysis released by the American Chemistry Council estimates that a rail strike would impact approximately $2.8 billion in chemical cargo that is moved weekly, with a month-long strike resulting in an overall hit to the economy of $160 billion, or one percentage point of GDP.

The ACC represents companies across industrial, energy and pharmaceutical sectors, among other manufacturing niches, including 3M, Dow, Dupont, Exxon Mobil, Chevron, BP and Eli Lilly.

Chemicals are among the most sensitive cargo moved by freight rail companies, and the first to be dealt with when there is risk of a strike. Strike preparation plans released by the railroads back in September when a looming work stoppage was averted indicated that the freight companies would start securing critical chemicals like chlorine for drinking water over regular cargo seven days prior to the strike date. Ninety-six hours before a strike deadline, all chemical shipments are no longer moved.

“AAR data show that there was a drop of 1,975 carloads of chemical shipments during the week of September 10 when the railroads stopped accepting shipments due to the threat of a strike,” said Jeff Sloan, ACC’s senior director of transportation policy. “We would expect a similar dramatic reduction in chemical shipments if an embargo were to take place this month.”

The start of rail strike preparation will depend on the voting results from some of the largest rail unions yet to ratify the labor deal recommended by President Biden’s Presidential Emergency Board.

The two largest unions, the Transportation Division of the International Association of Sheet Metal, Air, Rail, and Transportation Workers (SMART-TD) and the Brotherhood of Locomotive Engineers and Trainmen (BLET), a Division of the Rail Conference of the International Brotherhood of Teamsters, will announce their vote results on Monday, November 21.

If both unions ratify the tentative agreement, the strike date the rails would start prepping for is December 5. That’s the day the Brotherhood of Maintenance of Way Employees Division (BMWED), and the Brotherhood of Railroad Signalmen (BRS), can strike. Their cooling-off period ends December 4. The International Brotherhood of Boilermakers rejected the labor deal Monday, but said it will continue to negotiate during the cooling-off period.

More

Chemical industry warns rail strike will hit GDP, stoke inflation (cnbc.com)

March 2021 UK census population of England 56.49 million.

NHS England says 62 million are registered with a G.P. in England alone. How?

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.

UK unemployment rises to 3.6 per cent as recession looms

15 November 2022

The rate of UK unemployment rose to 3.6 per cent in the three months to September, up from 3.5 per cent in the previous three months, the Office for National Statistics said.

Darren Morgan, director of labour and economic statistics at the Office for National Statistics (ONS), said half a million working days in August and September were lost to strikes in addition to older people leaving the workforce.

The Office for National Statistics also published data on wages showing between July and September wages fell in real terms by 2.6 per cent for total pay when adjusted for inflation, and by 2.7 per cent on the year for regular pay.

“The proportion of people neither working nor looking for work has risen again,” Mr Morgan said.

“Since the onset of the pandemic, this shift has largely been caused by older workers leaving the labour market altogether, but in the most recent quarter, the main contribution has actually come from younger groups.

“August and September saw well over half a million working days lost to strikes, the highest two-month total in more than a decade, with the vast majority coming from the transport and communications sectors.”

Mr Morgan added that as real earnings begin to fall, most strikes are on disputes over pay.

He added: “Job vacancies continue to fall back from their recent peak, with increasing numbers of employers now telling us that economic pressures are a factor in their decision to hold back on recruitment.

“The biggest driver behind the fall came from hospitality, followed by retailing and wholesaling.”

It comes as the Bank of England warned the UK was falling into a deep recession amid rising inflation, food costs and energy bills.

More

UK unemployment rises to 3.6 per cent as recession looms (msn.com)

AIER Leading Indicators Index Remains Well Below Neutral

Robert Hughes  – November 14, 2022

AIER’s Leading Indicators Index held at 25 in October. The latest result is the fifth consecutive month below the neutral 50 threshold. The low readings are consistent with weakness in the economy and significantly elevated risks for the outlook.

The first estimate of third-quarter real gross domestic product (GDP) came in at a 2.6 percent annualized growth rate, following rates of -1.6 percent in the first quarter and -0.6 percent for the second quarter. Real final sales to private domestic purchasers, about 88 percent of real GDP and arguably a better measure of private domestic demand, has shown greater resilience, with growth having stayed positive despite declines in real GDP. However, domestic demand growth has slowed significantly, from a 2.6 percent pace in the fourth quarter of 2021 to 2.1 percent in the first quarter, 0.5 percent in the second quarter, and just 0.1 percent in the third quarter.

Consumers remain the cornerstone of the U.S. economy with real consumer spending accounting for about 70 percent of real GDP and about 80 percent of real domestic demand. For consumers, the labor market remains tight with payrolls continuing to expand (though the pace appears to be slowing), job openings at a high level, and layoffs hovering near lows. The solid labor market supports positive consumer attitudes but that is offset but high inflation and rapid interest rate increases that threaten future economic growth.

The longer elevated rates of price increases continue and the higher the Fed raises interest rates, the higher the probability that a vicious cycle of declining economic activity and contracting labor demand will begin to dominate the economy. Overall, the outlook remains highly uncertain. Caution is warranted.

AIER Leading Indicators Index Remains Well Below Neutral | AIER

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. 

Better late then never, or shutting the stable door long after the horses have bolted?

Myocarditis after Covid vaccination: Research on possible long-term risks underway

Both Pfizer and Moderna are launching clinical trials to track health issues — if any — in the years following a diagnosis of vaccine-associated heart problems in teens and young adults.

Nov. 12, 2022, 12:00 PM GMT

---- Miller is one of a very small group of people in the United States who have experienced myocarditis following vaccination with the Pfizer-BioNTech or the Moderna Covid vaccines based on mRNA technology.

Myocarditis is a condition that has long been linked to a number of viral infections, including influenza, coxsackieviruses, as well as Covid. It has also been observed as an infrequent but worrisome side effect of the mRNA Covid vaccines.

Are there long-term risks of myocarditis?

Of the hundreds of millions of Covid vaccine doses given in the U.S. since late 2020, there have been around 1,000 reports of vaccine-related myocarditis or pericarditis in children under age 18, primarily young males, according to the Centers for Disease Control and Prevention. Most of those who developed the condition have fully recovered, although research so far has only looked at how well they're doing after several months. Some doctors wonder if it can cause permanent damage to the heart.

Now, the first research in the U.S. is underway, tracking adverse health effects — if any — that may appear in the years following a diagnosis of vaccine-associated heart problems. Moderna has already launched two trials, the most recent in September. Pfizer confirmed that at least one of its trials, which will include up to 500 teens and young adults under age 21, is slated to begin in the next couple of months.

The Food and Drug Administration has required that the drugmakers conduct several studies assessing the potential long-term impacts of myocarditis, as part of its approval of the mRNA Covid vaccines in the U.S. Early findings from the research could be published as early as next year, sources told NBC News.

Some of the trials will follow those who developed the condition for as long as five years, according to the FDA’s approval letters. The trials will be monitoring for myocarditis and subclinical myocarditis, which doesn't cause symptoms.

The FDA declined to comment on Pfizer's and Moderna's studies because they are ongoing, but an agency official said the chance of having myocarditis occur following vaccination is "very low."

The condition does not lead to cardiac-related death, the official said, as claimed by Florida's surgeon general last month who cited an unpublished analysis of state data.

"There is no evidence of increased risk of deaths following mRNA vaccines compared to individuals who did not get vaccinated," the official said. "In fact, evidence from well-conducted, peer-reviewed, published studies suggests that the risk of death is higher for unvaccinated individuals for nearly every age group."

What is known about myocarditis and vaccines?

The vast majority of cases occur in young men, ages 16 to 24, according to the CDC. The agency did not have data available on the total number of cases in young adults 24 and younger, but it estimates there have been 52.4 cases and 56.3 cases per million doses of Pfizer's and Moderna's vaccines, respectively.

---- A study by Canadian researchers published Monday in the Journal of the American College of Cardiology found that men younger than 40 who got the Moderna vaccine had the highest risk of heart issues, usually within 21 days after the second dose. The study was observational, meaning it doesn’t prove cause and effect but it is one of only a few studies to compare the risk of myocarditis between the Pfizer and the Moderna vaccines.

More

Myocarditis after Covid vaccine: Research on long-term effects underway (nbcnews.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.

Today, something different. When the mirage ends. How to lose $32 billion in less than a week. Approx. 11 minutes.

How the Crypto King Lost It All in One Week | FTX Collapse Explained

How the Crypto King Lost It All in One Week | FTX Collapse Explained - YouTube

Column: Crypto tycoon Sam Bankman-Fried didn't lose a $16-billion fortune. His 'fortune' was never real

November 14, 2022

The Greek tragedy unfolding in the financial press over the past week is the story of Sam Bankman-Fried, the would-be cryptocurrency tycoon and political kingmaker whose multibillion-dollar empire has sunk like the Titanic after its encounter with the iceberg.

Bloomberg put it this way: "Bankman-Fried’s Assets Plummet From $16 Billion to Zero in Days."

The story under that headline reported that Bankman-Fried's entire fortune had been "wiped out" in "one of history’s greatest-ever destructions of wealth."

----Bankman-Fried either had $16 billion in assets at the start of last week and still has a sizable share of it today, or zero now and close to zero then. Both things can't be true.

Based on reports that Bankman-Fried and his cryptocurrency exchange firm, FTX, are now under investigation by federal prosecutors and securities regulators, I'm voting that $16 billion was mythical and that zero is the right number.

----What's known thus far, according to an FTX balance sheet published by the Financial Times, is that the firm recently had about $900 million in liquid assets against nearly $9 billion in liabilities. That means that FTX, the core of Bankman-Fried's purported fortune, was as much as $8 billion in the hole.

Not all those liquid assets are worth as much as the balance sheet states. It mentions about $472 million in stock of the brokerage Robinhood. But Robinhood shares have fallen in price by about 20% over the last 11 days, so that figure may be, um, optimistic by nearly $100 million.

When initial reports of FTX's upside-down capital structure leaked out recently, customers staged a run on the exchange, ordering withdrawals of billions of dollars in deposits that FTX couldn't provide. FTX has now filed for bankruptcy, and Bankman-Fried has stepped down as CEO.

Reports have also emerged that FTX lent customers' assets to its related trading arm, Alameda Research, which used them to fund risky investments of its own. If FTX were regulated by the same rules that conventional stock and bond brokerages must follow, client assets must be kept separate from brokerage assets.

----Among the assets the balance sheet describes as "illiquid" or "less liquid" — that is, possibly unavailable to cover liabilities — are cryptocurrencies purportedly worth billions of dollars, including $554 million in FTT, a crypto token originated by FTX itself.

Another cryptocurrency, Serum, was listed with a value of $2.2 billion as of last Thursday. The previous week, the extremely volatile crypto was valued at $5.4 billion, according to the balance sheet. Serum, by the way, is another crypto token originated by FTX, so even its $2.2-billion value on the balance sheet is extremely questionable.

More

Column: Crypto tycoon Sam Bankman-Fried didn't lose a $16-billion fortune. His 'fortune' was never real (msn.com)

How FTX got an EU licence just two months before it crashed

15 November, 2022

Sam Bankman-Fried enjoyed preaching about how he maintained high regulatory standards at his crypto exchange FTX.

In mid-September it secured a licence to operate in the EU, from Cyprus, and its 30-year-old founder declared: “Securing this license in the European Union is an important step in achieving our goal of becoming one of the most regulated exchanges in the world.

“We are continuing to work with [Cypriot regulators] and regulators across the globe to be the leader in the digital asset industry when it comes to meeting the financial standards that are expected of traditional financial institutions.”

Less than two months later, those claims look increasingly farcical with FTX in collapse and Bankman-Fried having resigned in disgrace. FTX’s main international exchange held just $900m (£763m) in easily sellable assets against $9bn in liabilities the day before it collapsed into bankruptcy.

The fiasco has shone a spotlight on how regulators have tied themselves in knots in attempting to supervise a “wild west” industry that has spent heavily to market itself to the mainstream – FTX’s name has been emblazoned on Lewis Hamilton’s Mercedes in Formula One.

In trying to expand FTX’s global footprint, Bankman-Fried turned to Cyprus as a window into the EU – a country that it is claimed has become notorious as a magnet for those seeking a “few questions asked” financial regime.

Now, the Mediterranean nation is backpedalling fast and questions are being asked in Brussels about how FTX could be granted an EU licence less than two months before it imploded. After occasional claims that post-Brexit Britain could pose a threat to the bloc’s financial stability, the EU is now being forced to do some soul searching of its own following the FTX debacle.

More

How FTX got an EU licence just two months before it crashed (msn.com)

“There are three kinds of lies: Lies, Damned Lies, and Statistics”

Attributed to Mark Twain, who himself attributed it to Prime Minister Benjamin Disraeli.

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