Thursday 15 December 2022

Higher For Longer. SBF Ratted Out.

 Baltic Dry Index. 1401 +44    Brent Crude 82.15

Spot Gold 1793         US 2 Year Yield 4.23 0.01

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

Deaths 53,103

Coronavirus Cases 15/12/22 World 655,575,187

Deaths 6,664,478

Success is the ability to go from one failure to another with no loss of enthusiasm.

Winston Spencer Churchill.

As expected, the Fed, the US central bank, raised its key interest rate by 50 basis points. What wasn’t expected was for Fed Chairman Powell to declare that more interest rates are to come and that rates will stay “high” for all of 2023 before declining slightly in 2024.

Wall Street swooned and took the Asian stock casinos down with them. Why buy stocks now when they’ll be far cheaper towards the end of 2023?

Asia stocks follow Wall St down as Fed warns of higher rates

December 15, 2022

BANGKOK (AP) — Asian shares skidded Thursday after a retreat on Wall Street as markets registered their dismay over the Federal Reserve’s warning that still higher interest rates are in store following its latest increase.

Oil prices fell while U.S. futures edged higher.

Japan reported its trade deficit in November surged to over 2 trillion yen ($15 billion) as higher costs for oil and a weak yen combined to push imports higher. It was the 16th straight month of red ink and a record high for the month of November.

Tokyo’s Nikkei 225 lost 0.3% to 28,058.42 and the Hang Seng in Hong Kong sank 1.1% to 19,449.15. The Kospi in Seoul gave up 1.1% to 2,372.78.

The Shanghai Composite index fell 0.3% to 3,167.73 and Australia’s S&P/ASX 200 shed 0.6% to 7,208.80.

Shares fell in Taiwan and Bangkok but rose in Mumbai.

As expected, the central bank raised its key short-term rate by 0.50 percentage points on Wednesday. It was its seventh hike this year. The Fed also said it expects rates to be higher over the coming few years than it had anticipated.

----The S&P 500 lost 0.6% to 3,995.32, giving up an earlier gain of 0.9%. The Dow Jones Industrial Average fell 0.4% to 33,966.35, and the Nasdaq composite gave back 0.8%, closing at 11,170.89.

Roughly 70% of the stocks in the S&P 500 closed lower Wednesday, with technology companies, banks and retailers among the biggest weights on the benchmark index. Apple fell 1.6%, Goldman Sachs dropped 2.3% and Best Buy slid 3.9%.

Small company stocks also fell. The Russell 2000 index slid 0.7% to 1,820.45.

The Fed’s latest hike is smaller than the previous four 0.75 percentage point increases and comes a day after an encouraging report showed that inflation in the U.S. slowed in November for a fifth straight month, to 7.1%.

----The Fed also signaled it expects its rate will come down by the end of 2024 to 4.1%, and drop to 3.1% at the end of 2025.

Consumer spending and employment remain strong. That has made it more difficult for the Fed to tame inflation while also helping to protect the slowing economy from a possible recession.

The U.S. will release its weekly report on unemployment benefits on Thursday, along with retail sales data for November.

More

Asia stocks follow Wall St down as Fed warns of higher rates | AP News

Fed raises key rate by half-point and signals more to come

December 14, 2022

WASHINGTON (AP) — The Federal Reserve reinforced its inflation fight Wednesday by raising its key interest rate for the seventh time this year and signaling more hikes to come. But it announced a smaller hike than it had in its past four meetings at a time when inflation is showing signs of easing.

The Fed made clear, in a statement and a news conference by Chair Jerome Powell, that it thinks sharply higher rates are still needed to fully tame the worst inflation bout to strike the economy in four decades.

The central bank boosted its benchmark rate a half-point to a range of 4.25% to 4.5%, its highest level in 15 years. Though lower than its previous three-quarter-point hikes, the latest move will further increase the costs of many consumer and business loans and the risk of a recession.

More surprisingly, the policymakers forecast that their key short-term rate will reach a range of 5% to 5.25% by the end of 2023. That suggests that the Fed is poised to raise its rate by an additional three-quarters of a point and leave it there through next year. Some economists had expected that the Fed would project only an additional half-point increase.

The latest rate hike was announced one day after an encouraging report showed that inflation in the United States slowed in November for a fifth straight month. The year-over-year increase of 7.1%, though still high, was sharply below a recent peak of 9.1% in June.

“The inflation data in October and November show a welcome reduction,” Powell said at his news conference. “But it will take substantially more evidence to give confidence that inflation is on a sustained downward path.”

In its updated forecasts, the Fed’s policymakers predicted slower growth and higher unemployment for next year and 2024. The unemployment rate is envisioned to jump to 4.6% by the end of 2023, from 3.7% today. That would mark a significant increase in joblessness that typically would reflect a recession.

Consistent with a sharp slowdown, the officials also projected that the economy will barely grow next year, expanding just 0.5%, less than half the forecast it had made in September.

“The Fed is not done — it sees a prolonged slowdown and a rise in unemployment as the only way to fully derail inflation,” Diane Swonk, chief economist at KPMG, said in a research note.

More

Fed raises key rate by half-point and signals more to come | AP News

In other news, can China avoid recession even as it u-turns on fighting Covid-19? If China can’t avoid the new global recession, how bad will that make recession in the G-7?

China’s retail sales shrink far more than expected, while industrial production disappoints

BEIJING — China reported economic data Thursday that missed expectations across the board during a month in which widespread Covid controls weighed on growth.

Retail sales fell by 5.9% in November from a year ago, the National Bureau of Statistics said.

That’s worse than expectations for a decline of 3.7%, according to analysts polled by Reuters, and a greater drop than the 0.5% year-on-year decline in October.

Industrial production grew by 2.2% in November from a year ago, missing Reuters’ forecast for a 3.6% increase. The reported pace was also slower than the 5% increase in October.

Fixed asset investment for the year through November slowed to 5.3% year-on-year growth, missing Reuters’ expectations for a 5.6% increase. The official print was also down from 5.8% growth in the first 10 months of the year.

Investment in infrastructure picked up pace in November from October on a year-to-date basis, while that in manufacturing slowed slightly. Investment in real estate fell at a sharper pace amid the industry’s ongoing slump.

The unemployment rate in cities ticked up to 5.7% in November. The jobless rate for young people ages 16 to 24 remained a far higher 17.1%.

The decline in retail sales brought the year-to-date total down by 0.1% from the first 11 months of last year.

Food and medicine were the only sub-categories that saw sales growth in November from a year ago, according to the statistics bureau. Clothing and shoes saw sales plunge by 15.6%.

Online sales of physical goods rose by just 4% year-on-year in November, down sharply from the prior month, according to CNBC calculations of data accessed through Wind Information.

Sweeping Covid changes

In the last two weeks, China has significantly peeled back a host of Covid-related restrictions that had hampered domestic travel and business activity. Authorities have emphasized vaccinations for elderly people, and encouraged Covid patients to recover at home.

Anecdotally, at least in Beijing, a significant share of the population has since fallen sick, if not tested positive for Covid, amid below-freezing weather.

A day before the data release, China’s National Bureau of Statistics canceled its in-person press conference set for Thursday without explanation.

More

China's retail sales shrink far more than expected, while industrial production disappoints (cnbc.com)

Finally, in the Great Cryptoland Fraud case, The Bahamas wisely goes after the only real assets left.

FTX’s Bahamian Liquidators Seek Control of 35 Properties

Dec. 13, 2022, 4:53 PM

· Bahamian courts can’t recognize US court’s orders, liquidators said

· FTX Digital paid for properties via $256 million in loans

Bahamian liquidators overseeing the wind-down of an FTX subsidiary are seeking to dismiss the US-filed bankruptcy of another FTX entity, claiming they’re owed $256.3 million.

The Chapter 11 case of FTX Property Holdings, which owns 35 properties in the Bahamas, should be dismissed because all its assets and creditors are located on the island, the liquidators of FTX Digital said in a filing Monday with the US Bankruptcy Court for the District of Delaware.

FTX Property has no connection to the US, the Bahamian court-appointed liquidators argued.

The request highlights a simmering international turf war over the collapsed cryptocurrency business, which filed for bankruptcy last month.

“Respectfully, this Court is not the best forum to resolve the issues this case would present,” the liquidators said.

Insolvency proceedings for Bahamas-based FTX Digital began on the island on Nov. 10. More than 130 FTX-related entities, including FTX Property, subsequently filed for bankruptcy in the US.

The liquidators’ motion came on the same day that FTX’s former CEO and co-founder, Sam Bankman-Fried, was arrested. He was charged with eight criminal counts Tuesday, including conspiracy and wire fraud for allegedly misusing billions of dollars in customers’ funds before the spectacular collapse of his cryptocurrency empire.

FTX Property owes FTX Digital $256.3 million, the liquidators said. FTX Digital is the largest creditor of FTX Property, they said.

The liquidators filed for Chapter 15 protection on behalf of FTX Digital last month. The liquidators seek US bankruptcy court recognition of the Bahamian insolvency process under Chapter 15 of the bankruptcy code.

FTX Property’s two directors as of July 2021 were Bankman-Fried and Ryan Salame, the liquidators said. But only Bankman-Fried signed the papers that supposedly authorized the entity’s Chapter 11 petition, the liquidators said.

Bahamian courts have jurisdiction over the real estate and “cannot recognize” the Delaware court’s orders, the liquidators said. Bahamian law doesn’t allow recognition of a foreign insolvency proceeding for a Bahamian company, they said.

FTX’s Bahamian Liquidators Seek Control of 35 Properties (bloomberglaw.com)

FTX insider turned on Sam Bankman-Fried days before bankruptcy, flagging potential fraud to regulators

Days before FTX’s bankruptcy filing last month, co-CEO Ryan Salame told Bahamian authorities that founder Sam Bankman-Fried may have committed fraud by sending customer money from the crypto exchange to his other firm, Alameda Research.

According to a filing on Wednesday tied to FTX’s bankruptcy proceedings, Salame disclosed “possible mishandling of clients’ assets” by Bankman-Fried. The letter included in the filing was dated Nov. 9, and was sent from the Securities Commission of the Bahamas to the commissioner of police. FTX declared bankruptcy on Nov. 11.

The disclosure on Wednesday marks the first public acknowledgement of an insider turning on Bankman-Fried, who was arrested in the Bahamas on Monday after the U.S. Attorney for the Southern District of New York shared a sealed indictment with the Bahamian government. The indictment, unsealed on Tuesday, charged Bankman-Fried with eight criminal counts related to fraud, money laundering and improper use of customer funds.

Salame told regulators that only three individuals at FTX — Bankman-Fried, Nishad Singh and Gary Wang — had the kind of access and authority to engineer the possibly fraudulent transfers to Alameda, a hedge fund and trading firm. Salame said he advised Bankman-Fried and Alameda executives that the possible mishandling of customer funds, which were commingled with Alameda, was contrary to “normal corporate governance.”

Salame’s LinkedIn profile says he’s based in the Bahamas. He also has multiple residences in the U.S., with homes in Massachusetts, Washington, D.C., and New Jersey. He had departed the Bahamas for the U.S. by Nov. 9, according to the letter.

Ex-FTX exec Salame alerted Bahamas regulators to SBF potential fraud (cnbc.com)

Exclusive: How a secret software change allowed FTX to use client money

Dec 13 (Reuters) - In mid-2020, FTX's chief engineer made a secret change to the cryptocurrency exchange’s software.

He tweaked the code to exempt Alameda Research, a hedge fund owned by FTX founder Sam Bankman-Fried, from a feature on the trading platform that would have automatically sold off Alameda's assets if it was losing too much borrowed money.

In a note explaining the change, the engineer, Nishad Singh, emphasized that FTX should never sell Alameda's positions. "Be extra careful not to liquidate,” Singh wrote in the comment in the platform's code, which it showed he helped author. Reuters reviewed the code base, which has not been previously reported.

The exemption allowed Alameda to keep borrowing funds from FTX irrespective of the value of the collateral securing those loans. That tweak in the code got the attention of the U.S. Securities and Exchange Commission, which charged Bankman-Fried with fraud on Tuesday. The SEC said the tweak meant Alameda had a “virtually unlimited line of credit.” Furthermore, the billions of dollars that FTX secretly lent to Alameda over the next two years didn't come from its own reserves, but rather were other FTX customers' deposits, the SEC said.

The SEC and a spokesperson for Bankman-Fried declined to comment for this story. Singh did not respond to several requests for comment.

The regulator, which called the exchange “a house of cards,” alleged Bankman-Fried concealed that FTX diverted customer funds to Alameda in order to make undisclosed venture investments, luxury real estate purchases, and political donations. U.S. prosecutors and the Commodity Futures Trading Commission also filed separate criminal and civil charges, respectively.

The complaints – along with previously unreported FTX documents seen by Reuters and three people familiar with the crypto exchange – provide new insights into how Bankman-Fried dipped into customer funds and spent billions more than FTX was making without the knowledge of investors, its customers and most employees.

---- The auto-liquidation exemption written into FTX code allowed Alameda to continually increase its line of credit until it “grew to tens of billions of dollars and effectively became limitless,” the SEC complaint said. It was one of two ways that Bankman-Fried diverted customer funds to Alameda.

The other was a mechanism whereby FTX customers deposited over $8 billion in traditional currency into bank accounts secretly controlled by Alameda. These deposits were reflected in an internal account on FTX that was not tied to Alameda, which concealed its liability, the complaint said.

More

Exclusive: How a secret software change allowed FTX to use client money | Reuters

 

Global Inflation/Stagflation/Recession Watch.

Given our Magic Money Tree central banksters and our spendthrift politicians, inflation now needs an entire section of its own.

Drought emergency declared for all Southern California

Wed, December 14, 2022 at 9:46 PM

As California faces the prospect of a fourth consecutive dry year, officials with the Metropolitan Water District of Southern California have declared a regional drought emergency and called on water agencies to immediately reduce their use of all imported supplies.

The decision from the MWD's board came about eight months after officials declared a similar emergency for 7 million people who are dependent on supplies from the State Water Project, a vast network of reservoirs, canals and dams that convey water from Northern California. Residents reliant on California's other major supply — the Colorado River — had not been included in that emergency declaration.

"Conditions on the Colorado River are growing increasingly dire," MWD Chairwoman Gloria Gray said in a statement. "We simply cannot continue turning to that source to make up the difference in our limited state supplies. In addition, three years of California drought are drawing down our local storage."

Officials said the call for conservation in Colorado River-dependent areas could become mandatory if drought conditions persist in the coming months, which some experts say is likely. By April, the MWD will consider allocating supplies to all of its 26 member agencies, requiring them to either cut their use of imported water or face steep additional fees. The agencies together serve about 19 million people.

----The Colorado River has fallen to such historic lows that Lake Mead and Lake Powell — the nation's two largest reservoirs — could reach "dead pool", or the point at which water no longer passes downstream from a dam. California and six other states that rely on the river have been under pressure from the federal government to drastically reduce their use.

In October, some California water agencies, including the MWD, pledged usage reductions of up to 400,000 acre-feet per year, or about 9% of the state's total 4.4 million water allotment from the river, through 2026. Still, other states are demanding that California do more to cut usage.

More

Drought emergency declared for all Southern California (yahoo.com)

 

OJ prices rise after Florida oranges damaged by hurricanes, disease

DEC. 13, 2022 / 9:19 PM

Dec. 13 (UPI) -- Orange juice is about to get even more expensive after hurricanes and disease damaged many of Florida's citrus groves.

Orange juice prices, which have increased along with other groceries due to inflation, could see even bigger price hikes in 2023 due to supply chain issues as growers in Florida grapple with the worst crop in more than 80 years.

"It is an incredibly heartbreaking moment for growers," said Shannon Shepp, executive director of the Florida Department of Citrus.

"To grow a crop for nine months and then watch it fall to the ground, or watch trees blow over, is incredibly devastating. In a time when you're seeing declined production anyway, it's a kick in the gut," she said.

Most of Florida's oranges are used for orange juice production, forcing orange juice makers to look to the international market, according to Shepp who said imports could soften prices.

The U.S. Department of Agriculture said the orange forecast for the 2022-23 season is at 2.83 million tons for the United States, which is down 18% from the previous season.

Florida's orange forecast stands at 20 million boxes, or 900,000 tons, which is down 51% from last season.

"The December crop forecast reflects the very real challenges that Hurricane Ian, Hurricane Nicole and the ongoing impacts of citrus greening have created for growers across the state," Shepp said. "Florida citrus growers are resilient. They have withstood centuries of extreme weather, and this hurricane season is no exception."

In addition to damage from severe weather, disease is a growing issue as Florida farmers deal with citrus greening in "100% of Florida groves," according to Shepp.

Citrus greening, which has no known cure, cuts off nutrients to orange trees. Over time, insects carry the infection to other trees, which produce fewer oranges and eventually die off.

The impact of weather and disease on Florida orange groves will trickle down to grocery stores where consumers will find limited supplies and higher prices, according to economists.

"We're going to have higher prices because we're so short on supply -- historically short," said Tanner Ehmke, lead economist for dairy and specialty crops at CoBank.

While Ehmke expects retail prices to follow orange juice future prices, which have spiked 42% this year, consumers may not see the impact for another three to six months.

OJ prices rise after Florida oranges damaged by hurricanes, disease - 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.

China won’t report asymptomatic COVID cases in further shift

December 14, 2022

BEIJING (AP) — China said Wednesday it would stop reporting asymptomatic COVID-19 cases since they’ve become “impossible” to track with mass testing no longer required, another step in the country’s uncertain exit from some of the world’s strictest antivirus policies.

China last week announced its most significant easing yet of antivirus measures and has begun to see what appears to be a rapid increase in new infections, raising concerns that its health system could become overwhelmed as those in other countries did during early COVID waves.

So far, though, many of those newly sick are staying home and there has been little evidence of a surge in patient numbers. But it’s difficult to get a clear picture of the virus’s spread, and the new reporting rules could make that even harder. Some hospitals have reportedly struggled to remain staffed because of rising infections among their employees.

A notice on the National Health Commission’s website on Wednesday said it stopped publishing daily figures on COVID-19 cases where no symptoms are detected since it was “impossible to accurately grasp the actual number of asymptomatic infected persons,” which have generally accounted for the vast majority of new infections.

The only numbers they’re reporting are confirmed cases detected in public testing facilities where symptoms are displayed. Many people also test at home — and any positive results there would also not be captured.

China’s government-supplied figures have not been independently verified and questions have been raised about whether the ruling Communist Party has sought to minimize numbers of cases and deaths.

While many governments have long focused on only the more serious cases, the latest move is part of a sea change for China, which has maintained a “zero COVID” policy that seeks to stamp out all virus transmission.

That included frequent mass testing campaigns, and it used to mean that anyone who tested positive was isolated in a government facility, even if they had no symptoms. Now people can recover at home if they don’t need medical care.

While many greeted the relaxing of the rules with relief, the major and rapid shift has also caused some concern — after years during which the Chinese government talked about the virus as a major threat.

More

China won't report asymptomatic COVID cases in further shift | AP News

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.

Brexit Britain signs £119m 'cutting-edge' Japan deal after being blocked from EU scheme

14 December, 2022

Following a visit to Japan, UK Science Minister George Freeman has announced that the UK will launch a global research fund to deepen scientific collaboration between international research partners. The new International Science Partnerships Fund has been handed an initial £119million in support of UK researchers collaborating with scientists in Japan and around the world. This fund brings Britain closer to enacting its "Plan B", after the country was blocked by EU from a major £80billion flagship research programme. Despite having negotiated its entry into the EU's Horizon Europe programme, disputes over the Brexit deal has meant that the UK has continued to be blocked from participating.

While this £80billion science programme that would have let UK researchers access prestigious EU grants and collaborate with European scientists on a range of projects, has not yet come to fruition.

While the Government has continued to push for its reentry into the programme, it is also looking to secure a backup plan, particularly by increasing collaboration with non EU countries like Australia, Switzerland, and now Japan.

While in Tokyo, Mr Freeman unveiled the first phase of the new International Science Partnerships Fund (ISPF), which will support and fund UK scientists and innovators to work with peers around the world on some of the most pressing issues facing the world.

In a keynote speech to scientists, investors, industrialists and global research leaders, he laid down the UK's plans to take a more global approach to science, innovation and business.

This approach would involve collaborating with partners across the world to "both drive innovation, investment and prosperity in the UK, while also strengthening the UK's leadership in tackling the big global challenges facing the globe."

----This deal with Japan follows a Memorandum of Understanding on Science with European science powerhouse Switzerland earlier this year.

The Department for Business, Energy, and Industrial Strategy, while this partnership is not aimed as a replacement to the UK collaborations with the EU, "the Government cannot wait forever to invest through association."

They added that the Government's top priority was to invest in the "UK's world-leading R&D sector and facilitate their collaborations with international counterparts.

"It is disappointing that while the Government continues to focus on strengthening the UK's international links and collaborations globally, the EU's persistent delays to the UK's association to Horizon is damaging collaboration with European partners."

Brexit Britain signs £119m 'cutting-edge' Japan deal after being blocked from EU scheme (msn.com)

The professors who taught Efficient Market Theory said that someone throwing darts at the stock tables could select stock portfolio having prospects just as good as one selected by the brightest, most hard-working securities analyst. Observing correctly that the market was frequently efficient, they went on to conclude incorrectly that it was always efficient.

Warren Buffett.

 

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