Saturday 3 December 2022

Special Update 03/12/2022 OPEC’s Big Weekend. Honest Sam.

 Baltic Dry Index. 1324 -14   Brent Crude 85.57

Spot Gold 1798       U S 2 Year Yield 4.28 +0.03

Covid-19 cases 02/04/20 World 1,000,000

Deaths 53,100

Covid-19 cases 03/12/22 World 649,383,271

Deaths 6,645,196

In central banking as in diplomacy, style, conservative tailoring, and an easy association with the affluent count greatly and results far much less.

John Kenneth Galbraith.

Be prepared for a chaotic week ahead.

OPEC meets tomorrow to either raise oil production, cut oil production or leave oil production unchanged. Who’d have thought it?

The G-7 attempts to cap Russian oil pricing next week, without setting off an unintended crude oil price surge on Russian oil scarcity. Good luck with that.

Winter returns to most of Europe next week if the weather forecasters are right.

Central banksters in the USA, China and much if not most of the G-7 economies, seem to be hopelessly out of touch with economic reality. Perhaps they should invite Sam Bankman-Fried to their next policy meetings. For more on honest Sam scroll down to the end.

Food and energy price inflation continues unstoppable. Who knew it was a bad idea to start a proxy war on Russia using the Biden Ukrainian’s?

Labour strikes and turmoil are breaking out just about everywhere.

All in all, not an ideal time to be gambling in stocks and commodities.

OPEC+ to consider deeper oil output cuts ahead of Russia sanctions and proposed price cap

OPEC and non-OPEC oil producers could impose deeper oil output cuts on Sunday, energy analysts said, as the influential energy alliance weighs the impact of a pending ban on Russia’s crude exports and a possible price cap on Russian oil.

OPEC+, a group of 23 oil-producing nations led by Saudi Arabia and Russia, will convene on Sunday to decide on the next phase of production policy.

The highly anticipated meeting comes ahead of potentially disruptive sanctions on Russian oil, weakening crude demand in China and mounting fears of a recession.

Claudio Galimberti, senior vice president of analysis at energy consultancy Rystad, told CNBC from OPEC’s headquarters in Vienna, Austria, that he believes the group “would be better off to stay the course” and roll over existing production policy.

“OPEC+ has been rumored to consider a cut on the basis of demand weakness, specifically in China, over the past few days. Yet, China’s traffic nationwide is not down dramatically,” Galimberti said.

Energy market participants remain wary about the European Union’s sanctions on the purchases of the Kremlin’s seaborne crude exports on Dec. 5, while the prospect of a G-7 price cap on Russian oil is another source of uncertainty.

The 27-nation EU bloc agreed in June to ban the purchase of Russian seaborne crude from Dec. 5 as part of a concerted effort to curtail the Kremlin’s war chest following Moscow’s invasion of Ukraine.

Concern that an outright ban on Russian crude imports could send oil prices soaring, however, prompted the G-7 to consider a price cap on the amount it will pay for Russian oil.

No formal agreement has yet been reached, although Reuters reported Thursday that EU governments had tentatively agreed to a $60 barrel price cap on Russian seaborne oil.

“The other factor OPEC will need to consider is indeed the price cap,” Galimberti said. “It’s still up in the air, and this adds to the uncertainty.”

The Kremlin has previously warned that any attempt to impose a price cap on Russian oil will cause more harm than good.

----Speaking earlier this week, RBC Capital Markets’ Helima Croft said there was no expectation of a production increase from the upcoming OPEC+ meeting and a “significant chance” of a deeper output cut.

“There is so much uncertainty,” Croft told CNBC’s “Squawk Box” on Tuesday. OPEC delegates “have to factor in what happens with China but also what happens with Russian production.”

However, after news that Sunday’s meeting will be held virtually, rather than in-person, Croft said in a research note that OPEC had opted for “no-drama optics” which “seemingly increases the likelihood of a rollover decision.”

“Irrespective of whether the group chooses to stay the course or cut deeper, we expect key ministers to signal a willingness to meet quickly to address any major change in market conditions that may be arising in the coming weeks and months,” she said in the note.

Oil prices, which have fallen sharply in recent months, were trading slightly lower ahead of the meeting.

More

OPEC meeting: Oil output cuts on the table ahead of Russia sanctions (cnbc.com)

The Fed’s path to a ‘Goldilocks’ economy just got a little more complicated

As far as jobs reports go, November’s wasn’t exactly what the Federal Reserve was looking for.

A higher-than-expected payrolls number and a hot wage reading that was twice what Wall Street had forecast only add to the delicate tightrope walk the Fed has to navigate.

In normal times, a strong jobs market and surging worker paychecks would be considered high-class problems. But as the central bank seeks to stem persistent and troublesome inflation, this is too much of a good thing.

“The Fed can ill afford to take its foot off the gas at this point for fear that inflation expectations will rebound higher,” wrote Jefferies chief financial economist Aneta Markowska in a post-nonfarm payrolls analysis in line with most of Wall Street Friday. “Wage growth remains consistent with inflation near 4%, and it shows how much more work the Fed still needs to do.”

Payrolls grew by 263,000 in November, well ahead of the 200,000 Dow Jones estimate. Wages rose 0.6% on the month, double the estimate, while 12-month average hourly earnings accelerated 5.1%, above the 4.6% forecast.

All of those things together add up to a prescription of more of the same for the Fed — continued interest rate hikes, even if they’re a bit smaller than the three-quarter percentage point per meeting run the central bank has been on since June.

More

The Fed's path to a 'Goldilocks' economy just got more complicated (cnbc.com)

Payrolls and wages blow past expectations, flying in the face of Fed rate hikes

Job growth was much better than expected in November despite the Federal Reserve’s aggressive efforts to slow the labor market and tackle inflation.

Nonfarm payrolls increased 263,000 for the month while the unemployment rate was 3.7%, the Labor Department reported Friday. Economists surveyed by Dow Jones had been looking for an increase of 200,000 on the payrolls number and 3.7% for the jobless rate.

The monthly gain was a slight decrease from October’s upwardly revised 284,000. A broader measure of unemployment that includes discouraged workers and those holding part-time jobs for economic reasons edged lower to 6.7%.

The numbers likely will do little to slow a Fed that has been raising interest rates steadily this year to bring down inflation still running near its highest level in more than 40 years. The rate increases have brought the Fed’s benchmark overnight borrowing rate to a target range of 3.75%-4%.

In another blow to the Fed’s anti-inflation efforts, average hourly earnings jumped 0.6% for the month, double the Dow Jones estimate. Wages were up 5.1% on a year-over-year basis, also well above the 4.6% expectation.

The Dow Jones Industrial Average fell as much as 350 points after the report on worries the hot jobs data could make the Fed even more aggressive. However, stocks shaved most of their losses as the trading session neared its close. Treasury yields initially jumped on the jobs news before turning mixed later.

“To have 263,000 jobs added even after policy rates have been raised by some [375] basis points is no joke,” said Seema Shah, chief global strategist at Principal Asset Management. “The labor market is hot, hot, hot, heaping pressure on the Fed to continue raising policy rates.”

Leisure and hospitality led the job gains, adding 88,000 positions.

More

Jobs report November 2022: Payrolls and wages blow past expectations and flying in the face of Fed rate hikes (cnbc.com)

But in other news, more signs that the global economy is shutting down.

 

Blackstone's $69 bln REIT curbs redemptions in blow to property empire

NEW YORK, Dec 1 (Reuters) - Blackstone Inc (BX.N) limited withdrawals from its $69 billion unlisted real estate income trust (REIT) on Thursday after a surge in redemption requests, an unprecedented blow to a franchise that helped it turn into an asset management behemoth.

The curbs came because redemptions hit pre-set limits, rather than Blackstone setting the limits on the day. Nonetheless, they fueled investor concerns about the future of the REIT, which makes up about 17% of Blackstone's earnings. Blackstone shares ended trading down 7.1% on the news.

Many investors in the REIT are concerned that Blackstone has been slow to adjust the vehicle's valuation to that of publicly traded REITs that have taken a hit amid rising interest rates, a source close to the fund said. Rising interest rates weigh on real estate values because they make financing properties more expensive.

Blackstone has reported a 9.3% year-to-date return for its REIT, net of fees, a contrast to the publicly traded Dow Jones U.S. Select REIT Total Return Index (.DWRTFT) 22.19% decline over the same period.

That outperformance has some investors questioning how Blackstone comes up with the valuation of its REIT, said Alex Snyder, a portfolio manager at CenterSquare Investment Management LLC in Philadelphia.

"People are taking profits at the value Blackstone says their REIT shares are at," said Snyder.

A Blackstone spokesperson declined to comment on how the New York-based firm calculates the valuation of its REIT, but said its portfolio was concentrated in rental housing and logistics in the southern and western United States that have short duration leases and rents outpacing inflation.

The spokesperson added that the REIT relied on a long-term fixed rate debt structure, making it resilient.

"Our business is built on performance, not fund flows, and performance is rock solid," the spokesperson said.

The REIT is marketed to wealthy individual investors. Two sources familiar with the matter said turmoil in Asian markets, fueled by concerns about China's economic prospects and political stability, contributed to the redemptions. The majority of investors redeeming were from Asia and needed the liquidity, they said.

Blackstone told investors in a letter it would curb withdrawals from its REIT after it received redemption requests in November greater than 2% of its monthly net asset value and 5% of its quarterly net asset value. As a result, the REIT allowed investors in November to redeem $1.3 billion, equivalent to approximately 43% of investors' repurchase requests.

Some analysts said Blackstone's REIT runs the risk of getting caught in a spiral of selling assets to meet redemptions if it cannot regain the trust of its investors. On Thursday, the firm said the REIT had agreed to sell its 49.9% interest in two Las Vegas casinos for $1.27 billion.

More

Blackstone's $69 bln REIT curbs redemptions in blow to property empire | Reuters

Evergrande's EV unit suspends mass production due to lack of orders - sources

SHANGHAI, Dec 2 (Reuters) - China Evergrande Group's electric vehicle unit has suspended mass production of its only model due to a lack of new orders, two people with knowledge of the matter said, in the latest set of troubles facing the indebted property developer.

China Evergrande New Energy Vehicle Group (0708.HK) said in mid-September that it had started mass production of the Hengchi 5 model at a plant in the northern city of Tianjin and in late October said it had delivered its first 100 cars.

 

However, the company has paused production as there are not enough new orders for the electric sport-utility vehicle, said the people, who declined to be named because they were not authorised to speak to media.

The two people also said many employees have yet to receive salaries for October and November.

Evergrande did not immediately respond to a request for comment.

Two other people said some work was still continuing. One of these two said the unit planned to lay off 10% of workers and would suspend salary payments to 25% of its workers for 1 to 3 months.

It was not immediately clear how long mass production would stay suspended for.

Once China's top-selling property developer, Evergrande has been at the centre of a deepening debt crisis that has seen multiple developers default on offshore debt obligations over the past year, leaving many negotiating restructuring.

The group had touted the EV unit as key to its transformation plans, with Chairman Hui Ka Yan vowing to shift the group's primary business within 10 years from real estate to the automobile venture, and to make 1 million vehicles a year by 2025.

In Julythe unit said it had received non-binding pre-orders for more than 37,000 units of the Hengchi 5.

The suspension at Evergrande's EV arm comes as automakers and investors are bracing for a downturn in the world's largest car market due to a sputtering economy, despite government incentives starting in June to boost sales, such as tax cuts and subsidies.

More

Evergrande's EV unit suspends mass production due to lack of orders - sources | 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.

As the Fed plans to 'raise and hold,' new projections may show the cost

WASHINGTON, Dec 2 (Reuters) - U.S. Federal Reserve officials have signaled plans for a half-point interest rate hike at their meeting this month, and while that would be a step down from recent rate increases, new projections issued then could show a policy rate headed toward levels last seen on the eve of the 2007 financial crisis.

Moreover, in an outlook that could lean against market expectations for rate cuts by the end of next year, the 19 U.S. central bankers' new forecasts may well show the federal funds rate remaining at that elevated level at least through 2023.

The updated outlooks will be a fresh chance for Fed officials to show how their "raise and hold" strategy is expected to play out in terms of the ultimate level of the overnight policy rate, and the progress of growth, inflation and unemployment in what they hope is a resilient economy.

The rate-setting Federal Open Market Committee meets on Dec. 13-14, capping a volatile year that saw the central bank respond to the fastest outbreak of inflation since the 1980s with the fastest increase in interest rates since then to try to offset it. That aggressive response sent a shock through the financial system that at one stage erased nearly $12 trillion of U.S. stock market value and more recently pushed home mortgages rates to 7% for a population used to cheap money.

Equity markets have risen lately and rocketed this week when Fed Chair Jerome Powell, in what were likely his last public remarks before the meeting, said the Fed was ready to slow down from a string of four straight three-quarter-point rate hikes - a potentially inconvenient outcome for a Fed chair who wants to keep financial conditions tight and keep public expectations firmly focused on the inflation battle.

More

As the Fed plans to 'raise and hold,' new projections may show the cost | Reuters

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.

Inside China's fight over the future of zero-COVID

SHANGHAI, Dec 2 (Reuters) - Samuel Ren is sick of zero-COVID.

"Omicron is not a threat, it is just like a normal cold," said the IT worker in his mid-20s in Shanghai, describing China's ongoing lockdown measures as "ridiculous".

His frustration about civil rights and economic damage won't sway Cai Shiyu, a 70-year-old resident of the megacity who has heart disease and high blood pressure.

"This isn't like a cold that just goes away after a while," said Cai, who feels one case of COVID-19 is too many to tolerate. "Otherwise the epidemic will definitely rebound."

Opinions about President Xi Jinping's signature "zero-COVID" policy vary wildly across China, a country often viewed from overseas as a surveillance state that enforces iron discipline.

The fierce debate, which has ignited several anti-lockdown protests, illustrates the difficulties facing Xi and his government in relaxing the world's most rigid COVID rules while heading off national discontent.

After nearly three years, a significant loosening of zero-COVID measures has been signalled by senior government officials and public health experts. Vice Premier Sun Chunlan said on Thursday that China's health system had "withstood the test" of COVID, allowing further adjustments to state policies.

This unnerves people such as Cai, who say a low death toll testifies to the merits of the hardline approach.

Officially, there have been about 5,200 COVID deaths in China, versus more than 1 million in the United States, 690,000 in Brazil and 212,000 in Britain. A U.S.-scale death rate would have seen over 4 million die in the country of 1.4 billion people.

The potential risks of moving away from strict curbs, just as daily infections hit record levels, are heightened by comparatively low vaccination rates among the elderly and concerns about the resilience of the healthcare system.

More

Inside China's fight over the future of zero-COVID | Reuters

 

World Health Organization - Landscape of COVID-19 candidate vaccineshttps://www.who.int/publications/m/item/draft-landscape-of-covid-19-candidate-vaccines

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 more useful Covid links.

Johns Hopkins Coronavirus resource centre

https://coronavirus.jhu.edu/map.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, I’ve added this section.

Traversable wormhole recreated in a quantum computer for first time

Michael Irving   November 30, 2022

Wormholes are a staple of sci-fi, and there’s a possibility that they exist in the real universe. But how would they work? Physicists have now used a quantum processor to simulate a traversable wormhole, teleporting information between two quantum systems.

In fiction, wormholes are usually depicted as tunnels that connect two distant points in space, allowing instantaneous travel across the cosmos. But while they might seem like little more than a convenient story device, wormholes are surprisingly plausible in reality. Einstein himself proposed their existence as a feature of his general theory of relativity, and in the decades since scientists have studied where and how we might find them.

But their properties remain poorly understood, with several conflicting models all possible. That creates a paradox – to find out more, we’d need observations of real wormholes, but to observe them we’d need to find out more so we know what to look for. Computer simulations can help break the loop, allowing physicists to test different models of wormholes and see how they might behave.

In the new study, scientists have achieved that for the first time. This kind of simulation can’t be run on just any old computer though – it required the power of quantum computers, which tap into the strange realm of quantum physics to perform calculations beyond the reach of traditional computers.

The team was investigating an intriguing correlation between wormholes and quantum physics – the idea of a wormhole sending things across the universe in the blink of an eye sounds suspiciously like quantum teleportation, where information can be instantly sent between two entangled particles, no matter how far apart they are.

Using Google’s Sycamore quantum processor, scientists from Caltech, Harvard, Fermilab and Google ran the first simulation of a wormhole. The key was an established model known as SYK that could simulate quantum gravity effects – in this case, the team entangled two simplified SYK systems together, then sent a quantum bit (qubit) of information into one of them.

And sure enough, the information emerged out of the second system. This demonstrated not only quantum teleportation, but because the two SYK models also simulate quantum gravity, it was a realistic simulation of how a traversable wormhole would work in the real world.

More

Traversable wormhole recreated in a quantum computer for first time (newatlas.com)

This weekend’s music diversion. Approx. 10 minutes.

Concerto Del Vivaldi / RV 376 in B major (Autograph score)

Concerto Del Vivaldi / RV 376 in B major (Autograph score) - YouTube

This weekend’s chess update. Approx. 9 minutes.

He Just Knows the Answer

He Just Knows the Answer - YouTube

This weekend’s Crypto Fraud update. Approx. 23 minutes. Tether next? Surely not.

Why I Will Never Trust or Invest in Crypto Ever Again!

Why I Will Never Trust or Invest in Crypto Ever Again! - YouTube

“When we remember we are all mad, the mysteries disappear and life stands explained.”

 Mark Twain.

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