Boom Becomes Bust? Fed Day One.

Baltic Dry Index. 1542  +07            Brent Crude 72.11

Spot Gold 1982              US 2 Year Yield 3.81 -0.33  Fri.

Coronavirus Cases 01/04/20 World 1,000,000

Deaths 53,103

Coronavirus Cases 21/03/23 World 682,610,071

Deaths 6,820,379

Sometimes the law defends plunder and participates in it. Sometimes the law places the whole apparatus of judges, police, prisons and gendarmes at the service of the plunderers, and treats the victim - when he defends himself - as a criminal.

Frederic Bastiat.

It is day one of the USA’s central bank meetings. Tomorrow’s interest rate decision and explanation, plus forward guidance will be critical. All the more so given the turmoil in bank bonds following the Swiss decision on Sunday to wipe out the CS AT1 bondholders but not wipe out the shareholders.

In the stock casinos, more hopium that the worst is over. But for how long?

Asia-Pacific markets rise after Wall Street saw gains on optimism led by regional banks

UPDATED TUE, MAR 21 2023 1:46 AM EDT

Asia-Pacific markets rose on Tuesday after Wall Street staged a relief rally overnight on hopes the banking crisis may be easing, following the $3.2 billion takeover of Swiss bank Credit Suisse by rival UBS.

U.S. Federal Reserve’s Federal Open Market Committee meeting kicks off later today stateside, with the central bank expected to approve a quarter-percentage-point interest rate increase, according to market pricing and many Wall Street experts.

In Australia, the S&P/ASX 200 rose 0.82% to close at 6,955.4, while South Korea’s Kospi was up 0.36% and the Kosdaq gained 0.18%. Markets in Japan are closed for a holiday.

Hong Kong’s Hang Seng index was up 0.93%, with the Hang Seng Tech index higher a 1.73%. In mainland China, the Shanghai Composite was up 0.49%, while the Shenzhen Component advanced 0.5%.

Overnight in the US, stocks rose on Monday night as regional banks rebounded. The Dow Jones Industrial Average closed 1.20% higher, the S&P 500 rose 0.89% and the Nasdaq Composite gained 0.39% at the end of the trading day.

Asia-Pacific markets rise after Wall Street saw gains on optimism led by regional banks (cnbc.com)

Stock futures inch higher following Monday’s relief rally: Live updates

UPDATED TUE, MAR 21 2023 1:07 AM EDT

Stock futures rose slightly in overnight trading Monday after the market staged a relief rally on the hope that the banking turmoil would be contained.

Futures on the Dow Jones Industrial Average gained 30 points. S&P 500 futures and Nasdaq 100 futures both inched up 0.1%.

The blue-chip Dow rallied more than 380 points on Monday, while the S&P 500 gained 0.9%. The action came a day after a forced takeover of Credit Suisse by UBS, which was engineered by the Swiss government. Investors also welcomed news that JPMorgan Chase could be advising embattled First Republic Bank on strategic alternatives.

First Republic Bank sold off another 47% during the session, extending its month-to-date decline to 90% as the collapse of Silicon Valley Bank made investors worried about other banks with large uninsured deposit bases.

Other regional banks rebounded from big losses in the past week. The SPDR Regional Banking ETF (KRE) rose 1% Monday after dropping 14% last week, with PacWest, First Citizens and Fifth Third Bancorp among the names leading the rebound.

“Bank selling appears exhausted and it would take the emergence of fresh deposit problems at a new name to bring out incremental supply, although there’s very little interest to step in and buy the group, especially the regionals,” Adam Crisafulli, founder of Vital Knowledge, said in a note.

Investors now expect a slower pace of tightening from the Federal Reserve in light of the banking crisis. Traders now are pricing in a 77% chance of a quarter-point rate hike when the Fed wraps its two-day policy meeting on Wednesday, according to CME Group’s FedWatch tool. The probability of a pause is at 23%.

More

Stock market today: Live updates (cnbc.com)

In other news. Has the everything boom turned into bust?.

 

Amazon cuts 9,000 more jobs, bringing 2023 total to 27,000

March 20, 2023

NEW YORK (AP) — Amazon plans to eliminate 9,000 more jobs in the next few weeks, CEO Andy Jassy said in a memo to staff on Monday.

The job cuts would mark the second largest round of layoffs in the company’s history, adding to the 18,000 employees the tech giant said it would lay off in January. The company’s workforce doubled during the pandemic, however, in the midst of a hiring surge across almost the entire tech sector.

Tech companies have announced tens of thousands of job cuts this year.

In the memo, Jassy said the second phase of the company’s annual planning process completed this month led to the additional job cuts. He said Amazon will still hire in some strategic areas.

“Some may ask why we didn’t announce these role reductions with the ones we announced a couple months ago. The short answer is that not all of the teams were done with their analyses in the late fall; and rather than rush through these assessments without the appropriate diligence, we chose to share these decisions as we’ve made them so people had the information as soon as possible,” Jassy said.

The job cuts announced Monday will hit profitable areas for the company including its cloud computing unit AWS and its burgeoning advertising business. Twitch, the gaming platform Amazon owns, will also see some layoffs as well as Amazon’s PXT organizations, which handle human resources and other functions.

More

Amazon cuts 9,000 more jobs, bringing 2023 total to 27,000 | AP News

 

Banking crisis: Thousands of City jobs at risk as Credit Suisse acquisition poses investment bank problems for UBS

March 20, 2023

Thousands of jobs in the City are at risk after UBS’s dramatic acquisition of Credit Suisse last night, with Credit Suisse’s investment banking division at the heart of discussions.

The Swiss banking stalwarts employ some 11,000 people in London, including a high concentration of their investment banking units which were already facing potentially hefty job cuts in the coming months.

Former chief of UBS UK, Mark Yallop, said on Radio 4 this morning it was “inevitable that a merger of this sort will result in some further job losses” and jobs in their investment banking units may be the first to go.

“I would imagine those would be concentrated in the risky investment banking business at Credit Suisse which is partly the cause of the problems that the firm is experiencing,” Yallop added.

Credit Suisse and UBS declined to comment on the scale of potential job cuts when approached by City A.M. this morning. 

An internal memo seen by the Financial Times confirmed a potential slew of job cuts could be on the way following the merger.

 

“We (will) work diligently and at pace throughout the coming period to identify which roles might be impacted,” Credit Suisse bosses told staff in an email.

A large proportion of the bank’s London-based employees are in its investment banking division which was already set to be spun off as CS First Boston as part of turnaround efforts under chief Ulrich Korner. The plans have been thrown into doubt by the UBS deal, however.

Announcing the deal yesterday, UBS chair Colm Kelleher said “UBS intends to downsize Credit Suisse’s investment banking business and align it with our conservative risk culture”

More

Banking crisis: Thousands of City jobs at risk as Credit Suisse acquisition poses investment bank problems for UBS (msn.com)

Next, did Switzerland just open up a big can of worms, if this is allowed to stand. If this can happen in Switzerland, how much more likely is it to happen in a future very left-wing New York, Toronto, London, or Paris, among others.

 

Bank of England says shares should be wiped out ahead of bonds

March 20, 2023

LONDON (Reuters) - The Bank of England joined other European regulators on Monday in saying that shareholders of failed banks should bear losses ahead of holders of Additional Tier 1 bonds after the structure of Credit Suisse's rescue in Switzerland angered bondholders.

Some 16 billion Swiss francs ($17.24 billion) of Credit Suisse's AT1 debt will be written down to zero on the orders of Swiss regulators as part of the bank's emergency takeover by UBS.

That means Credit Suisse's AT1 bondholders appear to be left with nothing while shareholders, who typically sit below bonds in the priority ladder for repayment, will receive $3.23 billion under the UBS deal.

The BoE confirmed that in Britain, holders of common equity tier 1 instruments - shares - should expect to suffer losses before AT1 bondholders.

"Holders of such instruments should expect to be exposed to losses in resolution or insolvency in the order of their positions in this hierarchy," the BoE said in a statement.

The British central bank said this was the approach used in its resolution this month of Silicon Valley Bank UK.

Bank of England says shares should be wiped out ahead of bonds (msn.com)

Credit Suisse rescue presents 'buyer beware' moment for bank bondholders

March 20, 2023

SINGAPORE (Reuters) - The rudest shock in the rushed deal to save embattled Swiss lender Credit Suisse Group AG was reserved for the holders of the bank's riskiest tranche of bonds.

Not only did investors discover they are the only investors not getting any compensation but that the long-established practice of giving bondholders priority over shareholders in debt recovery had been turned on its head.

Banks had already been paying far more this year than in the past for such hybrid capital, and now there would be no takers, analysts said. 

Swiss authorities brokering Credit Suisse's rescue merger with UBS have said 16 billion Swiss francs ($17 billion) of its Additional Tier 1 (AT1) debt will be written down to zero.

That is the largest loss in the $275 billion AT1 debt market to date, dwarfing the 1.35 billion euros lost by bondholders at Spain's Banco Popular in 2017.

AT1 bond holders rank below those holding equity stakes in Credit Suisse who can expect to receive 0.76 Swiss francs per share.

That shock rippled through financial markets on Monday, causing bank credit default swaps to widen and stocks to fall. MSCI's world bank stock index stood at 84, down from 100 in two weeks.

European bank shares and AT1 bonds from other European banks tumbled as traders re-priced the risk and cost of banks' capital.

Bid prices on AT1 bonds from banks including Deutsche Bank, HSBC, UBS and BNP Paribas dropped 9-12 points on Monday, sending yields sharply higher, data from Tradeweb showed.

A UBS AT1 bond that is callable in January 2024 was trading at a yield of nearly 29%, up from 12% on Friday, demonstrating how much more costly such debt could become.

A London-listed exchange-traded fund which tracks banks' AT1 debt tumbled 15.7%.

"With the restructuring of Credit Suisse, no-one had really thought about how it would affect the AT1 and that was a fat tail risk," said Sean Darby, global equities strategist at Jefferies in Hong Kong.

The issue lay not in the structure of such debt but how markets were unprepared for this outcome in a debt structuring, he said.

"What the market is saying today, is that between now and maturity there's a risk on this debt which hadn't been priced correctly in light of what's happening in banks in the U.S. and around the world."

At Credit Suisse itself, dollar AT1 bonds were bid as low as 1 cent on the dollar, Tradeweb pricing showed, as investors braced for the wipeout.

"When an investor buys an AT1 he knows he's down the capital structure compared to senior. But he assumes he's above equity," Steven Major, global head of fixed income research at HSBC, said on the phone from Melbourne.

More

Credit Suisse rescue presents 'buyer beware' moment for bank bondholders (msn.com)

Finally, from Axios yesterday, sent along from Ian in Canada, Toronto I think.

UBS yesterday agreed to buy troubled Swiss banking rival Credit Suisse, in a $3.2 billion deal whose speed was unthinkable before Silicon Valley Bank's collapse.

Why it matters: The Swiss government literally changed the law to get the deal done, creating short-term stability for the global banking sector but long-term questions about shareholder rights.

• In any acquisition of a publicly traded company, the acquired company's stockholders have the right to vote their shares in favor or disapproval.
• Credit Suisse shares are listed in both New York and Zurich, but the Swiss government unilaterally moved to eliminate the voting rights.
• It's an unprecedented decision. Ahead of the great financial crisis, for example, Bear Stearns shareholders voted to approve its government-desired takeover by JPMorgan (even getting a better deal in the process).

What they're saying: "This feels like Russia in Zurich," says a source close to Credit Suisse.

• But, but, but: Credit Suisse shareholders do make out slightly better in this deal than do bondholders, which isn't usually the case.

The bottom line: UBS buying Credit Suisse is a shotgun wedding, insisted upon by a Western, capitalist country. The question now is if it sets a precedent for other countries to follow, and how investors would react to losing one of their most fundamental protections.

 

When plunder becomes a way of life, men create for themselves a legal system that authorizes it and a moral code that glorifies it.

Frederic Bastiat.

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.

Protecting the shareholders before the bondholders, interesting, but I’m not sure that’s wise.

Credit Suisse says $17 billion debt worthless, angering bondholders

March 19, 2023 10:48 PM GMT

LONDON/NEW YORK, March 19 (Reuters) - Credit Suisse said 16 billion Swiss francs ($17.24 billion) of its Additional Tier 1 debt will be written down to zero on the orders of the Swiss regulator as part of its rescue merger with UBS (UBSG.S), angering bondholders on Sunday.

FINMA, the Swiss regulator, said the decision would bolster the bank's capital. The move reflects authorities' desire to see private investors share the pain from Credit Suisse's troubles.

Chair Marlene Amstad said FINMA had stuck to the country's "too-big-to-fail" banking framework in making the decision.

It means AT1 bondholders appear to be left with nothing while shareholders, who sit below bonds in the priority ladder for repayment in a bankruptcy process, will receive $3.23 billion under the UBS deal.

Engineered in the wake of the global financial crisis, AT1 bonds are a form of junior debt that counts towards banks' regulatory capital. They were designed as a way to transfer risks to investors and away from taxpayers if a bank gets into trouble.

The bonds can be converted into equity or written down when a lender's capital buffers are eroded beyond a certain threshold.

"It's stunning and hard to understand how they can reverse the hierarchy between AT1 holders and shareholders," said Jerome Legras, head of research at Axiom Alternative Investments, an investor in Credit Suisse's AT1 debt.

Reuters reported earlier on Sunday that Swiss authorities were considering imposing losses on bondholders as part of the rescue deal.

UBS' CEO Ralph Hamers told analysts that the decision to write down the AT1 bonds to zero was taken by FINMA, so it would not create a liability for the bank.

Credit Suisse's AT1 debt had rallied earlier on Sunday amid reports that shareholders would receive something in a deal with UBS, raising hopes that bondholders would be protected.

The bonds had sunk into distressed territory before the weekend due to mounting concerns over the health of the Swiss lender.

The move by the Swiss regulator could make it harder for other lenders to raise new AT1 debt, investors said.

"It's going to make the AT1 bonds more expensive for all the other banks going forward, because now everyone else is going to see this extra risk," said Michael Ashley Schulman, partner and chief investment officer at Running Point Capital Advisors.

AT1s pay higher interest as they carry more risk for investors than regular debt.

Prior to Sunday's news, investors had been apprehensive about the prospect of banks extending outstanding AT1 bonds to avoid refinancing at worse terms because of higher interest rates.

Credit Suisse says $17 billion debt worthless, angering bondholders | Reuters

 

Covid-19 Corner

This section will continue until it becomes unneeded.

Emails Reveal Journal’s Internal Discussions Before Rejecting Challenge to Pfizer’s Effectiveness Claim

Mar 15 2023

Officials at a major journal discussed a professor’s alleged anti-vaccine Twitter activity when considering whether to publish his paper challenging the claim that Pfizer’s vaccine was 95 percent effective, newly disclosed emails show.

The Lancet journal ultimately rejected the rebuttal paper.

Professor Norman Fenton “retweeted anti-vaxx posts on Twitter,” one Lancet official wrote to colleagues.

 

They also discussed “vaccine misinformation” and Fenton’s background, the heavily redacted emails show.

 

“[redacted] have investigated him a little and he does seem to have a legitimate academic appointment,” reads one email, titled “Ongoing issues monitoring.”

Fenton, emeritus professor of risk at Queen Mary University of London, obtained the emails from Elsevier, which publishes The Lancet.

 

“We knew that all the main academic journals were routinely rejecting any articles that were in any way questioning the accuracy of studies claiming vaccine effectiveness or safety. What surprised even us about this case was the sheer nastiness and lack of professionalism displayed by the journal’s editorial staff,” Fenton told The Epoch Times via email.

 

“The notion that authors’ academic credentials and Twitter activities had to be investigated as part of the reviewing process is shocking.”

 

The Lancet didn’t respond to a request for comment.

Effectiveness Claim

In May 2021, The Lancet published a paper from Israeli officials and Pfizer employees that claimed that the company’s vaccine was 95 percent effective against COVID-19 infection in Israel from Jan. 24, 2021, to April 3, 2021.

 

The study analyzed surveillance data drawn from government-funded insurance providers. Pfizer and Israel entered into multiple agreements early in the pandemic that saw the country primarily use the company’s vaccine and share data with the firm.

 

The study shows that two doses of Pfizer’s vaccine were “highly effective” across all age groups 16 and older in preventing symptomatic COVID-19, asymptomatic COVID-19, COVID-19-related hospitalization, severe disease, and death, researchers said in the study, which was peer-reviewed before publication.

 

“These findings suggest that COVID-19 vaccination can help to control the pandemic,” they said.

 

The study was funded by the Israeli Ministry of Health and Pfizer.

More

Emails Reveal Journal’s Internal Discussions Before Rejecting Challenge to Pfizer’s Effectiveness Claim (theepochtimes.com)

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.

Scratched EV battery? Your insurer may have to junk the whole car

March 20, 2023 12:15 PM GMT

LONDON/DETROIT, March 20 (Reuters) - For many electric vehicles, there is no way to repair or assess even slightly damaged battery packs after accidents, forcing insurance companies to write off cars with few miles - leading to higher premiums and undercutting gains from going electric.

And now those battery packs are piling up in scrapyards in some countries, a previously unreported and expensive gap in what was supposed to be a "circular economy."

"We're buying electric cars for sustainability reasons," said Matthew Avery, research director at automotive risk intelligence company Thatcham Research. "But an EV isn't very sustainable if you've got to throw the battery away after a minor collision."

Battery packs can cost tens of thousands of dollars and represent up to 50% of an EV's price tag, often making it uneconomical to replace them.

While some automakers like Ford Motor Co (F.N) and General Motors Co (GM.N) said they have made battery packs easier to repair, Tesla Inc (TSLA.O) has taken the opposite tack with its Texas-built Model Y, whose new structural battery pack has been described by experts as having "zero repairability."

Tesla did not respond to a request for comment.

A Reuters search of EV salvage sales in the U.S. and Europe shows a large portion of low-mileage Teslas, but also models from Nissan Motor Co (7201.T), Hyundai Motor Co (005380.KS), Stellantis (STLAM.MI), BMW (BMWG.DE), Renault (RENA.PA) and others.

EVs constitute only a fraction of vehicles on the road, making industry-wide data hard to come by, but the trend of low-mileage zero-emission cars being written off with minor damage is growing. Tesla's decision to make battery packs "structural" - part of the car's body - has allowed it to cut production costs but risks pushing those costs back to consumers and insurers.

Tesla has not referred to any problems with insurers writing off its vehicles. But in January CEO Elon Musk said premiums from third-party insurance companies "in some cases were unreasonably high."

Unless Tesla and other carmakers produce more easily repairable battery packs and provide third-party access to battery cell data, already-high insurance premiums will keep rising as EV sales grow and more low-mileage cars get scrapped after collisions, insurers and industry experts said.

More

Scratched EV battery? Your insurer may have to junk the whole car | Reuters

When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe.

Frederic Bastiat.