Baltic Dry Index. 3192 +255 Brent Crude 78.88
Spot Gold 2072 U S 2 Year Yield 4.56 -0.17
All the war-propaganda, all the screaming and lies
and hatred, comes invariably from people who are not fighting.
George Orwell.
Yesterday, Fed Chairman Powell folded. While saying for the record that if necessary, more interest rate hikes were possible, stare decisis, in obiter dicta remarks, Chairman Powell threw in the towel and kicked off the Fed’s Biden Boom re-election strategy.
Rate cuts galore in 2024, Biden or Bust. Look away from that soaring gold price now.
But
will the Powell resurrection plan work if as seems likely, China and Europe are
leading the rest of the world into recession? Look away from that collapsing
oil price now.
Fed
Chair Powell calls talk of cutting rates ‘premature’ and says more hikes could
happen
Federal Reserve Chairman Jerome Powell on
Friday pushed back on market expectations for aggressive interest rate cuts
ahead, calling it too early to declare victory over inflation.
Despite a string of positive
indicators recently regarding prices, the central bank leader said the Federal
Open Market Committee plans on “keeping policy restrictive” until policymakers
are convinced that inflation is heading solidly back to 2%.
“It would be premature to conclude
with confidence that we have achieved a sufficiently restrictive stance, or to
speculate on when policy might ease,” Powell said in prepared remarks for an
audience at Spelman
College in Atlanta. “We are prepared to tighten policy further
if it becomes appropriate to do so.”
However, he also noted that policy
is “well into restrictive territory” and noted that balance of risks between
doing too much or too little on inflation are close to balanced now.
Markets moved higher following Powell’s remarks,
with major averages positive on Wall Street and Treasury yields sharply lower.
“Markets view today’s comments as
inching toward the dovish camp,” said Jeffrey Roach, chief economist at LPL
Financial.
Expectations that the
Fed is done raising rates and will move to an easing posture in
2024 have helped underpin a strong Wall Street rally that has sent the Dow
Jones Industrial Average up more than 8% over the past month to a new 2023
high.
Powell’s remarks gave some credence
to the idea that the Fed at least is done hiking as the string of rate hikes
since March 2022 have cut into economic activity.
“Having come so far so quickly, the
FOMC is moving forward carefully, as the risks of under- and over-tightening
are becoming more balanced,” he said.
“As the demand- and supply-related
effects of the pandemic continue to unwind, uncertainty about the outlook for
the economy is unusually elevated,” he added. “Like most forecasters, my
colleagues and I anticipate that growth in spending and output will slow over
the next year, as the effects of the pandemic and the reopening fade and as
restrictive monetary policy weighs on aggregate demand.”
A Commerce Department report
Thursday showed that personal consumption expenditures prices, the Fed’s
preferred inflation gauge, were up 3% from a year ago, but
3.5% at a core basis that excludes volatile food and energy
prices. Recent sharp declines in energy have been responsible for much of the
easing in inflation.
Powell said the current levels are
still “well above” the central bank’s goal. Noting that core inflation has run
at a 2.5% annual rate over the past six months, Powell said, “while the lower
inflation readings of the past few months are welcome, that progress must
continue if we are to reach our 2 percent objective.”
----After inflation hit its highest level since
the early 1980s, the Fed enacted a series of 11 interest rate hikes, taking its
policy rate to the highest in 22 years at a target range between 5.25%-5.5%.
The FOMC at its past two meetings kept rates level, and multiple officials have
indicated they think the federal funds rate is probably at or near where it
needs to be.
The Fed’s next
meeting is Dec. 12-13.
“The strong actions
we have taken have moved our policy rate well into restrictive territory,
meaning that tight monetary policy is putting downward pressure on economic
activity and inflation,” Powell said. “Monetary policy is thought to affect
economic conditions with a lag, and the full effects of our tightening have
likely not yet been felt.”
Traders expect cuts
Market pricing Friday morning indicated that the Fed indeed is done hiking and could start cutting as soon as March 2024, according to the CME Group. Moreover, futures are pointing to cuts totaling 1.25 percentage points by the end of the year, the equivalent of five quarter percentage point reductions.
More
Fed
Chair Powell calls talk of cutting rates 'premature' and says more hikes could
happen (cnbc.com)
Markets pin hopes on soft
landing, with one eye on recession risk
By Yoruk Bahceli, Dhara
Ranasinghe and Naomi Rovnick
December 1, 2023 6:11 AM GMT
Dec 1 (Reuters) -
A stellar rally in equities and bonds suggests market confidence is high for
the world economy to reach a soft landing after a run of aggressive interest
rate hikes.
Yet labour
markets are softening, the euro zone faces recession and China's property
sector is in crisis.
Here's what some
closely-watched market indicators say about global recession risks:
1/ AMERICAN EXCEPTIONALISM?
The
U.S. economy grew
5.2% in the third quarter, defying dire
recession warnings.
But unemployment
is rising, nearing a closely-watched 'Sahm rule' threshold, that has shown
historically a recession is underway when the three-month rolling average
unemployment rate rises half a point above the low of the prior 12 months.
The
picture is bleaker elsewhere. China grew faster than expected in the third
quarter but manufacturing activity shrank
for a second straight month in November.
Britain's economy avoided the start of a recession in the third
quarter but still failed to grow.
The
euro zone contracted 0.1% in the third quarter and a business
activity downturn remained broad-based in
November, suggesting a year-end recession.
Economists broadly expect the global economy to slow next year
but avoid a recession.
"The outlier
is really the U.S.," said Guy Miller, chief market strategist at Zurich
Insurance Group.
"At a global
level, growth has and will be disappointing," he added.
2/ EVERYTHING RALLY
Inflation
slowing quicker than expected has boosted bets on central bank rate cuts next
year, fuelling a broad
market rally pinned on a 'soft landing'
scenario.
A
global index of government and corporate investment-grade bonds in November
delivered the best monthly return on record (.MERGBMI)
U.S. 10-year
Treasury yields tumbled over 50 basis points in November, the biggest monthly
drop in over a decade.
World
stocks (.MIWO00000PUS) rose around 9%, their best month since November
2020, when markets cheered COVID-19 vaccines hoping for economies to reopen.
"We are of
the view that risks are to the downside heading into January, and suspect
investors are underestimating the risks that persist, most notably slowing
economic growth," said Zurich Insurance's Miller.
More
Markets pin hopes on soft landing, with one eye on
recession risk | Reuters
Wall St Week Ahead Tax-loss selling, 'Santa rally' could sway
U.S. stocks after November melt-up
By David Randall
December
2, 20231 2:03 AM GMT
NEW YORK, Dec
1(Reuters) - As U.S. stocks sit on hefty gains at the close of a rollercoaster
year, investors are eyeing factors that could sway equities in the remaining
weeks of 2023, including tax loss selling and the so-called Santa Claus rally.
The
key catalyst for stocks will likely continue to be the expected trajectory of
the Federal Reserve's monetary policy. Evidence of
cooling economic growth has fueled bets that the U.S. central bank could begin
cutting rates as early as the first half of 2024, sparking a rally that has
boosted the S&P 500 (.SPX) 19.6% year-to-date and
taken the index to a fresh closing high for the year on
Friday.
At the same
time, seasonal trends have been particularly strong this year. In September,
historically the weakest month for stocks, the S&P 500 fell nearly 5%.
Stocks swung wildly in October, a month noted for its volatility. The S&P
500 gained nearly 9% gain in November, historically a strong month for the
index.
"We've
had a solid year, but history shows that December can sometimes move to its own
beat," said Sam Stovall, chief investment strategist at CFRA Research in
New York.
Investors
next week will be watching U.S. employment data, due out on Dec. 8, to see
whether economic growth is continuing to level off.
Overall,
December has been the second-best month for the S&P 500, with the index up
an average of 1.54% for the month since 1945, according to CFRA. It is also the
month most likely to post a gain, with the index rising 77% of the time, the
firm's data showed.
Research from
LPL Financial showed that the second half of December tends to outshine the
first part of the month. The S&P 500 has gained an average of 1.4% in the
second half of December in so-called Santa Claus rallies, compared with a 0.1%
gain in the first half, according to LPL's analysis of market moves going back
to 1950.
Stocks that
have not performed well, however, may face additional pressure in December from
tax loss selling, as investors get rid of losers to lock in write-offs before
year-end. If history is any guide, some of those shares may rebound later in
the month and into January as investors return to undervalued names, analysts
said.
Since 1986,
stocks that were down 10% or more between January and the end of October have
beaten the S&P 500 by an average of 1.9% over the next three months,
according to BofA Global Research. PayPal Holdings, CVS Health, and Kraft Heinz
Co are among the stocks the bank recommends buying for a tax-related bounce,
BofA noted in a late October report.
"The
market advance has been extraordinarily narrow this year, and there's reason to
believe that some sectors and stocks will really take it on the chin until they
get some relief in January," said Sameer Samana, senior global market
strategist at the Wells Fargo Investment Institute.
Despite the
market's hefty year-to-date rise, investment portfolios are likely to have
plenty of underperforming stocks. Nearly 72% of the S&P 500's gain has been
driven by a cluster of megacap stocks such as Apple, Tesla and Nvidia, which
have an outsized weighting in the index, data from S&P Dow Jones Indices
showed.
Many other
names have languished: The equal-weighted S&P 500, whose performance is not
skewed by big tech and growth stocks, is up around 6% in 2023.
Some worry
that investor over-exuberance may have already set in after November's big
rally, which spurred huge moves in some of the market's more speculative names.
Streaming
service company Roku soared 75% in November, for instance, while cryptocurrency
firm Coinbase Global climbed 62% and Cathie Wood's ARK Innovation Fund was up
31%, its best performance of any month in the last five years.
More
Global
Inflation/Stagflation/Recession Watch.
Given
our Magic Money Tree central banksters and our spendthrift politicians, inflation/recession now needs an entire
section of its own.
In a recession, out of one, on the brink? Here’s where Europe stands
Published on 01/12/2023 - 07:00•Updated 08:13
----Is Europe in a recession? The indicators
A good place to start is to look at the level of business
activity in the economy. One of the indicators that helps us in this regard is
HCOB’s Composite Purchasing Manager’s Index, which measures business conditions
using different metrics such as new orders, employment, selling prices,
purchasing activity and others.
According to the latest figures for the eurozone, the
PMI index registered at 47.1 in November. A reading below 50 suggests
contraction whereas above means economic expansion. The manufacturing PMI
output index shows that the manufacturing activity has remained below 50 for 8
straight months with the latest number coming in at 44.3.
Another indicator on economic health is the lending
activity of banks. If there are more loans being disbursed it certainly means
that people are confident in the economic prospects of the country/region and
therefore engaging in more business activity. A falling number of loans
indicate otherwise.
In Europe, loans to businesses were 0.3% lower in
October 2023, compared to October 2022, which is the first yearly fall since
2015. Similarly, a rising loan default ratio is another means to track the
growth in a country and in Europe the stress of loan defaults seem to be
rising, unfortunately.
Recently, the European Union reduced its growth
forecasts for the eurozone economy to 0.6% from 0.8%. The reduction in growth
prospects, or seemingly meagre figures of growth, are symbolic of the overall
challenges faced by the world in general and Europe in particular.
Rising interest rates, persistently high energy prices
and a highly volatile world economy adds to these worries. In fact, according
to various estimates by banks, higher rates can shave off 1% of gross domestic
product (GDP) from the eurozone.
What does the future hold?
With the recent geopolitical tensions, energy prices are
expected to remain elevated well into next year. While inflation has tamed a
bit it is still way above the 5 year moving averages.
In the IMF’s latest economic update, it anticipates a
slight recovery for the eurozone in 2024, however, as it expects the GDP growth
to average 1.5%. This, however, is based on certain assumptions and the most
important one is that the oil and gas prices will remain stable and with the
ongoing geopolitical conflicts this cannot be assured.
Wells Fargo said in its recent note that a recession in
the eurozone is “increasingly possible, but not yet inevitable”. They do not
expect a rate cut - one of the most important indicators and factors in this
debate - until June of 2024. On the consumer end we are not seeing any
encouraging spending trend as of today while retail sales are also down.
Mario
Draghi, former president of the ECB, also echoed this concern very recently.
While the Bank Governor of the Belgian central bank also agreed that risks are
“tilted to the downside when it comes to the eurozone”.
Other
factors and indicators are also concerning. Recently, the slowdown in eurozone
business activity “accelerated” due to weak demand in the services sector and
the new orders PMI now at its lowest level in the last 11 years (since
September 2012). Manufacturing activity shows that new orders fell at the
steepest rate since 1997. Some analysts are saying that while the eurozone
might be able to avert a full blown recession it will still face some “mild
bouts” of it. This also forms a good analogy of what many were calling a
“rolling recession” in the US.
All
in all, while we cannot certainly tell about the timing of the recession, one
thing that is for sure is that the downside potential to future economic growth
in the region is real, while a bouquet of indicators also now suggest that a
recession in the largest economy in the world, the US, is also due.
In a recession, out of one, on the brink? Here’s where
Europe stands | Euronews
This
section will continue until it becomes unneeded.
New COVID Variant Spreading in US, but Risk
Is Low: Experts
Compared
to Eris, BA.2.86 has a significantly lower growth efficiency, meaning that it
is less capable of replicating itself in the human bodies.
11/28/2023 Updated: 11/29/2023
The new
BA.2.86 variant, unofficially known as Pirola is taking hold in the United
States.
Between Oct. 28 to Nov. 25, its prevalence
increased from 1 to around 9 percent in the United States, according to the
U.S. Centers for Disease Control and Prevention (CDC).
The World Health Organization designated
Pirola as a variant of interest on Nov. 21, yet it also found the public health
risk posed by BA.2.86 to be “low at the global level (pdf).”
In
an update published on
Nov. 27, the CDC agreed with the WHO’s assessment “that the public health risk
posed by this variant is low compared with other circulating variants, based on
available limited evidence.”
Current Research
Suggests Low Risk of Disease
Pirola is derived from BA.2, an earlier
Omicron variant.
Other variants
derived from BA.2 include XBB.1.5 which became the dominant strain in early
2023.
The current
dominant variant is H.V.1, and it is derived from the variant EG.5,
unofficially known as Eris, a previously dominant variant in the United States.
“At this time,
BA.2.86 does not appear to be driving increases in infections or
hospitalizations in the United States,” the CDC wrote.
Research
outside of the United States similarly suggests that Pirola should not be more
severe than current variants.
Researcher Yunlong Cao, who holds a
doctorate in physical biochemistry from Harvard found that Pirola
“exhibits lower cell infectivity” compared to XBB.1.5 and Eris.
A preprint study from
Japan found that while Pirola may be more transmissible than Eris a previous
dominant variant, it is less likely to cause disease.
Technology Update.
With events happening fast in the
development of solar power and graphene, I’ve added this section.
This weekend, meet the Uni Wheel.
Hyundai
and Kia's radical Uni Wheel system could revolutionize EV design
Ben Coxworth November 29, 2023
As is the case with their gas-burning counterparts, electric
cars are limited in spaciousness and design by the layout of their drivetrain.
The Hyundai Motor Company and Kia Corporation have set about addressing that
issue, with their radical new Universal Wheel Drive System.
In internal combustion engine cars, the engine takes up a lot
of space, as do the transmission and drive shafts which transfer power from the
engine to the wheels. In an electric car, the engine is replaced by a motor,
but the vehicle's design still has to allow for a means of linking that one
motor to at least two of the wheels.
That's where the Universal
Wheel Drive System – aka Uni Wheel – comes in.
Unveiled Nov. 29th at a
media event in Seoul, the setup swaps one big motor for four smaller ones. Each
of those motors is located right beside one of the vehicle's wheels, and is
connected to it via a short drive shaft.
Occupying what would otherwise be empty space inside each wheel
hub is a reduction gear. It consists of a central "sun gear" that is
turned by the drive shaft, and which is connected via articulated linkages to
four outlying pinion gears. Those pinions are in turn meshed with a single
large "ring gear" that runs around the circumference of the hub.
So, on each Uni Wheel unit … the motor turns the driveshaft,
which turns the sun gear, which turns the pinion gears, which turn the ring
gear, which turns the wheel. If that sounds confusing, watching the explanation
in the video at the end of this article will help.
Additionally, thanks to the pivot points in the linkages
(which allow them to flex as the gears are turning), power transmission from
each motor to each wheel stays efficient and consistent even as the wheel moves
up and down while going over bumps in the road. By contrast, when the wheels on
a traditional drivetrain move vertically, power transmission efficiency
decreases as the angle of drive shaft deflection increases.
Other claimed advantages
of the Uni Wheel system include increased durability and torque, along with the
ability to independently control torque at each wheel for better handling. And
as mentioned earlier, there's also the fact that by moving most of the
drivetrain into the wheels, additional space becomes available inside the
vehicle.
That space could be used
for more seating, more cargo capacity, or for reconfigurable interiors – the
fact that the floor could be completely flat would certainly help in that
regard. The extra space could also be used for more batteries, thus expanding the
range of EVs without making them physically larger.
Hyundai and Kia now plan
on improving Uni Wheel's reduction gear ratio, and upgrading its lubrication
and cooling systems. There's currently no word on when it might actually enter
production.
More
Hyundai
and Kia's radical Uni Wheel system could revolutionize EV design (newatlas.com)
This weekend’s music
diversion. Teleman’s Table Music with a Hammered Dulcimer. Approx. 15 minutes.
G.PH.
TELEMANN: Concerto for Mandolin, Hammered Dulcimer and Harp in F major TWV
53:F1
G.PH. TELEMANN: Concerto for Mandolin, Hammered
Dulcimer and Harp in F major TWV 53:F1 - YouTube
This weekend’s chess
update. Approx. 13 minutes.
Kramnik
Unlocked A Hidden Power!
Kramnik Unlocked A Hidden Power! - YouTube
No
weekend the math’s update again this week. This week, wheat. Approx. 18 minutes.
WHEAT
Documentary: Everything You Ever Wanted to Know about Wheat
WHEAT Documentary:
Everything You Ever Wanted to Know about Wheat - YouTube
Peace cannot be kept by force; it can only be
achieved by understanding.
Albert Einstein.
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