Every generation has a defining moment. For my generation, it was 9/11/2001.
Here are my memories of 9/11/2001. It was a Tuesday.
I was a Senior at Staten Island Technical High School, which is about 20 miles from ground zero. We were about 1 week into the school year. I was sitting in Ms. Endriss’s 2nd Period A.P. Political Science class. We were going over some NYC Public School discipline policy, and discussing what kinds of weapons were forbidden in schools (brass knuckles were a no-no). A student walked into the classroom late. He had heard a rumor that a Cessna airplane had hit the World Trade Center. A girl in my class exclaimed that her father worked in the World Trade Center. I could see the look of fear in her eyes, even though none of us had any clue what was going on. She wanted to call her dad. I was the only student in the class with a cell phone, which I promptly gave her. The call did not go through–he worked on one of the upper floors of the tower, and passed away.
We finished second period, apprehensively. I logged onto a computer, and attempted to check the news. I recall one friend told me to check MTV.com for news. At that point, the reports were unclear, and no one knew what was going on. We proceeded to 3rd period A.P. Calculus with Mr. Curry. At that point, someone told us that it was not a Cessna, but in fact a passenger jet. We were all getting nervous, and didn’t quite know what was going on. Later in class, a student came into the class and said a second plane had crashed into the other tower. We also heard that there was an explosion at the Pentagon. At that point, we knew it was not an accident.
I remember leaving the class (something I never did) and walked up to the library where I knew there was a T.V. Just as I arrived in the library, I saw the first tower collapse. I watched it live. I was stunned and could not believe what was happening before my eyes. I grabbed my cellphone to call home, and almost immediately after the tower collapsed, I lost all service. I was not able to call my mom in Staten Island, though I could call my dad who was working in Long Island. Long distance calls seemed to work, but local calls were not working. I remember my dad told me that this was a life-changing event, and he had no idea what would happen. I heard some rumors on TV that there were 15 planes that were hijacked, and unaccounted for in the skies.
By lunch time, the school guidance counselor set up a conference room where students could go to talk. I remember seeing student after student who had a family member or friend who worked in the World Trade Center or in Manhattan. A large number of firefighters and police officers reside in Staten Island. Tragically, many of the emergency responders who perished were from Staten Island. What could we even tell those students?
After that, the day become a blur. I remember hearing that the second tower had collapsed, though I did not see it. I remember watching the entire United States Congress sing God Bless America on the steps of the Capitol. I had never been so afraid in my life. Later that night, I took a bus home. The New York City public buses were still running, and I remember the driver was not collecting fares. On the bus, people were talking about the imminent war (against whom, no one knew) and the imminent draft. Some were saying that students were exempt from the draft.
The next morning, September 12, 2001, I woke up and smelled this horrible smell. The air had this pungent odor, that reminded me of burned flesh at a BBQ. I went to school that morning, and attendance was low. In all of my classes, we were talking about war. I asked whether the US would need to use nuclear weapons. My teacher explained that carpet bombing–a phrase I had never heard of–could wreak plenty of damage in Afghanistan. Later that week students began making sandwiches for the relief workers, and collecting goods to donate to the relief effort.
From Staten Island, I could see the smoldering Ground Zero. It was surreal. The skyline looked so very empty. To this day, whenever I look at the Skyline, a sight I had seen thousands of times, I have the most bizarre feeling. Additionally, whenever we saw an airplane fly overhead, we all freaked out. This lasted for months.
For days, weeks, and months after 9/11, people in Staten Island were waiting for their loved ones to come home. Many patients were alive, but were so badly burned that they could not be identified. People prayed that these unnamed patients would soon come home. One woman whose husband was a firefighter waited outside her home every single night for months. She eventually put a candle in her window every night. Later, she put a memorial lamp in her window. He never came home. Others were simply waiting for remains of their loved ones to be returned. Many were never identified.
I ordered a gas mask from eBay, which I kept in my car, fearing a biological weapon attack on New York City. I remember I tried it on once and I almost suffocated. I wanted to order some Cipro for an anthrax attack, but I could not locate any.
It is hard to encapsulate what a New Yorker went through on 9/11. Thinking back on that day, when I was just 17 years old, I realized that I had to grow up awfully quick. It was a new world we were living in.
Never forget. Ever.
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As America navigates – none too gracefully – these trying times we now pause for a day to remember a different kind of trying time. A horrific time.
The United States of America has been through a lot of rough stuff in its relatively short history as the greatest nation on Earth. People are fond of saying that we are more divided now than ever before. If we were able to ask anyone who lived through the Civil War I’m fairly certain they’d disagree.
Comparing a nation’s struggles from different eras is silly. What the hell do I know about what the WWII generation went through? Heck, I was a kid when we were in Vietnam and all of the civil unrest that was raging here at home and I barely remember any of that.
My adult daughter doesn’t remember 9/11 because she was very young that day. Those of us who weren’t very young still feel like it was yesterday almost two decades later.
The greatest nation on Earth isn’t used to being attacked at home. Like the attack on Pearl Harbor, 9/11 shocked, then united, then galvanized America. However briefly, we behaved like the United States of America.
(AP Photo/Marcio Jose Sanchez)
As I look around America in 2020 I wonder how we would react to another 9/11 if, God forbid, something like that happened again soon. It’s difficult to imagine that kind of unity again, especially when the progressive idiots view patriotism and unity as toxic nationalism. We may not be as fractured as we were during the Civil War but, let’s be honest, we’re pretty beat up internally at the moment.
The wounds are all self-inflicted during this time of trial, which makes it worse. Sure, we can focus on coronavirus as an “enemy,” but it’s not the virus that’s setting our cities on fire.
It’s a terrible fact of the human condition that it usually takes some unforeseen tragedy to bring us together. I’m not so sure 2020 America has the coping skills even in that kind of situation. Of course, I pray we never have to find out.
It goes without saying that the horror of that day must never be forgotten. America is now facing the rise of a political force that would seek to rewrite history. This is a national tragedy that can’t be purged easily, but they will attempt to alter it as much as possible.
(AP Photo/Mark Lennihan)
Their families will forever grieve. America needs to never forget and to continue to pray for the victims of 9/11. Maybe that shared remembrance can heal our current situation just a little…
via ZeroHedge News https://ift.tt/32hfKWO Tyler Durden
Half Million People Evacuated in Oregon As Wildfires Spread, Arson Concerns Grow Tyler Durden
Fri, 09/11/2020 – 09:10
Wildfires continue to rage throughout Oregon Friday morning, have killed at least three people and forced more than half a million from their homes.
AP cites data from the Oregon Office of Emergency Management, which shows about 12% of the state’s 4.2 million population, or about 500,000 residents, have been evacuated. As much as 1,400 square miles (3,625 square kilometers) have burned across the state this week. State officials said wildfire activity flourished Thursday afternoon in northwestern Oregon as hot weather and windy conditions fueled the fires.
The Northwest Interagency Coordination Center’s latest fire map shows there are many uncontained wildfires across the state.
Readers may recall the U.S. Climate Prediction Center confirmed a broad shift in a weather pattern across the U.S. last month, called La Nina, which has transformed the western U.S. into a tinder box.
“We’re already in a bad position, and La Nina puts us in a situation where fire-weather conditions persist into November and possibly even December,” Ryan Truchelut, president of Weather Tiger LLC, told Bloomberg. “It is exacerbating existing heat and drought issues.”
Gov. Kate Brown has declared a state emergency for the wildfires that extends into early November. She said Thursday, “this could be the greatest loss of life and structures due to wildfire in state history. “
‘In the last 10 years, we see an average of 500,000 acres burn in an entire year. We’ve seen that nearly double in the past three days,’ said Oregon Governor Kate Brown as wind-driven wildfires burned through forests and towns in U.S. West Coast states https://t.co/66vMxeXuo5pic.twitter.com/1I3aY0BSbb
Even though La Nina has been confirmed, or depending on who you speak to, ‘climate change’, these have been some of the mainstream consensus themes of what could be fueling the fires. But, according to a new report via Reuters, arson investigators have been called to investigate fires as suspicion grows on the origins.
Earlier this week, there was at least one instance, according to Oregon State Trooper Ryan Burke, who tweeted a 36-year-old “Puyallup resident” was arrested on Wednesday (Sept. 9) for starting a fire on the “median on SR-167.”
Joint team effort!! WSP, Fife Pd and Puyallup PD just arrested a 36yr old Puyallup resident. He was caught in the median on SR-167@ Meridian setting a fire! He is currently on his way to jail! Great job everybody!#playstupidgamespic.twitter.com/8N3wHcT5kJ
Local TV station, Q13 FOX, reports “Jeff Demologik” was reportedly arrested by state troopers – here’s the man filming his arrest for setting fire in the median on the highway.
“Right wing militia members in Oregon who are convinced anti-fascists set fire to their town set up checkpoints with guns on roads ppl were using to flee. Who had this on their 2020 bingo card?”
It appears possible that some of these wildfires were not just started by lighting strikes or mishaps with utility companies but possibly there’s a chance arson could be involved.
via ZeroHedge News https://ift.tt/2ZJZRXp Tyler Durden
Nikola Offers 5 Paragraph Response To Yesterday’s Hindenburg Research Report, Threatens Legal Action Tyler Durden
Fri, 09/11/2020 – 08:57
Update 9/11/2020 0846AM EST: Nikola has published a brief response to yesterday’s almost 100 page report by Hindenburg Research on Friday morning. A press release, which does not debunk individual points of the report, simply says the company will refute allegations, then mentions that Nikola hired a law firm and will bring the actions of the short seller to the SEC:
“Yesterday, an activist short-seller whose motivation is to manipulate the market and profit from a manufactured decline in our stock price published a so-called “report” replete with misleading information and salacious accusations directed at our founder and executive chairman. To be clear, this was not a research report and it is not accurate. This was a hit job for short sale profit driven by greed.
We have nothing to hide and we will refute these allegations. They have already taken up more time and attention than they deserve. We have retained leading law firm Kirkland & Ellis LLP to evaluate potential legal recourse, including with respect to the activist short seller and any others acting in concert.
Nikola also intends to bring the actions of the activist short-seller, together with evidence and documentation, to the attention of the U.S. Securities and Exchange Commission.
We respect the rights of investors and the integrity of the market and will be back to you after we have advanced the process with the SEC.
Most importantly, Nikola remains focused on delivering on the promises we’ve made to our stakeholders.”
Headlines started hitting the wire on Friday morning:
NIKOLA SAYS SHORT SELLER REPORT IS NOT ACCURATE
NIKOLA SAYS MAY TAKE LEGAL ACTION, WILL BRING TO SEC ATTENTION
NIKOLA RESPONDS TO SHORT SELLER REPORT BY HINDENBURG
NIKOLA: ‘NOTHING TO HIDE’, REFUTES ALLEGATIONS
Nikola did not appear to answer any of the 53 questions that Hindenburg Research posed at the bottom of its report that was issued on Thursday morning. Some in the industry did not seem to be won over by the company’s response:
Headline of press release says Nikola refutes allegations, then body of release says Nikola *will* refute allegations. https://t.co/jg1jK8zfgI
Executive summary of $NKLA‘s upcoming refutation of the Hindenburg piece:
“Of COURSE they said those things- they’re SHORT-SELLERS! ‘Short and distort’ is a well-known technique they use. We will not lower ourselves to their low level by confronting the specific allegations.”
Update 9/10/2020 0939AM EST: Nikola’s CEO has responded on Twitter, saying he “needs a few hours” to respond to the report.
It makes sense. Tens of millions of shares shorted the last day or two to slam our stock and hit job by hindenburg. I guess everything is fair game in war, even a hit job. I know who funded it now. Give me a few hours to put together responses to their lies. This is all you got?
Nikola shares are selling off pre-market in response to a new report from Hindenburg Research, which calls it an “intricate fraud” based on conversations with former employees.
“Today, we reveal why we believe Nikola is an intricate fraud built on dozens of lies over the course of its Founder and Executive Chairman Trevor Milton’s career,” the report claims.
“We have gathered extensive evidence—including recorded phone calls, text messages, private emails and behind-the-scenes photographs—detailing dozens of false statements by Nikola Founder Trevor Milton. We have never seen this level of deception at a public company, especially of this size.”
The report was followed by Tweets that appear to show various types of deception from the company. For example, one Tweet claims that Nikola’s “One” semi truck was just rolling down a hill in a video where the company claimed it was “in motion.
Our investigation of the site and text messages from a former employee reveal that the video was an elaborate ruse— $NKLA had the truck towed to the top of a hill on a remote stretch of road and simply filmed it rolling down the hill. pic.twitter.com/n2NLDGInzR
Similar claims seem to show that the Nikola One was not powered on its own during its 2016 reveal, previously called into question by Bloomberg several months. Rather, the report notes there was
The report calls the reveal a “total farce”.
We present behind-the-scenes photos showing that $NKLA had an electricity cable snaked up from underneath the stage into the truck in order to falsely claim the Nikola One’s electrical systems functioned. pic.twitter.com/mVhGuwrMtg
Additionally, the report points out that inverters claimed to be made in-house from Nikola appear to have been bought from another company, with pieces of masking tape covering up their logo.
The masking tape covers the inverter’s label, which would have made it clear who actually developed the component.
We asked Cascadia whether the part was custom-built or open to the public, and they confirmed it is generally available. pic.twitter.com/CQJ0CPUBIP
And calls into question the company’s supposed battery technology.
….and (b) the President of the battery company was indicted months earlier over allegations that he conned NASA by using his expense account to procure numerous prostitutes. pic.twitter.com/nAt5QltTIw
The report comes just days after Nikola inked a partnership with General Motors, wherein GM would be supplying Nikola with fuel cells and production capacity – leaving many to wonder what, if anything Nikola was bringing to the deal. We imagine those skeptics will want to dig through this morning’s report.
Twitter further extended its censorship policy Thursday, announcing that it will label as ‘false information’ or remove any posts claiming an election victory before results have been officially certified.
In recognition of the changing circumstances of how people will vote in 2020, and in line with our commitment to protecting the integrity of the election conversation, we’re expanding this existing framework. The goal is to further protect against content that could suppress the vote and help stop the spread of harmful misinformation that could compromise the integrity of an election or other civic process.
The post continued:
Starting next week, we will label or remove false or misleading information intended to undermine public confidence in an election or other civic process. This includes but is not limited to:
False or misleading information that causes confusion about the laws and regulations of a civic process, or officials and institutions executing those civic processes.
Disputed claims that could undermine faith in the process itself, e.g. unverified information about election rigging, ballot tampering, vote tallying, or certification of election results.
Misleading claims about the results or outcome of a civic process which calls for or could lead to interference with the implementation of the results of the process, e.g. claiming victory before election results have been certified, inciting unlawful conduct to prevent a peaceful transfer of power or orderly succession.
The move is seemingly part of the ongoing narrative that Americans will have to wait weeks for the results of the election to be announced, as mail in ballots, which are speculated to be open to corruption, are tallied.
The move also means that any post by President Trump hinting that he has garnered enough votes to secure a second term could be removed by Twitter, which has censored Trump several times over the past few months.
Yet another reminder that social media companies have more power than the President of the United States. https://t.co/g7seWDsKra
US Consumer Prices Accelerate In August; Used Car & Furniture Prices Spike As Rent Inflation Slows Tyler Durden
Fri, 09/11/2020 – 08:39
While yesterday’s producer prices continued to show YoY deflation, this morning’s consumer price data pionted hitter than expected with the headline up 1.3% YoY – the fastest since March.
Source: Bloomberg
Core CPI also surged more than expected, rising 1.7% YoY.
The index for all items less food and energy increased 0.4 percent in August after rising 0.6 percent in July. The index for used cars and trucks increased 5.4 percent in August, its largest monthly increase since March 1969. The shelter index increased in August, rising 0.1 percent, with the indexes for rent and owners’ equivalent rent both rising 0.1 percent.
The recreation index increased 0.7 percent in August after falling in June and July. The index for household furnishings and operations increased 0.9 percent, its largest monthly increase since February 1991, as the index for furniture and bedding rose 1.6 percent and the index for appliances increased 2.0 percent. The apparel index rose 0.6 percent in August, its third consecutive monthly increase. The index for motor vehicle insurance rose 0.5 percent, and the index for airline fares increased 1.2 percent over the month.
The index for medical care rose slightly in August, increasing 0.1 percent. The indexes for hospital services and for physicians’ services both rose 0.1 percent, while the index for prescription drugs declined 0.2 percent. The new vehicles index was unchanged in August after rising in July. The education index decreased 0.3 percent in August, the first decline in the history of the index, which dates to 1993.
Source: Bloomberg
Goods Inflation rebounded to a positive (+0.4% YoY) in August as Services inflation slowed very modestly…
Source: Bloomberg
However, there is a silver lining – shelter/rent inflation is slowing (the first rent inflation print below 3.0% since March 2014)
Finally, we note that real average hourly earnings grew at 3.3% YoY (down from 3.7% YoY in July).
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National Public Radio’s interview last month with Vicky Osterweil, author of a new book called “In Defense of Looting,” generated so much pushback that the network had to add a clarification providing more “context” to help readers “fully assess” her “controversial” views. But there isn’t anything that NPR’s editors could do to contextualize Osterweil’s dangerous message.
In technical terms, her argument—that the American system of property rights is oppressive and looting and mayhem will bring about positive social change—is nuts. The interview contains myriad quotations that read like a parody from The Babylon Bee. I’m not unhappy that NPR published it, as it’s important to know what such people think. But why didn’t the interviewer ask any tough questions?
NPR asked Osterweil to talk about rioting as a tactic, in the way a lifestyle reporter might ask a celebrity to talk a little about a new movie. As the author explains, rioting accomplishes “important things.” For starters, “It gets people what they need for free immediately, which means that they are capable of living and reproducing their lives without having to rely on jobs or a wage…That’s looting’s most basic tactical power as a political mode of action.”
Got that? People steal stuff because they then don’t have to pay for it and, well, that means they don’t have to work to earn money to pay for those things. I’m not sure how theft becomes a “political mode of action,” but Osterweil assured readers that breaking store windows and grabbing consumer goods is more important now than ever—given that “during COVID times” jobs are unreliable, unavailable, or sometimes dangerous.
As an aside, many official coronavirus-related policies strike me as glorified looting, even though lawmakers don’t use bricks and Molotov cocktails. The governor, and even the president, can declare that people may live rent-free in other people’s buildings. Congress can run up debt to send us stimulus checks. Governors can arbitrarily force businesses to shut their doors, thus destroying what entrepreneurs have spent their lives creating.
Fortunately, the author explains traditional looting isn’t simply about stealing. It has a deeper and more uplifting purpose. “It also attacks the very way in which food and things are distributed,” Osterweil added. “It attacks the idea of property, and it attacks the idea that in order for someone to have a roof over their head or have a meal ticket, they have to work for a boss, in order to buy things…It points to the way in which that’s unjust.”
Who knew?
When my oldest daughter was very young, she asked why we have to pay for things. “Why can’t everything be free?” I explained that if everything were free, no one would work or produce anything or invest in factories and stores. In almost no time, we’d be staring down vast shortages—and people would go hungry. Violent thugs would rob and pillage. Society would collapse. That was a great question from a 6-year-old, but Osterweil is an adult.
Unfortunately, many American adults seem to share this childish view of the world. After my column explaining what rent control does to small landlords was posted in a left-leaning social-media group, I was taken aback by the vicious ad hominem responses. As a building owner, I’m apparently a greedy oppressor—and never mind the investments, renovations, and hard work that goes into providing quality housing for others at an agreed-upon price. One poster even called me a member of the “petty bourgeoisie.” Good grief.
Modern-day leftists have no understanding of how society builds wealth and prosperity. They revile those who create it, even as they post photos to the Internet from their iPhones. Do they believe such wonderful innovations fell from the sky? Didn’t any of their professors teach them about the violence, starvation, and misery that took place in Soviet Russia—and every other society that attacked the idea of private property?
“Destroying a small business is akin to destroying an artist’s studio, a scholar’s library or a chef’s kitchen,” wrote Steven Horwitz, a professor of free enterprise at Ball State University in Indiana. “It’s not just a matter of the loss of material goods, and insurance isn’t the point. It’s a loss of the space in which they make meaning in their lives and for others.” People who defend rioting defend the destruction of the very things that make us human. They are the ones being unjust.
I’m a strong defender of peaceful protests against police abuse and have been writing about the need for reform for years. But it’s one thing to peacefully march against injustice, and quite another to burn down what others built up. It’s a warning sign for our society when it doesn’t occur to a major news outlet that a defense of looting deserves more scrutiny than a puff interview.
This column was first published in the Orange County Register.
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National Public Radio’s interview last month with Vicky Osterweil, author of a new book called “In Defense of Looting,” generated so much pushback that the network had to add a clarification providing more “context” to help readers “fully assess” her “controversial” views. But there isn’t anything that NPR’s editors could do to contextualize Osterweil’s dangerous message.
In technical terms, her argument—that the American system of property rights is oppressive and looting and mayhem will bring about positive social change—is nuts. The interview contains myriad quotations that read like a parody from The Babylon Bee. I’m not unhappy that NPR published it, as it’s important to know what such people think. But why didn’t the interviewer ask any tough questions?
NPR asked Osterweil to talk about rioting as a tactic, in the way a lifestyle reporter might ask a celebrity to talk a little about a new movie. As the author explains, rioting accomplishes “important things.” For starters, “It gets people what they need for free immediately, which means that they are capable of living and reproducing their lives without having to rely on jobs or a wage…That’s looting’s most basic tactical power as a political mode of action.”
Got that? People steal stuff because they then don’t have to pay for it and, well, that means they don’t have to work to earn money to pay for those things. I’m not sure how theft becomes a “political mode of action,” but Osterweil assured readers that breaking store windows and grabbing consumer goods is more important now than ever—given that “during COVID times” jobs are unreliable, unavailable, or sometimes dangerous.
As an aside, many official coronavirus-related policies strike me as glorified looting, even though lawmakers don’t use bricks and Molotov cocktails. The governor, and even the president, can declare that people may live rent-free in other people’s buildings. Congress can run up debt to send us stimulus checks. Governors can arbitrarily force businesses to shut their doors, thus destroying what entrepreneurs have spent their lives creating.
Fortunately, the author explains traditional looting isn’t simply about stealing. It has a deeper and more uplifting purpose. “It also attacks the very way in which food and things are distributed,” Osterweil added. “It attacks the idea of property, and it attacks the idea that in order for someone to have a roof over their head or have a meal ticket, they have to work for a boss, in order to buy things…It points to the way in which that’s unjust.”
Who knew?
When my oldest daughter was very young, she asked why we have to pay for things. “Why can’t everything be free?” I explained that if everything were free, no one would work or produce anything or invest in factories and stores. In almost no time, we’d be staring down vast shortages—and people would go hungry. Violent thugs would rob and pillage. Society would collapse. That was a great question from a 6-year-old, but Osterweil is an adult.
Unfortunately, many American adults seem to share this childish view of the world. After my column explaining what rent control does to small landlords was posted in a left-leaning social-media group, I was taken aback by the vicious ad hominem responses. As a building owner, I’m apparently a greedy oppressor—and never mind the investments, renovations, and hard work that goes into providing quality housing for others at an agreed-upon price. One poster even called me a member of the “petty bourgeoisie.” Good grief.
Modern-day leftists have no understanding of how society builds wealth and prosperity. They revile those who create it, even as they post photos to the Internet from their iPhones. Do they believe such wonderful innovations fell from the sky? Didn’t any of their professors teach them about the violence, starvation, and misery that took place in Soviet Russia—and every other society that attacked the idea of private property?
“Destroying a small business is akin to destroying an artist’s studio, a scholar’s library or a chef’s kitchen,” wrote Steven Horwitz, a professor of free enterprise at Ball State University in Indiana. “It’s not just a matter of the loss of material goods, and insurance isn’t the point. It’s a loss of the space in which they make meaning in their lives and for others.” People who defend rioting defend the destruction of the very things that make us human. They are the ones being unjust.
I’m a strong defender of peaceful protests against police abuse and have been writing about the need for reform for years. But it’s one thing to peacefully march against injustice, and quite another to burn down what others built up. It’s a warning sign for our society when it doesn’t occur to a major news outlet that a defense of looting deserves more scrutiny than a puff interview.
This column was first published in the Orange County Register.
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“One believes things because one has been conditioned to believe them.”
Today is the anniversary of 9/11. Please find some time to trade with my former colleagues at BGC/Aurel-Mint who hold their charity day today in memory of the firm’s losses in NY that shocking day in 2001.
This morning we wake to the news the UK has staged something of an economic recovery – but as predicted it’s proving remarkably sticky reopening the economy. All eyes are still on the tech market – where the bounce proved the ailing cat isn’t in particularly good health. I shall stick my neck out and say the correction still has a way to go. Next week – beware.
Yesterday I wrote about complexity and how the pandemic, bubbles, repressed returns, years of monetary distortion and the evolving political economy have changed the dynamics of markets. One of the factors causing confusion is the increasing speed of change – it’s happening too quickly for us to fully comprehend.
Apparently my comments on MMT have upset a well-known city economist who told a contact at major investment firm: “Blain knows nothing about economics, he’s just a market hack wanting to be heard..” Excellent. And I would agree – I know nothing about economics, but neither does anyone else.. (Touche!) That’s why it’s called the dismal science.
Today, let me continue the New Reality analysis about dynamics and the speed of change. Rather than focusing on the past and present, let’s focus on the future and the other side of the equation – the outlook for business, industry and government, and how they will influence these changing dynamics.
There are three themes to this morning’s story:
What’s the upside?
The prospects for the global economy are fantastic! We can look forward to new generation micro-processing which will literally be a quantum revolution. The potential for a clean energy, new battery technologies, environmental improvement, and abundant power from fusion and hydrogen could be enormous. If you think the way we work has changed by “working from home”, the future of AI, Robotics, 3D and nano-tech will revolutionise everything we do and how we spend our increased leisure time. A new agricultural revolution in plants, food and soil will allow us to feed the world, alleviate poverty, raise educational standards and allow population growth to stablise, enabling us all to lead less anxious lives. Ah! Bliss.
Marvellous stuff! The future is going to be flying cars, rocket-packs and holidays on the beaches of Mars… ?
Perhaps. Why not? If try hard enough….
What’s the downside?
All these things can only happen if the global economy moves forward, develops and evolves. There are massive inertia problems to be resolved. Much of our current economy isn’t fit for purpose. Political leadership seems mired in quicksand. Bureaucracy is perhaps the greatest scourge of the modern age. The blockages, rigidities and hurdles holding back the business of business aren’t getting simpler. They are multiplying.
Not so good… is the future going to be like the Vogons currently running financial regulation?
And, most importantly…
How will it happen?
The role of government will be critical. The future of the global economy will depend on the delivery of functional physical and social infrastructure to enable change and evolution. That means breaking out of our current gridlocks, including inequality, and completely rethinking and remaking public goods like health, welfare and education and an acknowledgement that social justice and wealth-equality aren’t optional.
I don’t think I need to say too much about the possibility of a bright Tech-led future – what matters is getting there, or as close to it as possible. As a Porridge reader recently reminded me: 15 years ago there were no smartphones, no social media, no Uber or Airbnb, Apple and Amazon were struggling and GE was AAA rated. The world changes. Get over it.
Let’s start with the third issue – The role of government.That’s an immediate problem for my generation. We’ve been brainwashed since infancy to believe government is bad, less government is good. Big G is inefficient and leads to bureaucracy. Any Government spending will be riddled with featherbedding, inefficiency and outright corruption. Far better to let private enterprise lead the way – so we’ve always been told.
Really? Private Enterprise isn’t much better. Let’s be honest – big firms have their brief periods of innovation, stratospheric growth and market leadership before they stumble into middle age, become sclerotic and die from obsolescence, competition, null-entropy and bureaucracy – that’s the Darwinian process of capitalism. The last thirty years spent worshiping at the Friedman Temple of corporate shareholder capitalism has seen some pretty shady behaviours – massive executive rewards, stock buy-backs and the overleveraging of failing companies to pay out private equity owners…. I could go on.
There is a middle ground.
What if Maggie Thatcher was utterly wrong about Government having to be as frugal as a housewife? What if fiat money and monetary sovereignty works? What if Milton Friedman was wrong and Keynes, Smith et al are all right?
Yesterday I raised the issue of stakeholder capitalism – and predictably got a number of emails telling me anything except the continued wealth creation by successful entrepreneurial billionaires will lead to disaster and communism. That’s not what a stakeholder economy needs to lead to.
Shock Time. For the first time ever, I am going to say something positive about ESG – Environmental, Social and Governance Investment parameters.
For too many investors ESG is simply an easy tick-box approach to avoid difficult compliance or investment committee questions. But ESG is still at an early stage as we evolve towards Stakeholder Economies. Investments that aim to do good are laudable, but ones that are properly managed, do good and socialise the benefits are even better, especially when they also make profit! (Sharing the money around is the issue for unreformed capitalists..) Few big banks or investors would publically admit ESG is bad – so how can Stakeholder be bad?
The big issue is can Government be trusted to deliver the public goods we will need to deliver our Bright New World? Can they be trusted to use the magical money tree of MMT to deliver the necessary reforms of health, education and welfare provision, solve inequality and rebuild ailing national infrastructure. That’s a question for functional democracy.
One of the comments I got yesterday – from a leading academic – sums up the risks: “It’s as simple as this – unless you are the EU, which has zero monetary sovereignty, nations can solve all the issues you identify, including social and income equality, through focused MMT spending. Unless you are in the US, where the government has created some $670 bln and given it straight to the richest 1500, while 47 million and one in three kids still go hungry.”
It’s a warning – MMT is a potential solution. But a dangerous one if misapplied. If the resources of a state, and its control of fiat currency, are directed to support only the rich and powerful – explain to me what’s different from what they complain Communist China is guilty of?
Let’s be more optimistic. the future looks bright and perhaps we can better resolve issues by adopting Stakeholder Capitalism. We can fund it all by selective government MMT programmes to finance public goods enabling us to do these things. Sounds easy – but perhaps it is? We need Decent politicians – note the capital D. Decent as in decent, honest, brave and true.
Which leads us to the Big Problem, the second issue… the trend towards stultifying Bureaucracy.
One of my favourite economic concepts is “Niskannen’s Theory of Bureaucracy”. Bureaucrats are driven by economic goals – which include making their lives easier, and controlling more and more makes it easy. It’s not just a government problem. Its rife across the private sector. Let me start by asking… have you spoken to your bank recently?
Probably not. I bet you spent hours in a telephone queue, being told that “due to the Pandemic we are experiencing a high volume of calls”. I read the high street banks are sacking more staff and closing more branches.
Let’s face it.. our banks don’t work.
Because it makes sense to borrow money at negative real interest rates I recently applied for a mortgage – to finance rebuilding our house. We have money in the bank, and they are aware of our investment portfolio, pensions and other savings. However, they turned me down for a loan – on the basis I had a black credit mark.
It turns out that black score is because a mobile telephone company made a mistake and reported I hadn’t paid them the horrendous sum of £66.30. EE have now acknowledged the mistake and apologised for not cancelling a direct debit. I have a cheque on my desk from them repaying the direct debits they claimed before I cancelled it. However, they say that “legally” they can’t undo the damage done to my credit score. They say the law demands it stays on my report for 2 years – despite it being patently incorrect.
I asked the bank to be reasonable and look at the information. “Computer says No.” The Bank doesn’t want to lend to me, or anyone else, full stop. The telecoms company can’t be bothered to correct their mistake and raise potentially difficult questions about their systems.
Let’s focus on why banking bureaucracies fail. If a high-street bank lends money that causes all kinds of problems – if has to fill in sheaves of client reports, update their KYC, determine why someone with money in the bank wants to borrow more. They then will have to discuss the loan at half and dozen different compliance, diligence, diversity and capital committees. Then they have to weigh the risk of default, and put aside the correct capital charges to apply. Being “Pale, Male and Stale” doesn’t help – I might retire at some point in the 10-year life of the loan. Banks definitely don’t want to be lending to white-folk in their 60s.
Effectively the big banks no longer function. They have become bureaucracies where the treacle that flows through their operational arteries has made them ineffective and useless. They are still using multiple legacy systems, but don’t have the energy and won’t allocate the cash to replace them. Yet these same banks are considered critical to the economy and will be bailed out repeatedly, confirming their criticality to the economy. Their executives are paid in millions.
Let the Big Banks go bust – that’s what should happen to failing companies!
Actually, go further – close them down. The financial system will not collapse if we put HSBC up against the wall. I would argue it would be a great “pour le encourage les autres” moment.. (“The English like to shoot an Admiral or two to encourage the rest”, as Voltaire said.) While we are it, lets put EE up against the wall as well, and blindfold a couple of credit agencies as well…
A bit of corporate fear would be no bad thing.
There is no shortage of bright young FINTECH challenger banks out there that understand the opportunity to replace banking behemoths, and provide the missing aspects of customer service. The understand the need, the social service concept of banking for all, and they understand the opportunity to automate payments, digitise delivery and actually serve a useful social purpose…
I think you get the drift…. Extend the same thinking across the whole economy and every government department. A little bit of good old creative capitalist destruction wouldn’t do us any harm.
Here endeth today’s sermon..
via ZeroHedge News https://ift.tt/3hj0PzK Tyler Durden
Futures Rebound In Shaky Markets With Stocks On Pace For 2nd Weekly Drop Tyler Durden
Fri, 09/11/2020 – 08:07
After yesterday’s surprise intraday reversal lower – the third such lurch following last Friday’s and Tuesday’s drubbing – which may or may not have been sparked by a pair of sell programs late in the morning, US equity futures levitated sluggishly in the week’s final session while European shares struggled for momentum on Friday as concerns about extra monetary stimulus and overnight falls in U.S. big tech shares kept investors on edge. The dollar continued its decline while Treasury yields rose.
Despite the modest rebound in U.S. futures, global stocks, the S&P 500 and the Nasdaq Composite were course for a second straight week of losses. On Friday, Nasdaq 100 futures were up 1.3% and S&P 500 futures 0.9% firmer. The NYSE Fang+ index of big 10 tech companies has lost 5.4% so far this week, its biggest weekly loss since the market turmoil in March if sustained by the end of Friday. Menwhile, volatility is rising and as the next chart shows, the Nasdaq has moved more than 1% on every day in September.
“When you see these short-term, sudden moves after a run-up like we’ve had, it doesn’t mean you avoid the sector, but you have to be prepared that it’s the price of admission of being there,” said Charles Day, a managing director and private wealth advisor at UBS Global Wealth Management. “We still think investors should stay invested, we’re still positive on equities.”
Fears over a messy hard Brexit added to the bearish sentiment, putting sterling on track for its worst-week since March after the European Union told Britain it should urgently scrap a plan to break their divorce treaty. In other political clashes, the U.S. Senate killed a Republican bill that would have provided around $300 billion in new coronavirus aid, as Democrats seeking far more funding prevented it from advancing. That followed European Central Bank President Christine Lagarde earlier in the day appearing to rule out measures to weaken the euro, even though the ECB’s chief economist followed up this morning warning that a strong euro is dampening inflation.
“Investors were disappointed,” said Milan Cutkovic, market analyst at AxiCorp. “They were hoping that the central bank will boost the stock market rally by paving the way for further stimulus measures and talking down the euro. “But ECB President Christine Lagarde sounded less dovish, and her remarks about the strong euro left markets unimpressed.”
Europe’s Stoxx 600 was rangebound, opening lower before gaining 0.1%. The bank subgroup index fell as much as 1.4% and travel & leisure index dropped 1.1%, after ECB chief economist Philip Lane used a tougher tone than President Christine Lagarde and warned that the euro’s appreciation this year has dampened the inflation outlook, signaling that more monetary stimulus might be needed. After crashing by a record 20% in the second quarter, Britain’s economy grew by 6.6% in July, slower than June’s monthly rate, the Office for National Statistics said.
The European Union is ramping up preparations for a tumultuous end to the four-year Brexit saga after Britain explicitly said this week that it plans to break international law by breaching parts of the Withdrawal Agreement treaty that is signed in January.
MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.4%, moving away from a one-month trough touched earlier this week. Markets in Asia were mixed, with Jakarta Composite and Shanghai Composite rising, and Australia’s S&P/ASX 200 and Thailand’s SET falling. The Topix gained 0.7%, with Diamond Electric Holdings and Raksul Inc rising the most. The Nikkei rose after Tokyo dropped its coronavirus alert by one notch from the highest level as COVID-19 cases trend down. The Shanghai Composite Index rose 0.8%, with Yechiu Metal Recycling China and Jiangsu Sinojit Wind Energy Technology posting the biggest advances.
With the world’s stocks still trading near the most expensive levels relative to profit outlook since the 2000 tech bubble, some analysts called for caution.
“Global shares had rallied on expectations of economic recovery from lockdowns. But as the autumn begins (in the northern hemisphere), people wonder if the coronavirus infections could worsen,” said Kozo Koide, chief economist at Asset Management One. “You never know if vaccine deployment is that easy nor if banks need to aside more provisions for struggling firms in hospitality sector. Considering all that, investors are likely to question the current valuations can be justified,” he said.
In rates, Treasuries drifted lower led by long end as the curve bear-steepened, with futures near lows of the day in early U.S. trading. 10- and 30-year yields remain below this week’s auction stops, with a 20-year reopening ahead on Tuesday. Yields are cheaper by ~2bp at long end, steepening 5s30s by 1.6bp; 10-year higher by 1.3bp near 0.69%. Government bond yields across the euro area fell after Lane’s comments that inflation will be persistently low in the coming years. Bunds outperformed by ~3.5bp, helped by comments from ECB’s Lane who said the euro’s recent rise dampens the inflation outlook; gilts outperform Treasuries by 2.7bp.
In fx markets, the Bloomberg Dollar Spot Index slipped for a second day as the greenback weakened versus most of its peers as gains in U.S. stock futures dented demand for haven assets. The euro advanced for a third day as investors shrugged off policy makers’ commentary about how the common currency’s strength dims inflation prospects. The EURUSD rose 0.5% to 1.1874 day high, up 0.3% on a weekly basis, after ECB chief economist Philip Lane warned that the euro’s appreciation this year has dampened the inflation outlook, using tougher language than President Christine Lagarde and signaling that more monetary stimulus might be needed. Norway’s krone and antipodean currencies were at the top; the Australian dollar advanced against the greenback to erase a weekly loss after exporters and speculative funds bought spot to cover short term obligations into the weekend. The pound extended this week’s slump and headed for its worst week since March on a deterioration in Brexit negotiations. Dollar-yen stayed in a tight range as investors refrained from taking fresh positions ahead of U.S. inflation data.
In commodities, oil prices were under pressure from a surprise rise in U.S. stockpiles and weak demand due to the coronavirus pandemic. Brent was down 0.4% at $39.91 a barrel after falling nearly 2% on Thursday. U.S. crude dropped 0.2% to $37.23 a barrel, having fallen 2% in the previous session. Despite the continued dollar drop, gold was roughly unchanged at $1,944.75 per ounce after hitting its best level since Sept. 2 on Thursday.
Looking at the day ahead, data highlights include the US CPI reading for August. There are an array of ECB speakers, including chief economist Lane, Schnabel, Mersch, Villeroy and Weidmann. Kroger is reporting earnings.
Market Snapshot
S&P 500 futures up 0.9% to 3,370.75
STOXX Europe 600 up 0.07% to 367.74
MXAP up 0.4% to 170.90
MXAPJ up 0.3% to 560.25
Nikkei up 0.7% to 23,406.49
Topix up 0.7% to 1,636.64
Hang Seng Index up 0.8% to 24,503.31
Shanghai Composite up 0.8% to 3,260.35
Sensex down 0.1% to 38,796.07
Australia S&P/ASX 200 down 0.8% to 5,859.42
Kospi up 0.01% to 2,396.69
Brent futures down 0.2% to $39.97/bbl
Gold spot down 0.2% to $1,943.19
U.S. Dollar Index down 0.1% to 93.23
German 10Y yield fell 3.6 bps to -0.469%
Euro up 0.3% to $1.1846
Italian 10Y yield fell 1.2 bps to 0.883%
Spanish 10Y yield fell 3.0 bps to 0.32%
Top Overnight News from Bloomberg
The U.K. secured a free-trade agreement with Japan, its first major post-Brexit accord and a boost to Prime Minister Boris Johnson as negotiations deteriorate with the EU
Britain’s economy expanded 6.6% in July compared to June, when it gained a record 8.7%, with activity being boosted by the reopening of restaurants and bars in early July
Investors are now paying for the privilege to lend cash to the U.K. government for short periods of time, adding to conviction for rate cuts by the Bank of England
JPMorgan Chase & Co. is requiring its most senior sales and trading employees to return to their offices by Sept. 21, the strongest move yet by a U.S. bank to restaff its workplaces
French President Emmanuel Macron will meet with his government Friday to discuss how to curb a surge in coronavirus infections without endangering a tentative economic recovery. France recorded close to 10,000 new cases Thursday, the most since the lockdown ended in May
Norges Bank will probably raise its main interest rate a good deal earlier than the bank’s own forecasts suggest, according to Norway’s statistics agency
A look at global markets courtesy of NewsSquawk
Asian equity markets trade mixed, but finished mostly positive, as the region partially shrugged-off the weak performance stateside where all major indices declined amid resumed heavy selling in tech and energy, while higher US jobless claims data and the failure to pass the skinny stimulus bill at the Senate added to the downbeat mood. ASX 200 (-0.8%) underperformed with tech and miners leading the broad descent across its sectors, while Rio Tinto shares whipsawed following the announcement of top-level changes with CEO Jacques to exit the Co. when a successor is appointed or by end-March 2021 and iron ore chief Salisbury to step down with immediate effect as a fallout from the destruction of the Aboriginal heritage sites. Nikkei 225 (+0.7%) recovered initial losses with the index helped by mildly favourable currency flows and amid reports Japan is to allocate JPY 1.6tln for coronavirus measures from the reserve fund. Hang Seng (+0.8%) and Shanghai Comp. (+0.8%) were indecisive after this week’s PBoC liquidity efforts resulted to a net weekly injection of CNY 230bln, but with upside restricted after President Trump adamantly dismissed extending the deadline for TikTok and with weakness seen in defense stocks after China and India border tensions eased following a meeting of their foreign ministers in which the sides issued a joint statement that they agreed to honour existing agreements and to not escalate the border situation. Finally, 10yr JGBs were marginally higher as they took their cue from USTs and with the BoJ also present in the market for nearly JPY 1.2tln of JGBs with up to 10yr maturities, although gains were limited by the improvement in risk appetite overnight and with stubborn resistance at the 152.00 level.
Top Asian News
Credit Suisse Hires 11 for China Research After JV Control
India Survey Suggests Covid-19 Cases Hit 6.4 Million by May
Nissan Makes Euro Bond Market Debut After Jumbo Dollar Sale
Bank Indonesia Intervenes as Planned Social Curbs Hit Rupiah
Directionless trade thus far and relatively contained in early European hours (Euro Stoxx 50 -0.4%) as the region took the lead from a mixed APAC performance and fluctuates between negative and positive territory amidst a lack of fresh catalysts heading into US CPI. Meanwhile, US index futures see more pronounced gains following yesterday’s tech-led slide. European sectors also see a mixed performance with little to be derived in terms of a risk profile. Healthcare leads the gains – propped up by Pharma behemoths Novartis and Roche, with the latter noting that new data further reinforces Co’s Ocrevus as a highly effective treatment for MS. To the downside, banks feel the ill-effects of a slightly lower European yield environment, whilst Oil & Gas and Travel & Leisure react to dwindling demand prospects. In terms of individual movers, Altice (+24%) tops the charts amid news that it is to be acquired by Next Private in an all cash offer of EUR 4.11/shr; expected to completed in Q1-2021. Meanwhile, Banco de Sabadell (-3%) failed to capitalise on further Spanish banking sector consolidation rumors as merger talks reportedly have not been initiated. Sticking with M&A, LSE (+1.8%) shares are supported by reports that Board of directors of Italy’s CDP and CDP equity have resolved to proceed jointly with Euronext (+1.8) to submit non-binding bid for Borsa Italiana.
Top European News
U.K. Agrees Post-Brexit Trade Deal With Japan, Boosting Johnson; U.K. Economy Surges in July But Clouds Gather Over Brexit
Sunak Urged to Extend U.K. Job Support, Help Indebted Firms
LVMH, Hermes Gain as Morgan Stanley Sees Rosier Luxury Outlook
Euronext Joins Italy State Lender CDP in Borsa Italiana Bid
In FX, sterling remains vulnerable heading into Friday’s round of Brexit trade talks, and with UK PM Johnson facing a Conservative Party revolt against the Internal Market Bill on top of the EU backlash following no reassurances about commitment to comply with the WA from yesterday’s extraordinary joint committee meeting. However, Cable briefly clambered back over 1.2800 after positive reports from Japan about agreement on a trade deal with Britain and Eur/Gbp retreated through 0.9250 before rebounding again after the cross catapulted 2 big figures to 0.9270 on Thursday, albeit with the Euro off its post-ECB highs across the board. For the record, no discernible reaction to a raft of UK data that was mixed on balance, but pretty much as expected in terms of GDP, and from a chart perspective the Pound may find underlying bids around 1.2750 vs the Dollar as the 200 DMA sits not far below at 1.2737, while 0.9300 could offer some sentimental support relative to the Euro.
AUD/NZD – Broad risk sentiment is still fragile after a resumption of the tech-inspired equity market bull correction on Thursday, but the Aussie and Kiwi have taken comfort from more resilient performances across APAC bourses overnight. Moreover, Aud/Usd and Nzd/Usd will draw encouragement from the fact that their latest pullbacks were shallower, down to around 0.7250 and 0.6650 respectively compared to 0.7200 and 0.6600 on Wednesday, while retesting 0.7300 and 0.6700. Note, however, Aud/Nzd is holding above 1.0900 in wake of softer NZ food prices and the manufacturing PMI only just retaining 50+ status.
EUR/CHF/CAD – Also rebounding vs the Greenback, as the DXY meanders between 93.356-129 parameters ahead of US CPI, with the single currency near the top of a 1.1869-14 range and keeping tabs on a host of ECB speakers for anything fresh/pertinent to supplement pretty routine and unchanged guidance from September’s policy meeting. Meanwhile, the Franc has reclaimed 0.9100+ status and the Loonie is pivoting 1.3170 without additional impetus from BoC Governor Macklem who basically repeated Wednesday’s post-meeting statement and merely acknowledged that Usd/Cad has not fallen as much as other pairs in the past month.
JPY – Very little deviation in the Yen just under 106.00 against the Buck awaiting next week’s LDP leadership developments and BoJ policy outcome that is now widely touted to culminate in an upgrade to the economic assessment for Japan.
In commodities, WTI and Brent front month futures are flat within tight ranges in the aftermath of yesterday’s decline, as the complex awaits fresh news flow ahead of US CPI metrics. WTI has been contained within USD 0.5/bbl parameters between 37.00-50/bbl and 39.65-15/bbl respectively, with the only scheduled crude-specific data the weekly Baker Hughes rig count which will be released as usual. Next week is poised to be a relatively busy week for crude markets, with the OPEC and IEA MOMRs alongside the JMMC, which collectively should provide some meat on the bone around what is still an uncertain supply/demand outlook. Elsewhere, spot gold and spot silver are uneventful in caged-trade sub-USD 1950/oz and below USD 27/oz, Meanwhile, Shanghai copper closed lower on the day, weighed on by the losses seen across US stock markets, whilst Dalian iron ore rebounded on demand recovery hopes.
US Event Calendar
8:30am: US CPI MoM, est. 0.3%, prior 0.6%; 8:30am: US CPI Ex Food and Energy MoM, est. 0.2%, prior 0.6%
8:30am: US CPI YoY, est. 1.2%, prior 1.0%; 8:30am: US CPI Ex Food and Energy YoY, est. 1.6%, prior 1.6%
8:30am: Real Avg Hourly Earning YoY, prior 3.7%; Real Avg Weekly Earnings YoY, prior 4.3%
2pm: Monthly Budget Statement, est. $235.4b deficit, prior $200.3b deficit
DB’s Jim Reid concludes the overnight wrap
25 years ago today with great trepidation I walked into my graduate training program and started in Investment Banking. My honest plan at that point was to do it for 3-5 years and earn enough money to pursue my dream of becoming a rockstar. I genuinely believed this would happen. The fact that I’m writing this a quarter of a century later suggests my dreams were quashed or alternatively that I’m a very bad analyst. However with Mick Jagger still going strong at 77 maybe there’s hope that I can do this for another 3-5 years and then pursue my dreams of becoming a rockstar! Note that back on this day in 1995, 10yr US, German, UK and Italian yields were 6.22%, 6.61%, 7.89% and 11.51% respectively. I think the first thing I learnt on that training program was that yields and interest rates don’t go negative. So if you’re reading this as a new graduate, ignore the first thing you learn today.
If you really want to look at long-term returns our “The Age of Disorder” (link here) provides you with them spliced and diced numerous ways for global equities, bonds and commodities. This is in addition to our thematic view in the report that we are about to start a new era – the 6th in the last 160 years. The lead topic was one of a likely ongoing deterioration in the US-China relationship. We showed in Figure 3 (and in our CoTD yesterday here) that China is only restoring its historical position that it lost for a century or so post the mid-19th century. That catch up was fine while it was still far behind the size of the US economy but as parity has got closer and as China has resisted conforming to Western ideals, tensions have been and will continue to increase. See the report for a full chapter on this but remember there’s an 8-page executive summary that covers all the report at a high level.
The month of disorder continues in September with yesterday turning into yet another volatile day for investors as a raft of headlines out of Europe coupled with weak labour market data from the US saw swings between gains and losses before the US took a sharp leg lower post the European close led by the tech sector (-2.28%) once again, with the NASDAQ -1.99%. The S&P 500 was flat at noon in New York before finishing -1.76% down on the day. While there was no specific impetus to the selloff, there were a couple of negative headlines that may have reinforced the week-old risk-off sentiment. A slimmed down US stimulus bill failed to pass the Senate (somewhat expectedly), and Microsoft (-2.80%) announced that they had detected new cyberattacks targeting the US elections. With Europe missing the late drop in risk, the STOXX 600 fell a lesser -0.59%. Sovereign bonds diverged as yields on 10yr Treasuries fell (-2.3bps) to 0.677% as investors sought safety in the late risk off. Earlier yields on 10yr bunds (+2.9bps) had moved higher to -0.43%.
One of the bigger FX moves came from sterling, which fell -1.52% against the US Dollar and -1.60% against the euro as Brexit tensions escalated further between the UK and the EU – the biggest daily drops since 18 March during the worst of the pandemic selling. It follows the release on Wednesday of the UK government’s internal market bill, which seeks to override parts of the already-signed Withdrawal Agreement. In terms of the developments in the last 24 hours, an extraordinary meeting of the EU-UK joint committee was held, following which Commission Vice President Šefčovič said that the adoption of the internal market bill by the UK “would constitute an extremely serious violation of the Withdrawal Agreement and of international law.” More notably, the EU called on the UK “to withdraw these measures from the draft Bill in the shortest time possible and in any case by the end of the month”, and that the EU would “not be shy” when it came to using the mechanisms and legal remedies in Withdrawal Agreement to address any violations.
On the UK side however, there was no sign of the government backing down, with their legal defence issued yesterday saying that “Parliament is sovereign as a matter of domestic law and can pass legislation which is in breach of the UK’s Treaty obligations.” Questions have been raised however as to whether the legislation could successfully pass through Parliament, since although the government has an 80-seat majority in the House of Commons (The Times this morning suggest that up to 30 Tory MPs could rebel), they don’t have one in the Lords, where even the former Conservative leader and Brexit supporter Michael Howard expressed disquiet over the fact that the UK could breach its treaty obligations.
In a statement from EU chief Brexit negotiator Barnier, he noted “significant differences remain in areas of essential interest for the EU.” This was almost the exact same wording from U.K. counterpart Frost, who said that “a number of challenging areas remain and the divergences on some are still significant.” The negotiators are due to meet again next week but, as Mr Barnier noted, both sides are in essentially the places they started eight rounds of negotiations ago.
With the Brexit saga dominating, the ECB were somewhat lower down the headlines yesterday, particularly as they left policy on hold with nothing new in the statement. One of the big questions was how they’d react to the recent appreciation in the euro’s exchange rate, which crossed over the $1.20 threshold recently for the first time in over two years. On this President Lagarde said that “to the extent that the appreciation of the euro puts negative pressure on prices, we have to monitor carefully such a matter, and this was extensively discussed”. However, it was a Bloomberg headline rather than comments from Lagarde that saw the euro strengthen during her press conference. It basically said that the ECB was said to agree there was no need to overreact to the Euro’s gains. In response the euro appreciated to $1.19 shortly afterwards, before paring back some of its gains by the close to finish up +0.10% at $1.182.
In terms of their latest economic forecasts, they now see a smaller -8.0% contraction in GDP this year (vs. -8.7% in June), before a +5.0% rebound in 2021 (vs. +5.2% in June). And on the inflation side, the recent weak inflation prints didn’t stop them revising their outlook slightly higher, with this year’s HICP forecast remaining at +0.3%, before next year saw an upgrade to +1.0% (vs. +0.8% in June) while 2022 remained at +1.3%.
With the ECB behind us now, central bank attention is fully on the upcoming Fed meeting next week, which will be the first since the new framework was presented at the virtual Jackson Hole symposium. To that end at 14:30 BST today, Matt Luzzetti, our Chief US economist, will be in conversation with David Wilcox (the former chief economist at the Fed) on the next steps for the Fed ahead of the important FOMC next week. To register for this event, please click here.
Overnight in Asia markets are mixed with the Nikkei (+0.29%) and Hang Seng (+0.42%) both up while the Shanghai Comp (-0.21%), Kospi (-0.67%) and Asx (-0.69%) are all down. The Nikkei is trading higher after reversing earlier declines helped by news that Yoshihide Suga, the leading candidate to become Japan’s next leader, said there’s no need to raise the sales tax again in the next decade. This overnight remark is significant after he had said a day prior that a further increase in the tax is inevitable in the future given Japan’s aging population. In Fx, the British pound and euro are both up +0.20% and +0.17% respectively this morning while the US dollar index is down -0.16%. Futures on the S&P 500 and Nasdaq are trading up +0.59% and +0.64% respectively. In terms of data, Japan’s August PPI came in line with consensus at -0.5% yoy.
On the coronavirus, the CEO of AstraZeneca Pascal Soriot said that a vaccine could still be available by the end of the year after their trial was delayed. Meanwhile, the head of the US FDA has said overnight that drug makers seeking an emergency authorization for a Covid-19 vaccine will have to meet a higher standard of efficacy than normally would be required for such clearance.
Onto the virus numbers now and there were further signs that Europe was becoming a renewed area of concern, with the UK reporting a further 2,935 cases in the past 24 hours, which brought the 7-day average up to its highest since May 25 at 2,532 albeit with higher testing levels now. We have been highlighting the transatlantic shift in new cases over the last month – rising in Europe while falling in the US over the past 6 weeks. Yesterday was the first time since early spring that new daily cases in the European Union and the U.K. surpassed those in the US (c.27k vs c.26k). European leaders continue to advocate for targeted measures over national lockdowns, with French President Macron saying, “we have to continue to be rigorous, realistic, without giving in to any kind of panic” as the country is seeing more weekly cases than ever. Elsewhere, Japan and Singapore are planning to open a reciprocal green lane for travel next week in a bid to revive business between the two countries.
Looking at yesterday’s data, both the initial weekly jobless claims and continuing claims surprised to the upside in the US. The initial claims for the week through September 5th came in at 884k (vs. 850k expected), which is unchanged from the previous week’s level, while the continuing claims covering the previous week increased to 13.385m (vs. 12.904m expected). Notably, the uptick in the insured unemployment rate to 9.2% was the first weekly increase since mid-July, and only the second since May. So that’ll add to concerns that labour market progress is slowing, particularly in the absence of another stimulus package in the US.
Chances for that additional stimulus package fell yesterday, as Senate Democrats voted down a ‘skinny’ bill that some Senate Republicans and the President had been pushing. The bill was estimated at $500-700bn targeted at supplemental unemployment insurance benefits and aid to small businesses. It was a big drop from the Democrats’ most recent salvo of $2.2tr and the Republicans’ opening $1tr bill. With fewer than 60 days to the election it is uncertain what the path forward is here, as some Senate Republicans are still unsure if more stimulus is even needed while Democrats may wait to see if they have a stronger negotiating platform in November.
To the day ahead now, and there are an array of ECB speakers, including chief economist Lane, Schnabel, Mersch, Villeroy and Weidmann. Separately, data highlights include the US CPI reading for August and the UK’s GDP reading for July.
via ZeroHedge News https://ift.tt/2Fio3ZC Tyler Durden
