Rabobank: We Have A New Champion In The “I Can’t Believe This Is Happening” Category

By Michael Every of Rabobank

In a year in which every week see a fresh battle for top slot in the ‘I Can’t Believe This is Happening’ headline competition, we have a new potential champion. San Francisco has decided it will pay criminals $300 a month provided they do not put a bullet in anyone, or get one put in them. Is this the first ‘shot’ towards Universal Income outside of the recent Covid furloughs/cheques? Is there a sliding scale for knives and brass-knuckles? And shall we call this policy “Cash for Crooks” or “Universal In-Gun”?

This latest champion headline reflects the underlying polarization of our socio-economic system, as well as the ironic fusion of its extreme edges, e.g., the NRA and San Fran would both seem to benefit from a scheme that sees far more guns and then far less shooting of them. It also reflects the equally sharp dichotomy of stories we see in daily newsfeed and the analytical round-up – in particular between those that recognise the above trend, and those that choose to ignore it.

“S&P up 0.03%”; “US 10-year yields unchanged”; “WTI -0.58%, Brent -0.06%” These are examples of market headlines that most people working in markets are quite happy to see, and to focus on. You can change the numbers up or down a little bit and that remains true.

Meanwhile, here are a sample of headlines that I get the impression most people working in markets are very unhappy to see, and many choose not to focus on at all.

US:

• “Techs Outperform as Risks to Payrolls Report Grow: Markets Live” (BBG) – after yesterday’s ADP employment report massively disappointed, suggesting that the US is still 7m jobs behind where it needs to be in this recovery, and with momentum fading, not gaining.
• “US DOJ Readying Google Antitrust Lawsuit over Ad-Tech Business” (BBG) – suggesting that the above pivot may be in to a cul-de-sac.
• “Amazon now running 164 flights a day to deliver stock in the US” (FT) – underlining that alongside supply chain disruption, some may try to ape ‘Too Big to Fail’ into ‘Too Big to Sail’ and vertically integrate logistics. Will mega-firms de facto own their own airlines and ships in order to control trade and set market terms? Looking back in time, think the VOC and EIC; looking forward, think ‘The Spice Must Flow!’
• “Bill Gross Says Bonds Are ‘Investment Garbage’ Just Like Cash” (BBG) – as the former ‘Bond King’ says the King is dead due to low returns, and doesn’t add ‘Long Live the King’
• “Crypto platforms need regulations to survive, says SEC boss” (FT) – Tick, tock, tick, tock.
• “Corporate America fights uphill battle against anti-China push” (Politico) – which points out US Big Business is having to line up with the Democrat’s Progressive wing like Bernie Sanders (which politically deserves a “!” from both sides of the deal, NRA-San Fran style) to try to stall even more anti-China legislation being passed – and all the while November 2022 polling suggests that uphill battle may then be a vertical climb.
• “China’s new U.S. ambassador goes full wolf in first major speech” (Politico) – stressing Qin Gang warning of “disastrous consequences” if the US seeks to suppress China using a “Cold War playbook.” On which note, see the political timeframe and underlying political dynamic referred to just above.

 China:

• “Beijing’s ‘Volcker Moment’ May Be Approaching Fast: China Today” (BBG) – talking about the risks to the key property sector if house prices are targeted under Common Prosperity. (Which was discussed in “Pro-Fund or Profound Revolution?” yesterday.)
• “China’s ‘Volcker Moment’ is a Mounting Risk to Global Recovery” (Telegraph) – echoing that this has global consequences even if the globe isn’t paying much attention.
• “Chinese Firms Rush to Embrace Xi’s ‘Common Prosperity’ Slogan” (BBG) – meaning it is happening on some fronts at least already – so why not others?
• ”China’s Economy Barely Responding to Contained Virus: Economics” (BBG) – after the Caixin manufacturing PMI joined the official services PMI below the contractionary 50 level, showing the economy can ill afford another Volcker Moment.
• “Evergrande, Huarong Woes a Warning for Commodities: Intelligence” (BBG) – again showing how what happens in China does not stay in China.
• “Xi Jinping calls on young officials to strengthen loyalty, competency for important tasks” (CGTN) – where his speech included: “It is unrealistic to always want to live a peaceful life and not want to fight. We must abandon our illusions, fight bravely, refrain from stepping or giving way to issues of principle, and safeguard national sovereignty, security, and development interests with unprecedented will and quality.“

EU:

• “Europe’s Waning Crisis Triggers ECB Debate on Ending Stimulus” (BBG) – where the ECB may be repeating its historic form of not being able to look beyond its own borders when thinking about tightening monetary policy (relatively).
• “Repeat Warning for Equities in Falling Global Manufacturing PMI” (BBG) – as case in point
• “EU regulator warns of ‘high risks’ for market crash” (Politico) – as retail punters have gone in for things like cryptocurrencies and meme stonks.
• “EU tries to redirect Afghan refugees to neighbouring countries” (ITAR-TASS) – so no “Wir Schaffen Das 2.0”, which mirrors Mrs Merkel being out the door in weeks. However, it means the EU paying people to stay away. Perhaps $300 a month, if they don’t shoot people?
• “Europe’s glory days of trade deals are over” (Politico) – because “it’s never been so politically toxic”, and leaving what for all those trade-mavens to do from now on?

UK:

• “UK House Prices Surge in August Despite Ending of Tax Cut” (BBG) – or, ‘Builders’ Bums Better’
• “BE Primer: UK Recovery to Slow in 2H as Virus Risks Intensify” (BBG) – or, ‘Bums Better Build’.

AU/NZ:

• “A profound moment in the pandemic” (AFR) – as Victoria admits it can’t get to zero Covid even with lockdowns. And where Victoria leads…
• “ASX slips; BHP wipes 2021 gains; ANZ says RBA to delay taper” (AFR) – whocouldanooed?
• “New Zealand Reports 49 New Cases of Covid-19 in Community” (BBG) – again, whocouldanooed?

One could go on. And on. And on. Or one can say: “S&P up 0.03%”; “US 10-year yields unchanged”; “WTI -0.58%, Brent -0.06%” Which in some ways is arguably not too far removed from getting $300 a month not to shoot people.