Month: September 2024

Authored by Charles Hugh Smith via OfTwoMinds blog,

So the entire economy depends on the stock market going up as punters front-run the Fed–and this is not only fine, it’s optimal, the best arrangement the world has ever seen. On which ethereal plane is this considered sane, much less optimal?

That the real-world economy–a neofeudal confection featuring a parasitic, predatory Nobility vacuuming up virtually all the gains of the Everything Bubble while the bottom 80% stumble along in debt-serfdom, resigned to serving the top 10% who own 90% of the assets bubbling higher–is teetering on the precipice, clinging to the wealth effect of soaring assets, courtesy of the Federal Reserve, for its lifeline is, well, insane.

Speaking of gaslighting–how many people do you know who call this arrangement by its real name, neofeudalism? No one? How many people are trembling with excitement because every time the Fed cut rates at or near the all-time highs in the stock market, stocks were higher the next year–20 times out of 20? Hundreds? Thousands? A great multitude to be sure.

And this outstanding track record of the Fed stimulating the wealth effect is generating ecstatic euphoria in exactly which cohorts? The bottom 50% who own a single-noise 2.6% of the nation’s financial assets? Households paying half their net income in rent? No, the euphoria is limited to the cohort which stands to boost its already gargantuan gains from Fed stimulus–the top 10%.

Does anyone actually buy a stock or index based on the fundamentals? We all answer “yes” because that’s the acceptable cover story for the reality, which is Fed, Fed, Fed: the Fed is going to cut rates, so front-run the rate cut, and then front-run everyone front-running rate cuts, until the golden day the Fed finally does cut rates, then buy, buy, buy, as the statistics–20 out of 20!– guarantee a huge gain regardless of price-earning ratios, revenues, profit margins, or any of that fundamental-analysis nonsense.

Sure, the big research houses spew out reams of the stuff, but nobody actually pays any attention to it, despite their lip-service to the contrary: the only real trigger for pushing the “buy” button is the Fed. Everything else is just the cover story that gives an impression of serious analysis and “investing.”

The economy is dependent on the wealth effect fueling the incomes and spending of the top 10% who collect roughly half the income and account for almost half of all consumption–the high-end consumption that keeps the economy afloat. Should the Fed’s next round of financial fentanyl fail to boost housing and stocks even higher, then the income and spending of those reaping the gains of the asset bubble might stop spending, and the economy will promptly crater.

Let’s summarize: the US economy is completely dependent on one thing: the top 10% front-running everyone front-running Fed stimulus. So front-running the front-runners is the sole support of “growth.”

As for all those gleaming statistics promising fat returns to front-runners, they’re shiny but they’re not causation, or even correlation: if the causal conditions have changed, then the results will be different, regardless of what happened in the past under different conditions.

Have causal conditions changed? Well, how about China, which has transitioned from the engine that pulled the global economy uphill with its famed credit impulse, to the current stagnation caused by its monumental real estate bubble popping, deflating not just consumption but the entire wealth effect that’s fueled its economy for two decades.

If causal conditions have changed, the “guarantee” offered by statistics is empty.

Those holding index funds convinced that “stocks always go up 8% a year over time” will be bagholders because causal conditions have changed, and the smart money has been selling to retail punters enthralled by statistics–20 out of 20, we can’t lose!–and those buying and holding index funds because that’s worked so well since front-running the Fed became the entire market and economy, circa 2009.

Contrary to what stock market statisticians claim, the world is not a mechanical device that spits out rallies when the crank is turned. Though it has been largely forgotten, we inhabit a moral universe, where the absolute faith in greed as the wellspring of plenty, the prideful confidence that our winnings at the Fed’s casino were “earned” by our genius and hard work, while those who didn’t own the assets bubbling higher slip into the abyss–all this hubris generates feedback.

Hubris invites Nemesis. Nemesis offers a curative lesson to greed and prideful over-confidence. We just don’t know in what form or when, but the crank will turn and the results won’t be predictably euphoric.

Is an economy based on the wealth effect generated by front-running the front-runners really that stable? Is an economy based on enriching the already rich so their wealth increases by tens of trillions of dollars as assets bubble higher a sound economy? Or is it an exploitive, parasitic neofeudal economy of extremes awaiting Nemesis? Perhaps we’ll find out sooner than the front-running multitude expects.

US equity futures are higher, led by tech with small-caps underperforming, as European stocks jump near record high (even as Europe slides deeper into recession) and Asian markets surge after China’s announced a flurry of “stronger than expected” stimulus measures which aided China and Hong Kong equities to more than 4% gains. As of 8:00am, S&P and Nasdaq futures were up 0.1%, fluctuating between gains and losses, as traders were unsure if China’s massive stimulus would prove to be inflationary and thus crush the Fed’s hopes for an accelerated easing campaign. The news of China’s multiple rate cuts and market-supporting measures (full details here) is also boosting the commodity complex with both Energy and Base Metals seeing gains. And with commodities once again flying, bond yields are 1-4bps higher as the curve bear steepens. The USD is mixed as the yen slides now that the carry trade is once again back on thanks to China. As JPM notes this morning, while the US has been the anchor for global growth, “a China reboot will also benefit the globe though may create another inflation pressure,” so keep an eye on commodities and bond yields over the coming weeks. Higher yields are not a headwind to stocks but when yields set new highs (e.g., 10Y > 5%) that is when US Equities are disrupted. On the macro calendar we have the September Phillly Fed non-manufacturing activity (8:30am), July FHFA house price index and S&P CoreLogic house prices (9am), September consumer confidence and Richmond Fed manufacturing index (10am); Fed speakers scheduled include Bowman at 9am.

In premarket trading, US-listed Chinese stocks surged after China’s central bank announced a slew of measures aiming to boost the economy, housing sector and the stock market; among the biggest movers were Alibaba (BABA) + 5.7%, JD.com (JD) + 8.2%, and NetEase (NTES) +6.2%. Here are some other notable premarket movers:

• Hawaiian Electric Industries (HE) slips after pricing an offering
• Liberty Broadband (LBRDA) shares soar 20% after John Malone’s cable company proposed an all-stock merger with Charter Communications (CHTR)
• Light & Wonder (LNW) falls after saying it had received an order from the US District Court for the District of Nevada granting gambling machine manufacturer Aristocrat a preliminary injunction relating to L&W’s Dragon Train game
• Miniso (MNSO) extends Monday’s decline after announcing a plan to buy a majority stake in Yonghui Superstores
• Salesforce (CRM) gains as Piper Sandler raised its recommendation on the stock to overweight from neutral, seeing free cash flow per share doubling by 2029
• Starbucks (SBUX) falls as Jefferies assigned an underperform rating, saying it’s too early to get excited about the company’s prospects for a turnaround even with a new CEO in charge
• Walmart (WMT) rises after Truist Securities upgraded the retailer to buy from hold. Costco (COST) declines after Truist downgraded the stock

Overnight market sentiment is euphoric after PBOC governor Pan Gongsheng announced a barrage of policy easing measures this morning, including a 20bp primary policy rate cut, a 50bp RRR cut and a 50bp interest rate cut on existing mortgages. Summary of stimulus package:
 

1. 50bp RRR cut (Governor Pan flagged the central bank will consider cutting RRR further by year-end);
2. 20bp cut to policy rate (7d OMO rate);
3. Governor Pan flagged this would guide MLF rate lower by 30bp and lower LPRs and deposit rates by 20-25bp;
4. Lowering mortgage rates (by ~50bp as estimated by PBOC), and lowering the downpayment ratio of second-home purchase to the level for first-home purchase (to 15% from 25% previously);
5. Launching new monetary policy tools to support stock market development (i.e., supporting brokerages, mutual funds and insurance companies to borrow liquidity from PBOC via asset pledges);
6. Launching special-purpose relending to guide bank to provide funding for list companies on their share buybacks.

China’s broad package of monetary stimulus on Tuesday included reduced reserve requirements for banks and at least 800 billion yuan ($114 billion) of liquidity support for stocks. According to Goldman, the announcement was “one of the largest / strongest moves by the PBOC since probably the height of COVID” and while “until now, its been fairly piecemeal in nature and rather uncoordinated leaving lukewarm reactions, today’s joint PBOC, CBRC and NFRA press conference was the setting with expectations are high for further fiscal / property market easing over the coming weeks – though there remains obvious questions on the efficacy of all of this through to the real economy in the context of oversupply and a continued cautious consumer.” As a result, this move appears to signal greater openness to easing from senior policymakers, but more fiscal easing measures are needed to boost domestic demand (they will come now that China has announced no more half measures). Given the guidance from the PBOC governor, Goldman expects another 25bp RRR cut in Q4 for this year, and maintain a forecast for additional RRR/policy rate cuts in 2025 (two 25bp RRR cuts in Q1/Q3 and two 10bp policy rate cuts in Q2/Q4 2025).

Beijing’s poilcy stimulus blitz sent China’s stocks soaring the most in fueled by the central bank’s latest blitz of policy measures designed to stem the worsening economic outlook and market mood. After a modest open, equities gathered steam after People’s Bank of China Governor Pan Gongsheng’s announcement, with traders assessing if the stimulus package was sufficiently robust. By the close,, the benchmark CSI 300 index surged more than 4.3%, the biggest jump since the March 2020 Covid panic.

Still, it will take time for the economic impact of any stimulus to feed through, Michael Sneyd, head of cross-asset and macro quantitative strategy at BNP Paribas, told Bloomberg TV. “That China stimulus news is probably not enough to take off those downside risks in the European economy just yet.”

Meanwhile, back in the US, a handful of Fed officials on Monday left open the door to the possibility of more large interest-rate cuts to come, saying that the current level is still weighing on the economy. Chicago Fed President Austan Goolsbee said that “we have a long way to come down to get the interest rate to something like neutral.” Although he and his colleagues made clear that incoming data will determine what comes next.

In short: China jumping on the stimulus bandwagon just in time for the US to aggressively cut, means we have all the makings of a global superbubble.

Investors are now awaiting data on the Fed’s preferred price metric and US personal spending later this week for further clues on the depth of future reductions. US Traders have been wagering on nearly three-quarters of a point of policy easing by year-end, suggesting at least one more major rate cut is in store.

And sure enough, European stocks, having been hammered by the lack of a credible China stimulus for years, erupted higher tracking a China-led rally in Asia. The Stoxx 600 is up 0.6%, with luxury and mining sectors the biggest benefactors. UK machinery firm Smiths is the day’s biggest laggard after preliminary FY2024 results. Here are the biggest European movers:

• European sectors with high exposure to China, including miners, luxury-goods makers and automakers, gain strongly after the Asian nation announced measures to boost growth and shore up its property market
• TUI rises as much as 3.2% after the travel company said it experienced a strong end to the summer season, leaving it confident it can deliver its annual guidance, and made a promising start to the winter season
• Raspberry Pi rises as much as 9.5% after the British PC maker reported a 61% increase in 1H revenue, boosted by pricier Raspberry Pi 5 boards; the stronger-than-expected 1H is likely followed by a weaker 2H
• AMS-Osram shares jump as much as 16% after UBS lifts its recommendation for the Swiss chip-maker to buy from neutral, citing limited liquidity and leverage concerns and a clear path to further deleveraging
• Smiths Group drops as much as 8.3%, the most since 2021, after the UK machinery firm releases its preliminary results for FY24 and FY25 targets. Jefferies says consensus expectations for FY25 may “drift”
• Saab falls as much as 7.4% to the lowest since March after Bank of America downgraded its rating on the Swedish weapons and defense systems manufacturer to neutral, trimming its price target to SEK240
• Aurubis shares drop as much as 3.7% after Hauck & Aufhaeuser analysts downgraded their recommendation on the firm. Shares had slid more than 10% on Monday after the firm’s profit guidance missed estimates
• Dunelm shares drop as much as 7.5%, the most since September 2022, after its deputy chairman sold shares in the British homeware retailer at a discount to the last closing price

Meanwhile, Asian stocks headed for their highest close since February 2022 as a slew of measures from China to support its struggling economy boosted sentiment on the region’s equities. The MSCI Asia Pacific Index rose as much as 1%, with Tencent, TSMC and Alibaba among the biggest boosts. Stocks rallied in mainland China and in Hong Kong, with the CSI 300 index closing up 4.3% in its best day in more than four years. The Hang Seng China Enterprises index surged over 5%. China’s stimulus package, which includes a reduction to a key policy rate and $113 billion of liquidity support for the stock market, helped ease concerns that authorities are reluctant to take bold policy steps. Investors were already warming toward emerging market assets following the Federal Reserve’s 50-basis-point rate cut, and a sustainable rebound in Chinese shares can provide an additional boost to the region.  The stimulus has “raised the expectations that more is coming,” providing support for the stock market, Grace Tam, chief investment advisor at BNP Paribas Wealth Management, said in a Bloomberg TV interview. “The market will expect more support on the fiscal side,” she added.

In FX, the Bloomberg Dollar Spot Index is little changed. The yen is the weakest of the G-10 currencies, falling 0.6% against the greenback. The Aussie dollar reversed its post-RBA gain after Governor Bullock said a hike was not explicitly considered at today’s meeting.

In rates, Gilts lead a sell off in European government bonds, with UK 10-year yields rising 6 bps to 3.98%. Treasuries 10-year yields are up 4 bps to 3.79% amid fears China may overstimulate and derail the Fed’s easing plans.

Commodities also benefited from China’s panic, with WTI rising 2.6% to $72.20 a barrel, and as a major Israeli strike on Hezbollah targets in Lebanon kept tensions high in the Middle East. Gold hit a fresh record of $2,640.11 per ounce.  Iron ore and copper climb over 1%.

Looking at today’s calendar, we get September Philadelphia Fed non-manufacturing activity (8:30am), July FHFA house price index and S&P CoreLogic house prices (9am), September consumer confidence and Richmond Fed manufacturing index (10am). Fed speakers scheduled include Bowman at 9am.

Market Snapshot

• S&P 500 futures up 0.3% to 5,791.50
• STOXX Europe 600 up 0.8% to 520.21
• MXAP up 0.9% to 188.95
• MXAPJ up 1.3% to 593.95
• Nikkei up 0.6% to 37,940.59
• Topix up 0.5% to 2,656.73
• Hang Seng Index up 4.1% to 19,000.56
• Shanghai Composite up 4.2% to 2,863.13
• Sensex up 0.1% to 85,042.00
• Australia S&P/ASX 200 down 0.1% to 8,141.97
• Kospi up 1.1% to 2,631.68
• German 10Y yield little changed at 2.2%
• Euro up 0.3% to $1.1140
• Brent Futures up 1.5% to $75.03/bbl
• Gold spot down 0.0% to $2,628.41
• US Dollar Index little changed at 100.81

Top Overnight News

• China unveiled its most aggressive package of stimulus measures since the pandemic as the gov’t rushes to bolster the economy (steps include interest rate cuts, including the 7-day reverse repo, bank RRRs, and mortgage borrowing costs, along with liquidity injections aimed at bolstering stocks). RTRS
• BOJ’s Ueda downplays the potential for an Oct rate hike, saying high uncertainty warranted a patient approach to tightening. WSJ
• Australia’s RBA leaves rates unchanged at 4.35%, as was widely expected, although the forward guidance turned slightly dovish at the margin as further tightening wasn’t discussed. RTRS
• Zelensky says he believes Russia’s war on his country is closer to an end than many believe. Czech Republic president Petr Pavel said Ukraine needs to be realistic and accept that an end to the war will probably involve ceding some territory to Russia. ABC News / NYT
• Washington believes Israel has significantly weakened Hezbollah with recent strikes but is working “feverishly” to prevent an IDF ground incursion into Lebanon. CNN
• Private credit is set to face a “reckoning moment” and period of difficulty unseen since 2008 amid inflation and recession risks, NY Life CIO Jae Yoon said. He emphasized that the risk was not “Armageddon” level, but said the flood of capital had led to too much debt concentration. BBG
• Visa will be hit with an antitrust lawsuit by the DOJ on Tuesday following a years-long review of the firm’s business practices. FT
• Former President Donald Trump threatened to hit US farm machinery maker Deere & Co. with steep tariffs if the company moves production to Mexico during an event on American farmers and trade. “I’m just notifying John Deere right now, if you do that, we’re putting a 200% tariff on everything that you want to sell into the United States,” Trump said Monday, citing reports about the company shifting manufacturing to Mexico. BBG
• GameStop said it raised $400M from its latest ATM offering program (this means the company now has ~$4.6B in cash/securities, or nearly 50% of the present market cap). RTRS

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mostly higher following gains on Wall St. and China’s various stimulus measures. ASX 200 was subdued amid the RBA rate decision where the central bank unsurprisingly opted for a hawkish hold. Nikkei 225 gapped above the 38,000 level as it played catch up on its return from the long weekend. Hang Seng and Shanghai Comp were boosted after the PBoC, NDRC and NRFA press briefing where PBoC Governor Pan announced a cut in the RRR by 50bps and the 7-day reverse repo rate by 20bps to 1.50%, while it will reduce the MLF rate and guide the LPR lower. Furthermore, support measures were also announced for the property industry and China will create new tools to support the stable development of the stock market, as well as allow funds and brokers to tap PBoC funds to buy stock.

Top Asian News

• Former US President Trump said regarding his tariff plans that he doesn’t need Congress and would have the right to impose them himself, according to Washington Post’s Stein.
• BoJ Governor Ueda says it is desirable for FX to move stability reflecting fundamentals; global market remains somewhat unstable; must watch market developments with strong sense of urgency for the time being. Says the unwinding of short-term speculative JPY positions, which were partially behind the August rout, have likely run their course. Says he wants scrutinise each month’s service price data in gauging development in underlying inflation. BoJ natural rate of interest was among the factors taken into account when setting policy. Does not comment on short-term FX fluctuations.

European bourses, Stoxx 600 (+0.9%) began the session on a very strong footing, taking impetus from a strong APAC session overnight, which was sparked by a flurry of Chinese stimulus efforts. As it stands, European indices are firmer across the board and near session highs. European sectors hold a strong positive bias, with the best performers in Europe largely a beneficiary of the aforementioned Chinese stimulus efforts; Basic Resources, Consumer Products (particularly Luxury) and Tech all top the pile. Real Estate and Utilities are found towards the foot of the pile. US Equity Futures (ES +0.2% NQ +0.4% RTY +0.2%) are modestly firmer across the board, taking impetus from a strong European session which has digested and benefited from China’s stimulus bazooka.

Top European News

• ECB President Lagarde says the ECB is almost at the 2% target, wants to make sure they reach the target and remain there, according to comments on The Daily Show.
• ECB’s Muller says “it’s reasonable to expect more cuts if outlook holds”.
• UK PM Starmer is to argue that tough decisions are needed for the UK national renewal and say in his speech on Tuesday that there are no easy answers, according to FT. It was also reported by Huffington Post that PM Starmer is to warn of more pain to come as he pledges a new Britain.
• French Finance Minister Armand says they are working on the latest estimates for the 2024 budget deficit, aiming to be able to present “something credible”.

FX

• USD is showing a mixed performance vs. peers in the current risk environment; stronger vs. JPY and CHF but softer vs. EUR, CAD, GBP. DXY is currently contained within yesterday’s 100.71-101.22.
• EUR is able to gain against the USD despite more dismal data from Germany which saw a miss across the board on IFO metrics. EUR/USD has been able to hold above the 1.11 mark throughout the session and has climbed as high as 1.1139 but is yet to challenge Monday’s 1.1167 peak.
• Cable has once again eked out another marginal YTD high, this time at 1.3375. There hasn’t been anything fresh during today’s session to drive the move and instead looks to be more a continuation of the current trend. UK PM Starmer is to speak at the UK Labour Party Conference at 14:00BST.
• JPY is struggling alongside the current pro-risk sentiment seen overnight in China and in Europe. Ueda spoke earlier but comments did not look particularly dovish and in-fact could be seen as slightly more hawkish vs his prior comments. USD/JPY has been able to eclipse last week’s 144.49 peak with focus now on a test of the 145 mark.
• AUD/USD is unable to benefit from the Chinese stimulus efforts with greater attention on events at the RBA. The Bank delivered what was seen as another hawkish hold. However, AUD/USD was subsequently dragged lower by comments from the RBA Governor stating that, unlike the prior meeting, the board did not discuss a rate hike.

Fixed Income

• USTs are weighed on by the broader risk tone and down to a 114-13+ base. Support comes in at Monday’s 114-11+ trough before the figure. Fed’s Bowman and US 2yr supply.
• Bunds are softer below 134.50 but still clear of Monday’s 134.02 base, potentially weighed on by somewhat hawkish remarks from Ueda (vs his post-policy announcement speech) and the strengthening risk tone more generally given substantial Chinese stimulus overnight. Poor German Ifo data spurred no real reaction in the complex.
• Gilts are pressured and moving in-line with peers; BoE’s Bailey spoke earlier, but added little. Gilts initially opened higher by 13 ticks but have since faded and lost the 99 handle to a 98.73 trough.
• UK sells GBP 1.5bln 0.75% 2033 I/L Gilt: b/c 3.17x (prev. 2.94x) and real yield 0.486% (prev. 0.462%).
• Germany sells EUR 3.708bln vs exp. EUR 4.5bln 2.70% 2026 Schatz: b/c 2.4x (prev. 2.5x), average yield 2.14% (prev. 2.41%) and retention 17.6% (prev. 16.93%).

Commodities

• A firm session thus far for the crude complex amid the overnight raft of Chinese stimulus announced which takes some sting out of the Chinese demand woes which has plagued the crude markets for much of this year and amid the heightened geopolitical environment in Lebanon/Israel.
• Upward bias across precious metals but to varying degrees. Spot gold sees the shallowest gains, potentially amid less demand for havens in a risk-on environment. XAU overnight printed yet another fresh All-time-high at USD 2,640.18/oz (vs low 2,622.68/oz).
• Base metals are higher across the board as the raft of Chinese stimulus announced overnight boosts demand prospects for the sector. 3M LME copper topped USD 9,700/t.
• BP (BP/ LN) cut oil and gas production at two US Gulf of Mexico platforms and curtailed output at two others, while it is removing non-essential staff from five US Gulf of Mexico platforms ahead of a predicted hurricane.
• Chevron (CVX) announced it was evacuating non-essential personnel from all Gulf of Mexico platforms including Anchor, Big Foot, Blind Faith, Jack/St. Malo, Petronius and Tahiti.
• NHC says Hurricane John is just inland over southern Mexico. Life-threatening winds, storm surges and flash flooding continues in the warning area; more recently, John has been downgraded to a tropical storm, moving north-westward; life threatening flash flooding to continue along southern Mexican coast for the next few days
• Ukrainian President Zelensky said he held talks with Japanese PM Kishida on energy supplies in light of Russian attacks.

Geopolitics: Middle East

• IDF Radio, citing military sources, say “We have a long way ahead and we are still at the beginning”, via Al Arabiya.
• “Senior Israeli official says a ground operation in Lebanon could be considered if political track does not lead to the return of the Israeli residents to the north”, according journalist Soylu.
• Hamas armed wing said field commander Mahmoud Al-Nader was killed in an Israeli strike on southern Lebanon on Monday.
• US President Biden and UAE’s leader said after their meeting that a two-state solution is the only framework for resolving the conflict, while it was also reported that the UAE expressed deep concern over Israeli attacks on southern Lebanon.
• US State Department senior official said the US has been working hard in recent days to find a diplomatic solution to the spike in fighting between Israel and Hezbollah, while the key focus for Secretary of State Blinken’s discussion with allies is on finding an off-ramp to prevent further escalation and the US has some “concrete ideas” that it is going to be discussing to prevent escalation in the region.
• US Deputy Treasury Secretary told the Bank of Israel Governor of US concern about threats by some within the Israeli government to sever correspondent banking relationships between Israeli and Palestinian banks, while the Deputy Treasury Secretary insisted these relationships should be extended for at least a year and stressed these relations would be critical to preventing an economic crisis in the West Bank.
• EU’s Borrell said the escalation in Lebanon is extremely worrying and that they are almost in a full-fledged war, while he added that they are still working to stop escalation in Lebanon but the worst expectations are becoming reality.
• Iran’s President said US policies support and encourage Israel in its open war and Washington’s actions contradict its words, while Iran reaffirms that an open regional war will not be in the interest of anyone in the region and the world. Furthermore, he said Iran has sufficient capacity to strike Israel and their response will be at the right time and in the appropriate way, while he added that Israel’s assassination of Haniyeh will not be without a response and their reply is coming.
• Iran’s President said at the UN Summit of the Future that Tehran aspires to “a world free of nuclear weapons and a Middle East free of weapons of mass destruction, without any preconditions”, according to journalist Abas Aslani via X.
• Iran’s Foreign Minister denied statements attributed to Iran’s President about a willingness to reduce tensions with Israel, while the Foreign Minister added that Israel will receive a response to attacks in due course, according to Al-Arabiya.
• “The response to the new air force airstrikes in Lebanon would not only come from Lebanon, but from other resistance axes such as Yemen”, according to Houthi sources cited by Lebanese newspaper Al-Akhbar.

Geopolitics: Other

• Ukrainian President Zelensky said Ukraine’s war with Russia is ‘closer to the end’ and separately commented that US decisive action now could hasten an end to Russian aggression next year, according to ABC News and Reuters.
• EU’s Borrell said it is clear that Russia has been receiving new weapons in particular, missiles from Iran, while he added that G7 will hold talks about providing long-range missiles to Ukraine to strike Russian territory.
• Venezuela’s highest court approved an arrest warrant for Argentine President Milei who is a vocal critic and ideological rival of Venezuelan President Maduro, according to AFP News Agency. Argentine Justice requests international arrest of Venezuelan President Maduro for alleged human rights violations

 

 

 

US Event Calendar

• 08:30: Sept. Philadelphia Fed Non-Manufactu, est. -9.3, prior -25.1
• 09:00: July S&P/Case-Shiller US HPI YoY, prior 5.42%
• 09:00: July FHFA House Price Index MoM, est. 0.2%, prior -0.1%
• 09:00: July S&P/CS 20 City MoM SA, est. 0.40%, prior 0.42%
• 09:00: July S&P CS Composite-20 YoY, est. 5.90%, prior 6.47%
• 10:00: Sept. Conf. Board Expectations, prior 82.5
• 10:00: Sept. Conf. Board Present Situation, prior 134.4
• 10:00: Sept. Richmond Fed Index, est. -12, prior -19
• 10:00: Sept. Conf. Board Consumer Confidenc, est. 104.0, prior 103.3

DB’s Jim Reid concludes the overnight wrap

The most exciting thing about yesterday for me was losing my AirPod Pro headphones on the train on the way to the office and then nervously tracking them on the “find my” feature to the South Coast of England and back to London twice before I met them later after tracking the train in an emotionally charged reunion. They were on the floor under the seat where I had dropped them. It’s a miracle no one took them or handed them in which would have been pretty annoying/inconvenient. I’m off to Paris this morning so a few days without headphones would have been irritating. Let’s hope I don’t leave them on the plane as I’m not sure it’ll be quite so easy to retrieve them!

As my headphones went on two seaside day trips yesterday, markets put in a mixed performance as further strength in the US supported the S&P 500 (+0.28%) to a new record (the 40th of the year), despite mounting concern about Europe’s economic weakness. The main driver for that were the latest flash PMIs for September, which painted a divergent picture from around the world. So in the US, positive numbers helped bolster hopes for soft landing, whilst weakness in Europe led investors to dial up the chance that the ECB would accelerate their rate cuts and move again at the next meeting in October. That meant it was a pretty varied session across different asset classes, and even as the S&P 500 hit a new high, there were some subplots pointing to concern at the same time. Notably, the classic safe haven of gold hit a fresh all-time high in nominal terms, closing at $2,628/oz.

Overnight, Asian equity markets are mostly rising with Chinese markets leading the way following additional stimulus measures announced from Beijing. As I check my screens, the Hang Seng (+3.28%) is outperforming with the Shanghai Composite (+2.38%) and the CSI (+2.07%) also strong. PBOC Governor Pan Gongsheng announced a multitude of measures today including cutting banks’ required reserve ratio (RRR) by 0.5 percentage point, bringing it down to 9.5% for major banks whilst reducing the 7-day reverse repo rate by 0.2 percentage points to 1.5%. Additionally, the central bank will cut outstanding mortgage rates and relax rules for second-home purchases. Elsewhere, the Nikkei is up +0.67% while the KOSPI (+0.07%) is holding on to its gains. S&P 500 (-0.17%) and NASDAQ futures (-0.18%) are lower though. As I type the RBA have left rates on hold. Before the decision 16bps of cuts were priced in before year-end, this has dipped by 1-2bps in the initial reaction to the accompanying statement.

Back to yesterday and the flash PMIs dictated a lot of the sentiment in markets, as the European numbers raised fears that the economy wasn’t as resilient as some had thought. In particular, the composite PMI for the Euro Area was back in contractionary territory for the first time in 7 months, at 48.9 (vs. 50.5 expected), and both the French (47.4) and German (47.2) numbers were beneath 50 as well. The euro PMI also saw the composite employment index fall to its lowest since early 2021, at 49.3, led by a decline in Germany. So that led to mounting expectations that the ECB might speed up the pace of their rate cuts from the quarterly pace they’ve delivered so far, and instead start cutting at every meeting. In fact, overnight index swaps lifted the chance of an October rate cut to 41% yesterday, having been at just 26% by Friday’s close.

With growing anticipation for another ECB rate cut, that helped sovereign bond yields to fall back across much of the continent, with yields on 10yr bunds down -5.0bps. Significantly, the moves also meant the German 2s10s yield curve dis-inverted for the first time since November 2022, ending the session at +0.4bps. So a significant milestone, and that echoes the re-steepening that’s happened in the US as well. Weaker European data and lower rates also saw the euro post its worst day against the dollar in nearly four weeks (-0.33%).

Meanwhile in France, yesterday also brought a fresh widening in the Franco-German 10yr spread, which moved up +2.5bps to 78bps. That’s its highest level since the market turmoil in early August, and not far off its recent closing peak of 82bps, shortly before the first round of the legislative election in the summer. The move follows the announcement of new ministers over the weekend, but there’s still uncertainty about how long this government will survive, as they don’t have a majority in the National Assembly, and will rely on other parties not voting them down.

In the US however, there was quite a different picture yesterday, as the flash PMIs pointed to ongoing economic resilience. For instance, the composite PMI was at 54.4 (vs. 54.3 expected), continuing the run since May where all the readings have had a 54 handle. So that suggested that the economy’s strength was continuing into September, and that fears of a downturn weren’t evident in the data so far. Risk assets also got a fresh boost from the latest Fed speakers, who affirmed their plan to keep cutting rates. In particular, Chicago Fed President Goolsbee said that there would likely be “many more rate cuts over the next year”. However, there was a signal that 50bp rate cuts may not continue, with Minneapolis Fed President Kashkari saying that “we will probably take smaller steps unless the data changes materially”.

For now at least, investors are still completely split on the size of the Fed’s next move, with futures pricing in a 54% chance of another 50bp cut in November. So we might find ourselves with a real sense of déjà vu over the coming weeks if that remains in the balance. Bear in mind we’ve still got a couple more jobs reports as well beforehand, so plenty of time for that to shift. But in the meantime, Treasury yields were little changed yesterday, with the 2yr down -0.4bps to 3.59%, while the 10yr yield was up +0.9bps to 3.75%. That left the 2s10s yield curve at +16bps, its steepest closing level since June 2022. In my CoTD yesterday (link here) I looked at our rates strategists’ latest view. If they are correct this will be a rare rate cutting cycle where 10yr US yields go up. See my piece for the info and all the links to their latest pieces on this.

The stronger US data supported US equities, helping the S&P 500 (+0.28%) to achieve its 40th all-time high of 2024 so far. In fact, the index is almost up +20% on a YTD basis. And for what it’s worth, if it manages two consecutive years up at least +20% (having risen +24.2% in 2023), it would be the first time it’s managed that since 1997-98. In terms of yesterday’s drivers, the S&P’s gains were quite broad-based, with over 70% of constituents higher on the day, led by energy (+1.31%) and consumer discretionary (+1.30%) stocks. The tech mega caps also outperformed with the Magnificent 7 (+0.71%) closing at a 2-month high, albeit still almost -6% beneath its peak. Over in Europe, concerns about political uncertainty and an economic downturn failed to prevent gains, with the STOXX 600 up +0.40% yesterday. That said, European credit spreads did underperform, widening for the first time in eight sessions (+7bps for HY).

To the day ahead now, and central bank speakers include the ECB’s Muller, Escriva and Nagel, along with the Fed’s Bowman. Data releases include the Ifo’s business climate indicator for Germany in September, and the Conference Board’s consumer confidence indicator for the US in September. We’ll also get the FHFA’s house price index for July.

Boeing made a “best and final offer” to tens of thousands of striking International Association of Machinists and Aerospace Workers (IAM) for a renewed contract. However, IAM rejected the proposal, stating it fell short of members’ demands. 

According to Boeing’s letter to IAM, the new contract would bump general pay by 30% over four years, reinstate the performance bonus, enhance retirement benefits, and double the ratification bonus to $6,000. Boeing stated that all other terms of the Tentative Agreement remain the same, and the new offer is contingent on ratification by the end of the week. 

The new offer already appears dead in the water after IAM District 751 said it would not hold a new vote on it. This is also the second time the union has rejected an offer, the first being a 25% pay increase earlier this month.

“Logistically, we don’t have the ability to set up a vote for 33,000 people in a few days like that anyway. Plus, it missed the mark on many of the things our members said were important to them,” said IAM District 751 President Jon Holden. He is also the lead negotiator on the Boeing contract. 

Holden told Reuters in an interview that the union “is not obligated to vote (on) their offer. We may, down the road. But our hope is that we can get into some discussion so we can actually address the need of our members.” He noted the new offer did not meet all demands around retirement, wages and other critical issues. 

On Sept. 13, about 32,000 IAM workers walked off the production lines of commercial jet plants across Portland and Seattle. This was the union’s first major strike since 2008. The union seeks to increase pay by 40% over four years.

Multiple credit rating agencies recently warned that a prolonged strike could threaten Boeing’s prized investment-grade credit rating and reduce it to junk status. 

• Moody’s Threatens Boeing With Junk Downgrade As Strike Halts 737 Production

The two-week strike is set to pressure Boeing’s massive supplier network, as it reduces spending to preserve cash piles. This could be a troubling sign that executives at the struggling planemaker forecast the strike might last at least a month, if not longer.

• Boeing Strike May Spark Chaos Across Supplier Network As “Significant Spending Reductions” Imminent

Goldman analysts Noah Poponak and Anthony Valentini told clients:

IAM workers at Boeing are on strike, though we expect a resolution soon, and for Boeing to be able to pick back up its aircraft production and delivery momentum. Deliveries the last few months have improved and September was tracking quite strong before the strike. The company faces a balance sheet question, and has suggested raising capital is possible given the importance of the credit rating. We assume Boeing raises $12bn of equity before year-end, which matches the total maturities due in 2025 + 2026, and keeps the cash balance well north of $10bn in the near-to-medium-term while they ramp back up commercial deliveries and strive to resolve defense profitability. Management provided a recent intra-quarter conference update suggesting defense in 3Q24 would have losses similar to 2Q24, and recently made leadership changes in the segment. While BA continues to face several challenges to work through near-term, we see attractive valuation relative to long-term fundamentals and are Buy rated on the stock.

The analysts noted their ‘Buy’ rating on Boeing. 

How attractive is the current valuation considering the ongoing strike, potential credit rating downgrade, possible capital raise, and other challenges?

The Boeing strike at its main jet plants is being closely monitored by White House officials and Wall Street as the US presidential elections in November near. 

Authored by Jenna McCarthy vua Jennaside.rocks,

As unfathomable as it may be for folks on the farthest sides of the aisle to believe, there are American citizens who right this minute cannot decide who to vote for in November. Some days their most pressing political need is for abortion to be regulated at the federal level, and other days they remember they need to put gas in their cars and food on their tables. They like open borders and free speech. They want equal, unfettered access to guns and gender affirming care. It’s just impossible to choose. Could go either way, really.

In one corner, you’ve got a joyful, cackle-happy, mixed race, assigned-female-at-birth *can you hear the highest, thickest, most impervious glass ceiling of them all shattering?* DEI hire former prosecutor whose “tough on crime” approach disproportionally impacted minority communities and who will, in fact, tax Americans—to use the technical, politico-scientific term for it—up the wazoo. Across the ring you’ve got a boastful business tycoon with a bit of a tremendous superiority complex (Let me tell you folks, he’s positive he’s the best. Unbelievable, really. Just ask him. No one else comes close.) who wants to deport millions of illegal immigrants who are burdening our systems, raping and murdering our citizens (not all of them obviously, but isn’t one one-too-many?), and may or may not be eating our pets.

Anyone have a quarter I can toss?

She was ranked more-progressive-than-Bernie-Sanders before the media decided to rewrite history and cast her as just a smidge left of center hahahahaha. She promises to pursue green energy investments, expand affordable healthcare, ensure federal protections for reproductive health services, and reduce “voter suppression” (by making voting less racist, i.e. requiring an ID to do it). He is a famously mean tweeter who swears he’ll resuscitate the economy, rebuild our military, finish the border wall, and make America energy independent again (most of which he actually did last time around, FWIW).

The thing is, they’ve both spent roughly the same amount of time in the White House. There’s no wild card in this deck. We know pretty much where each candidate stands and what he or she will be most focused on and committed to if (re)elected. So ask yourself: Are you better or worse off today than you were four years ago? Are your basics like food, gas, rent, insurance, and entertainment more or less affordable? Do you feel safer or less secure in your home or in your community? Are you saving for the future or struggling to make ends meet? Joy and humility and kumbaya aside, which presidential hopeful is more likely to march us straight into WWIII?

Let’s look at where the candidates stand (and how they’ve fared) on some key issues that directly impact your day to day life:

HEALTHCARE

In a recent report looking at the ten most advanced economies in the world, the US healthcare system came in dead last on all metrics. We spend the most on healthcare, have the shortest lives, suffer the most avoidable deaths, and our infant mortality rate is among the worst. It’s actually embarrassing, when you think about it.

Harris champions “healthcare for all” which would expand the role of government in healthcare funding, eliminate private insurance, and sounds an awful lot like socialized medicine (you can ask folks in the UK and Canada how that’s working out). With RFK Jr. on his team, Trump will address the rise of chronic conditions like autoimmune disorders, autism, and obesity, and eliminate the chemicals in our food and the corruption in our health agencies. Basically, she’ll keep you sick but possibly make it cheaper to go to a doctor (that you might have to wait eighteen months to see); his team wants to make you healthier so you don’t need to see the doctor at all. Tough call, I know.

TAXES

In 2022, Harris cast the tie-breaking vote on a bit of legislation that allowed the IRS to track and tax tips. (I know, she later flip-flopped to “no taxes on tips” right after Trump announced “no taxes on tips,” but her plan was very different in that it was the exact same.) She’s proposed a terrifying plan to tax unrealized capital gains (which admittedly would only impact the wealthiest at first… exactly as the Alternative Minimum Tax was designed to do in 1969—literally targeting 155 households—and which ultimately affected millions of people). It’s easy to sit back and declare “the wealthiest should pay more” until they change the definition of “the wealthiest” to include you.

This week, the IRS wholeheartedly endorsed the democratic candidate (could that have anything at all to do with Harris casting the deciding vote to boost the IRS budget by $80 billion?), which basically translates into as MSNBC put it, ‘get ready to be taxed to death.” Conservative strategist Greg Price added, “If the IRS, the FBI, Wall Street, Iran, Putin, the military industrial complex, the New York Times, Iran, 100 former McCain interns, and Dick Cheney all want one candidate to win then, for the love of God, vote for the other one.” He’s got a point.

ECONOMY

Author and sociologist Michael G. Zey explained the state of American finances succinctly in an article in the American Thinker (and these are but a few highlights; I encourage voters to read the whole piece):

“When Americans elected Biden in 2020, their message to him was clear: Trump handed you a booming economy.  Just don’t do anything to ruin it! Unfortunately, Biden has done just that, and Americans have taken notice.

“The Trump economy Biden inherited in early 2021 was expanding at a 6.7% annual rate.  Unfortunately, in less than three years, Biden’s war on fossil fuels, overregulation of industry, and wasteful government spending has driven the country into financial hell.

“Trump slashed regulatory costs by $11,000 per household. Biden’s regulations cost Americans a total of $10,000 per household.

“Trump’s energy policies drove gas down to $1.87 per gallon.  Biden’s climate policies resulted in a record $5.02 in June 2022.  Gas hit $7.00 per gallon in some areas.”

But gender equity and social justice! It’s another tricky decision undecided voters will have to think long and hard about.

IMMIGRATION

Trump wanted to build a wall. Harris wants to use your taxpayer dollars to give illegal immigrants food, housing, cell phones, healthcare, cash, interest-free loans, and gender reassignment surgeries, should they (the illegals, not the surgeries) fancy them (the surgeries, not other illegals sorry but pronouns are confusing).

Sure, you’re pinching pennies to put food on your table and walking around with a cracked iPhone SE and paying 7% interest on your home loan—just kidding who can afford a home anymore?—and recently cancelled Netflix to save $10 a month, but you know what? Complaining about any of that is obviously racist. Better to keep your mouth shut and be thought a fool than to open it and remove all doubt.

AMERICA FIRST

The US has provided more than $174 billion in aid to Ukraine alone since February 2022, money that could have been used to repair and improve decaying infrastructure in this country (which would also create jobs and boost the economy, BTW), provide tax rebates to American families (increasing disposable income and stimulating spending), provide affordable childcare to working families (duh), fund mental health programs in schools, and much more.

Democrats will say it’s our global civic duty—our humanitarian responsibility—to help other countries in need. Why do the millions of Americans in need not exist on their own neighbors’ radar?

Imagine a couple who has four children, two of whom are emaciated, barefooted, and infested with lice. Now imagine the couple is donating thousands of dollars a month to the neighbor’s Pool Party Fund (even though those kids don’t lift a finger to help around the place and barely even show up for school and they don’t even invite the starving barefoot children to their stupid party). If that makes sense to you, you’re technically not an undecided voter. #You’reWithHer

FREE SPEECH

During the pandemic, if you said something controversial online—you know, like “hey, look, this super safe drug is treating Covid with remarkable efficacy” or “my husband/wife/sister/daughter/friend died an hour after being vaccinated”—you were silenced. Your social media accounts were immediately shut down. If you were on the side of safe-and-effective-and-everything-else-is-disinformation, maybe you even gloated or cheered when you saw this happen. But what if the next big controversy is something less fringy? What if the thing you suddenly can’t say online is “The sky is blue,” or “Twizzlers are better than Red Vines,” or “folding a fitted sheet is the awfulest of all the awful household tasks”?

Not a real headline but damned funny and also accurate.

Here’s the thing: Without the ability to express (possibly dissenting) beliefs and ideas and challenge authority, democracy collapses. Free speech is how we hold the powerful accountable. A society without it is a dictatorship in disguise. And it’s a slippery-as-hell slope from “we’re protecting you from this harmful opinion” to “this is what you will think, say, and do, and nonconformists will be severely punished.”

Kamala Harris has promised a Brazil-style crackdown on free speech if elected. If that doesn’t scare the bejesus out of you, kindly move to North Korea or Cuba and take your vote with you.

“If liberty means anything at all, it means the right to tell people what they don’t want to hear.”
—Orwell

“I disapprove of what you say, but I will defend to the death your right to say it.”
—Evelyn Beatrice Hall (conjuring Voltaire)

“The freedom of speech may be taken away—and, dumb and silent, we may be led, like sheep, to the slaughter.”
— George Washington

According to the Global Freedom Index by Democratic watchdog organization Freedom House, Iran scored just 11 points out of 100 in 2024, which is one point worse off than in 2023 and categorizes the country as “not free”.

As Statista’s Anna Fleck details below, this index is considered a key barometer for democracy, analyzing the world’s most-free to its most-oppressed nations.

You will find more infographics at Statista

On this index, Iran ranks one point better off than Yemen and one point worse than Cuba, Laos and Bahrain.

Despite the fact the Islamic Republic of Iran holds elections regularly, these are deemed to fall short of democratic standards, due partly to the heavy influence of an unelected body named the Guardian Council.

The continued crackdown on dissent is also cited by Freedom House for the country’s low score, particularly in the wake of the ‘Women, Life, Freedom‘ uprising of 2022.

For the index, a total of 210 countries and territories were analyzed on their levels of access to political rights and civil liberties, before being categorized as either “free”, “partly free” or “not free”.

While democracy has been in decline for nearly two decades, the global landscape has improved since the report was first published 51 years ago.

Back then, 44 out of 148 countries were counted as “free”, versus 81 out of 210 countries and territories today.

Authored by Alex Kimani via OilPrice.com,

Shell Plc has ditched plans to build a low-carbon hydrogen plant on Norway’s west coast due to a lack of demand, Reuters reported on Monday. 

“We haven’t seen the market for blue hydrogen materialize and decided not to progress the project,” a Shell spokesperson has told Reuters.

Shell’s announcement comes hot on the heels of a similar move by oil and gas giant, Equinor ASA.

Last week, the Norwegian state-owned multinational energy company announced that it will not move forward with plans to build a pipeline to carry hydrogen from Norway to Germany with partner RWE (OTCPK:RWEOY), citing a lack of customers as well as an inadequate regulatory framework. Equinor was to build hydrogen plants that would enable Norway to send up to 10 gigawatts per annum of blue hydrogen to Germany.

“We have decided to discontinue this early-phase project. The hydrogen pipeline hasn’t proved to be viable. That also implies that hydrogen production plans are also put aside,” an Equinor spokesman told Reuters.

Over the past decade, climate experts have touted the outsized role that hydrogen could play in helping the planet limit catastrophic global warming. Indeed, net-zero models have forecast that hydrogen could provide as much as 20% of the world’s primary energy by 2050, nearly as much as all renewables currently contribute to the United States’ energy mix. Not surprisingly, there’s no shortage of big hydrogen ambitions.

Unfortunately, the hydrogen sector is struggling mainly due to high costs.

According to Bloomberg New Energy Finance (BNEF), just 12% of hydrogen plants have customers with offtake agreements.

Even among projects that have signed offtake deals, most have vague, nonbinding arrangements that can be quietly discarded if the potential buyers back out. 

“No sane project developer is going to start producing hydrogen without having a buyer for it, and no sane banker is going to lend money to a project developer without reasonable confidence that someone’s going to buy the hydrogen,” BNEF analyst Martin Tengler notes.

Green hydrogen made by electrolyzing water using renewable energy costs nearly four times as much as gray hydrogen created from natural gas, or methane, using steam methane reformation but without capturing the greenhouse gasses emitted in the process. This makes it hard to build hydrogen infrastructure when the demand may not materialize for years.

In the run-up to the U.S. presidential elections, both candidates have outlined their visions for agricultural policy – which do differ significantly.

After the publication of the traditional Farm Bureau questionnaire in mid-September, former President Donald Trump spoke today at an event in rural Pennsylvania on proposed bans of Chinese agricultural land purchases. 

Data from the USDA shows that at the end of 2022, 20 million acres of U.S. farmland, or 2.2 percent, were foreign owned.

China’s share was just a fraction of that and sinking.

You will find more infographics at Statista

As Statista’s Katharina Buchholz reports, Chinese investors or U.S. corporations with Chinese shareholders owned just around 500,000 acres of U.S. land at the end of 2022 – 7 percent less than at the end of 2021.

Much more was owned by Canadian and European entities, for example from the Netherlands, the United Kingdom, Italy and Germany. 

Experts said that they saw no threat from Chinese land and agricultural land purchases.

However, the purchase of land close to military installations by foreign investors was recently restricted under the Biden Administration, following controversies around Chinese purchases.

Some states have also taken action in this regard.

Via OilPrice.com,

• The EU’s stringent regulations on data and technology are stifling AI innovation within the bloc.

• The UK, with a more flexible approach to AI development, could benefit from the EU’s regulatory overreach and become a global leader in AI.

• Former Italian Prime Minister Mario Draghi acknowledges the EU’s competitiveness gap but proposes solutions that may exacerbate the problem.

EU regulatory overreach has gone from a Brexiteer conspiracy theory and source of ridicule to something that  EU leaders themselves acknowledge and are trying to address. But when it comes to AI, they’re already behind, says James Price

If you’ve bought a plastic drinks bottle in recent months, you may have noticed a maddening change – the lid can  no longer be detached from the rest of the bottle. You may find this rather annoying; you may even pretend to yourself that you like the increase in spills and mess in order to help save the environment. Regardless, it represents one of the major regulation-led innovations emanating from the European Union.

At the same time, the United States has fostered companies that have created large language models like ChatGPT, self-driving cars, drones, commercial space walks, and many, many other things that I’m not smart enough to understand.

This shocking gap in competitiveness across Europe has, like many ideas, gone from a crazy Brexiteer conspiracy theory and source of ridicule to something that  EU leaders themselves acknowledge and are trying to address.

This has come to a head with the recent publication of former Italian Prime Minister Mario Draghi’s long-awaited report into the EU’s competitiveness gap. Whilst correctly diagnosing some of the problems, the remedies it offers are – inevitably – more European integration, government spending and decarbonisation. That means more expensive energy, less competition or experimentation between member states, and higher taxes. Good luck with that!

But Mr Draghi’s first lament in a piece he wrote on the report focuses on something even the layman knows is a potentially enormous growth area, artificial intelligence (AI). This new wellspring of technologies could prove to quite literally be a deus ex machina for the economic and governmental ills of the world, and there’s no reason why Europe shouldn’t be able to be a leader in it. 

Mr Draghi’s report literally proposes “making it easier for researchers to commercialise ideas”. But the EU has been blocking some of the biggest tech companies who are investing in AI from training its products on user data inside the bloc. This means less innovation, and products that are not as useful inside the EU as they are outside. 

At the same time, Thierry Breton, an EU Commissioner, decided that the major tech challenge in Europe was Elon Musk’s Twitter removing blue ticks from celebrities. Threatening to ban Twitter across the EU has at least seen Monsieur Breton quit his post after being told he would lose it.

Barmy EU priorities

These barmy EU priorities are proving another Brexiteer talking point that was called ‘crazy’ at the time: the idea that over time the UK could benefit from diverging from statist EU rules.

The UK Information Commissioner’s Office (ICO) has recently decided NOT to intervene to prevent user data training AI models in the UK. Partly thanks to the beefed-up guidance on regulators’ duties to promote growth, instituted by the Conservative government back in May, companies like Meta will be able to release and develop exciting new AI products that will benefit users in the UK, but will be absent across the Channel. 

This was such a divergence from the EU that Meta President of Global Affairs and former EU MEP (oh, and former Deputy Prime Minister) Sir Nick Clegg has acknowledged the deep damage the EU is doing to itself here.

Sir Nick is a serious man who has spent enough time amongst the geniuses of Silicon Valley to know which way the world is turning. He will also understand that the UK can be a world leader in these new techs, thanks to its university talent, access to capital markets and the sheer good luck of having Google Deepmind based here.

The potential benefits are enormous, and other countries are already stealing a march. When the UAE appointed a minister for AI in 2017 others laughed at it as a gimmick. They aren’t laughing now as the Gulf state pioneers all manner of new tech. 

There are some great European AI companies, from defence firms like Helsing in Germany to Mistral AI in France who are world-leaders, but they risk being left behind by the American primes because of the EU’s backwards take on regulation.

If you don’t trust politicians not to mess up a bottle of fizzy pop, don’t trust them not to strangle the world-changing, life-saving tech of AI.

Authored by Mac Slavo via SHTFPlan.com,

French President Emmanuel Macron has called for reform of the current “unjust” world order so that humans can coexist more peacefully in the “New World Order.”

What the ruler didn’t say was that the slaves would still be slaves, and governments would still rule them, it’s only that illusion that is going to go away.

While speaking before the Catholic community of Sant’Egidio, Macron said “We must be imaginative enough to think about the peace of tomorrow, a peace in Europe in a new form.” 

If the European continent is to become more stable, everyone should acknowledge that it is “neither quite the European Union nor resolutely NATO,” he stated.

“We will have to think of a new form of organization for Europe and rethink our relationship with Russia” after the Ukraine conflict is over, the president added.

Macron further claimed that the global system that was created in the wake of World War II was “incomplete and unjust,” because many modern nations did not even exist at that time and don’t have a “proper place at the table.”

He said international bodies, such as the United Nations, the World Bank, and the International Monetary Fund, should be reformed accordingly.

However, if anyone wants freedom, reforming the governing structure isn’t the way to go about it.

Abolishing the system of slavery is what we should be doing, not changing it.

Hopefully, no one is falling for this horrific propaganda anymore.

The speech comes as Ukrainian leader Vladimir Zelensky is set to meet US President Joe Biden to present his so-called ‘victory plan’ – a purported roadmap to pressuring Russia into conceding defeat. He wants permission to conduct long-range strikes deep inside Russia with Western weapons as part of the plan, according to a report by RT. 

Macron has never been in the habit of promoting peace. No ruler will ever want peace, because it would mean their power is nonexistent.  In early 2024, he said the West should not rule out the deployment of NATO troops on Ukrainian soil. Multiple other national rulers have rejected that idea.

France is among a handful of nations that have donated such military hardware to Ukraine in the form of SCALP/Storm Shadow cruise missiles, which the country produces jointly with the UK. British officials have supported Kiev’s request to strike Russia, but the ultimate decision is understood to be in Washington’s hands.

Russian President Vladimir Putin has stated that any such attack would be considered an act of war by NATO member states and Moscow would respond appropriately.

No reforms to the ruling systems will ever result in peace.

They are inherently violent in nature and the only way to achieve anything close to peace is to abolish all slave systems for good and stop falling for the rhetoric.

Because all government is slavery, and slavery will never be peaceful, unless every ruling class is going to disband itself and stop stealing from others and hiring thugs to force compliance with its edicts, there will be no peace.

Authored by Joe Lauria via Consortium News,

On March 7, 2022, two weeks after Moscow entered the civil war in Ukraine, U.S. Secretary of State Antony Blinken told CBS News from Moldova that the U.S. would give NATO-member Poland a “green light” to send Mig-29 fighter jets to Ukraine to enforce a no-fly zone against Russian aircraft. 

U.S. House Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer then also backed the no-fly zone. But within days the Pentagon shot down the idea as it engaged in a consequential battle with the State Department and members of Congress to prevent a direct NATO military confrontation with Russia that could unleash history’s most unimaginable horrors.

A no-fly zone “could result in significant Russian reaction that might increase the prospects of a military escalation with NATO,” according to then Pentagon spokesman John Kirby. President Joe Biden was caught in the middle of the fray. Pressure on the White House from some members of Congress and the press corps was unrelenting to recklessly bring NATO directly into the war.

Biden ultimately sided with the Defense Department, and he couldn’t be more explicit why. He opposed a NATO no-fly zone over Ukraine fighting Russian aircraft, he said, because “that’s called World War III, okay? Let’s get it straight here, guys. We will not fight the third world war in Ukraine.”

U.S. Defense Secretary Lloyd Austin  backed him up:

“President Biden’s been clear that U.S. troops won’t fight Russia in Ukraine, and if you establish a no-fly zone, certainly in order to enforce that no-fly zone, you’ll have to engage Russian aircraft. And again, that would put us at war with Russia.”

(The administration plan was, and apparently still is, to bring down the Russian government through a proxy counteroffensive and an economic and information war, not a direct military one.)

Blinken, who stepped out of line to speak above the heads of the president and the Pentagon, lost that round. It’s surprising he kept his job. But he survived and now he’s come back for more. 

Relentless 

Blinken’s recklessness emerged yet again last week when he peddled a story — eagerly picked up by The Guardian and The New York Times — that Biden would approve a British request to fire its Storm Shadow missiles deep into Russia.

The Guardian story on Sept. 11 said: 

“The US secretary of state, Antony Blinken, gave his strongest hint yet that the White House is about to lift its restrictions on Ukraine using long-range weapons supplied by the west on key military targets inside Russia, with a decision understood to have already been made in private.

Speaking in Kyiv alongside the UK foreign secretary, David Lammy, Blinken said the US had ‘from day one’ been willing to adapt its policy as the situation on the battlefield in Ukraine changed. ‘We will continue to do this,’ he emphasized.”

To fire British Storm Shadows, Ukraine would have to depend on British technical soldiers on the ground in Ukraine to actually launch them and on U.S. geolocation technology. German Chancellor Olaf Scholz revealed those British soldiers are already in Ukraine.

In other words, it would be a NATO attack on Russia, dressed up as a Ukrainian one. It would mean the U.S. and Britain were at war with Moscow, something Blinken seems to want and said was going to happen. 

The next day Russian President Vladimir Putin warned that launching such missiles into Russia “will mean that NATO countries — the United States and European countries — are at war with Russia. And if this is the case, then, bearing in mind the change in the essence of the conflict, we will make appropriate decisions in response to the threats that will be posed to us.”

Polish MP Grzegorz Braun tells U.S. & Sec. Blinken to GO HOME ASAP! :

“Blinken, go home. We don’t want Polish people paying or dying for your wars” #Russia #Ukraine.”@SecBlinken pic.twitter.com/sdYm2mAt8o

— Judge Napolitano (@Judgenap) September 13, 2024

Nevertheless, The New York Times ran a story on the same day with the headline: “Biden Poised to Approve Ukraine’s Use of Long-Range Western Weapons in Russia.” 

The Guardian added:

“British government sources indicated that a decision had already been made to allow Ukraine to use Storm Shadow cruise missiles on targets inside Russia, although it is not expected to be publicly announced on Friday when Starmer meets Biden in Washington DC.”

Blinken’s words evidently raised British Prime Minister Keir Starmer‘s hopes that he would satisfy his desire to strike Russia with his nation’s arsenal of long-range missiles, despite Putin saying that meant direct war with NATO.

Blinken and the British are trying to lead us to the brink. 

Sanity in Arlington

Except that the Pentagon, the purveyor of the most monstrous violence in world history, has pulled the world back from it. For at least the second time — publicly known — the Department of War secured peace from neocon recklessness fronted by Blinken. 

Starmer was sent back on his chartered British Airways flight from the White House meeting licking his wounds. He’d evidently been led by Blinken to believe that it was a done deal: the U.S. would let Britain attack Russia with its long-range missiles using U.S. technology — even if the U.S. wouldn’t allow its own long-range ATACMS to be used. 

The Times of London reported that Biden withholding approval “surprised British officials who had listened closely to hints from Antony Blinken, the US secretary of state, that America was edging towards authorizing Storm Shadow, an Anglo-French weapon which relies on American GPS guidance systems.”

Starmer’s mania to strike Russia illustrates the British elite’s continuing pathological hatred of Russia, extending back centuries, compared to a perhaps more tempered, though determined, American geostrategic rivalry with Moscow. 

Biden’s Limits With the Neocons 

Biden has proven himself a supreme warmonger, his advocacy for the illegal invasion of Iraq and his complicity in the genocide in Gaza as the most egregious examples. 

Like the two presidents before him, Biden allowed neocons to worm themselves into positions of power in his administration. But the extent to which Biden himself is a neocon, as opposed to a traditional warmonger, is subject to question.

As a creature of Washington of more than half a century, he seems to respect the military’s judgement about military matters and, on his good days, understands that even America has limits. 

Barack Obama let Hillary Clinton, the “Queen of Warmongers,” bring Neocon Queen Victoria Nuland into his administration. Donald Trump let neocons John Bolton and Mike Pompeo into his.  And Biden has Blinken (and for a time Nuland too.)

Instead of banishing these people, they are allowed to linger and drag the U.S. into evermore perilous failures: Iraq, Afghanistan, Gaza and Ukraine, leaving behind a mountain of squandered dollars and an ocean of blood.

As a careerist, Blinken said what he had to say to get to where he is. Obama in 2015 wisely decided against arming Ukraine after the Nuland and Biden-led 2014 coup because he did not want to antagonize Russia, for whom he said Ukraine was a vital interest, while it was not for the U.S. Obama also feared U.S. arms would fall into the hands of “thugs” — meaning neo-Nazi Azov types, whom Obama was well aware of.

Blinken at the time was Obama’s deputy secretary of state.  To support the president’s position, he told a conference in Berlin:

“If you’re playing on the military terrain in Ukraine, you’re playing to Russia’s strength, because Russia is right next door. It has a huge amount of military equipment and military force right on the border. Anything we did as countries in terms of military support for Ukraine is likely to be matched and then doubled and tripled and quadrupled by Russia.”

But once he was freed of the restraints of Obama, he joined Biden’s aggressive Ukraine policy at the top of the State Department. From that position, and with a power vacuum in the White House because of Biden’s dementia, Blinken has been openly pushing the neocon agenda, laid out plainly in the 2000 report of the Project for a New American Century. 

And what is that agenda? In another age, before it became a dirty word, it would have been proudly proclaimed as imperialism. It contains all of the hubris and sense of invincibility and impunity of any empire in history.

PNAC plainly promulgates that no power or alliance of powers will be allowed to rise up to stand in the way of the neocons’ mad quest to harness American power to achieve world domination. An alliance of powers such as that of China, Russia and the BRICS countries, which has only accelerated in opposition to unhinged, neoconservative adventurism.

No matter the many disasters piling up, notably Iraq, Palestine and now Ukraine, the neocons are undeterred and unrestrained. It’s about power and murder but it is made palatable to themselves with flowery language about America saving the world for democracy.

Their belief in their own supremacy, cloaked in an American flag, remains fanatic, no matter the death and destruction they cause. They do not understand that American power has limits and to test that, they risk everything.

really brilliant move by Biden-Blinken to pick fights with both China & Russia at the same time, every serious book on diplomacy ever written recommends picking fights with all your rivals simultaneously to force them to join together against you in ways they otherwise wouldn’t pic.twitter.com/zctOP70ZuM

— Mark Ames (@MarkAmesExiled) September 20, 2024

In 2019, Blinken teamed up with arch-neoconservative Robert Kagan to write a Washington Post op-ed arguing for more aggressive use of U.S. power abroad and against U.S. domestic trends towards non-interventionism.

With Kagan’s wife Nuland out of the Biden Administration and National Security Advisor Jake Sullivan crucially siding with the realists, Blinken has emerged as the undisputed leader of who George H.W. Bush called the “crazies in the basement.”

That was 30 years ago. The neocons are in the penthouse now and only the restraint of the Pentagon and Sullivan’s persuasion brought Biden back from the brink.

This time.