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The big picture was clear to anyone who bothered to keep their eyes open: back in August, when we first reported that Russian supplies of nat gas via the Yamal pipeline had collapsed and when the first stirrings of the upcoming surge in nat gas prices were emerging, we said to “call it a perfect storm of declining supplies, lack of sufficient inventories and ongoing geopolitical posturing as Russia piles pressure on EU authorities to approve the dual-pipeline Nord Stream 2 project through the Baltic Sea and into Germany, while gas shippers are running low on time and, indeed, options to keep Europe adequately supplied this winter.”

Specifically, we also warned that “a worst case scenario could see European gas prices explode to suborbital levels that would make Jeff Bezos proud should the continent fail to stock up on sufficient nat gas amounts.“

Indeed, that’s precisely what happened in the ensuing two months

But more importantly, even though Europe is now facing a devastating cold winter with widespread blackouts, Europe’s unelected bureaucrats still refuse to accept the reality in which Putin calls all the shots.

So perhaps to make it very clear what it would take to avoid a miserable, freezing winter, today Russia signaled that it won’t go out of its way to offer European consumers extra gas to ease the current energy crisis unless it gets something in return: regulatory approval to start shipments through the Nord Stream 2 pipeline.

In exchange for upping supplies, Bloomberg reports citing people close to state-run gas giant Gazprom and the Kremlin – that Russia wants what was clear to anyone – i.e., to get German and European Union approval to begin using the pipeline to Europe.

“We cannot ride to the rescue just to compensate for mistakes that we didn’t commit,” Konstantin Kosachyov, a top pro-Kremlin legislator in the upper house of parliament, said in an interview, without specifying what Russia is seeking. “We’re fulfilling all our contracts, all our obligations. Everything on top of that should be a subject for additional voluntary and mutually beneficial agreements.”

Well, Russia clearly has good lawyers to find all the loopholes that allow it to ship far less gas than it has recently while remaining in compliance with its contractual terms.

To underscore the point, Nord Stream 2 said Monday its first line is full of so-called technical gas and ready to begin operation, though it can’t ship it until regulatory approval is granted. That announcement came hours after European gas prices spiked on news that Gazprom had again bid for only a small amount of capacity to ship the fuel to Europe via other routes.

Amusingly, Bloomberg spins the narrative as if it is somehow Moscow’s responsibility to keep Europe warm saying that “as surging fuel costs have caused increasing economic havoc, pressure has grown on Russia, Europe’s largest supplier, to pump more. Extra Russian gas is seen as the main way to avoid an even deeper supply crunch in the middle of the winter.”

Actually, the truth is that if energy prices don’t plunge – and soon – the pressure will grow on Europe’s politicians to find gas at any price or meet an angry mob. As for Russia, as long as it complies with its contract, if it is willing to forego on marginal profits for additional gas exports well that’s entirely it’s decision.

Meanwhile, amid deep sanctions targeting the Kremlin which has emerged as the “biggest western enemy” as a distraction for Hillary Clinton’s catastrophic failure to win the 2016 presidency, the Kremlin has zero appetite to do any favors. Although exports to Europe are up this year from last year’s depressed levels, they lag those seen in 2019, according to the Oxford Institute for Energy Studies. Daily flows have dropped in October and Gazprom has been slow to refill storage facilities it owns in Europe, adding to upward pressure on prices. Russia has blamed an overly hasty shift to relying on spot markets and alternative energy sources for the crisis.

Mocking the gullible Europe, last week President Vladimir Putin suggested at an energy conference that Russia could offer more gas. But he also lamented the slow progress on getting approval for Nord Stream 2, a process that could take until well into next year. German regulators are currently reviewing its application for certification but have said their initial decision could come only in January, after which the European Commission would also have to give the go-ahead.

“If we could increase deliveries through this route, this would substantially ease tension on the European energy market,” Putin said. “However, we cannot do this so far because of the administrative barriers.”

In other words, if Europe freeze this winter it has nobody to blame but itself… and the ESG lobby of course, whose impact has led to a collapse in traditional fossil fuel investments.

 

 

 

One month ago, when the world was gripped by the crisis involving China’s 2nd largest property developer Evergrande, we said that “Beijing will pay local bondholders and soft nationalize Evergrande, but will avoid allegations of backsliding on tightening/deleveraging promises and and “common prosperity” by stuffing foreign creditors.”

Brilliant: Beijing will pay local bondholders and soft nationalize Evergrande, but will avoid allegations of backsliding on tightening/deleveraging promises and and “common prosperity” by stuffing foreign creditors.

— zerohedge (@zerohedge) September 22, 2021

Since then, that’s precisely what has happened with the company making one onshore coupon payment while withholding all payments to offshore creditors. Then, overnight, Reuters reported that Hengda Real Estate Group, Evergrande’s flagship unit, has remitted funds to pay an onshore bond coupon of 121.8 million yuan ($19 million) due on Tuesday. Citing sources, Reuters noted that the company needs to prioritize its limited funds towards the domestic market where the stakes are much higher for the country’s financial system.

And while Evergrande scrambles to squeeze every last drop of liquidity as it seeks to at least repay local creditors and holders of WMPs, things are going from bad to worse for the company whose deal to sell a 51% stake in its property services unit has been put on hold, Reuters also reported, “in a blow to the embattled developer’s hopes of avoiding a potentially disruptive default.”

The company had been in talks to sell the stake in Evergrande Property Services to smaller rival Hopson Development Holdings for around HK$20 billion, sources previously told Reuters. However, the deal, which was set to be the biggest asset sale for the company, has been put on hold as it has yet to win the blessing of the Guangdong provincial government, which is overseeing Evergrande’s restructuring, one of the people said on Tuesday. While, it was not immediately clear why the Guangdong provincial government has not approved the Evergrande Property Services transaction, some of Evergrande’s offshore creditors had also opposed the deal, Reuters sources added. Another source said the announcement of the deal will be delayed, pending China’s regulatory approval. The deal has already won Hong Kong Stock Exchange’s special approval.

In more bad news for Evergrande, last week Chinese state-owned Yuexiu Property pulled out of a proposed $1.7 billion deal to buy Evergrande’s Hong Kong headquarters building over worries about the developer’s dire financial situation.

Yet while Evergrande has been careful not to impair local creditors, offshore bondholders have little to look forward to: an Evergrande bond due March 23, 2022 will officially be in default on Oct 23 when the 30-day grace period for a missed coupon payment that had been due on Sept. 23 expires.

Still, and somewhat paradoxically, the wider offshore bond market has responded positively despite a crippling slowdown in China’s property market after soothing words from China central bank’s and coupon payments by two other major developers. An index of China high-yield debt which is dominated by property developer issuers, has seen spreads tighten from last week’s record levels to around 1,484 points on Tuesday.

The move was catalyzed in large part by another local property giant, Sunac China, which has a $27.14 million payment due Tuesday, and which has paid its bondholders, a source with knowledge told Reuters. At the same time, Kaisa Group said on Monday it had also paid a coupon due Oct. 16 and it plans to transfer funds for a coupon worth $35.85 million due Oct. 22 on Thursday.

Bonds from Chinese developers that gained on Tuesday included Modern Land’s 2022 bonds which bounced over 8% to 40.250 cents on the dollar, while Central China Real Estate’s 2024 bonds climbed over 5% to 44.843 cents.

It was not all good news, however, and on Monday, smaller developer Sinic Holdings defaulted on $246 million in bonds as expected; It had previewed the default last week, saying it did not have sufficient financial resources

In an attempt to ease mounting concerns about China’s sudden property deep freeze, in the past few days, the People’s Bank of China has said spillover effects on the banking system from Evergrande’s debt problems were controllable and that China’s economy was “doing well”. Just like what we heard around the time Lehman failed. 

Authored by Mimi Nguyen Ly via The Epoch Times,

Nebraska Attorney General Doug Peterson issued a legal opinion saying that his office won’t seek disciplinary action against doctors who prescribe hydroxychloroquine or ivermectin as off-label medicines to treat or prevent COVID-19, as long as they are not engaging in any misconduct.

The opinion (pdf), issued on Oct. 15, was in response to a request from Dannette Smith, CEO of the state’s Department of Health, which licenses and disciplines doctors. Smith asked whether it would be “deemed unlawful or otherwise subject to discipline” for doctors to prescribe ivermectin, hydroxychloroquine, or other “off label use” medications to treat or prevent COVID-19.

The Republican attorney general said in the opinion that his office finds “the available data does not justify filing disciplinary actions against physicians simply because they prescribe ivermectin or hydroxychloroquine to prevent or treat COVID-19.”

Health care providers in general may be subject to discipline if they “neglect to obtain informed consent, deceive their patients, prescribe excessively high doses, fail to check for contraindications, or engage in other misconduct,” wrote Peterson.

He said his office is not recommending any particular treatment options for COVID-19, but only the off-label early treatment options as raised by the health department “and conclude that the available evidence suggests that they might work for some people.”

The opinion continues, “Allowing physicians to consider these early treatments will free them to evaluate additional tools that could save lives, keep patients out of the hospital, and provide relief for our already strained health care system.”

The legal opinion also noted that there may be other promising off-label medicines to tackle the CCP (Chinese Communist Party) virus, which causes COVID-19.

Hydroxychloroquine, an anti-inflammatory and anti-malarial medication, gained prominence and heavy scrutiny after former President Donald Trump said he was taking it as a prophylactic.

Last year, medical journal The Lancet initially published a paper condemning hydroxychloroquine before retracting it after more than 100 medical professionals raised major issues with the study.

Facebook, Twitter, and YouTube in July 2020 removed videos of a group of doctors who advocated for its use as early treatment and prophylaxis amid the pandemic.

A study published in the American Journal of Medicine on Jan. 1 found that hydroxychloroquine helped lower mortality in the early treatment of COVID-19.

The World Health Organization in March advised against the use of hydroxychloroquine for COVID-19.

Ivermectin, a generic medicine widely used against some parasitic worms as well as to treat scabies, lice, and rosacea in humans, has been praised by some doctors as a life-saving early treatment for COVID-19.

Two groups, the Front Line COVID-19 Critical Care Alliance and the British Ivermectin Recommendation Development Group, have urged for the off-label use of ivermectin for COVID-19. There are at least 63 studies, of which 45 are peer-reviewed, on the treatment of COVID-19 with ivermectin.

The American Medical Association, the American Pharmacists Association, and the American Society of Health-System Pharmacists, said in a joint statement in September they were against its use outside of a clinical trial as a COVID-19 drug.

In Australia, the therapeutics regulator has restricted the prescription of ivermectin for COVID-19 and other off-label use only for certain specialists, including infectious disease physicians, dermatologists, gastroenterologists, and hepatologists.

*  *  *

Jarrad Winter, via AmericanThinker.com, has broken down a few key sections from the AG’s lengthy opinion.

As to the question of ivermectin as a treatment option:

The Mahmud study–a CRT that explored ivermectin as an early treatment for 363 individuals–concluded that “patients with mild-to-moderate COVID-19 infection treated with ivermectin plus doxycycline recovered earlier, were less likely to progress to more serious disease, and were more likely to be COVID-19 negative on day 14. And Niaee’s research team found that ivermectin can help even hospitalized patients. That group conducted a “randomized, double-blind, placebo-controlled, multicenter clinical trial” with 180 hospitalized patients diagnosed with COVID-19. They concluded that ivermectin “reduces the rate of mortality and duration of hospitalization in adult COVID-19 patients,” and the improvement of other clinical parameters showed that the ivermectin, with a wide margin of safety, had a high therapeutic effect on COVID-19.

What initially made ivermectin a target for all the inexplicable slander?

Why would ivermectin’s original patent holder go out of its way to question this medicine by creating the impression that it might not be safe? There are at least two plausible reasons. First, ivermectin is no longer under patent, so Merck does not profit from it anymore. That likely explains why Merck declined to “conduct clinical trials” on ivermectin and COVID-19 when given the chance. Second, Merck has a significant financial interest in the medical profession rejecting ivermectin as an early treatment for COVID-19.

As to the question of hydroxychloroquine as a treatment option:

In 2004, long before the COVID-19 pandemic began, a lab study revealed that chloroquine “is an effective inhibitor of the replication of the severe acute respiratory syndrome coronavirus (SARS-CoV) in vitro” and thus that it should be “considered for immediate use in the prevention and treatment of SARS-CoV infections”. The following year, another paper explained that “chloroquine has strong antiviral effects on SARS-CoV” and “is effective in preventing the spread of SARS[-]CoV in cell culture.”

It is widely recognized in the medical community that hydroxychloroquine is generally safe, so safe in fact that it may be prescribed to pregnant women and “children of all ages.”

What made hydroxychloroquine controversial in the first place?

A striking example features one of the world’s most prestigious medical journals–the Lancet. In the middle of the COVID-19 pandemic, the Lancet published a paper denouncing hydroxychloroquine as dangerous. Yet the reported statistics were so flawed that journalists and outside researchers immediately began raising concerns. Then after one of the authors refused to provide the analyzed data, the paper was retracted, but not before many countries stopped using hydroxychloroquine and trials were cancelled or interrupted. The Lancet’s own editor in chief admitted that the paper was a “fabrication, a monumental fraud,” and “a shocking example of research misconduct in the middle of a global health emergency.”

Interesting note about ivermectin and hydroxychloroquine hesitancy:

As for professional associations’ and physician groups’ views on hydroxychloroquine, it appears they generally adopt the same position they did on ivermectin. Those like the AAPS who support ivermectin as an option for early COVID-19 treatment generally support hydroxychloroquine too, while those like the AMA, APhA, and ASHP that oppose one typically resist the other.

The AG’s conclusion:

Allowing physicians to consider these early treatments will free them to evaluate additional tools that could save lives, keep patients out of the hospital, and provide relief for our already strained healthcare system.

*  *  *

Read the full opinion below:

Following August’s surprisingly large jump, building permits and housing starts were expected to slow down significantly in September, and slow-down they did.

After the 5.6% MoM surge (revised down from +6.0% MoM) in August, Building Permits plunged 7.7% MoM in September (dramatically worse than the 2.4% MoM drop expected).

Housing Starts were dramatically revised lower in August (from +3.9% MoM to +1.2% MoM) and September saw starts tumble 1.6% MoM (considerably worse than the 0.0% expected).

Source: Bloomberg

Permits are at their lowest level since September 2020 and Starts are at 6-month lows…

Source: Bloomberg

Multi-family permits plunged 21% SAAR from 630K to 498K while single-family permits slide to 1.041MM, the lowest since July 2020.

Single-family home starts were unchanged at 1.080MM while multi-family starts dropped 5.1% SAAR from 492K to 467K

All of which is odd given that NAHB sentiment just rebounded strongly…

Maybe homebuyers know better after all.

President Trump has a very simple solution for President Biden’s problem of vaccine credibility.

“I would sell it to them,” the former president said during an interview with former Fox News host Bill O’Reilly that aired last night on The First TV.

He added that when he was president there was “no talk of” vaccine mandates, and added that in under nine months, his administration helped produce not one but three vaccines, all of which have proven to be the industry standard around the world.

“I wouldn’t say to anybody, ‘You have to.’ But I would sell it. Look, I’m very proud of what we did with the vaccines,” Trump told political news host Bill O’Reilly in an interview that will air at 8 p.m. Monday on The First TV.

“It was supposed to take five years and they said it wasn’t going to work. I did three vaccines in less than nine months and they do work, they work really well.

[…]

“I would convince people, take it. I don’t want to push it…when I was president, there was no talk about mandates or anything. Everybody wanted the vaccine. Now a lot of people don’t want it.”

Trump has good reason to remember the pace of vaccine development all too well, since the first vaccine trial data were released roughly a week after the Nov. 3 election.

That, according to Trump, has allowed President Biden to take credit for the vaccines, which were funded – let’s remember – by federal dollars flowing out of Operation Warp Speed. President Biden and Vice President Kamala Harris have both tried to take credit for the jab even though at one point they suggested they were suspicious of any jab developed under the Trump organization?

Already, 79% of US adults and 77% of people over age 12 have had at least one COVID jab, which is a rate much higher than other countries, like Russia, where the adult population has largely rejected the jab.

Biden last month justified his new vaccine mandates by arguing that vaccine refusers were recklessly endangering others. “Our patience is wearing thin, and your refusal has cost all of us,” Biden said. Meanwhile, Chicago Mayor Lori Lightfoot just accused the city’s Fraternal Order of Police – the city’s biggest police union – of trying to foment an “insurrection” in a city that’s hounded by gun violence day in, day out.

Authored by Bill Blain via MorningPorridge.com,

“Everything transitory is but an image…”

The biggest risk to markets have always been policy mistakes by central banks and/or governments. The risks are rising as confusions about inflation abound. The reality is Central banks have tripped themselves – by assuring us inflation was transitory, they’ve pretty much nailed on its permanence!

Policy Mistake Risk and Inflation

Early doors y’day I was listening to Professor David “Danny” Blanchflower on the radio – ex Bank of England economist and Monetary Policy Committee member. He made a telling comment about the news BoE Governor Andrew Bailey is pushing for a rate hike at the November 4th MPC rate-setting meeting – dismissing every single rate hike since 2007 as a “policy mistake”. He’s spot on. He also reckons a deep recession is about to hit the US – based on his analysis of consumer anxiety and fears – and if the US catches a cold, then the UK will be thumped!

“Is the BoE about to make a policy mistake? Markets sure seem to think so”, says a senior portfolio manager at Allianz this morning in the FT: “Investors worry over potential BoE rates ‘mistake’. Hmm…. Imagine that.. and investor who has figured out rising rates aren’t necessarily good for his book? Who would have guessed.. ?

Policy mistakes are a massive market risk. Don’t believe Central Banks and Politicians are omnipotent. The issue is defining what would be a policy mistake and what is a POLICY MISTAKE.

For instance; Financial Assets remain seriously distorted by the consequences of the last 10 years of QE and ultra-low interest rates. It would be a policy mistake not to unravel the multiple negative market consequences of bad policy. However, to do so – by tapering QE purchases, raising interest rates, and causing investors to question the implicit put they think Central Banks have given markets – will likely trigger a market tumble, and thus be a policy mistake.

It becomes a Policy Mistake when Central Banks give up trying to pull the wool over our eyes about “transitory inflation” (the market equivalent of being a little bit pregnant), yet hike rates into the face of a supply chain recession, spurred on by Governments wanting to rein back debt by introducing austerity programmes and tax hikes. That’s a combined central bank policy mistake and a political Policy Mistake = triggering a run on the currency caused by rising competency fears about the debt they are trying to cut which will herald and imported inflation spike.. Etc, etc…

On the other hand, the most recent US retail sales data was exceptionally strong – was it a real spending splurge by consumers following the pandemic, or was it retail stocking up in the expectation of shortages to come?

Blanchflower and many other economists are still in the transitory inflation cap, citing US Lumber prices earlier this year – which spiked higher as builders hoarded timber on anticipated shortages, but quickly fell as the demand spike proved unsustainable.

Which leads to the question when does a price spike lead to transitory or long-term inflation? Retail Prices tend to demonstrate fluidity on the way up, but are notoriously sticky once they peak. Central banks might think the prices retail consumers encounter in the shops respond to stimulus like bond prices – they don’t.

Rising prices clearly colour expectations and purchase decisions. If folk accept inflation is transitory they will just keep buying – which means prices remain high.

Doh! – you see the problem…?

Belief in something being transitory is likely to make it permanent. If prices remain high that triggers wage inflation. Etc, Etc. Jay Powells comments on “Transitory Inflation” might just go down alongside Alan Greenspans “If you understood me, I misspoke” comments in the Big Book of Central Bank Moments.

I guess the coming holiday spending season will be .. interesting… Container ports around the globe remain clogged up, lorry drivers are scarcer than hen’s teeth, labour costs are under pressure (I’ll be intrigued to see what Amazon et al pay their Christmas hires this year..), and supply chain glitches put manufacturing under pressure… just how transitory do you expect it all to be?

Meanwhile, big trouble in big China

The market flow yesterday confirmed we are certainly living in interesting times…. China’s sub 5% growth raised recessionary fears around the globe… 4.9% growth would be considered stellar in most developed economies, but the fact China is struggling with supply chains, soaring energy costs, and the unfolding Evergrande debacle and potential contagion is illustrative.

I suspect our view of the implosion of the Chinese property sector is a bit like watching ducks on a windy day – serenely floating on the surface looking unperturbed, but furiously paddling below the waterline. It’s worse than it looks. The realisation of just how heavily dependent the economy is on property sales – looks unsustainable.

The consensus is $50 bln held by Evergrande bond holders will suffer most. Domestically, it’s a different tale; even as more property firms default the CCP will try to ensure the real estate sector is “stable and orderly”. Evergrande’s domestic liabilities of some $148 bln plus will no doubt be dealt with in order not to unleash a tide of domestic business defaults and retail pain – but it will have to be done in a manner that doesn’t look like a bailout.

It’s likely to get messy. The Chinese will find trying to micromanage the property sector by simultaneously disciplining banks on property company lending, while encouraging mortgage lending to mop up surplus supply creates all kinds of opportunities for speculators. Keep an eye on that space.. I suspect China will continue to contract. When China catches a cold, the rest of us will probably break out in pustules…