Peak Growth Fears Captured In Record Low Real Yields

Peak Growth Fears Captured In Record Low Real Yields

By Laura Cooper, Bloomberg reporter and macro commentator

U.S. real yields hitting record lows captures the cautious mood in markets –- and expectations for policymakers to ease up on the hawkish tone amid rising virus and growth risks. The move looks overdone, with a U.S. recovery still strong despite peak growth in 2Q.

Money markets have pared back rate-hike bets amid concerns the delta variant could see growth recoveries stumble, warranting ongoing monetary accommodation. The implied yield of the December 2022 Eurodollar futures has slipped from the late June highs, with all eyes turning to the FOMC later this week. Easing growth optimism, renewed market volatility and virus uncertainty reduces the likelihood of a hawkish surprise with those tapering discussions likely to continue ahead of Jackson Hole.

Of course, the virus spread may not materially thwart the recovery. Slower growth is inevitable after a robust 2Q, to be captured in data this week. And inflation coming in hotter-than-expected with another core PCE print due this week warrants attention from the Fed. U.S. breakeven rates remaining range-bound since early June suggests concerns over price pressures remain.

But with growth fears creeping back into the market narrative, real yields remain on the back foot, keeping the greenback struggling for direction amid haven bids and caution evident in U.S. equities.

Tyler Durden
Mon, 07/26/2021 – 15:47

via ZeroHedge News https://ift.tt/2V8mq8y Tyler Durden

Federal Appeals Court Sneaks in One Final Ruling Against the CDC’s Expiring Eviction Moratorium


CDCheadquarters

The government’s eviction moratorium expires at the end of this week. A federal appeals court in Tennessee just gave it one final kick on the way out the door.

On Friday, the U.S. Court of Appeals for Sixth Circuit unanimously ruled that the U.S. Centers for Disease Control and Prevention (CDC) exceeded the authority given to it by Congress when it issued a near-comprehensive ban on evictions for non-payment in September of last year.

The CDC justified that unprecedented policy—which applied to anyone making under $99,000 (or couples making under $198,000) who signed a financial hardship declaration—by pointing to the 1944 Public Health Service Act. That law gives federal health officials the power to “make and enforce such regulations” that are “necessary to prevent the introduction, transmission, or spread of communicable diseases.”

Under both President Donald Trump and President Joe Biden, the CDC claimed that its moratorium was necessary for mitigating the pandemic’s spread. Otherwise, evicted renters would move into more crowded living situations, potentially bringing COVID-19 with them.

But the CDC’s powers, wrote Circuit Judge John K. Bush, are limited by the succeeding sentence in the Public Health Service Act. In order to carry out and enforce those regulations, the law says, the CDC director “may provide for such inspection, fumigation, disinfection, sanitation, pest extermination, destruction of animals or articles found to be so infected or contaminated as to be sources of dangerous infection to human beings.”

“Those specific grants of power would be superfluous” if the intent of Congress was to give the CDC power to impose any regulation it considered “necessary,” wrote Bush.

Under the government’s interpretation of the law, Bush continued, “the CDC can do anything it can conceive of to prevent the spread of disease. That reading would grant the CDC director near-dictatorial power for the duration of the pandemic, with authority to shut down entire industries as freely as she could ban evictions.”

The Sixth Circuit’s ruling represents the sixth time a lower court has struck down the CDC’s moratorium, with most decisions similarly criticizing the near-limitless powers the agency was trying to claim for itself.

Three other federal courts have ruled in favor of the CDC’s eviction moratorium, including a U.S. Court of Appeals for the D.C. Circuit ruling in June. That same month, the U.S. Supreme Court refused to take up an emergency petition to hear a challenge to the moratorium, although a majority of five justices did indicate that they considered the policy illegal.

While the federal moratorium is set to expire at the end of the week, Friday’s Sixth Circuit ruling still has some important practical implications, says Ilya Somin, a law professor at George Mason University.

“The implications of the government’s position are extremely broad—that the CDC can shut down activity of any kind” to combat a disease, regardless of its lethality or infectiousness, he says. Friday’s decision “will likely have an impact on future attempts to use these powers.”

The Sixth Circuit’s decision, he says, is binding on lower district courts in that circuit who could hear challenges to a future eviction moratorium case. In addition, appellate courts try to avoid split opinions, meaning Friday’s ruling could influence how they decide similar cases.

“Aside from legal doctrine and precedent, the fact that there’s been a wave of rulings against the administration puts this administration and future administrations on notice that if they try to use a power like this it will end up litigation and they might lose,” Somin adds.

By all indications, the Biden administration will let its eviction moratorium expire come July 31. Only six states, including New York, California, and Washington, continue to have state-level moratoriums of their own.

These emergency policies proved surprisingly sticky throughout the pandemic, with both states and the federal government continuing to push back their expiration dates. They allowed governments to keep people housed at zero public expense. Instead, landlords have eaten the cost of hosting nonpaying tenants.

These same governments have generally been exceedingly slow at distributing billions in federal rent relief meant to keep tenants housed and to make landlords whole.

It is questionable whether these moratoriums were needed to prevent the oft-prophesized wave of evictions. (Evictions have been below historic averages during the pandemic, even in places that, prior to the CDC’s order, had no eviction moratorium in place.) And the research suggesting they’ve prevented thousands of COVID deaths is likely deeply flawed.

Even with the policy set to expire in a few days, it’s good to see courts aren’t letting this envelope-pushing exercise of government power go without official criticism.

from Latest – Reason.com https://ift.tt/3rB0kYl
via IFTTT

Drown the Federal Flood Insurance Program


krtphotoslive887382

If American politicians want to diminish the harms of flooding, recently on deadly display on the other side of the Atlantic, an easy first step would be to eliminate the National Flood Insurance Program (NFIP). Keeping this failing program in place encourages people to live in dangerous, flood-prone areas.

Established in 1968, the NFIP aimed to reduce post-disaster aid by subsidizing flood insurance. Instead, by artificially lowering the risk premium of building new structures, the program exacerbates disaster-related risk and encourages more building in flood-prone areas. Meanwhile, costs went up, not down: The agency owed more than $25 billion to the U.S. Treasury until 2017, when taxpayers bailed out $16 billion of its debt.)

The program is a perfect example of moral hazard, a phenomenon in which people take more risks knowing they will not bear the full cost of the risk. In this case, the government gives homeowners insurance at premiums far below market prices. The program accepts all applicants, and rates do not increase when the same homeowner makes multiple claims for flooding. All this distorts the market signaling of risk.

The program also suffers from what economists call the time-consistency problem: Even if the NFIP stopped insuring new buildings in flood-prone areas, people know the government has bailed people out in the past and expect it will do so again. To the government, another bailout is seemingly harmless, since people already live in flood-damaged areas. So people keep moving to those areas, and the government keeps bailing them out. The estimated number of people living in America’s officially designated Special Flood Hazard Areas rose from 10 million in 1970 to more than 16 million—though some estimates say FEMA vastly underestimates this risk, and the real number is closer to 41 million. The “flood insurance program” is exposing more people to flooding risks.

Nor, for the most part, is the program helping low-income families afford homes. It’s not hard to imagine the main demographic of people buying houses in flood-prone coastal areas: high-income families escaping the suburbs for a vacation. Ending the NFIP would move these people away from flood-prone areas by making it more costly to build there.

As politicians go on a spending spree, hiding pet projects hidden in lengthy climate legislation, we need cheaper, smarter, and more effective policies. A private flood insurance market will make premiums expensive for people wanting to build in a flood-prone area—or not offer insurance at all where the risk is too high. That is how the market is supposed to work.

from Latest – Reason.com https://ift.tt/3BJGL4P
via IFTTT

And Now The Hangover: Goldman Sees Sharp Deceleration In US Economic Growth In 2022

And Now The Hangover: Goldman Sees Sharp Deceleration In US Economic Growth In 2022

It was good while it lasted, but the party is finally ending.

One day after we reported that unemployed households which no longer receive emergency benefits are suddenly spending far less, and on the same day we read about an “unprecedented spike” in evictions as foreclosure moratoriums end, the only thing missing was a sellside downgrade to the US economy. Well, we got just that early this morning, when Goldman – which last year was the first bank to unveil materially above consensus GDP projections – cut its 2021 second half consumption growth forecast, resulting in 1% downgrade to its GDP growth forecasts for Q3 and Q4 to +8.5% and +5.0%, respectively, “as it is becoming apparent that the service sector recovery in the US is unlikely to be as robust as the bank had expected. Which is odd considering the trillions in monetary and fiscal stimulus that have entered into the economy. One wonder how many more trillions would be needed for Goldman to be happy.

But while Goldman’s expected 2021 slowdown is manageable, it gets far worse in 2022, when the sluggishness is expected to truly hammer the growth rate, which Goldman now expected to shrink to a trend-like 1.5% – 2% by the second half of 2022, a far “sharper deceleration than consensus expects.”

What’s driving Goldman’s sharp slow-growth shift?

First, and as noted above, he service sector is not rebounding as sharply as the bank had expected. And rising cases of the virus suggest momentum will slow.  A complete service sector recovery will likely require fully overcoming virus fears and returning to office work patterns. Both now appear likely to take longer than the bank’s economists anticipated.

Second, return-to-office has been “particularly disappointing“, suggesting a prolonged delay in the office-adjacent economy.

Office attendance in large cities is still just one-third of the pre-pandemic level, and surveys indicate that both workers and employers expect work from home to remain much more common than before the pandemic.

Job advertisements provide further evidence that remote work is likely to persist. Usingdata on individual job listings and descriptions from LinkUp, we estimate that over 7%of new jobs listed in June offered remote working options (Exhibit 5), well above thepre-pandemic norm of roughly 1%.

As Goldman notes, “greater remote work is likely to delay the recovery of the office-adjacent economy, which implies a lower level of services spending in the near term. Workers who commute to an office, for example, might consume transportation services to and from the office, restaurant meals during lunch, work-appropriate apparel and dry cleaning services, and other goods and services they pass by during their time away from home. Remote workers need to eat too, of course, and they might be as or more content preparing their own meals or wearing casual clothing at home, but in the eyes of the GDP statistics, this new arrangement is likely to mean less market-transacted economic activity.”

As an example of this, the next chart shows that food services employment remains substantially lower in the cities that have been slower to return to the office, and this remains true even if one controls for state-level virus restrictions, the local share of office employment, or the current level of overall local consumer spending. In the case of food services, former office workers could reallocate some or all of their office lunch budget to food services near their homes, but for some office-adjacent services, such as transportation services used for commuting, there are not substitutes.

Corresponding to the downgrade to its GDP growth forecast, Goldman has also bumped up its unemployment rate forecast slightly from 4.2% to 4.4% at end-2021, although the bank caveats that it expects to “learn considerably more about the prospects for labor market recovery from the July employment report, which should provide a test of the impact of seasonal adjustment irregularities and the early expiration of federal unemployment benefits in some states.”

Bottom-line: after maintaining a growth outlook well above consensus for much of the pandemic, Goldman’s economists now forecast a steeper slowdown in activity, and expect growth to slow further to a trend-like 1.5-2% by 2022 H2, “a sharper deceleration than consensus expects.” And since virtually everyone on Wall Street waits for Goldman to take the lead with every notable inflection call, brace for a barrage of GDP downgrades in the coming days as the sellside consensus suddenly starts clamoring for even more cowbell stimulus, which only another widespread delta lockdown can bring.

Tyler Durden
Mon, 07/26/2021 – 15:28

via ZeroHedge News https://ift.tt/3x4aUbp Tyler Durden

Federal Appeals Court Sneaks in One Final Ruling Against the CDC’s Expiring Eviction Moratorium


CDCheadquarters

The government’s eviction moratorium expires at the end of this week. A federal appeals court in Tennessee just gave it one final kick on the way out the door.

On Friday, the U.S. Court of Appeals for Sixth Circuit unanimously ruled that the U.S. Centers for Disease Control and Prevention (CDC) exceeded the authority given to it by Congress when it issued a near-comprehensive ban on evictions for non-payment in September of last year.

The CDC justified that unprecedented policy—which applied to anyone making under $99,000 (or couples making under $198,000) who signed a financial hardship declaration—by pointing to the 1944 Public Health Service Act. That law gives federal health officials the power to “make and enforce such regulations” that are “necessary to prevent the introduction, transmission, or spread of communicable diseases.”

Under both President Donald Trump and President Joe Biden, the CDC claimed that its moratorium was necessary for mitigating the pandemic’s spread. Otherwise, evicted renters would move into more crowded living situations, potentially bringing COVID-19 with them.

But the CDC’s powers, wrote Circuit Judge John K. Bush, are limited by the succeeding sentence in the Public Health Service Act. In order to carry out and enforce those regulations, the law says, the CDC director “may provide for such inspection, fumigation, disinfection, sanitation, pest extermination, destruction of animals or articles found to be so infected or contaminated as to be sources of dangerous infection to human beings.”

“Those specific grants of power would be superfluous” if the intent of Congress was to give the CDC power to impose any regulation it considered “necessary,” wrote Bush.

Under the government’s interpretation of the law, Bush continued, “the CDC can do anything it can conceive of to prevent the spread of disease. That reading would grant the CDC director near-dictatorial power for the duration of the pandemic, with authority to shut down entire industries as freely as she could ban evictions.”

The Sixth Circuit’s ruling represents the sixth time a lower court has struck down the CDC’s moratorium, with most decisions similarly criticizing the near-limitless powers the agency was trying to claim for itself.

Three other federal courts have ruled in favor of the CDC’s eviction moratorium, including a U.S. Court of Appeals for the D.C. Circuit ruling in June. That same month, the U.S. Supreme Court refused to take up an emergency petition to hear a challenge to the moratorium, although a majority of five justices did indicate that they considered the policy illegal.

While the federal moratorium is set to expire at the end of the week, Friday’s Sixth Circuit ruling still has some important practical implications, says Ilya Somin, a law professor at George Mason University.

“The implications of the government’s position are extremely broad—that the CDC can shut down activity of any kind” to combat a disease, regardless of its lethality or infectiousness, he says. Friday’s decision “will likely have an impact on future attempts to use these powers.”

The Sixth Circuit’s decision, he says, is binding on lower district courts in that circuit who could hear challenges to a future eviction moratorium case. In addition, appellate courts try to avoid split opinions, meaning Friday’s ruling could influence how they decide similar cases.

“Aside from legal doctrine and precedent, the fact that there’s been a wave of rulings against the administration puts this administration and future administrations on notice that if they try to use a power like this it will end up litigation and they might lose,” Somin adds.

By all indications, the Biden administration will let its eviction moratorium expire come July 31. Only six states, including New York, California, and Washington, continue to have state-level moratoriums of their own.

These emergency policies proved surprisingly sticky throughout the pandemic, with both states and the federal government continuing to push back their expiration dates. They allowed governments to keep people housed at zero public expense. Instead, landlords have eaten the cost of hosting nonpaying tenants.

These same governments have generally been exceedingly slow at distributing billions in federal rent relief meant to keep tenants housed and to make landlords whole.

It is questionable whether these moratoriums were needed to prevent the oft-prophesized wave of evictions. (Evictions have been below historic averages during the pandemic, even in places that, prior to the CDC’s order, had no eviction moratorium in place.) And the research suggesting they’ve prevented thousands of COVID deaths is likely deeply flawed.

Even with the policy set to expire in a few days, it’s good to see courts aren’t letting this envelope-pushing exercise of government power go without official criticism.

from Latest – Reason.com https://ift.tt/3rB0kYl
via IFTTT

Decline In UK COVID Cases Signals Coming “Inflection” For US As Delta Fears Subside

Decline In UK COVID Cases Signals Coming “Inflection” For US As Delta Fears Subside

Just one week ago, as Dr. Anthony Fauci was cranking the Delta variant “fearmongering” up to 11 once again, JPM’s Croatian quant Marko Kolanovic was telling the bank’s clients that a looming inflection point for new cases in the UK (widely seen as a leading indicator for the direction of new cases in the US) would soon arrive, kick-starting demand for value stocks and reopening plays.

Althought Kolanovic is a Wall Street quant, not an epidemiologist, it turns out his view was correct. Because one week later, the number of new cases being confirmed in the UK and EU has fallen, even as the UK’s “Freedom Day” has come and gone. Deutsche Bank’s Jim Reid described the decline in new cases in the UK “nothing short of remarkable”.

According to Reuters data, the number of new cases fell for a sixth consecutive day, to 24,950 on Monday from 29,173 on Sunday. The total number of new cases over the past week, at just over a quarter of a million, is more than 20% lower than the prior week.

While the UK’s economy-crippling “pingdemic” continues, and many have continued to isolate, meaning the UK is still a way’s away from achieving a return to “normality”.

Additionally, despite the fast rise of cases to near peak levels, mortality is currently 95% lower than during the January peak. This should give confidence to investors that delta is not a serious threat to global growth. If the US follows the template of the UK, daily cases might be peaking in the next 12 days…while we think Energy-Epicenter stocks are going to start to rally beginning this week.

While the Delta variant continues to dominate “our discussions with clients,” Kolanovic claimed that fears about the variant are overblown. The UK, he added, appears to be following a timeline similar to what the world saw in India. This should give confidence to investors that Delta isn’t a serious threat to global growth. Well, that and the drop in mortality. Speaking of markets, Kolanovic suggested that this is the start of a rotation into cyclicals.

Some might be tempted to attribute the drop in UK cases to a fluke, or the pingdemic, or some other factor. But as Kolanovic reminds us, the trajectory of India’s recent COVID flareup (the first national outbreak to be  caused by the delta variant) was similarly swift, as JPM illustrates with a handy chart.

The main thrust of Kolanovic’s latest note is that markets – particularly bond markets – are too fixated on the potential economic impact of the Delta variant. Given the strong correlation between cases and vaccinations, BofA adds that economic risks for heavily vaccinated countries like the US – despite the Biden Administration’s warnings about a “pandemic of the unvaccinated” – remain low.

The disparity can be seen quite clearly in a pair of charts from a recent BofA note: just look at the difference between the vaccination rate for the UK, and its attendant impact on virus-related mortality…

…and Indonesia, which has an adult vaccination rate well below 10%.

Analysts at Goldman have reached a similar conclusion: while rising cases may lead to more cautious consumer behavior, we ultimately view the economic and medical risks from the delta variant as manageable, given convincing evidence that the vaccines help prevent serious illness.

The implication for the US is pretty clear.

Tyler Durden
Mon, 07/26/2021 – 15:05

via ZeroHedge News https://ift.tt/3y8Z5lE Tyler Durden

Gun Control Scheme Harms Black and Hispanic New Yorkers, Public Defenders Tell Supreme Court


zumaglobaleight140446

The U.S. Supreme Court will hear oral arguments this fall in New York State Rifle & Pistol Association v. Corlett, a case about the constitutionality of New York’s requirement that anyone seeking a license to carry a concealed handgun in public first satisfy a local official that he has “proper cause” to do so.

Big cases about hot button issues like gun control always attract a lot of friend of the court briefs, and this one is no exception. Many of those briefs will have zero impact on the ruling. But a brief filed this month just might make a difference.

The brief is from a coalition of public defense lawyer organizations, including the Black Attorneys of Legal Aid, the Bronx Defenders, and Brooklyn Defender Services. They are urging the Supreme Court to overrule New York’s gun licensing scheme for both violating the Second Amendment and disparately harming black and Hispanic people.

“Each year,” the groups state in their brief, “we represent hundreds of indigent people whom New York criminally charges for exercising their right to keep and bear arms. For our clients, New York’s licensing requirement renders the Second Amendment a legal fiction. Worse, virtually all our clients whom New York prosecutes for exercising their Second Amendment rights are Black and Hispanic.” And that, the brief argues, “is no accident. New York enacted its firearm licensing requirements to criminalize gun ownership by racial and ethnic minorities. That remains the effect of its enforcement by police and prosecutors today.”

According to the public defender groups, New York’s scheme has “brutal” consequences for their clients. They write:

New York police have stopped, questioned, and frisked our clients on the streets. They have invaded our clients’ homes with guns drawn, terrifying them, their families, and their children. They have forcibly removed our clients from their homes and communities and abandoned them in dirty and violent jails and prisons for days, weeks, months, and years. They have deprived our clients of their jobs, children, livelihoods, and ability to live in this country. And they have branded our clients as ‘criminals’ and ‘violent felons’ for life. They have done all of this only because our clients exercised a constitutional right.

It’s possible that such arguments will resonate with Justice Sonia Sotomayor, who is perhaps the Court’s leading critic of overpolicing and related law enforcement abuses. This brief seems to be right up her alley. As the public defense lawyers make clear, a ruling against New York’s gun control scheme would be a victory not only for the Second Amendment but for criminal justice reform.

from Latest – Reason.com https://ift.tt/3iSlP2P
via IFTTT

Troubling Debt Loads At Graduation And Useless College Degrees

Troubling Debt Loads At Graduation And Useless College Degrees

Authored by Mike Shedlock via MishTalk.com,

Let’s discuss job opportunities and debt loads of students at graduation.

College Degrees and Debt Loads at Graduation

Data for the above chart was courtesy of Paul Hill, founder of Educate to Career  

Their mission is to enable families to make fiscally responsible college to career planning decisions.

I asked Hill for a short synopsis of the problems and he wrote these paragraphs.

What is problematic with so many people pursuing masters degrees is that far too few of these students are analyzing what their occupational outcomes might be, post graduation. They presume a masters degree will push them over the top and into the strata of high earners. The reality is that for so many grads, there is little or no market for their skill set. If one were to dig deep into the requirements for a specific job (as we have) you’ll see that employment opportunities are almost non existent. 

For example, a significant percentage of the 48,000 students who enroll in history programs for their undergrad studies literally believe that they eventually will become a history professor. Less than half of those who enroll in history actually graduate with that degree after 6 years. None become history professors, while about 15% become elementary school teachers. The ambitious are undeterred, and ~1900 enroll in a masters program, specializing in an arcane field of history. Roughly 80% graduate with a masters in history after 3 years. Almost none will become history professors.

Rather than torture you by continuing with this exercise, we’ll cut to the chase. Nationwide, about 300 jobs open up each year for history professors at the university level. All will require a PhD and those who dedicated 10 to 12 years of their lives (and have $200,000 in student debt to prove it) will be the candidates for those jobs. The same dynamics apply to the other soft majors.

The inverse is true with STEM majors. Try to get through a comp sci masters degree without being recruited away from college with a six figure offer. One of the problems colleges are having with their math, physics and comp sci programs at the masters and the undergrad level is that recruiters are luring the students away with incredible offers, ‘Come and spend a summer with us. We’ll pay you $6k to $8k as an intern and if you like it, stay on with the big kids next fall rather than coming back to school’.

Useless Degrees 

In a phone discussion, Hill noted that Parks and Rec, Humanities, Home Ec, and most Business degrees are all but useless. 

Take Humanities for example.

The average debt load at graduation is about $50,000. 

Those graduates will likely get a minimum wage job and struggle for the rest of their lives unable to pay back that debt unless they work 10 years in a qualified government program that cancels the debt.

*  *  *

Like these reports? I hope so, and if you do, please Subscribe to MishTalk Email Alerts.

Tyler Durden
Mon, 07/26/2021 – 14:44

via ZeroHedge News https://ift.tt/3zAxp9K Tyler Durden