Month: March 2023

Treasury Yields Plunge Most ‘Since Lehman’, Gold Soars Amid Dovish-Dive In Fed Expectations

Treasury Yields Plunge Most ‘Since Lehman’, Gold Soars Amid Dovish-Dive In Fed Expectations

The 2Y Treasury yield is down 45bps from yesterday’s highs…

That is the biggest 2-day drop in the 2Y yield since Lehman (Sept 2008)…

Source: Bloomberg

The market’s expectation for Fed moves has shifted dramatically more dovish with the terminal rate tumbling by over 40bps and a full 25bps rate-cut now priced-in by year-end…

And gold is seeing huge safe haven inflows…

Will The Fed break its blackout window to soothe market fears?

Tyler Durden
Fri, 03/10/2023 – 09:50

via ZeroHedge News https://ift.tt/W9ctDp0 Tyler Durden

Mask On, Mask Off: New York Trying Everything Except Not Telling People What To Do


New York City Mayor Eric Adams frets that COVID-19 masks are making it too easy for shoplifters to evade facial recognition.

New Yorkers can be forgiven for losing track of just when they should and should not wear (questionably effective) face masks, at least in the eyes of the entity that taxes their paychecks, regulates their businesses, and polices their compliance.

After all, the masking requirement in New York City health care facilities was lifted only last month. Public transportation mandates lasted until a half-year ago. Kids between the ages of 24 and 59 months were required by law to have their mouths and noses covered in congregate settings as recently as last June; their older K-12 siblings were only released from the rule three months prior to that. One year plus one week ago, any business found having an unvaccinated employee or customer not wearing a mask was subject to a $1,000 fine.

Even though the COVID-19 vaccine became widely available to everyone aged 5 and up beginning in November 2021, the main nonpharmaceutical intervention intended to bridge the gap between pandemic onset and inoculation remained stubbornly if haphazardly in place for months after, particularly in polities dominated by elected Democrats.

So it cannot quite count as a surprise that New York City Mayor Eric Adams on Monday once again thrust the public sector’s nose into the private choice of whether to wear a face covering.

“We are putting out a clear call to all of our shops—do not allow people to enter the store without taking off their face mask,” Adams said (emphasis mine) on AM 1010 WINS, in response to a question about increased shoplifting. “Once they’re inside, they can continue to wear it if they so desire to do so. But we need to use the technology we have available to identify those shoplifters and those who are committing serious crimes. When you see these mask-wearing people, oftentimes it’s not about being fearful of the pandemic, it’s fearful of the police catching them for their deeds, and we’re really putting the call out.”

Adams, who was elected amid a backlash against rising public disorder, pandemic-era school restrictions, and an economy battered by COVID-related disruptions, was quick to stress that his anti-masking exhortation was a recommendation and not a requirement. Ditto NYPD Chief of Department Jeffrey Maddrey: “We are asking the businesses to make this a condition of entry, that people when they come in, they show their face, they should identify themselves,” Maddrey said at a press conference last week. “We need our businesses to be proactive and do their due diligence. We need to make sure people are identifying themselves.”

It makes sense for local cops to be against masks—they certainly haven’t been wearing the things much, even back when it was mandatory, and New York is already the most video-surveilled metropolis in the country. No doubt city officials would love it if every corner store instituted no-mask entry, installed facial recognition software, and shared the results promiscuously with law enforcement. At a time when petty but visible property theft continues to rise, even as the 2020–21 violent crime spike subsides, the NYPD is no doubt eager for some public relations wins.

But masking off so soon after masking on threatens to extend, not end, the types of Democratic dysfunction that helped elect Adams and also flip NYC-adjacent congressional districts—and therefore partisan control of the House of Representatives—to the GOP. Sure, voters are sick of watching bodega assault videos and subway violence on the local news every night, but seesawing arbitrarily between policy extremes inspires neither confidence in authority nor predictability in civic life.

The Washington Post published an attempted scare-story Wednesday about public health agencies and government executives being “stripped…of their powers” to impose pandemic restrictions. “Health officials and governors in more than half the country are now restricted from issuing mask mandates, ordering school closures and imposing other protective measures or must seek permission from their state legislatures before renewing emergency orders,” the paper lamented. Added Marquette Law School professor Edward Fallone: “Masking requirements, vaccine requirements, school closures are completely off the table without new legislation.” Said like it was a bad thing.

Replacing force-backed, arbitrary masking restrictionism with heavily recommended arbitrary anti-masking restrictionism may change one policy in a direction I prefer, but it doubles down on a process I abhor. Which is: The public health regime, and “the science” behind it, is whatever the apex political authority says it is. Change the management, change the policy. That’s not reform; it’s a zag instead of a zig. The other half of the country has it right—give politicians less power, give the people more.

The enforcement whiplash, too, can degrade respect and contribute to uncertainty. Twelve years ago, 50,000 otherwise suspicionless New Yorkers per year were being rung up on low-level marijuana charges after being stopped, questioned, and frisked by cops; now teenagers openly smoke joints on subway cars. Three years ago you couldn’t buy a flavored nicotine cartridge in the city’s then-dwindling number of vape stores; now you can’t sneeze without your droplets hitting a new bodega window display of fanciful water pipes, with potent over-the-counter gummies sold routinely to the obviously underage.

New York politicians, city and state, are forever making normal adult things illegal in one breath, while telling cops and courts to deprioritize enforcement in the next. In an exuberantly commercial city, that combination is a recipe for gray markets (typically transacted in eminently robbable cash) and the twin scourges of selective policing and corruption.

You would think that the city of Eric Garner, pinball prohibition, and a recent mayor so nannyish that he tried to criminalize transfats, would at some point conclude that maybe the civic order might better be served by allowing adults to legally make their own choices, and tasking cops and prosecutors with fighting a more limited number of crimes that have actual victims. Like, you know, shoplifting.

But New York politicians do love their press conferences, their ribbon cuttings, their weekly spots on local broadcast media, each of which is a fresh opportunity to announce some new public campaign telling individuals and businesses what they should and potentially must do. In this way mayors and governors and police chiefs and health commissioners can generate headlines and give off the impression that they’re doing something about the things that make taxpaying residents grumpy.

These are the personality-driven New York political values that for a century have produced a base level of governing dysfunction only sporadically relieved by competence. Adams was supposed to be a reactive agent against that rotted host, but the best you can say about him so far is that he’s using the same bad tools somewhat better. Until he or his successor or Gov. Kathy Hochul or (God forbid!) a relevant legislature takes a machete to the thicket of mandates that make complying with, let alone enforcing, the law an exercise in randomness and knowing the right people, Gotham will likely continue its greasy skid.

The post Mask On, Mask Off: New York Trying Everything Except Not Telling People What To Do appeared first on Reason.com.

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Wages Are Rising for Low-Skill Workers, Driving Down Poverty and Inequality


Starbucks workers

Income inequality and poverty are falling, thanks to rising wages for workers in low-skill jobs. A lot of low-wage work is, in fact, becoming middle-wage work.

The shift stems—at least in part—from low unemployment, which means companies of all sorts must compete harder for workers. And they’re doing that by offering things like higher wages, better benefits, and bonuses.

Annie Lowrey detailed this half-decade wage compression in The Atlantic last week:

After a brutal few decades in which low-wage jobs proliferated and the American middle class hollowed out, the working poor have started earning more—a lot more. Many low-wage jobs have become middle-wage jobs. And incomes are increasing faster for poorer workers than for wealthier ones, a dynamic known as wage compression.

As a result, millions of low-income families are experiencing less financial stress and even a modicum of comfort, though the country’s surging rents and rising pace of inflation are burdening them too. The yawning gaps between different groups of American workers—Black and white, young and old, those without a college degree and those with one—have stopped widening and started narrowing. Measures of poverty and income inequality are dropping.

I hesitate to call this the “Great Compression,” given that earnings disparities remain a dominant feature of the American labor market and American life. (Plus, economists already use that term to refer to the middle of the 20th century.) But it really is a remarkable trend, a half-decade-old “Little Compression” that policy makers should do everything in their power to extend, expand, and turn great.

Alas, Lowrey sees a role for much government intervention to extend this trend.

Meanwhile, her colleague Conor Friedersdorf offers a more market-friendly solution to making life easier for lower-wage workers:

What’s needed next is enough new construction of houses, condos, and apartment buildings to bring costs down. All we have to do is stop preventing real-estate developers from erecting them.

The New York Times also took a look at poverty this week—albeit through a much less hopeful lens.

In “Why Poverty Persists in America,” sociologist Matthew Desmond noted that progressives today often blame poverty on cuts to government spending on anti-poverty programs since the Reagan era. But this is a myth:

Throughout Reagan’s eight years as president, anti-poverty spending grew, and it continued to grow after he left office. Spending on the nation’s 13 largest means-tested programs — aid reserved for Americans who fall below a certain income level — went from $1,015 a person the year Reagan was elected president to $3,419 a person one year into Donald Trump’s administration, a 237 percent increase.

Much of this increase was on account of health care spending. But excluding Medicaid spending from the equation still yields a 130 percent increase in federal anti-poverty programs between 1980 and 2018.

“There is no evidence that the United States has become stingier over time,” wrote Desmond. “The opposite is true.”

One might look at this and conclude that simply throwing more and more money at the problem won’t work. Progressives, meanwhile, will surely decide we just need to spend even more.

In any event, Desmond didn’t suggest the problem is lack of funding for anti-poverty programs, but government using these funds for things unrelated to material well-being. “Arizona has used welfare money to pay for abstinence-only sex education,” he wrote. “Pennsylvania diverted TANF funds to anti-abortion crisis-pregnancy centers. Maine used the money to support a Christian summer camp.”

Again, this calls into question the efficacy of trying to alleviate poverty solely through government-sponsored programs.

Desmond devoted the bulk of his piece to theorizing about the potential role of exploitation in driving poverty. He defined exploitation to include wages that he doesn’t think are sufficient—a situation for which he blamed all the usual left boogeymen, like declining union membership. But in recent years, it’s been market competition more than unions that have driven up wages.

There’s some dispute that Desmond is even measuring poverty right to begin with.

“I was appalled to see a leading scholar of poverty repeat the misleading claim that the poverty rate has not improved in the last 50 yrs in @nytimes,” tweeted Harvard’s Jason Furman. “This is only true if you look at data that ignores most [of] our major anti-poverty programs including the EITC, SNAP and more.”

This brings us to the question of what it means to truly alleviate poverty.

“Jason, I agree that broader measures show improvement in poverty. But this is almost all due to higher gov’t transfers to low-income people, rather than an increase in their earned income,” Jon Baron, the founder of the Coalition for Evidence-Based Policy, responded to Furman on Twitter. “We’re alleviating econ hardship but not breaking the poverty cycle.”

Increasing spending during the pandemic temporarily pulled more people above the poverty line, on paper. But poverty rates went up again when stimulus payments and extra unemployment benefits were taken away. Simply giving people cash might help with short-term needs but it doesn’t constitute sound help in the long run.

This is why the data on rising wages for low-skill workers—and its attendant effect on inequality and poverty measures—are so encouraging. Leveraging free markets is a much better way to pull people out of poverty in the long term than making them ever more dependent on the government.

FREE MINDS 

A man in Montreal, Canada, was arrested for giving the middle finger to his neighbors. Police charged him with criminal harassment. Now, a judge has acquitted him—with some strong words about the fact that he was even prosecuted in the first place.

“To be abundantly clear, it is not a crime to give someone the finger,” Quebec court Judge Dennis Galiatsatos wrote in his decision. “Flipping the proverbial bird is a God-given, Charter-enshrined right that belongs to every red-blooded Canadian. It may not be civil, it may not be polite, it may not be gentlemanly. Nevertheless, it does not trigger criminal liability.”

“In the specific circumstances of this case, the Court is inclined to actually take the file and throw it out the window, which is the only way to adequately express my bewilderment with the fact that Mr. Epstein was subjected to an arrest and a fulsome criminal prosecution,” Galiatsatos added.

FREE MARKETS 

“The administrative state is where most of the abuse in government is these days,” suggests The Wall Street Journal Editorial Board in a piece condemning Federal Trade Commission (FTC) overreach—and those who would give the agency even more power.

Republicans have been angry with the FTC lately over intrusion into Twitter’s affairs. But during the Trump administration, many were itching to grant the FTC even more authority. (One wishes this would serve as a lesson to the GOP, but alas, both parties seem ever content to expand government power when they’re in office and then complain about this expanded power when they’re not.)

QUICK HITS 

• Is a proposed Food and Drug Administration rule about what products can be labeled “healthy” a violation of the First Amendment? That’s what General Mills, Kellogg’s, and Post Consumer Brands are arguing. “If finalized in its present form,” the rule “would be open to legal challenge in that it violates the First Amendment by prohibiting truthful, non-misleading claims in an unjustified manner and also exceeds FDA’s statutory authority in several ways,” they say.

• Massachusetts’ tobacco ban went about as badly as you’d expect.

• Fewer people are going to college—and that could be a good thing, writes Reason‘s Emma Camp.

• The Electronic Frontier Foundation, the Knight First Amendment Institute, and the Social Justice Legal Foundation are suing over a California county jail’s policy of digitizing mail sent to incarcerated people and destroying the physical copies.

The post Wages Are Rising for Low-Skill Workers, Driving Down Poverty and Inequality appeared first on Reason.com.

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Yikes. The Fed has still learned nothing about inflation

Last June, during the European Central Bank forum, the host asked the chairman of the Federal Reserve about inflation.

The Fed Chairman responded, “I think we now understand better how little we understand about inflation.”

“Uh, that’s not very reassuring,” the host chuckled.

Talk about an under statement. It’s downright terrifying.

This is the Fed Chairman— the High Priest of finance— who has the power to control virtually everything in the economy.

He can conjure trillions of dollars out of thin air practically at will, raise and lower interest rates, push businesses and banks into bankruptcy, and cause people to lose their jobs.

And here he is acknowledging that they didn’t have a clue about inflation.

Thank goodness that was 8 months ago! Certainly by now they’ve really learned everything they need to know.

Wrong. They still don’t have a clue.

This week Fed officials have been busy giving speeches in advance of their interest rate policy meeting later this month.

And they keep complaining that the unemployment rate is too low. Too many people have jobs!!

The Fed is trying to put more people out of work… under the assumption that if more people are unemployed, there will be less spending in the economy, and therefore inflation will fall.

But this is such idiotic thinking.

They may very well be successful in pushing millions of people into the unemployment line.

But everybody knows that as soon as this happens, the government will step in and bail those people out with generous unemployment benefits.

Think about it— the government did this in the 2008 recession, doling out luxurious unemployment benefits that lasted for YEARS.

And during COVID they paid people to NOT work and stay home.

So it’s practically a given that the government will dish out fresh new benefits to newly unemployed workers.

And where will the government get all that money from to pay unemployment benefits? From the FED! Duh. How do these Fed officials not understand this?!?!?

Another thing the Fed has totally missed is the ‘quality’ of the employment numbers. They fret that there’s too much job growth in the US— because they’re just looking at the QUANTITY.

But if you take even a casual look beyond the headline numbers, you’ll see that most of the job growth is for waiters and bartenders. The US labor market doesn’t have red hot job growth for software engineers, biomedical researchers, or senior investment analysts.

America is essentially becoming a bartender economy now.

This is going on in front of their very eyes, but the Fed can’t see it.

If you look at the official minutes and records from the Fed’s policy meetings, you can see what they actually discuss… and it becomes even more obvious they still don’t understand inflation.

They STILL blame inflation on Putin and the evil virus.

There is ZERO discussion about how the government destroyed the economy and labor market with lockdowns, or how oil companies are being chased out of town (leading to higher energy prices), or all the idiotic new rules penned by the woke capitalism mob.

And of course there’s zero discussion about the Fed’s own role in slashing interest rates to zero (and keeping them there for the better part of a decade), or printing more than $8 trillion since the 2008 recession.

There’s no discussion of the $31+ trillion government debt, or last year’s $4 trillion deficit, or the impact of idiotic legislation like the poorly named “Inflation Reduction Act”.

Ultimately they consistnetly prove that the people in charge of managing the US dollar have still learned absolutely nothing.

When you think about it, that goes for nearly every major institution.

The White House appears to have learned nothing, the media has learned nothing, the high priests of climate change have learned nothing.

The good news though, is that everyone else— who feel the impact of these destructive policies— is learning very quickly.

And people are finally starting to declare independence from the expert class.

This is the topic of our podcast today.

We start by going back in time more than 500 years ago to another period in history when people were under the thumb of the expert class… which routinely proved itself tone deaf and out of touch.

But a revolution took place. Historians call it the Reformation, and people stood up and declared their own independence from the expert class.

This is one of the reasons why I remain so optimistic… because it was from this independence movement that we saw the Age of Enlightenment, the Scientific Revolution, and more.

I think we’re on the cusp of a new movement… and one that will unfold MUCH faster.

Scientists have already successfully conducted nuclear fusion experiments, the most recent was back in December. It’s no longer a pipedream.

And just earlier this week, a group of researchers claimed they had created a superconductor that works at near-ambient temperature.

This is just the tip of the iceberg. There are real advances that are taking place which can actually solve so many of the problems that the political and media elite have gotten us into.

And in many ways, as more and more people realize this, it’s almost like we’re entering a New Reformation.

You can listen here.

Source

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California’s K9 Reform Bill Is Barking Up the Wrong Tree


Police dog K9 California state legislature criminal justice reform policing reform cops dogs

A new California bill that forbids police from using canines for crowd control or to apprehend suspects has generated an unusually large amount of attention given its likely slim possibilities of passage. But it strikes me as a case study about why the Legislature so rarely accomplishes anything of substance.

“The use of police canines has been a mainstay in the constant dehumanizing, cruel abuse of Black Americans and people of color,” according to the bill. “(P)olice canines are a carryover from a dark past.” That’s undoubtedly true, but instead of dealing with an ongoing problem in a targeted way, the bill’s authors seem intent on making a broader ideological point.

That’s given opponents of Assembly Bill 742 (by Assembly members Corey Jackson, D-Riverside, and Ash Kalra, D-San Jose) the opportunity to portray the measure as typical Capitol lunacy. Depicting the bill as “the latest woke hysteria,” conservative writer Rob Smith argued in a column that “the reality is that DOGS—no matter what Leftist activists will try to make you believe—CANNOT be racist.”

More rationally, Fresno Police Chief Paco Balderrama argued that, “strong accountability already exists in most law enforcement agencies that do not allow for the use of K9s in low-level arrests, non-violent arrests, or for crowd control.” That rebuttal focuses on the real question: Are police agencies using their dogs in a responsible manner? In 2020, the Police Executive Research Forum released a detailed report offering guidance for canine units.

In 2013, I reported on a court case involving Sacramento police who were chasing a suspect who hid in a tree in an innocent family’s backyard and released the dog. As I wrote, “Police dogs are trained to bite and hold suspects, but they can’t distinguish between law-abiding citizens relaxing with friends and police suspects. So Bandit attacked the first person it saw.”

Instead of instituting reforms, the department argued that “‘officer safety’ would be endangered by requiring a reasonable warning before releasing a police dog on private property.” Balderrama is no doubt correct that Fresno police dogs have a bite ratio of less than half of one percent, but the Sacramento incident doesn’t instill confidence.

The bill’s sponsor, ACLU California Action, notes, “police dogs seriously injured 186 people within the last two years—more than batons or tasers. Many of these injuries were accidental and some resulted in death or permanent disfigurement.” That’s a significant enough problem to warrant a bill that carefully limits procedures for deploying dogs.

Last year, the city of Sacramento paid a $175,000 settlement to a family because of a 2019 incident in which a dog attacked a man in his home, causing him neurological damage. Police knocked on the family’s door asking to search their backyard for a fleeing suspect. A family member gave officers access to the yard through the garage, according to the Sacramento Bee.

But an officer “allowed his police K9 to enter the house without permission or warning,” and then bit a man sitting at his computer. Dogs aren’t racist, as Smith concluded, but they can inflict harm if used improperly. This issue isn’t primarily about race, but proper police procedures.

Instead of a broad ban and incendiary language, the legislation should impose strict restrictions on the use of canines—and expand the liability of departments that might disregard the public’s safety. Dogs can, as the Fresno chief added, “de-escalate most use-of-force incidents,” but these incidents show they can also turn routine encounters into dangerous ones.

Unfortunately, AB 742 doesn’t even address one of the main problems with the police use of dogs. As the bill language explains, “This section shall not be interpreted as to prevent the use of police canines by law enforcement for purposes of search and rescue, explosives detection, and narcotics detection that do not involve biting.”

Dogs certainly are useful for search and rescue operations and explosives detection, so those exemptions are important. But dogs have a sketchy history when it comes to drug detection. There’s a reason police canines are known as “barking probable cause.” Their sniffs give officers carte blanche to search people for drugs, yet studies suggest their drug sniffing is inaccurate 50 percent to 75 percent of the time. Why not just flip a coin instead?

Reason magazine reported in 2018 on a Washington state police canine named Karma who “gave an ‘alert’ indicating the presence of drugs 100 percent of the time during roadside sniffs outside vehicles.” Often, police use these highly inaccurate alerts to confiscate people’s cars and cash under civil asset-forfeiture laws that allow property takings without due process or securing a conviction for any crime.

So the issue of police dogs is a legitimate one, but if Jackson and Kalra want to be taken seriously they need to focus on the real problems and not just use the legislation as an opportunity to posture.

This column was first published in The Orange County Register.

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Watch: Fauci Defends Gain-of-Function, Mocks Lab Leak Censorship

Watch: Fauci Defends Gain-of-Function, Mocks Lab Leak Censorship

Authored by Steve Watson via Summit News,

In a remarkable interview Thursday, Anthony Fauci had the gall to defend dangerous gain of function research, which in all likelihood was the direct cause of the COVID pandemic, and mocked the idea that a lab leak is being covered up.

Screenshot

Appearing on Fox News, Fauci told anchor Neil Cavuto “If you shut off all gain of function research. Did you get the flu shot this year, Neil? If you did, and you got it from an influenza vaccine, that was gain-of-function that made that influenza vaccine. That’s what people don’t understand.”

Fauci twice suggested that he should be “taken out of this,” reasoning that “I’m a charged person,” and went on to argue the case for gain of function research, which makes pathogens more deadly.

“The whole scientific community feels that you have to have some degree of being able to manipulate organisms,” Fauci claimed, adding “When you do it, you have to do it carefully and under very controlled conditions.”

All the while, Fauci was again careful not to define exactly what gain of function is, having previously changed the definition to cover his own culpability.

When asked if the research serves any value, Fauci stated “It depends on what your definition of gain of function is,” going on to say “Look at a whole array of virologists and scientists who do research that is absolutely critical for the health of the country. Some of that involves manipulating organisms. You want to call it gain of function. It really is not, in many respects, but it needs to be very well-regulated.”

Fauci also mocked the idea that discussion of a potential Wuhan coronavirus lab leak was dismissed and suppressed, after Jim Jordan, the chairman of the House Judiciary Committee, suggested that Fauci bribed scientists into silence on the matter with a $9 million grant.

Jordan was referring to testimony earlier this month by Dr. Marty Makary, a professor at Johns Hopkins, who charged that two scientists who believed that COVID-19 leaked from a lab changed their minds after receiving the $9 million grant from Fauci.

“I almost have to laugh at that, Neil. That’s totally bizarre,” Fauci responded, going on to explain “First of all, I wasn’t leaning totally strongly one way or the other. I’ve always kept an open mind. As the data evolved and evolutionary virologists looked at the data, it looked more likely it was a natural occurrence from an animal reservoir.”

“I have always kept a completely open mind that it could be one or the other. Quite frankly, the evidence weighs more likely towards one, namely a natural occurrence,” Fauci claimed.

“The other absolutely preposterous thing that Jim Jordan said was that we gave the investigators $9 million bribe to change their mind. Is he kidding me?” Fauci further stated.

He continued, “They put in a grant about a year and a half before this all happened. The grant was reviewed by a peer review and put before an independent council and approved before the meeting even took place.”

“So to assume that they were getting a $9 million grant because of the fact that we tried to get them to change their mind is beyond ludicrous. Beyond ludicrous,” Fauci asserted.

Earlier this week, Senator Rand Paul accused Fauci, along with other scientists working with him at the National Institutes Of Health of engaging in an “elaborate cover-up” of the lab origin of the coronavirus pandemic in order to hide their own involvement.

Tyler Durden
Fri, 03/10/2023 – 09:41

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Archrivals Iran & Saudi Arabia Restore Ties In China-Brokered Deal

Archrivals Iran & Saudi Arabia Restore Ties In China-Brokered Deal

Iran and Saudi Arabia announced that the two longtime rivals and enemies are restoring diplomatic relations following years of tensions, which involved each side charging the other with state-sponsored terrorism. Crucially, China helped see the deal through and hosted meetings of the two sides in Beijing.

NBC describes that “The deal, which will see the two countries reopen embassies in each other’s capitals, was sealed during a meeting in China — a boost to Beijing’s efforts to rival the United States as a broker on the global stage.” Indeed this is the message China is quick to emphasize:

SAUDI ARABIA, IRAN TALK IN BEIJING IS VICTORY OF PEACE: WANG YI

A joint communique confirming the restoration of relations from was issued by Riyadh, Tehran, and Beijing – and was first published in state-run Saudi Press Agency (SPA). The statement emphasizes “a shared desire to resolve the disagreements between them through dialogue and diplomacy, and in light of their brotherly ties.”

It spells out that the next step is for foreign ministers from both countries to “meet to implement this, arrange for the return of their ambassadors, and discuss means of enhancing bilateral relations.”

Representing the Iranian side in the Beijing talks was Ali Shamkhani, a close adviser to Iran’s supreme leader Ayatollah Ali Khameni. On the other side was Saudi Arabia’s Minister of State Musaad bin Mohammed Al-Aiban, with the two engaging in intense negotiations.

Not only has the regional rivalry, which intensified most during the decade of the proxy war in Syria which began in 2011, been set amid a centuries-long divide over correct interpretation of Islam (Shia Iran vs. Sunni Saudi Arabia), but it has also spilled over in places like Yemen, scene of another grinding proxy war which pit Shia rebels against a Saudi-backed government. 

The Saudis and Iranians also clash in supporting rival political factions inside Lebanon, with Tehran being the Shia paramilitary group Hezbollah’s biggest backer. For these reasons, accusations of supporting terrorism have been frequently hurled back-and-forth over the years. Iranian state media, for example, has long charged the Saudis with being a prime covert backer of the Islamic State (ISIS) in their drive to overthrow President Assad in Syria. 

The detente is also a surprise given the warming relations between Saudi Arabia and Israel, based on attempts to bring Riyadh into the Abraham Accords. Very likely, this new agreement which was helped along by China will delay any possibility of the Saudis and Israelis establishing official relations on an accelerated timeline.

* * *

Below is the official joint communique:

Riyadh, March 10, 2023, SPA — In response to the noble initiative of His Excellency President Xi Jinping, President of the People’s Republic of China, of China’s support for developing good neighborly relations between the Kingdom of Saudi Arabia and the Islamic Republic of Iran;

And based on the agreement between His Excellency President Xi Jinping and the leaderships in the Kingdom of Saudi Arabia, and the Islamic Republic of Iran, whereby the People’s Republic of China would host and sponsor talks between the Kingdom of Saudi Arabia and the Islamic Republic of Iran;
Proceeding from their shared desire to resolve the disagreements between them through dialogue and diplomacy, and in light of their brotherly ties;

Adhering to the principles and objectives of Charters of the United Nations and the Organization of Islamic Cooperation (OIC), and International conventions and norms;

The delegations from the two countries held talks during the period 6-10 March 2023 in Beijing – the delegation of the Kingdom of Saudi Arabia headed by His Excellency Dr. Musaad bin Mohammed Al-Aiban, Minister of State, Member of the Council of Ministers, and National Security Advisor, and the delegation of the Islamic Republic of Iran headed by His Excellency Admiral Ali Shamkhani, Secretary of the Supreme National Security Council of the Islamic Republic of Iran.

The Saudi and Iranian sides expressed their appreciation and gratitude to the Republic of Iraq and the Sultanate of Oman for hosting rounds of dialogue that took place between both sides during the years 2021-2022. The two sides also expressed their appreciation and gratitude to the leadership and government of the People’s Republic of China for hosting and sponsoring the talks, and the efforts it placed towards its success.

The three countries announce that an agreement has been reached between the Kingdom of Saudi Arabia and the Islamic Republic of Iran, that includes an agreement to resume diplomatic relations between them and re-open their embassies and missions within a period not exceeding two months, and the agreement includes their affirmation of the respect for the sovereignty of states and the non-interference in internal affairs of states. They also agreed that the ministers of foreign affairs of both countries shall meet to implement this, arrange for the return of their ambassadors, and discuss means of enhancing bilateral relations. They also agreed to implement the Security Cooperation Agreement between them, which was signed on 22/1/1422 (H), corresponding to 17/4/2001, and the General Agreement for Cooperation in the Fields of Economy, Trade, Investment, Technology, Science, Culture, Sports, and Youth, which was signed on 2/2/1419 (H), corresponding to 27/5/1998.

The three countries expressed their keenness to exert all efforts towards enhancing regional and international peace and security.

Issued in Beijing on 10 March 2023.
For the Islamic Republic of Iran
Ali Shamkhani
For the Kingdom of Saudi Arabia
Musaad bin Mohammed Al-Aiban
Minister of State, Member of the Council of Ministers, and National Security Advisor
For the People’s Republic of China
Wang Yi
Member of the Political Bureau of the Communist Party of China (CPC) Central Committee and Director of the Foreign Affairs Commission of the CPC Central Committee
–SPA

Tyler Durden
Fri, 03/10/2023 – 09:16

via ZeroHedge News https://ift.tt/t7OPLKU Tyler Durden

S&L Crisis 2.0? Uncle Sam’s Short-Term 5% UST Is Sucking Capital Out Of Banks

S&L Crisis 2.0? Uncle Sam’s Short-Term 5% UST Is Sucking Capital Out Of Banks

Excerpted from Larry McDonald’s ‘The Bear Traps Report’,

Wall Street Banks just spent the last four weeks selling investors on a soft – NO landing scenario — There are rare moments of social risk awareness in markets where everyone is huddled on the wrong side of the boat, and when the migration starts, the broad belief system flips and the swing can be very violent. We are here NOW…

Back to the Future

It´s a lot more like the late 80s (S&L Crisis), than 2008.

Most of the risk is spread out across hundreds of regional banks. Tertiary financials — like ALLY above — are important leading indicators. At 19x earnings, now… most of us can see an air pocket of the face of the S&P 500, hello 13x, next stop.

Available-For-Sale Securities

AFS is the term of the day – On the balance sheets of the regional – KRE Banks – there are hundreds of billions of dollars of AFS — “available for sale securities” — (US Treasuries, mortgage-backed securities, and high-quality investment grade corporate bonds).

For YEARS these assets NEVER had to be marketed to market — they NEVER MOVED in price. Regional bank executives look more like your local — overweight car salesman than Wall St. risk managers.

They are sitting on hundreds of billions of dollars of assets that FOR DECADES NEVER moved in price.

Now you have a US 2-year treasury near 5% vs. 3% in August — there is an elevator shift drop in prices here, NOT marked to market at the banks.

We are told the macro-prudential risk crowd inside the NY Fed has been annoyed that FCIs (financial conditions) have NOT tightened all that much considering 5% front-end rates (tightening FCIs act like a fire hose on an inflation fire). We are hearing, the NY Fed (with the FDIC and OCC) is now forcing the regional banks to mark their collection of toys to market.

If you include HELOC, Auto loans, Commercial real estate, and MBS – the losses must be $1T across the regional banking ecosystem. Raising rates 500bps in 14 months comes with a price, it´s NOT free.

The brainless lunacy of Wall Street “economists” calling for a soft – NO landing with this kind of interest rate risk turning into credit risk – BLOWS ONE’s MIND!!!

***To make matters worse, Tbills at 5% are sucking billions a day out of regional banks…

Deposit Beta

Again, for decades — the “Deposit Beta” moved at 5mph, now 100mph. Regional Bankers are slow-moving, local — sleepy fellows. As the Fed has juiced front-end rates, regional banks have NOT adjusted their bank deposit yields to keep up!

Precious capital is running out to the banks faster than a LA Lakers full-court press.

Some banks are being forced to liquidate AFS securities and sell stock to raise cash urgently with a massive dilutive impact.

Stay tuned.

S&L Crisis 2.0

Nasdaq banks weekly chart. Just a jaw-dropping disaster. Sliced through key support at the 200-week moving average (yellow line) like it wasn’t even there. VERY pre-crashy.

As one NY PM told McDonald: “Banks have been very quiet about these risks for months.”

What SIVB is telling us:

1) deposit data – run off zero cost deposits – deposits flight, run on deposits, deposit beta much faster, Uncle Sam’s short term 5% UST is sucking capital out of banks!!!!!!!!!!!!

2) interest rate risk – mark to market available for sale securities, funding mismatch, bottom line fed hiking 500bps in 14 months is showing UP HERE!!!!!!!!!!!!

“Maybe that whole zero interest rate and QE thing wasn’t such a good idea..,” exclaimed another NY PM.

Breaking “news”: 500bps in 14 months comes with a price, it´s NOT free — Anything can happen, but when the banking sector breaks down like this, it usually last more than a day – like weeks or months. The Fed MUST be getting hysterical calls. They are aware. Just like a deer in headlights is aware before it is killed by a truck.

Memories of Non-Liquidity

“Our liquidity position is strong, we are adequately capitalized.”

– Alan Schwartz, Bear Stearns, March 2008

McDonald ends with a very aggressive forecast: We think the Fed cuts rates 100bps by September.

We can only imagine the level of market stress required for that to come to pass. Brace!

“Black Monday?” — PM NY

Tyler Durden
Fri, 03/10/2023 – 09:00

via ZeroHedge News https://ift.tt/wexlS20 Tyler Durden

February Payrolls Come In Hot At 311K – Record 10th Beat In A Row – But Unemployment Rate Unexpectedly Rises

February Payrolls Come In Hot At 311K – Record 10th Beat In A Row – But Unemployment Rate Unexpectedly Rises

If the already jittery market needed another reason to be very confused today, it got it moments ago when the BLS reported February jobs data and which -on one hand – came in hotter than expected at the headline level, with some 311K jobs reportedly created in February, which while was a drop from last month’s downward revised 504K, was well above the 225K consensus and was also above the whisper number of 250K.

The change in total nonfarm payroll employment for December was revised down by 21,000, from +260,000 to +239,000, and the change for January was revised down by 13,000, from +517,000 to +504,000. With these revisions, employment gains in December and January combined were 34,000 lower than previously reported.

Putting this number in context, this was a record 10th consecutive beat to consensus expectations.

But while the headline payroll number was hotter than expected – driven mostly by retail workers and waiters – the not so good data come from the unemployment rate, which unexpectedly jumped from 3.4% to 3.6%, and above the 3.4% consensus estimate as the number of unemployed workers jumped from 5.694MM to 5.936MM, more than the number of Employed workers (which increased from 160.138MM to 160.315MM), while the labor force increased by 1.7 million workers in the past 3 months.

Among the major worker groups, the unemployment rate for Hispanics (5.3 percent) increased in February. The unemployment rates for adult men (3.3 percent), adult women (3.2 percent), teenagers (11.1 percent), Whites (3.2 percent), Blacks (5.7 percent), and Asians (3.4 percent) changed little over the month.

The underemployment rate also rose modestly, from 62.4% to 62.5%.

Elsewhere, the infamous Birth-Death adjustments added 176K, vs a decline of -144K in Jan; there’s half the modeled gain.

There was also some relief in wage growth, as average hourly earnings rose 0.2% M/M, down from 0.3% in January and below the 0.3% consensus estimate. This translated to a 4.6% increase YoY, which was also below the 4.7% consensus estimate (largely due to a base effect).

The increase may also be due to a decline in the denominator: average weekly hours worked dropped from 34.6 to 34.5.


Some more details from the report:

  • The number of job losers and persons who completed temporary jobs increased by 223,000 in February to 2.8 million.
  • The number of persons jobless less than 5 weeks increased by 343,000 to 2.3 million in February, offsetting a decrease in the prior month. The number of long-term unemployed (those jobless for 27 weeks or more), at 1.1 million, changed little in February and accounted for 17.6 percent of the total unemployed.
  • In February, the labor force participation rate was little changed at 62.5 percent, and the employment-population ratio held at 60.2 percent. These measures have shown little net change since early 2022 and remain below their pre-pandemic February 2020 levels (63.3 percent and 61.1 percent, respectively).
  • The number of persons employed part time for economic reasons, at 4.1 million, was essentially unchanged in February. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs.
  • The number of persons not in the labor force who currently want a job was little changed at 5.1 million in February. These individuals were not counted as unemployed because they were not actively looking for work during the 4 weeks preceding the survey or were unavailable to take a job.
  • Among those not in the labor force who wanted a job, the number of persons marginally attached to the labor force was little changed at 1.4 million in February. These individuals wanted and were available for work and had looked for a job sometime in the prior 12 months but had not looked for work in the 4 weeks preceding the survey. The number of discouraged workers, a subset of the marginally attached who believed that no jobs were available for them, also changed little over the month at 363,000.

Drilling deeper into the Establishment report, we find the following details:

  • Leisure and hospitality added 105,000 jobs in February, similar to the average monthly gain of 91,000 over the prior 6 months. Food services and drinking places added 70,000 jobs in February, and employment continued to trend up in accommodation (+14,000).
  • Employment in retail trade rose by 50,000 in February, reflecting a gain in general merchandise retailers (+39,000). Retail trade employment is little changed on net over the year.
  • Government employment increased by 46,000 in February, about the same as the average monthly gain of 44,000 over the prior 6 months. Employment in local government continued to trend up in February (+37,000).
  • Employment in professional and business services continued to trend up in February (+45,000), with a gain of 12,000 in management, scientific, and technical consulting services.
  • Health care added 44,000 jobs in February, compared with the average monthly increase of 54,000 over the prior 6 months. In February, job growth occurred in hospitals (+19,000) and in nursing and residential care facilities (+14,000).
  • Construction employment grew by 24,000 in February, in line with the average monthly growth of 20,000 over the prior 6 months.
  • Employment in social assistance rose by 19,000 in February, similar to the average monthly gain of 22,000 over the prior 6 months.
  • In February, the information industry lost 25,000 jobs. Employment continued to trend down in motion picture and sound recording industries (-9,000) and in telecommunications (-3,000). Employment in information has decreased by 54,000 since November 2022.
  • Transportation and warehousing lost 22,000 jobs in February, including 9,000 in truck transportation. Employment in transportation and warehousing is down by 42,000 since October 2022.

Of the above, perhaps most notable is that manufacturing employment lost jobs for the first time since April 2021.

So what to make of this data, and why are stocks higher after kneejerking lower initially?

Bloomberg’s chief US economist Anna Wong says that “February’s extremely strong jobs report exceeded expectations — and, following January’s blowout report,  means the Fed will likely follow through with Powell’s statement in his semiannual congressional testimony about accelerating the pace of rate hikes. That said, there are some signs of weakening in the print — Hours worked slowed, and average hourly earnings cooled faster than expected – that are consistent with our read that the labor market is softening. Still, with inflation elevated, the Fed will have to take the data in this report at face value. We have upgraded our baseline to a 50-basis-point hike at the March FOMC meeting.”

According to TD Securities’ strategist Priya Misra, one of the reasons the market is sharply higher is because it is reacting to average hourly earnings coming in weaker than forecast:

“I guess it lowers pressure on the Fed to go 50bp but the labor market is still strong and wages are running at 4.6% (far greater than the 3.5% that the Fed needs). The Fed will not stop hiking until they see the labor market weaken so we think that the 2s10s curve should flatten. We should see the market keeping some risks of a 50bp hike in March. Not a bad report for risk assets but financials loom larger. We stay long 10s here.”

Here, however, KPMG chief economist Diane Swonk countered “don’t get so excited about the slowdown in earnings” as the payroll gain as more important. “This keeps a half-point hike on the table because of the sheer volume of paychecks that we’re generating, which is buoying demand. At the end of the day what the Fed is worried about is how strong demand is relative to supply. The issue is not wages; it’s aggregate demand. And this is feeding into aggregate demand, which is buoying inflation.”

According to Omair Sharif, founder of Inflation Insights, today’s report is “just what the Fed ordered.”

“This report screams soft landing and looks to be a pretty good one for the Fed.”

If only the US banking sector were screaming the same…

Tyler Durden
Fri, 03/10/2023 – 08:49

via ZeroHedge News https://ift.tt/E8sgpf9 Tyler Durden

Silicon Valley Bank Capital-Raise Failed, Deposit-Outflows Outpacing Sales Process; Report

Silicon Valley Bank Capital-Raise Failed, Deposit-Outflows Outpacing Sales Process; Report

Update (0900ET): CNBC’s David Faber reports that SVB has sought an adviser to find a buyer after attempts to raise capital have failed. However, Faber added that deposit outflows are outpacing any efforts to find a buyer…

Meanwhile, we’ve seen this playbook before…

* * *

Trading in Silicon Valley Bank shares has been halted for news pending after they plunged another 65% overnight after numerous icon VCs recommended clients pull cash from the struggling regional bank…

Perhaps more problematically, SVB’s bonds (1.8s of 2031) are collapsing…

Bonds are extending losses after the stock was halted…

SVB Financial Group Chief Executive Officer Greg Becker held a conference call on Thursday advising clients of SVB-owned Silicon Valley Bank to “stay calm” amid concern about the bank’s financial position, according to a person familiar with the matter.

But a large number of VCs have suggested pulling cash sooner rather than later.

“This is a classic bank run, and when the bank run starts you don’t want to be the last guy there,” Ava Labs President John Wu said in an interview with Bloomberg Television.

However, some VCs said they were standing by the bank.

“It is truly unfortunate that several GPs and companies are making a tough situation for SVB worse by pressing the panic button,” said G Squared founder Larry Aschebrook.

“SVB has supported entrepreneurs and GPs at all stages of their businesses and that partnership should run both ways.”

“We’ll have to see how this story develops but something always breaks hard during or after a Fed hiking cycle,” said Jim Reid, a strategist at Deutsche Bank AG.

“Is this another mini wobble on this front or the start of something bigger?”

Michael ‘Big Short’ Burry also weighed in on Silicon Valley Bank last night.

“It is possible today we found our Enron,” the ‘Big Short’ investor said Thursday in a now-deleted Tweet

The Treasury Department is monitoring Silicon Valley Bank “very carefully,” White House Economic Advisor Bharat Ramamurti tells CNBC.

“I don’t want to say more than that right now, but I want to assure the viewers that this is something we are on top of,” he says, while adding that this is a “highly fluid situation”

Developing…

Tyler Durden
Fri, 03/10/2023 – 08:40

via ZeroHedge News https://ift.tt/DAwVmyY Tyler Durden