Month: June 2023

In a BBC News interview in April, Elon Musk said Twitter is now “roughly breaking even,” and most advertisers have returned. However, The New York Times said they obtained the social media’s internal weekly sales projections presentation that allegedly showed a sharp decline. 

NYT said Twitter’s US advertising revenue for the five weeks from April 1 through the first week of May was $88 million, down 59% versus the same period a year ago. The report noted weekly sales projections were frequently missed by as much as 30%. 

Adding more gloom, NYT spoke with seven current and former Twitter employees. Here’s a summary of what they said:

Twitter’s ad sales staff is concerned that advertisers may be spooked by a rise in hate speech and pornography on the social network, as well as more ads featuring online gambling and marijuana products, the people said. 

For June, the internal forecast shows that advertisers are reducing ad spend or have left entirely. The forecast shows that ad spending each week of this month will be halved versus figures last year.

That may be why Musk decided to bring on NBCUniversal’s head of advertising, Linda Yaccarino, last month as CEO to restore confidence in the platform among advertisers. 

NYT spoke with Jason Kint, chief executive of Digital Content Next, an association for premium publishers, who said Twitter is “unpredictable and chaotic.” He added: “Advertisers want to run in an environment where they are comfortable and can send a signal about their brand.” 

And this likely points to why Musk made the move to bring on Yaccarino. She could smooth out concerns among some of the social media’s largest advertisers — Apple, Amazon, and Disney — who, according to three former and current Twitter employees, have been spending less. 

And it’s not just about restoring confidence for mega-corporations. Advertisers, in general, have reduced spending on the social media platform due to “Musk’s changes to the service, inconsistent support from Twitter and concerns about the persistent presence of misleading and toxic content on the platform,” NYT said. 

Meanwhile, Fidelity was compelled last week to announce that it slashed Twitter’s valuation to just $15 billion, about a third of the $44 billion Musk paid in October. 

If the NYT report is accurate, it makes sense why Musk brought on Yaccarino to re-establish trust in the platform among advertisers. 

Authored by Charles Hugh Smith via OfTwoMinds blog,

By this terminal stage, the competent have been driven out, quit or burned out.

What happens with the competent retire, burn out or opt out? It’s a question few bother to ask because the base assumption is that there is an essentially limitless pool of competent people who can be tapped or trained to replace those who retire, burn out or opt out, i.e. quit in favor of a lifestyle that doesn’t require much in the way of income or stress.

These assumptions are no longer valid. A great many essential services that are tightly bound to other essential services are cracking as the competent decide (or realize) they’re done with the rat-race.

The drivers of the Competent Opting Out are obvious yet difficult to quantify. Those retiring, burning out and opting out will deny they’re leaving for these reasons because it’s not politic to be so honest and direct. They will offer time-honored dodges such as “pursue other opportunities” or “family obligations.”

1. The steady increase in workloads, paperwork, compliance and make-work (i.e. work that has nothing to do with the institution’s actual purpose and mission) that lead to burnout. There is only so much we can accomplish, and if we’re burdened with ever-increasing demands for paperwork, compliance, useless meetings, training sessions, etc., then we no longer have the time or energy to perform our productive work.

I wrote a short book on my experience of Burnout. I believe it is increasingly common in jobs that demand responsibility and accountability yet don’t provide the tools and time to fulfill these demands. Once you’ve burned out, you cannot continue. That option no longer exists.

For others, the meager rewards simply aren’t worth the sacrifices required. The theme song playing in the background is the Johnny Paycheck classic Take this job and shove it.

Healthcare workloads, paperwork and compliance are one example of many. Failure to complete all the make-work can have dire consequences, so it becomes necessary to do less “real work” in order to complete all the work that has little or nothing to do with actual patient care. Alternatively, the workload expands to the point that it breaks the competent and they leave.

2. Loss of autonomy, control, belonging, rewards, accomplishment and fairness. Professor Christina Malasch pioneered research on the causes of burnout, which can be summarized as any work environment that reduces autonomy, control, belonging, rewards, accomplishment and fairness. Despite a near-infinite avalanche of corporate happy-talk (“we’re all family,”–oh, barf) this describes a great many work environments in the US: in a word, depersonalized. Everyone is a replaceable cog in a great impersonal machine optimized to maximize profits for shareholders.

3. The politicization of the work environment. Let’s begin by distinguishing between policies enforcing equal opportunity, pay, standards and accountability, policies required to fulfill the legal promises embedded in the nation’s social contract, and politicization, which demands allegiance and declarations of loyalty to political ideologies that have nothing to do with the work being done or the standards of accountability necessary to the operation of the complex institution or enterprise.

The problem with politicization is that it is 1) intrinsically inauthentic and 2) it substitutes the ideologically pure for the competent. Rigid, top-down hierarchies (including not just Communist regimes but corporations and institutions) demand expressions of fealty (the equivalent of loyalty oaths) and compliance to ideological demands (check the right boxes of party indoctrination, “self-criticism,” “struggle sessions,” etc.).

The correct verbiage and ideological enthusiasm become the basis of advancement rather than accountability to standards of competence. The competent are thus replaced with the politically savvy. Since competence is no longer being selected for, it’s replaced by what is being selected for, political compliance.

It doesn’t matter what flavor of ideological purity holds sway–conservative, progressive, communist or religious–all fatally erode competence by selecting for ideological compliance. Everyone knows the enthusiasm is inauthentic and only for show, but artifice and inauthenticity are perfectly adequate for the politicization taskmasters.

4. The competent must cover for the incompetent. As the competent tire of the artifice and make-work and quit, the remaining competent must work harder to keep everything glued together. Their commitment to high standards and accountability are their undoing, as the slack-masters and incompetent either don’t care (“I’m just here to qualify for my pension”) or they’ve mastered the processes of masking their incompetence, often by blaming the competent or the innocent for their own failings.

This additional workload crushes the remaining competent who then burn out and quit, go on disability or opt out, changing their lifestyle to get by on far less income, work, responsibility and far less exposure to the toxic work environments created by depersonalization, politicization and the elevation of the incompetent.

5. As the competent leadership leaves, the incompetent takes the reins, blind to their own incompetence. It all looked so easy when the competent were at the helm, but reality is a cruel taskmaster, and all the excuses that worked as an underling wear thin once the incompetent are in leadership roles.

By this terminal stage, the competent have been driven out, quit or burned out. There’s only slack-masters and incompetent left, and the toxic work environment has been institutionalized, so no competent individual will even bother applying, much less take a job doomed to burnout and failure.

This is why systems are breaking down before our eyes and why the breakdowns will spread with alarming rapidity due the tightly bound structure of complex systems.

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Authored by Michael Maharrey via SchiffGold.com,

We have a debt ceiling deal.

And the deal is there is functionally no debt ceiling until January 2025.

When this drama all started back in January, I called it “a fake debt ceiling fight.”

Well, the fake debt ceiling fight got us some fake spending cuts!

In effect, the US government can borrow an unlimited amount of money until after the next presidential election.

The plan also includes “spending cuts.” Here’s how the New York Times explained it.

It would cut federal spending by $1.5 trillion over a decade, according to the Congressional Budget Office, by effectively freezing some funding that had been projected to increase next year and then limiting spending to 1 percent growth in 2025, which is considered a cut because it would be at a lower level than inflation.”

House Speaker Kevin McCarthy bragged that this was “the LARGEST SPENDING CUT that Congress has ever voted for in history.”

But when you strip away all of the rhetoric the spending “cuts” in this debt ceiling deal are actually increases in real spending. That means the enormous budget deficits will continue.

The fact that the “largest spending cut” ever is going to increase spending tells you everything you need to know about Washington DC.

And the sad reality is there is no way that the federal government spending will be contained by this deal. The spending limits will last right up to the moment the government comes up with some new emergency to justify more spending.

So, like, next week.

But don’t worry. Congress just handed Uncle Sam a credit card with no limit. He can afford it.

Here’s the ugly truth. Even with these “historic spending cuts,” total spending will still be more than a trillion dollars above where it was in 2019.

And Congress had the gall to name the bill “The Fiscal Responsibility Act of 2023.”

It’s too bad government isn’t held to “truth in advertising” standards.

Keep in mind, we had a big deficit problem long before the pandemic. In FY2019, the Trump administration ran a $984 billion deficit. At the time, it was the fifth-largest deficit in history. Through the first two months of fiscal 2020 — before the pandemic came to America — the deficit was already 12% over 2019’s huge Obama-like number and was on track to eclipse $1 trillion.

So, with this deal, we’re still doing that and then some.

And this deal doesn’t even address non-discretionary spending such as Social Security and Medicare. Mises Institute executive editor Ryan McMaken summed it up this way.

What all this really means is that discretionary spending (which is generally around $2 trillion in miscellaneous and military spending) will continue upward without even a meaningful pause. Meanwhile, mandatory spending—such as Social Security, Medicare, and Medicaid is in no danger of actually going down. At a minimum, we can expect annual increases of $60 billion or more each year in the near future. That’s the most ‘thrifty’ scenario. After all, it’s only a matter of time until there’s a recession and thus a need for ‘stimulus’ and bailouts. Or, Washington may decide the US needs another full-blown war. At that point, all bets are off when it comes to spending.”

Currently, the Biden administration has been spending at around a half a trillion dollars per month clip. In April, the US government blew through $426.34 billion. Thanks to all of that spending, coupled with declining tax receipts, the fiscal 2023 budget deficit already stands at just under $1 trillion.

So, this great deal means we’re just going to keep doing that.

Now, the CBO claims that “as the deal stands today,” there will be about a $1.5 trillion reduction in the deficit over the next decade. That sounds pretty awesome until you realize that is just $150 billion per year and amounts to less than 5% of the projected deficits. And I have to reiterate that the deal won’t stand as it does today.

On top of that, the CBO and other pundits analyzing the plan are including all kinds of unrealistic rosy economic projections. If you use a more realistic set of assumptions, the deficits are just going to get bigger.

The US government already faces a revenue problem. Last year, strong tax receipts helped to paper over the spending problem. The federal government enjoyed a revenue windfall in fiscal 2022. According to a Tax Foundation analysis of Congressional Budget Office data, federal tax collections were up 21%. Tax collections also came in at a multi-decade high of 19.6% as a share of GDP. But CBO analysts warned it won’t last.

We’re already seeing that downward trajectory. Compared to April 2022, tax receipts were down 26.1% in April 2032, according to the monthly Treasury statement.

And government tax revenue will decline even faster if the economy spins into a recession.

This budget deal is the ultimate in “kick the can down the road.” All of the politicians in DC can pretty much continue business as usual without worrying about any kind of borrowing limit until after the next presidential election. Meanwhile, the public assumes that everything is fine because “they got a deal done.”

But as I have explained previously, everything is not fine. This deal doesn’t solve anything. Now, the now the real problem begins.

According to an analysis by Goldman Sachs, the US Treasury may have to sell $700 billion in T-bills within six to eight weeks of a debt ceiling deal just to replenish cash reserves spent down while the government was up against the borrowing limit. On a net basis, the Treasury will likely have to sell more than $1 trillion in Treasuries this year.

Who is going to buy all of those bonds?

The market may be able to absorb all of that paper, but it will almost certainly cause interest rates to rise even more as the sale drains liquidity out of the market.

In effect, as the Treasury floods the market with new debt, bond prices will likely fall in order to create enough demand for all of those Treasuries. Bond yields are inversely correlated with bond prices, and as prices fall, interest rates rise.

A Bank of America note projects that the anticipated post-debt ceiling bond sale would have an impact equivalent to another 25 basis point Federal Reserve rate hike.

Of course, there is no cap on how much the federal government can spend on interest payments to support the massive national debt.

The liquidity crunch will also spill over into the private bond market. The price of non-government debt instruments will have to fall as well in order to compete with Treasury bonds. That means the cost of borrowing will go up for everybody.

This is obviously problematic in an economy that is loaded up with debt and already in the midst of a financial crisis.

At some point, this unlimited borrowing is going to force the Federal Reserve to monetize some of this debt. That means a return to quantitative easing.

Even if it doesn’t happen immediately, QE is in the future. There is no other way for the market to absorb all of the debt the Treasury will have to issue to support the spending with on a credit card with no limits.

In order to prop up the bond market and keep prices higher than they otherwise would be (and interest rates lower), the Fed will ultimately have to buy bonds to boost demand. It will buy those Treasuries with money created out of thin air.

That’s inflation.

In other words, you’re going to pay for all of this government spending through the inflation tax.

So, after months of wrangling, we have fake spending cuts and an effective debt ceiling of infinity.

This should go well.

Not.

Futures are flat with oil jumping after OPEC+ cut output by an extra 1mm bpd in a unilateral move by Saudi Arabia taking its production to the lowest level for several years.At 7:30am ET, S&P futures were flat, while Nasdaq futures were down 0.2% with some artificial-intelligence exposed stocks like Nvidia Corp. and C3.ai Inc. trading down. In contrast, Apple Inc. surpassed its previous closing record in premarket ahead of what’s expected to be its most significant product launch event in nearly a decade. Oil rose 2%, with oil giants such as Chevron and Exxon up in premarket trading. The Bloomberg dollar index is up as are 10Y yields now that the market’s attention turns to the $1+ trillion deluge in new debt issuance. Gold dropped, as did bitcoin after the crypto currency got its usual Asian session rugpull.

Oil-related stocks rose in US premarket trading after Saudi Arabia announced it would scale back oil output by a further 1 million barrels a day in July, taking the OPEC+ member’s production to the lowest level for several years after a slide in crude prices. Saudi Energy Minister Prince Abdulaziz bin Salman said he “will do whatever is necessary to bring stability to this market”; with oil prices being weighed down by relentless shorting by hedge funds amid a softer economic outlook.  The rest of the 23-nation OPEC+ group offered no additional action to buttress the current market, but did pledge to maintain their existing cuts until the end of 2024. Chevron, Exxon Mobil and Occidental Petroleum all rise more than 1%, as do Phillips 66 and Schlumberger.

Also in premarket trading, Apple rose 0.6% putting the shares on track to reach a new record high. The company is expected to launch a mixed-reality headset at the Worldwide Developers Conference on Monday, marking its most significant product launch in nearly a decade. Here are some other notable premarket movers:

• Bellerophon Therapeutics shares slid 74% Monday after the company said its phase 3 rebuild study of INOpulse to treat fibrotic interstitial lung disease failed to meet its primary endpoint.
• Day One Biopharmaceuticals shares rise as much as 35% after the biotech company provided updated data for its drug for the treatment of pediatric low-grade brain tumors that was “highly impressive,” according to a Wedbush analyst.
• Epam Systems falls as much as 11% after the IT services company cut its adjusted earnings per share forecast for the second quarter.
• ImmunoGen shares gain as much as 19% in premarket trading on Monday, after the biotech company provided full results from its late-stage trial for its treatment of ovarian cancer.
• Oil-related stocks rise after Saudi Arabia announced it would scale back oil output by a further 1 million barrels a day in July, taking the OPEC+ member’s production to the lowest level for several years after a slide in crude prices.
• Palo Alto Networks Inc. (PANW) shares gain 4.9% on Monday, following a Friday announcement that the stock is set to replace Dish Network Corp. in the S&P 500.
• Southwestern Energy Co. (SWN) rises 2% as it looks like a “logical target” for either Coterra Energy Inc. or Chesapeake Energy Corp., according to Citi.

With the debt ceiling now behind us, markets will now prepare for a deluge of issuance; BBG reports that bearish positioning in the S&P is highest since 2007 while bullish bets on NDX are near last year’s highs. Meanwhile, the steamrolling of the bears continues with S&P 500 is just 0.2% short of a 20% gain from its October low in the previous trading session; the Nasdaq 100 is already firmly in a bull market, as traders anticipate a pause in the Federal Reserve’s rate hiking cycle. Expectations that any slowdown in the US would be mild and optimism about developments in AI have also fueled the gains.

James Athey, investment director at Abrdn, said the advance toward a bull market focused on the small number of important but highly backward-looking economic readings that suggest the economy is doing well. “The broader data set shows much less strength and much more volatility and vulnerability,” he said. “But until jobs crack, I’m sure equities will choose to ignore.”

Strategists are split about the path forward for stocks from here. A Morgan Stanley team led by Michael Wilson said the likelihood of Fed rate cuts in 2023 and durable growth playing out simultaneously is low and they expect a tactical correction in equities before a durable recovery and a real bull market.

UBS Global Wealth Management strategists also said the risk-reward balance for stocks, especially in the US, remains unfavorable. On the flip side, Evercore ISI strategists raised their S&P 500 target as inflation easing likely signals a Fed pause.

Meanwhile, frustration among bears has rarely been greater with more stocks making new 52-week lows in the S&P 500 than 52-week highs in May.  “Breadth is awful,” Athey said, referring to the limited number of stocks contributing to the rally. “There’s very narrow leadership. It doesn’t look too healthy to me.”

In Europe, the Stoxx 50 is little changed while FTSE 100 outperforms peers, adding 0.6%, FTSE MIB lags, dropping 0.3%. Consumer products, tech and travel are the worst-performing sectors. The region continues to lose momentum from being the proxy for China’s reopening boom; do investors buy the dip with China looking to add stimulus? PMIs continue to slow and are at 3-month lows. Value is leading, Momentum is lagging; Defensives over Cyclicals. UKX +0.5%, SX5E -0.0%, SXXP +0.1%, DAX +0.0%. Here are some of the most notable European moves:

• Energy stocks were among the strongest gainers in Europe Monday as crude advanced following Saudi Arabia’s pledge to make an extra 1 million barrel-a-day supply cut in July, taking its production to the lowest level for several years. Shell rises as much as 1.6%.
• Shares of European telecom operators rise across the board, rebounding from a selloff on Friday when Bloomberg News reported that Amazon is planning to provide low-cost mobile phone service to Prime members in the US. Deutsche Telekom and Vodafone gain respectively as much as 3.5% and 3.4%.
• UBS shares gain 1.3% on Monday after the banking giant announced it expects to complete its acquisition of Credit Suisse as early as June 12. ZKB sees this as a positive development, initiating what it sees as a “protracted integration process.” Credit Suisse rises as much as 2.3%.
• Asos shares jump as much as 14%, the most since Jan. 12, after the Sunday Times reported that the online fast fashion retailer received a takeover approach from Turkish online retailer Trendyol in December.
• Indivior shares surge as much as 13%, to highest in 15 weeks, after the drugmaker announces it has reached an agreement to resolve antitrust claims brought by the Attorneys General of 41 states and the District of Columbia.
• Red flags that pricey luxury shares have hit a peak are piling up as conviction on the China reopening trade takes a hit. LVMH shares fall as much as 1.2%
• Viaplay shares fall as much as 59% to a record low after the Nordic media firm slashed its 2023 guidance, scrapped 2025 targets and said CEO Anders Jensen stepped down with immediate effect.
• Bollore shares fall as much as 3.7%, after Kepler Cheuvreux cut its recommendation on the French conglomerate to hold from buy, noting the stock’s recent outperformance and the simplified offer.

Earlier in the session, Asian stocks were mostly positive amid momentum from Friday’s post-NFP gains on Wall Street and as participants digested stronger Chinese Caixin Services and Composite PMI data.

• Hang Seng and Shanghai Comp. were kept afloat following the encouraging Caixin PMIs but with gains capped amid US-China frictions and after China’s Cabinet noted that the foundation for the economic recovery is not solid, while property names were also pressured despite reports that China is mulling a support package for the property sector and bolster the economy.
• Australia’s ASX 200 was led higher by gains across nearly all sectors with early tailwinds in energy names following Saudi Arabia’s additional 1mln bpd output cut, while the RBA is seen to keep rates unchanged at tomorrow’s meeting.
• The Nikkei 225 climbed above 32,000 for the first time since 1990 with exporters propelled by a weaker currency.
• Key stock gauges in India ended with gains mirroring a board-based rally across Asian markets on Monday as investors assess prospects of a pause in rate hikes by the Federal Reserve and easing concerns over a US recession. The S&P BSE Sensex rose 0.4% to 62,787.47 in Mumbai just shy of its all-time closing high levels, while the NSE Nifty 50 Index advanced 0.3% to 18,593.85. Strong automobile sales data triggered buying in auto stocks in India with the Nifty Auto index climbing 1.3%, its best day since May 8.

In FX, the Bloomberg Dollar Spot Index gained as much as 0.3%, taking gains into a second day, after last week’s jobs data added to the market’s view that the Fed will raise rates by 25 basis points next month. CAD and EUR are the strongest performers in G-10 FX, with the Canadian currency receiving some support as oil prices advance; SEK and GBP underperforms. BRL (1.1%), COP (1.1%) lead gains in EMFX, TRY (-1.1%) lags.

In rates, Treasuries were cheaper across the curve, following bigger losses in core European rates with S&P 500 futures steady near Friday’s highs.  The two-year Treasury yield rises 4 basis points to 4.54%, rising toward a 2-1/2-month high of 4.64% touched just over a week ago. Yields higher by 4bp-6bp on the day with 2s5s30s fly wider by 2bp as belly underperforms; 10-year yields around 3.74% with bunds and gilts cheaper by 2bp and 1.5bp in the sector. Traders are pricing in a near 90% possibility that the Fed will hike rates to 5.5% in July; they see just the prospects of a June rise at around 30%. Elsewhere, gilts bear-flatten, Bunds bear-steepen. Peripheral spreads are mixed to Germany; Italy widens, Spain widens and Portugal tightens.

In commodities, Crude oil futures remain higher by about 2% after a 4.6% advance sparked by Saudi Arabia’s output-cut pledge at weekend’s OPEC+ meeting. Spot gold falls roughly $6 to trade near $1,942/oz.

US session includes factory orders data and ISM services gauge and Durable Goods/Cap Goods, while Fed speakers are in quiet period ahead of June 13-14 FOMC meeting.  

Market Snapshot

• S&P 500 futures little changed at 4,289.00
• MXAP up 0.6% to 163.41
• MXAPJ up 0.2% to 514.82
• Nikkei up 2.2% to 32,217.43
• Topix up 1.7% to 2,219.79
• Hang Seng Index up 0.8% to 19,108.50
• Shanghai Composite little changed at 3,232.44
• Sensex up 0.5% to 62,885.07
• Australia S&P/ASX 200 up 1.0% to 7,216.27
• Kospi up 0.5% to 2,615.41
• STOXX Europe 600 up 0.1% to 462.66
• German 10Y yield little changed at 2.36%
• Euro down 0.2% to $1.0689
• Brent Futures up 2.5% to $78.06/bbl
• Gold spot down 0.3% to $1,941.52
• U.S. Dollar Index up 0.24% to 104.26

Top Overnight News

• 1) Inflation is pushing Japan into a new era that could lift equities by spurring more households to move savings out of low-yielding bank deposits, the head of the country’s stock exchange operator has said. Hiromi Yamaji, president of the JPX group that controls the Tokyo and Osaka exchanges, said he expected many Japanese to stop sitting on so much cash — the country’s households have amassed ¥1 quadrillion ($7tn) in bank savings — and look to stock markets for better returns in response to rising living costs. FT
• 2) China’s defense minister attacked the US policy in the Pacific, accusing the Pentagon of stoking confrontation (and a Chinese navy ship sailed within 140 meters of a US Navy guided missile destroyer). Worth noting China will soon account for less than 50% of US imports from low-cost countries in Asia as Western firms shift supply chains out of the mainland.  London Telegraph / FT
• 3) China’s Caixin services PMI for May was strong, coming in at 57.1 (up from 56.4 in April and ahead of the Street’s 55.2 forecast). Also, Indonesia’s CPI for May undershot the Street, coming in at +2.66% (down from 2.83% in April and below the Street’s 2.81% forecast). RTRS
• 4) Ukrainian President Volodymyr Zelensky said he was now ready to launch a long-awaited counteroffensive but tempered a forecast of success with a warning: It could take some time and come at a heavy cost. “We strongly believe that we will succeed,” Zelensky said in an interview in this southern port city as his country’s military girded for what could be one of the war’s most consequential phases as it aims to retake territory occupied by Russia. WSJ
• 5) Banks in the US could see their capital requirements jump as much as 20% under new rules being formulated at the Fed (the rules would apply to institutions with assets >$100B, and fee-based activities, such as wealth mgmt. or interchange revenue, will be punished under the new framework). Also, Banks in the US are preparing to sell commercial property loans at a discount even when borrowers are current on their payments as firms rush to reduce their exposure to this segment of the market. WSJ / FT
• 6) With a debt ceiling deal freshly signed into law Saturday by President Joe Biden, the US Treasury is about to unleash a tsunami of new bonds to quickly refill its coffers. This will be yet another drain on dwindling liquidity as bank deposits are raided to pay for it — and Wall Street is warning that markets aren’t ready. BBG
• 7) Yesterday’s OPEC+ meeting was moderately bullish, on net, with three main developments. First, Saudi Arabia pledged to deliver an additional 1mb/d unilateral “extendible” output cut in July (bullish). Second, the voluntary cuts from the 9 OPEC+ countries are scheduled to extend until December 2024, from December 2023 previously (somewhat bullish). Third, output baselines will be redistributed in 2024 from countries struggling to reach their targets to those with ample spare capacity (somewhat bearish output effect, but bullish cohesion). GIR
• 8) Hedge funds accelerated selling in US Energy amid price declines last week. Last week’s notional net selling in US Energy was the largest in 10 weeks and ranks in the 97th percentile vs. the past five years. Info Tech was the most notionally net bought global sector on the Prime book for the 4th straight week. Last week’s net buying in Info Tech was the largest in 5+ months and ranks in the 92nd percentile vs. the past five years. GS PB
• 9) AMZN wireless story met with skepticism as firms deny involvement (Amazon, T-Mobile, and Verizon all said nothing is in the works) and analysts suggest economics/logistics don’t make sense. Barron’s
• 10) More bank insiders are buying shares in their own companies, a vote of confidence in the industry after a crisis sparked by the collapse of four regional lenders earlier this year. The number of buyers has already jumped to 778 in the second quarter through May 26 from 524 in the first three months of the year, according to research firm VerityData, which said the surge is being driven by small and midsize banks. More purchasers stepped up even as share prices sank to multiyear lows in early May. BBG

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were mostly positive amid momentum from Friday’s post-NFP gains on Wall Street and as participants digested stronger Chinese Caixin Services and Composite PMI data. ASX 200 was led higher by gains across nearly all sectors with early tailwinds in energy names following Saudi Arabia’s additional 1mln bpd output cut, while the RBA is seen to keep rates unchanged at tomorrow’s meeting. Nikkei 225 climbed above 32,000 for the first time since 1990 with exporters propelled by a weaker currency. Hang Seng and Shanghai Comp. were kept afloat following the encouraging Caixin PMIs but with gains capped amid US-China frictions and after China’s Cabinet noted that the foundation for the economic recovery is not solid, while property names were also pressured despite reports that China is mulling a support package for the property sector and bolster the economy.

Top Asian News

• on Friday, while the meeting was said to be candid, constructive and part of ongoing efforts to maintain open lines of communication, according to the Treasury.
• China is soon to account for less than half of US low-cost imports from Asia in 2023 for the first time in over a decade, according to an annual reshoring index from Kearney cited by the FT.
• Wuhan Commerce Bureau said initial talks have started with Disney (DIS) for the US firm to start a project in the city, according to Reuters.

European equities trade flat with not much in the way of weekend newsflow to guide prices following Friday’s solid session for the region, whilst the FTSE 100 narrowly outperforms. Equity sectors are a mixed bag with Telecoms top of the leaderboard, followed closely by Energy and Real Estate, while Tech, Travel & Leisure, and Consumer Products & Services reside at the bottom. US equity futures are flat following Friday’s session of gains (ES -0.1%, NQ -0.2%, RTY +0.1%)

Top European News

• BoE is looking to broaden reform of the deposit guarantee scheme after the collapse of SVB’s UK arm highlighted the weakness of the current regime, according to FT.
• ECB’s Vujcic said Eurozone inflation risks are tilted to the upside; wage pressures are “still very lively”, according to Bloomberg.
• Fitch affirmed the Bank of England at AA-; Outlook Negative.
• S&P said France’s “AA/A-1+” ratings affirmed; outlook remains negative; says tighter financial conditions and still-high core inflation will restrain France’s economic activity in 2023 and 2024

FX

• DXY maintains a bullish momentum above 104.00 in the wake of Friday’s strong US payrolls gain which resulted in a hawkish tilt in Fed pricing.
• USD/JPY rebounds sharply towards 140.50 from just shy of 140.00 overnight amidst higher Treasury yields and wider spreads to JGBs after slowdowns in Japan’s services and composite PMIs.
• Euro extends declines against its US counterparts and against the backdrop of mostly sub-prelim or expected Eurozone services and composite PMIs.
• Aussie straddles 0.6600 on the eve of the RBA that could be a very close call.
• Yuan weakens irrespective of a firmer than forecast Chinese Caixin services PMI that boosted the composite number along with the manufacturing PMI, as China-US/Canadian/NATO tensions overshadowed the encouraging surveys.
• PBoC set USD/CNY mid-point at 7.0904 vs exp. 7.0918 (prev. 7.0939)

Fixed Income

• Bunds are off worst levels having pared some losses from 134.81 amidst more mixed Eurozone macro releases including soft PMIs, PPI, Sentix readings vs a healthier-than-expected German trade balance.
• Gilts have slipped to a new intraday base, albeit marginal at 96.25 in recent trade and probably in recognition of minor upward revisions to the final services and composite PMIs
• US Treasuries remain underwater, but the curve is a bit more stable after post-NFP flattening in advance of the final PMIs, services ISM and a speech from Fed’s Mester.

Commodities

• WTI and Brent contracts gapped higher upon the return of futures trading following the weekend OPEC+ deliberations (see below).
• Spot gold is subdued under USD 1,950/oz as the Dollar index remains firmer on the session – with the yellow metal finding support at its 100 DMA (1,939/oz) earlier.
• Base are mostly subdued but to varying degrees amid the aforementioned APAC growth concerns, although the complex has trimmed losses. Iron ore continued rising overnight.

OPEC+ Meeting

• Saudi Arabia announced it is to cut an additional 1mln bpd of oil output for July in which its output will drop to 9mln bpd and all other OPEC+ producers agreed to extend earlier cuts through to the end of 2024. OPEC+ agreed to a new output target of 40.4mln bpd from 2024 with the output target for 2024 lowered by 1.4mln bpd and said Russia, Angola and Nigeria are to see significant production cuts in 2024, while the next OPEC+ meeting is to take place on November 26th, according to Reuters.
• Saudi’s Energy Minister said they are not targeting prices and that the extra voluntary cut is a precautionary measure, while they will keep the markets in suspense on whether the additional voluntary cut for July will be extended and will review the extra voluntary cuts every month.
• Saudi’s Energy Minister said Russia is delivering on its oil output commitments, while the UAE’s Energy Minister said there are some discrepancies in Russian production numbers and they don’t want politics involved in how they look at Russian production numbers, according to Reuters.
• Russian Deputy PM Novak said OPEC+ agrees total oil output cuts of 3.66mln bpd and that the oil market is more or less balanced, while he added they are seeing oil demand rising and they have the possibility of tweaking decisions. Furthermore, he said they will take decisions so that the oil market is stable and that Russia is fulfilling its obligations in full, according to Reuters.
• White House officials said they will continue to work with all fuel producers to ensure energy markets support US economic growth, according to Reuters.

Fox News has experienced a massive decline in ratings year-over-year following Tucker Carlson’s sudden departure from the network approximately six weeks ago.

According to Nielsen, Fox News has experienced a 37% YoY decline of 1.42 million primetime viewers, according to Deadline Hollywood. Competing network MSNBC, meanwhile, saw an increase in viewers, bringing the network to 1.16 million during primetime, a 14% YoY gain in May.

In third place was CNN, which saw its primetime ratings shrink to 494,000 viewers last month, a 25% decline YoY vs. May 2022.

Fox, meanwhile, averaged some 135,000 viewers in the coveted 25–54 age demographic that advertisers often target during the primetime hours, the analysis shows. That’s a 62-percent year-over-year decline. MSNBC had 120,000 demographic viewers, or a 14 percent increase year-over-year, while CNN saw a 25 percent drop to 113,000 viewers in that demographic.

In comparison, Fox News averaged some 2.09 million primetime viewers in the first quarter of 2023. That was likely due to Carlson’s influence, as the former host would routinely draw more than 3 million viewers during his 8 p.m. ET show. –Epoch Times

That said, Fox News‘ “The Five” is still the #1 cable news TV show, averaging 2.6 million viewers, and 267,000 viewers in the key 25-54 age group. Meanwhile, host Jesse Watters averaged over 2 million viewers per episode.

Since Carlson’s departure in late April, Fox has rotated several top hosts into his old 8pm slot – with next week’s “Fox News Tonight” slated to be hosted by anchor Harris Faulkner next week.

“No decision has been made on a new primetime line-up and there are multiple scenarios under consideration,” a network spokesperson told the Times.

Last week former President Donald Trump suggested that Fox would be smart to cater to his voters.

“FOX should embrace MAGA,” Trump said on Truth Social on June 2, adding that Fox News is suffering “because the very smart, even brilliant, Magadonians know that, despite all the fake lip service, FoxNews is pushing Ron DeSanctus, or anyone else for that matter, because they hate the greatest ‘America first’ president to ever put on a suit and tie, me.“

“They are all globalists, and globalists will never, Make America Great Again!”

Authored by Matthew Piepenburg via GoldSwitzerland.com,

We have hardly been the first nor the last to realize that rising rates “break things.”

We’ve all seen the disastrous credit events in the repo crisis of late 2019, the UST debacle in March of 2020, the gilt implosion of October 2022 and, of course, the banking crisis of March, 2023.

And behind, beneath, above and below each of these debacles lies a bemused central banker.

There’s More “Breaking” to Come

But there’s far more “breaking” to come.

As for recessions, the data is equally (and objectively) abundant that those rising rates (red circles below) tend to correlate directly with recessions, both soft and hard (grey lines below).

Powell can re-define recessions with words, but despite his double speak, he too knows that a recession is already under, or at the very least, directly off, the American bow.

Powell’s Un-Spoken “Plan”?

It has always been my contention that the rate hikes of late have been a public ruse to allegedly “defeat inflation,” when in fact inflation and negative real rates were always part of the unofficial plan to help inflate away portions of Uncle Sam’s openly embarrassing bar tab.

More importantly, Powell’s deeper motive (in my opinion) for the rate hikes of 2022 was done in order to give the Fed something to cut once the mammoth recession they’ve publicly denied becomes, well: mathematically undeniable.

The Past as Prologue

As in 2018, when Powell forward-guided rate hikes simultaneously with QT (Fed balance sheet reduction via UST dumping), the end result was disastrous (remember December 2018 and the days of 10% daily market swings).

This disaster was soon followed by an inevitable/foreseeable rate “pause” and then more QE.

The current pattern is fairly similar.

Although a QT policy of letting the Fed’s reserve of bonds “mature” rather than be dumped into the open market slightly differentiates 2022’s rate hikes from 2018, the end-game of raising rates into an even greater debt bubble will end with even more pain, volatility (and ultimately, QE) than seen in the 2018-2019 debacle/policy.

This pattern is easy to see because the Realpolitik of the bond market is easy to see.

The Bond Market is the Thing

In the most simplistic terms, Uncle Sam survives off debt, which means he survives off of IOUs (i.e., USTs).

If no one buys those IOUs, Uncle Sam falls off his bar stool into a puddle of his own tears as USTs fall further in price and hence yields and rates rise further in interest-expense pain.

And as 2022 reminds, that weaponized USD led to Uncle Sam’s worst fears coming foreseeably true as the world dumped USTs at the same time central banks made historically unprecedented purchases of gold.

The Next Moves Are Fairly Easy to See…

Needless to say, this bond-dumping scares the “H-E- double-toothpicks” out of Uncle Sam and his cadre of corporatist, number-crunching technocrats at the Treasury Dept and FOMC, as even they know what we all know: Someone or some thing has to buy Uncle Sam’s IOUs or it’s game over.

And who do you think that buyer will be?

All together now: “The Federal Reserve.”

And where will the money needed to buy those unloved USTs ultimately come from?

All together now: “An inflationary mouse-clicker at the Eccles Building.”

Pain, then Pleasure for Stocks, But No Way Out for the Dollar

But between now and that oh-so-foreseeable QE end-game, more things will need to break, which means we are likely to see deflationary forces (tanking market, emerging recession) followed by profoundly inflationary money printing.

Or stated more simply, stocks will tank and then stocks will rise as the currency which measures (and “saves”) them gets more and more diluted by failed policy makers and a Fed which should never have been conceived in 1910.

Why do I believe this?

Well, the markets, rather than Powell, are telling us so.

Let’s dig in.

The Futures Markets: Neon-Flashing Signs of Stock Market “Uh-Oh”

There are a number of signs pointing toward an “uh-oh” moment in risk assets.

The fact, for example, that we are seeing oil futures pricing oil lower despite production cuts (what the fancy lads call “backwardation”) stems from a market anticipating the kind of tanking oil demand that only comes from a much-anticipated stock market fall (mean reversion) in the wake of an equally anticipated recession in 2023.

The Eurodollar futures market is also screaming of a similar market fall in the coming months.

But perhaps most importantly (or obviously), the S&P futures market is now net-short at levels surpassing 2011 and approaching the levels of late 2007.

If I recall, those were not promising times for subsequent stock prices…

Or stated more simply, the big boys at those oh-so clever hedge funds (who are tracking credit crunches, bond flows and Powell’s “higher-for-longer” meme) are betting heavily against the S&P as the “higher-for-longer” Powell soon becomes the “higher-something-broke-again” Powell.

In short: The next thing to “break” will be stocks.

What Goes Naturally Down Then Goes Un-Naturally Up

Then comes the volatility and the dip-buyers after stocks take a hit (driven by more bank failures and rate hikes) which could be worse than 2008.

It’s my view that hedge funds are waiting to buy low and are biding their time like snipers patiently hiding behind a bond-market breastwork.

That is, they have been piling into negative-yielding USTs of late (that is, willingly losing a bit of return) as a holding pattern “asset” which they will then quickly dump to buy discounted equities once the stock market pukes as per above.

Amidst this looming volatility (buy the VIX?), I thus foresee a subsequent move out of anemic bonds and back into discounted stocks.

Of course, if the hedge funds start dumping Uncle Sam’s IOUs, their yields and rates will get dangerously higher (expensive) for Uncle Sam, which means Uncle Fed will have to do what it did in 2019/2020 and start mouse-clicking more instant liquidity to control Treasury yields and monetize America’s increasingly unloved UST market.

Such QE will be good for stocks dying on the field, but bad for the inherent purchasing power of an ever-more debased and diluted USD.

Chess vs. Checkers

Thus, deflationary or inflationary, the end-game for the neutered USD and its checker-level financial planners is fairly foreseeable, which means the end-game for gold is no less so.

See why the chess-players (mostly Eastern Central Banks) are stacking gold at levels higher than ever recorded?

A Rigged Game

This journey from tanking markets to rising markets is a game which many insiders at the hedge funds know and play well.

Furthermore, it’s a game the Fed has no choice to play, as a rising stock market (and capital gains taxes) is one of the few ways Uncle Sam can get tax receipts at a level high enough to pay its $800B (and climbing) interest expense on debt.

The rise-and-fall stock game is rigged, and ultimately, as I’ve written, “Rigged to Fail,” but regardless of its immoral and capitalism-destroying mandate, one can front-run the Fed if one sees the totally centralized chess-board.

On Sunday afternoon, NORAD scrambled two F-16 fighter jets to intercept an unresponsive private jet that breached highly restricted airspace in Washington, DC. The private jet crashed shortly afterward in mountainous terrain in Northern Virginia. 

BREAKING: A small Cessna plane flew over a no fly zone in Washington, D.C. unresponsive this afternoon.

– F16’s were then scrambled to intercept the unresponsive aircraft.

– The Annapolis Office of Emergency Management confirmed that a sonic boom was caused by the F16s.

-… pic.twitter.com/ophNbbtbDo

— Brian Krassenstein (@krassenstein) June 4, 2023

“In coordination with the Federal Aviation Administration, NORAD F-16 fighter aircraft responded to an unresponsive Cessna 560 Citation V aircraft over Washington, D.C., and northern Virginia on June 4, 2023,” a statement from NORAD’s Continental U.S. Region said.

NORAD’s fighter jets “were authorized to travel at supersonic speeds and a sonic boom may have been heard by residents of the region,” according to the statement. Residents across the region were startled by the loud noises. 

🚨#WATCH: As a dc resident captured the Sonic boom on a home security camera

📌#Washington | #DC

Earlier this evening, incredible video was captured on a home security camera showing a loud sonic boom which was caused by fighter jets that quickly took off to intercept an… pic.twitter.com/NYyRpcQPoy

— R A W S A L E R T S (@rawsalerts) June 4, 2023

“During this event, the NORAD aircraft also used flares — which may have been visible to the public — in an attempt to draw attention from the pilot,” NORAD said. 

“The pilot was unresponsive and the Cessna subsequently crashed near the George Washington National Forest, Virginia,” it added.

#BREAKING Images you’ll only see on @nbcwashington, a Cessna Citation business jet crashed into a Virginia mountain side, fighter jets scrambled from Joint Base Andrews could only watch as the incapacitated pilot descended from 30K feet #BreakingNews @TomLynch_ @charlienbc pic.twitter.com/A9XszAt66N

— ʙʀᴀᴅ ꜰʀᴇɪᴛᴀꜱ (@Chopper4Brad) June 5, 2023

ABC News reported four people were aboard the private jet that had initially taken off from Elizabethton, Tennessee, and was headed for Long Island MacArthur Airport in New York. However, when the private jet approached Long Island, it continued at an altitude of 34,000 and made a U-Turn towards DC. 

Axios received an emailed statement from Virginia State Police spokesperson Corinne Geller, saying, “No survivors were located” at the crash site near Montebello. 

Flightradar24 spokesman Ian Petchenik told Bloomberg that the plane disappeared from its tracking system, plunging at about 20,000 feet per minute. 

The question remains: What caused the private jet to crash?