Month: February 2024

Exxon has entered the chat…

That was the gist of the message Chevron gave to the world earlier this week after warning that its proposed $53 billion acquisition of Hess could see competing bids from ExxonMobil and China National Offshore Oil Corporation.

Both ExxonMobil and China National Offshore Oil Corporation are “asserting their right to pre-empt its purchase of a stake in a Guyana oil project that is central to the deal,” according to a new report from Financial Times. 

Exxon and CNOOC are joint owners of the Stabroek Block project, the report says. A Chevron regulatory filing out this week says it is in discussion with the parties “regarding a right of first refusal provision in the joint operating agreement” and Exxon has said it is “engaged in conversations with Hess and Chevron and those conversations will continue”.

The full text of Chevron’s new disclosure states:

Chevron may not complete the acquisition of Hess Corporation within the time frame the company anticipates or at all, which could have adverse effects on Chevron.

The completion of the acquisition of Hess Corporation (Hess) is subject to a number of conditions, including regulatory approvals and approval by Hess stockholders of the adoption of the merger agreement. Additionally, Hess and Chevron have been engaged in discussions with Exxon Mobil Corporation and China National Offshore Oil Corporation regarding a right of first refusal provision in the joint operating agreement for the Stabroek Block offshore Guyana.

If these discussions do not result in an acceptable resolution and arbitration (if pursued) does not result in a confirmation that such right of first refusal provision is inapplicable to the merger, then there would be a failure of a closing condition under the Merger Agreement, in which case the merger would not close.

Exxon also confirmed earlier this week it was in talks regarding the deal, stating: “We owe it to our investors and partners to consider our pre-emption rights in place under our joint operating agreement to ensure we preserve our right to realise the significant value we’ve created and are entitled to in the Guyana asset.”

The “most likely outcome is one in which the . . . deal is ultimately consummated, perhaps with a bit of a delay,” analyst Jason Gabelman with TD Cowen told FT. 

He continued: “A low-probability outcome is one in which an arbitrator rules a [right of first refusal] is applicable, in which case the deal would fail and [Hess] would continue to exist as an independent company with its current interest in the Stabroek Block.”

A Chevron spokesperson responded: “There is no possible scenario in which Exxon or Cnooc could acquire Hess’ interest in Guyana as a result of the Chevron-Hess transaction.”

He continued, stating the Chevron was “fully committed to the transaction”.

As WSJ noted, the disagreement centers on the specifics of a Joint Operating Agreement (JOA) established over ten years ago. Hess became a party to this agreement in 2014, acquiring its share from Shell. Under some JOAs, current partners, such as Exxon, are granted the opportunity to engage in changes to ownership, enabling them to counter an offer for a stake in the ownership with a bid of their own.

Exxon and Chevron have divested billions in assets in Asia and Africa, highlighting the shift towards U.S. shale and South America. Chevron resumed oil operations in Venezuela under eased sanctions, boosting production unexpectedly, and is also investing in Argentina’s shale and exploring near Guyana. Meanwhile, tensions have risen as Venezuela increased its military presence near Guyana, a less equipped neighbor, though analysts deem an invasion unlikely, the WSJ report notes.

Exxon, taking on significant risk, has spearheaded drilling in Guyana, uncovering vast oil reserves now estimated at nearly 11 billion barrels. The company recently initiated a new offshore development in Guyana, increasing production significantly, with plans to expand further by 2027, aiming for a daily output of 1.2 million barrels.

The likely scenario we think?

XOM will of course allow CVX to buy HESS… it just may cost them a little, or not so little.

— zerohedge (@zerohedge) February 27, 2024

After two lousy, record large coupon auctions in Monday’s two-for-one special, moments ago the Treasury issued a non-record $42BN in 7 Year paper (we saw far bigger 7Y auctions which hit a mindblowing $62BN during the covid crisis), in what was a solid auction to close the month.

The high yield of 4.327% was above last month’s 4.109% and on pa with November’s 4.399%. It also stopped through the 4.329% When Issued, a 0.2bps stop through which was the first since November, and followed three consecutive tails.

The bid to cover at 2.577 was flat vs last month’s 2.574 and right on top of the six-auction average of 2.56.

The internals were solid with Indirects awarded 69.6%, the highest since October and also above the recent average of 68.0%. And with Directs taking down 14.8%, modestly below the recent average of 17.6%, Dealers were left holding 15.60%, the highest since December and above the average of 14.4%.

Overall, this was a solid auction, and a welcome reversal from the two subpar coupon sales yesterday which helpd push the 10Y as high as 4.3% yesterday. Not surprisingly, 10Y yields dropped to 4.28% after the auction, 2bps lower thanks to the strong auction results.

Authored by Christopher Roach via American Greatness,

There are rumors – likely trial balloons – that Joe Biden is about to get serious about controlling the border. Along with inflation and our country’s repeated humiliations on the global stage, the border debacle is one of the major sources of Biden’s persistent unpopularity.

He tried to use the border situation as leverage in negotiations with congressional Republicans over Ukraine funding by pretending he could not close the border until the funding bill passed. This is false, as this authority was the basis of Trump’s “Muslim Ban,” which was upheld by the Supreme Court.

Under Biden, the Border Patrol is on the scene and fully funded, but unfortunately, the President and his Homeland Security Director, Alejandro Mayorkas, are employing them as the welcoming committee.

Liberal Universalism is the Root of Open Borders Policy

While I have no doubt any politician will do popular and necessary things when forced to, Biden’s problem is deeper than his neglect of the border. This neglect is a product of a broader rejection of the right of the nation to have borders and to look out for its citizens. This sentimental idealism instead looks at our country not as a place inhabited by a particular people to whom the government has a particular duty of care but as the superstructure supporting an abstract mission to do good around the world.

This is why Biden and so many others in Washington, including many Republicans, get so excited about Ukraine. They love the idea of being part of a moral crusade, and they do not find sufficient joy or meaning in delivering prosaic goods to their countrymen, like a secure border or decent infrastructure. They believe in the ideology of empire, where national greatness resides in a world-historical mission and not simpler things like peace and prosperity.

A Disloyal Leadership Class

While there has been a lot of hysteria over Russian collusion stories in recent years, rock-ribbed patriotism and loyalty to the American people are in short supply among our politicians. Indeed, it is hard to imagine how a foreign occupier could do much worse than Obama and Biden have done for the American people.

Together, they have doubled and tripled the cost of healthcare without any tangible increase in health. They have presided over the mass “deincarceration” of violent criminals. They have added trillions to the debt with very little to show for it. They have politicized the military and encouraged its leaders to think of their own countrymen as the enemy. And, relevant to this discussion, they have gotten all misty-eyed over armies of men from every third-world dump who make it across our border and utter the word “asylum.”

The politicians view our nation as a vessel for a universal idea. The idea is more important than the place or the people. This is why the top Army general during the Fort Hood massacre said, “As horrific as this tragedy was, if our diversity becomes a casualty, I think that’s worse.” Our worthless leaders would rather have dead soldiers than have anyone question why the foreign guy with the funny name keeps making threats.

We saw this ideology in full bloom during the chaotic collapse of Afghanistan in 2021. When it became clear everything our military had done would go up in smoke, we were presented with the consolation prize that we could heroically introduce tens of thousands of Afghan refugees into our country.

Did anyone want this? Did we attack Afghanistan after 9/11 so that, 20 years later, thousands of them could arrive with dubious asylum claims?

It’s been a few years. What have these Afghans done for our country since then, other than push down wages for menial jobs and create problems? The American people have repeatedly signaled their displeasure with the numbers and quality of immigrants, but the politicians keep pushing this unpopular and destructive policy.

Refugees, asylum seekers, and other border jumpers serve the domestic agenda of the ruling class, who have reached consensus among themselves in favor of open borders. The left faction wants them to be constituents, future voters, and also to accelerate the cultural marginalization of white Americans. The anti-Trump Republicans want cheap labor as well as to show that they’re super sincere about their commitment to liberal universalism.

Are We a Real Country or an Idea?

Both halves of the ruling class are fundamentally liberal because both deny the importance of ethnic and cultural cohesion at home. Both deny that our nation exists for the safety and welfare of its citizens. Leaders on both sides denied that we are a nation with a common language, culture, habits, and origins, along with a right to continue as such.

The chief problem of massive and sustained third-world immigrants is not necessarily any one thing like crime, economic impact, or the effect on our domestic politics. The problem is more fundamental.

It is our country.

It is our home.

It belongs to us as citizens.

We get to decide who comes into our collective home, just as we get to decide individually who enters our actual homes. We do not need an elaborate explanation showing a “legitimate public policy reason” for excluding immigrants any more than we do for not wanting a stranger to enter our home. In other words, not wanting change or diversity is a completely normal and laudable human sentiment.

But Biden does not believe in that, and neither does most of his party—indeed, neither do a lot of Republicans among the Chamber of Commerce crowd. So Biden’s attempt to rebrand himself as the protector of the border rings hollow.

The border got this way because this is how Biden and his party want it. Far from it being a problem, they view the massive inflow of unskilled and unvetted third-world people as a positive good and a fulfillment of liberal principles.

The Democrats think the broke newcomers are future constituents for the many state-funded NGOs and agencies that hand out funds and provide nice hotels. No one worries much about the American citizens facing staggering housing costs and other economic difficulties as all this is happening.

For the liberal, treating these newcomers with any less courtesy than a Daughter of the American Revolution, a seventh-generation West Virginia coal miner, or an injured veteran of our military is RACIST. As Biden himself said, “Folks like me who are Caucasian of European descent for the first time in 2017 will be an absolute minority in the United States of America. . . . That’s not a bad thing, that’s a source of our strength.”

No, it’s not. The American people and the great bounty of the American continent are the source of our strength. But liberal universalism functions to turn our objective decline and displacement into a positive good. It is a form of false consciousness and brainwashing, but it’s also undeniably what motivates Joe Biden and the entire Democrat Party.

Everyone can see that their attempts to secure the border will be temporary, half-hearted, and a mere tactical retreat from their goal of completing the erasure of the historical American nation, demographically and otherwise.

Wendy’s is about to test a surge pricing model similar to Uber, in which the cost of menu items will fluctuate throughout the day on ‘high-tech menu boards’ that can update prices in real-time, meaning a burger and fries will cost people more during the lunch or dinner rush than slower times of day, the NY Post reports.

The fast-food chain’s unappetizing plans, set to be tested in a high-stakes rollout next year, will squeeze more money out of already inflation-battered Americans who may not have the option to eat their meals during “off-peak” hours.

During a recent investor call, CEO Kirk Tanner said that the Ohio-based company will invest $20 million on the high-tech menu boards.

“As we continue to show the benefit of this technology in our company-operated restaurants, franchisee interest in digital menu boards should increase further supporting sales and profit growth across the system,” he said, without noting how high prices could ‘surge’ – or whether the base price would actually fall during slower periods.

According to a spokesperson, who also didn’t indicate if off-peak prices would be lower than current prices, “Dynamic pricing can allow Wendy’s to be competitive and flexible with pricing, motivate customers to visit and provide them with the food they love at a great value.”

“We will test a number of features that we think will provide an enhanced customer and crew experience.”

That said, Wendy’s already charges vastly different prices depending on location. In Times Square, a Dave’s Single costs $8.19 – vs. $5.99 at an outpost in Newark, NJ, the Post reports.

“Guess people better change their lunch hours from 2pm to 4pm. With all of the concern of rising prices, the last thing you want to have to consider is how much will it cost you for a burger and fries depending on the time of day,” Ted Jenkin, CEO of Atlanta-based wealth management firm oXYGen Financial, told The Post.

“This isn’t any better than what we see going on with guilt tipping right now. It will prey on the fact that people can’t remember what the price was yesterday or the week before. It isn’t a Taylor Swift concert, it’s a burger, fries, and a Frosty.”

Incoming Backlash

According to industry experts, this won’t go over well.

“There are people who view dynamic pricing as a rip-off,” Mark Kalinowski, a restaurant analyst, told the Post.

Restaurant consultant Arlene Spiegel told the outlet: “It won’t fly and guests will be very upset. You can’t surprise a guest with, ‘Your meal will cost another 50 cents or $1 today.’”

Wendy’s is the most expensive fast-food chain in the US after menu costs rose 35% due to inflation between 2022 and 2023, according to data from consumer transparency platform PriceListo.

Franchise owners contend that dynamic pricing is more about helping with scheduling and easing the burden on kitchen staff during peak hours – as opposed to maximizing profits.

“I think there’s a lot of room for consumers in terms of price amounts they’re going to accept,” Faizan Khan, a Dog Haus franchise owner, said at the recent Restaurant Finance and Development Conference, according to Food & Wine. “Generationally, I think we’re seeing this being acceptable.” -NY Post

The question now, if Wendy’s pulls this off and people accept it – will McDonalds, Burger King, and other competitors follow suit?

Authored by Simon White, Bloomberg macro strategist,

The Fed’s pivot in December and the Treasury’s willingness to run persistently large fiscal deficits will lead the dollar to resume its downtrend from 2022 highs.

Dollar strength seems to be in vogue again, but fiscal and monetary policy will conspire to make that trend unlikely to persist much longer. Running pro-cyclical fiscal deficits, not just in the US but across much of the developed world, has become the norm. Electorates’ expectations widened after the pandemic, and now there is an unwritten pact between governments and their voters that they will underwrite a growing itinerary of risks from job loss to disease – the Treasury put.

Large fiscal deficits are a long-term negative for the currency as they are inflationary, and considering the US deficit is one of the largest in GDP terms, it poses greater downside risk to the dollar versus other currencies. This will also be a tailwind for the new bull market in stocks.

But shorter-term leading indicators are also dollar negative. On this horizon, the real yield curve gives one of the best leads on the dollar, by about six-to-nine months. This is where the Fed’s pivot comes in.

The real yield curve had been steepening last year, as longer-term real yields were rising more than shorter-term ones, due in part to the influence of rising term premium. That would have anticipated a rising dollar. The real yield curve then began to re-flatten, which continued even after the Fed performed its verbal volte-face in December, as longer-term real yields have risen much less than short-term ones.

The DXY index is up ~2.3% this year, versus the average of 1.4% in the first two months of the year (data back to 1980). But the dollar typically sees all its net gains in the first three months of the year (1.7%) versus an average decline of 0.9% through the remainder.

Net positioning in the dollar is flat, leaving speculators free to move with or against it. They should favor the latter, and not be deterred by recent dollar strength (which is fairly unremarkable), and instead look to the seasonally negative latter three quarters of the year, given extra credence by fiscal and monetary policy that will continue to be a headwind.

As lawmakers have days to strike an agreement to avert a partial government shutdown on Friday, President Biden has called a meeting with the ‘big four’ Congressional leaders to discuss how the United States can funnel more money to Ukraine, while also convincing lawmakers to strike a deal to keep the government’s lights on.

House Speaker Mike Johnson’s remains in a dilemma – having to choose between a deal with Democrats to avoid a partial government shutdown, or side with the House Freedom Caucus who are happy to play chicken over a shutdown.

Last Friday, Johnson told members that another stopgap could be required to buy time while lawmakers iron out final details. That said, April 30 is a hard deadline for Democrats, who will refuse to support 1% across-the-board funding cuts that kick in after that date.

Johnson is caught between House conservatives opposed to further spending, and establishment-loyal military hawks who want to avoid defense cuts that would be triggered if Congress fails to enact new full-year spending appropriations by April 30. The conservative Freedom caucus, meanwhile, has no problem with a shutdown that would bring the country closer to those 1% cuts.

According to Axios, GOP members are pessimistic about today’s White House meeting, while the WSJ suggests that such White House summits “tend to be more stagecraft than statecraft—high-profile opportunities for both sides to show they are fighting for their parties’ priorities, rather than nitty-gritty policy negotiations.”

For months, the Republican House and Democratic Senate have deferred on Congress’s responsibility to set new spending levels and priorities for the federal government for fiscal year 2024, instead passing a series of stopgap measures by repeatedly extending spending levels set back in December 2022.

Now once again time is running out. In the coming hours or days, Johnson could seal a deal with congressional Democrats and try to pass fresh full-year spending legislation. Two thirds of lawmakers would need to approve it. Johnson could put it off a few days or weeks with a short-term patch, again with Democrats’ help. Or he could try to rely on his narrow and rebellious Republican majority to pass another stopgap bill through September, triggering automatic across-the-board spending cuts. –WSJ

“In less than a week, the federal government will begin to shut down, unless both sides—both sides—work together to extend funding,” Senate Majority Leader Chuck Schumer (D-NY) said in a Monday floor speech. “Meanwhile, the moral obligation for Congress to help the people of Ukraine, and fortify our own national security, grows heavier with each passing day.”

Johnson said Schumer was playing “petty politics,” and that the House “has worked nonstop, and is continuing to work in good faith, to reach agreement with the Senate on compromise government funding bills in advance of the deadlines.”

Senate Republican Leader Mitch McConnell (R-KY) insisted that GOP lawmakers in the upper chamber are “not going to allow the government to shut down.”

“Shutting down the government is harmful to the country. And it never produces positive outcomes—on policy or politics,” McConnell said in Monday remarks.

As the Epoch Times notes further; Mr. McConnell warned that without a swift resolution by Friday, the nation could experience disruptions across vital sectors, including agriculture, transportation, military construction, and essential services at the Department of Veterans Affairs.

The Senate Republican leader said that a government shutdown is entirely avoidable, citing the Senate’s passage of the first full-year spending package for critical areas last November.

“We have the means—and just enough time this week—to avoid a shutdown and to make serious headway on annual appropriations,” Mr. McConnell said. However, he stressed that it requires lawmakers to work together to achieve “clean appropriations” and avoid “poison pills.”

The veteran GOP leader, noting the significance of the matter, said that millions of Americans would be closely monitoring Congress’s actions this week.

“American farmers and ranchers, like the Kentuckians visiting Washington this week, expect us to take the challenges they face in feeding our nation seriously,” he said.

“Veterans who swore to protect and defend expect us to keep our promise to care for them when they return home. In the coming days, we’ll need to do just that.”

Roadblocks may come in the GOP-led House.

The sticking points in the political standoff are President Joe Biden’s contentious request for billions of dollars for Ukraine and Israel and concessions sought by hardline Republicans, including on U.S. border security, which has been an issue of bipartisan concern.

Earlier this month, the Senate passed a bill to fund the federal government for the fiscal year that included $95 billion for Ukraine and Israel aid but not for the southern U.S. border. House Speaker Mike Johnson (R-La.) declared the bill dead on arrival in the lower chamber.

White House press secretary Karine Jean-Pierre said the president intends to urge a deal to keep the government funded beyond Friday and continue his advocacy for billions of dollars to be provided to Ukraine and Israel.

“A basic, basic priority or duty of Congress is to keep the government open,” Ms. Jean-Pierre said. “So, that’s what the president wants to see. He’ll have those conversations.”

Last month, Congress passed a “continuing resolution,” a stopgap measure, to extend the deadline to pass its annual appropriations bills to March 1 and March 8 for the Senate and House, respectively. The CR meant that some government departments continued to be funded at current levels, including the Pentagon, Department of Homeland Security, and the Department of State, until Friday.

Without the CR, government funding would have otherwise partially run out on Jan. 19. This was Congress’ third such short-term measure in four months.

French President Emmanuel Macron is now openly discussing the possibility of sending European troops to Ukraine to fight the Russians, which would without doubt trigger WW3 between major nuclear powers.

His jingoistic words came just at the end of a summit held in Paris in support of Ukraine, which involved 20 mainly European leaders. He said of efforts to arm the Ukrainians with more advanced weapons, “people used to say give them just sleeping bags and helmets.” But he emphasized that now “Nothing should be ruled out.”

He admitted there is as yet “no consensus” on sending Western troops Ukraine but he laid out that “We will do anything we can to prevent Russia from winning this war.”

Macron warned in his remarks, “There is a change in Russia’s stance. It is striving to take on further territory and it has its eyes not just on Ukraine but on many other countries as well, so Russia is presenting a greater danger.”

“We’re at a critical moment in this conflict that requires us to take the initiative,” Macron said while also unveiling a new European coalition which is to provide Kiev with medium-range and long-range missiles. President Putin and top Kremlin officials have repeatedly rejected the charge that Russia is seeking to wage an expansionist war in Europe and in other former Soviet satellite states.

According to CNN, “Macron had told reporters at a news conference that while he and the other 21 European leaders present did not agree on deploying military personnel, the prospect was discussed openly.” However, Germany, the UK, Poland and others have rejected the possibility of deploying troops, with German Chancellor Olaf Scholz – who was among those present – later emphasizing that participants were “unanimous” in being set against it. The statement out of the UK prime minister’s office was interesting, given it admits the “small number of personnel” already on the ground in Ukraine: 

Britain is not planning a “large-scale deployment of troops” in Ukraine, Prime Minister Sunak’s press secretary said. “Other than a small number of personnel who are in the country supporting the Ukrainian armed forces, we have no plans for a large-scale deployment,” he was quoted as saying by Reuters.

Germany’s Scholtz tried to caution, “What was agreed among ourselves and with each other from the very beginning also applies to the future, namely that there will be no ground troops, no soldiers on Ukrainian soil sent there by European countries or NATO states.”

Macron’s bluster further resulted in NATO Secretary-General Jens Stoltenberg issuing a response. “NATO allies are providing unprecedented support to Ukraine. We have done that since 2014 and stepped up [support] after the full-scale invasion. But there are no plans for NATO combat troops on the ground in Ukraine,” he said.

As for the Kremlin response to Macron raising the issue of ‘boots on the ground’ – it was snippy and sarcastic, calling out French hypocrisy: 

“As for Emmanuel Macron’s statements about potentially deploying NATO troops to Ukraine, <...> one gets a strong feeling that the French president realizes neither what his subordinates say nor what he says himself,” the diplomat wrote on Telegram.

Zakharova pointed out in this regard that just a month ago, the top French diplomat had denied that Paris was involved in recruiting mercenaries for the Kiev regime, slamming direct evidence as “crude Russian propaganda.”

Referencing an infamous French SS division from WW2, Zakharova further quipped: “Emmanuel, have you decided to form a Charlemagne deux (two) division to defend [Ukrainian President Vladimir] Zelensky’s bunker?”

But Moscow also warned of major direct conflict with the West. According to more from the Kremlin response: “The very fact of discussing the possibility of sending certain contingents to Ukraine from Nato countries is a very important new element…in that case, we would need to talk not about the probability, but about the inevitability (of a direct conflict).”

But the Kremlin wasn’t the only one to provide a sarcastic critique of Macron’s words. This was the tone even among some allies. For example Germany’s deputy chancellor Robert Habeck called out France for not doing much heavy lifting on transferring weapons to Kiev compared to other in the alliance.

“I’m pleased that France is thinking about how to increase its support for Ukraine, but if I could give it a word of advice — supply more weapons.” https://t.co/SS7cxCQ0xO via @ft

— Tom Braithwaite (@TBraithwaite) February 27, 2024

“I’m pleased that France is thinking about how to increase its support for Ukraine, but if I could give it a word of advice — supply more weapons,” Habeck said Tuesday. And yet President Macron wants to ‘talk tough’ and issue maximalist threats of direct action.

All of this comes as Ukraine is in retreat, following Russia’s capture of the eastern city of Avdiivka. Several other smaller towns and cities have also fallen, with Ukraine’s front lines in disarray. This has resulted in several days of what might be called empty threats being issued from the West, as it sits helplessly while watching Russian forces advance.

By Michael Every of Rabobank

A great variety of moron symptoms appear

Like Gramsci, look around and see the old is dying and the new cannot be born; see the great variety of morbid symptoms appearing as a result; and the greater variety of moron symptoms.

• AI is not the new tech bubble, honest, even if there appears to be a staggering degree of artificiality in the intelligence it’s showing to us. (Presumably, it’s ‘impossible to tell’ if this Daily is ‘as bad as Hitler or Stalin’, because it contains statements some readers may not agree with.)
• At the start of year three of the Ukraine War, President Macron just presided over a meeting of EU powers, stated, “We will do everything needed” to stop Russia winning, yet delivered no new weapons, while also declaring there was no consensus to send in EU troops on the ground, “but in terms of dynamics, nothing can be ruled out.” Really? Because I can rule that out right now.
• In the Red Sea crisis, as flagged, analysis by Sea-Intelligence shows the need to move empty containers back to producers has grown 2.5 times faster than that to move full containers out. That isn’t good for global logistics, just as it wasn’t during Covid. Neither are reports of a shortage of oil (and LNG) tankers due to longer routes being taken. Meanwhile, the Houthis may have cut key Asia-Europe internet cables: Moody’s, who say Suez is having no inflationary impact, even as half of UK businesses are feeling its effects, will only notice when they can’t order lunch at a swipe. (Stick to UNCTAD’s ‘Navigating Troubled Waters’ on this issue.)
• And on lunch, a US fast food chain is to experiment with surge pricing models: its burgers will now get more expensive at mealtimes. I’m sure the BLS team are onto this trend, if it spreads, and will show it means lower prices, when adjusted for eating when not hungry, right?

But let’s not get distracted by micro-Gramscis of hot air, Houthis, and hunger-pangs when the kilo-Gramscis are in understanding what a changing geopolitical and geoeconomic order means.  

A Financial Times op-ed says ‘our global trade system is in desperate need of an overhaul’, repeating my old argument that Ricardo’s free trade comparative advantage theory itself admits it won’t work in a world of mobile global capital, which we censor, as we do Smith arguing the “invisible hand” actually keeps investors’ money circulating domestically. Yes, our system is now more imbalanced thanks to China, even as a global bifurcation away from it is underway. But there will be no joint overhaul, and things will likely be resolved via Western protectionism. In short, Trump started a trade war; Biden extended it; Trump, if he wins, now threatens a return to full US mercantilism. If you work in economics and/or markets and you don’t understand what that means, you are in desperate need of an overhaul.

In narrow terms, the market is again seeing America First means Dollar First regardless of narratives about gold, or BRICS, or, as I put it to Jim Rickards, of countries throwing bricks of gold at each other. That’s even more the case if the Fed isn’t rushing to cut rates. After more comments from Schmid noting, “further disinflation will need to come from services,” that, “we may need to cool demand further to tame price pressures,” and that moderating US wage growth was needed to get back to 2% CPI, not only should we look to the RBNZ meeting tomorrow, but try to imagine if the next set of US payrolls and CPI prints come in hot again. If the three 25bp rate cuts our ahead-of-the-curve Fed watcher Philip Marey –and, belatedly, the market– expects for 2024 then get pushed back from June, how close to, or after, the US election can the Fed move without being seen as political?

Yet US mercantilism, alluded to by the FT, shakes every market box and every asset tree. On this front, Michael Pettis, asks ‘Can Trade Intervention Lead to Freer Trade?’ and “Doesn’t an expansion of global trade always benefit the countries that participate in international trade and, more generally, the global economy?” He answers, “No,” before showing why this is so, logically.

• Only capital controls, not tariffs, can stop foreign purchases of US assets to prevent mirroring trade surpluses: that’s the Ricardo (and Smith) argument in another form.
• The US should only impose tariffs on mercantilists while holding to free –but balanced– trade with likeminded countries. That would shake Japan and Europe and mean global bifurcation, as the FT yesterday notes, ‘China plans to reshape trade on its own terms’.
• If the US acts like this, the dollar’s global reserve currency status would be broken. Yet that doesn’t mean it would collapse. Nothing could replace it, and in a mercantilist world where it’s harder to get trade dollars –with massive offshore Eurodollar debts to repay– the buck would remain essential, and more expensive.

Pettis also makes clear Wall Street would suffer in this scenario, which US capital controls obviously entail. That’s as Bloomberg notes ‘Xi Crackdown on ‘Hedonistic’ Bankers Fuels Industry Brain Drain’, which sounds like the common prosperity so many on Wall Street tried to sell me as ‘regulatory reform’; and ‘Beijing warns China’s US$63 trillion financial sector: serve the real economy and enrich lives’, as state media tells the financial sector to focus on supporting the real economy and refrain from “fake financial innovation,” or Marx’s “productive” over “fictitious capital”… and so more mercantilism. Meanwhile, both the US and Europe governments are begging their financial sectors to invest in the real economy, particularly in defence goods, not to speculate on assets: clearly, things will have to change if the West is to keep up.

Indeed, former ECB President Draghi recently noted, “Many profound changes have taken place in the last few years in the global economic order. These changes have a variety of consequences, one of which is clear… that we’ll have to invest an enormous amount in a relatively short time in Europe,“ underlining the need for “bold action to cover the cost” of the green, digital, *and* defence transitions. That’s trillions of Euros a year – covered how, exactly? And US maritime expert John Konrad favours disbanding the US army and rebuilding the US Navy and merchant marine to cement its global economic power, while removing income taxes and relying on tariffs for revenue, as was originally the US model.   

So, yes, the old is dying and the new cannot be born; and we have a great variety of morbid symptoms appearing as a result. And if you think none of these will happen in whole or in part, and perhaps soon, or that you can play both sides forever as it does, then you are suffering from a great variety of moron symptoms.

For an example, McKinsey has been dragged into a scandal after it was revealed it helped counsel China on a mercantilist industrial policy initiative that raised tensions with the US, while presumably also working with US firms and politicians to downsize and offshore American production, as it the industry norm. The firm is now being threatened with the potential loss of US government contracts, while how much of a future it, or any Western management consultant, holds in a China focused on the real, not fictitious or hedonistic, economy remains to be seen.

At a moment the Israelis are downplaying the possibility of a new hostage deal with Hamas, President Biden is out there claiming a ceasefire agreement is likely a mere days away. No other leader involved in the Qatar-mediate talks has offered this level of optimism and has certainly stayed away from predicting specific dates. All reports out of the region are negative on the prospect of a speedy truce deal.

But Biden while in an ice cream shop in New York with Seth Meyers was asked by a reporter when he thought a ceasefire could begin, to which he answered he hoped a truce would be implemented within days. “Well, I hope by the beginning of the weekend, by the end of the weekend,” he said.

And that’s when he even additionally offered Monday as the day the warring sides will reach a ceasefire. “My national security adviser tells me that we’re close. We’re close. We’re not done yet. My hope is, by next Monday, we’ll have a ceasefire.”

His response was somewhat rambled, given he uttered the words “beginning” of the weekend to then quickly switching to “end” of the weekend, before asserting “by next Monday”.

It’s unclear if the president is going off of anything concrete at all, given Israeli Prime Minister Netanyahu earlier this month temporarily pulled his negotiating team from Doha. He has also repeatedly slammed Hamas’ demands as “delusional”. 

Political commentator Mario Nawfal quips, “Biden says Gaza ceasefire will be agreed by Monday. Hamas says no way. Qatar wonders what he’s been smoking.”

Yesterday, reports in Israeli media said the Israeli negotiating team is nowhere close:

An Israeli official sought to temper expectations on Monday as negotiators flew to Qatar to continue working on a potential hostage deal, telling The Times of Israel that there is not necessarily cause for optimism.

“We need to be careful,” said the official. “We’re still talking to ourselves.”

Currently, a proposed US-Israel-Egypt-Qatar deal outlined in Paris this past weekend would see Hamas release 40 hostages in exchange for a six-week pause in fighting. The Israelis would release hundreds of Palestinian prisoners. The Israeli captives that would go free include women, children, the elderly and sick. But there are major obstacles in the way of an agreement, by all accounts.

Watch Biden prematurely declare a ceasefire will be likely “by the weekend”…

“My national security advisor tells me that we’re close, we’re close, we’re not done yet. My hope is by next Monday we’ll have a ceasefire.”
President Joe Biden on Monday, said he hoped there would be a ceasefire in Gaza which could start by the beginning of next week. pic.twitter.com/8OoG1ogXPe

— Middle East Eye (@MiddleEastEye) February 27, 2024

One Israeli official was cited in the The Times of Israel as explaining that the biggest gap on which the fiercest disagreement centers remains the question of “the end of fighting, the IDF leaving the Gaza Strip.” The official then said, “All the rest, we can figure out,” said the official.

The Netanyahu government has rejected as a non-starter the Hamas demand that Israeli forces first make a full withdrawal from the Strip before a ceasefire deal can take effect, and hostages can go free. Netanyahu has not only vowed to pursue the full eradication of Hamas, but he hasn’t backed off plans for an imminent ground offensive against Rafah, which is teeming with over one million refugees.

Meanwhile, Biden almost made it through the full thought…

Biden loses his train of thought after ⁦@sethmeyers⁩ asks how Americans can be assured he’s not too old for another 4 years pic.twitter.com/erYeNBXE7l

— Tom Elliott (@tomselliott) February 27, 2024

After rebounding strongly from November to January, US Consumer Confidence tumbled in February, according to the latest survey from The Conference Board, beating expectations across the board.

• Consumer confidence fell to 106.7 (estimate 115.0) in February from revised 110.9 in January

• Present situation fell to 147.2 from revised 154.9 in January

• Expectations index fell to 79.8 from revised 81.5 in January

Source: Bloomberg

While that decline on the chart does not look like much, it is dramatic relative to expectations and pre-revision levels. A six-sigma miss…

Source: Bloomberg

But, for the fourth straight month, The Conference Board revised its consumer confidence data significantly lower. In fact January’s was the biggest downward revision since Feb 2022…

Source: Bloomberg

So January’s spike above July’s revised highs which everyone shot their load of exuberance over… is gonzo!!

Source: Bloomberg

For context, that is 11.1 pts of ‘confidence’ erased by ‘adjustments/revisions’ in four months – by far the largest downward shift in the survey’s history…

Source: Bloomberg

Which brings up the same question we had last month?

How do you revise consumer confidence down? Do you ask them again and they tell you, “You know what, I wasn’t feeling it as much as I thought I was”

— Zebra Cat (@ZebraCat20) November 28, 2023

The Conference Board’s indicator inflation expectations tumbled further to +5.2% – still notably high but trend in the right direction…

Source: Bloomberg

The labor market indicators trended notably stronger again in February?

Source: Bloomberg

Bidenomics: where everything is revised lower a month after nobody remembers.