Month: March 2024

The Egyptian pound crashed Wednesday as the government initiated a devaluation of more than 38%, while also hiking interest rates, in order to attract billions more in loans from the International Monetary Fund (IMF).

Already with one of the world’s highest levels of foreign debt, Egypt is trying to avoid potential default in the coming years, and has been propped up by loans and central bank deposits from Persian Gulf states and the IMF. Like other governments in the region, particularly Lebanon, Egypt has long had a severe shortage of foreign-currency reserves, resulting in the Central Bank of Egypt artificially propping up the pound’s value, leading to a robust black market exchange.

The central bank announced Wednesday, “The unification of the exchange rate is crucial, as it facilitates the elimination of foreign-exchange backlogs following the closure of the spread between the official and the parallel exchange-rate markets.” It will allow “the exchange rate to be determined by market forces.”

The statement said it further raised the overnight lending rate to 28.25% and its overnight deposit rate to 27.25%, and crucially that it would let the Egyptian pound trade freely on international markets, in a bid toward quashing inflation.

The central bank said of its drastic moves that they are “backed by the steadfast support of multilateral and bilateral partners” and that “sufficient funding has been secured to avail foreign exchange liquidity.”

Last month we previewed the $35 billion deal that will see the United Arab Emirates develop a sprawling portion of prime Mediterranean coast in Egypt’s northwest. It marks the largest foreign direct investment in an urban development project in the country’s modern history. This expected windfall of foreign exchange is badly needed as local businesses have been suffering and the cost of imported goods has soared.

Economic conditions have only steadily worsened by the increasing strain of over five months of war in neighboring Gaza, amid an ever-present risk that all of this together could fuel popular unrest and destabilization in northern Africa’s most populace country. 

The Wall Street Journal noted, “The market reaction was swift, as Egypt’s pound lost more than half its value against the U.S. dollar, and was trading at around 48.0, compared with 30.9 at Tuesday’s close.”

So a big question will remain whether the inflation surge will lead to a spike in local instability at a very delicate geopolitical moment. The Sisi government and military deep state has long been propped up by Washington, in order to ensure the Camp David Accords and historic peace with Israel; however, the opposition and outlawed Muslim Brotherhood and its ultra-conservative Islam still holds sway over huge swathes of the population.

Another big deval for Egypt was inevitable and it finally came today. Here’s the thing. If Egypt now repegs $/EGP at 50 (blue), this is all for nothing. Inflation will push up the real exchange rate (black), as after every previous deval, and Egypt will need to deval yet again… pic.twitter.com/W58mCI5Kka

— Robin Brooks (@robin_j_brooks) March 6, 2024

Simmering anger on the Egyptian street over Israel’s military actions in Gaza, and soaring civilian death toll, could when combined with the inflationary surge unleashed by these major reform steps could boil over into anti-government unrest. Though talks are ongoing, Egypt’s bailout deal with the IMF is expected to exceed $10 billion. The aforementioned major UAE deal was a big catalyst in moving the IFM deal forward, coupled now with the planned currency devaluation. 

Authored by Matt Lamb via The College Fix,

A popular rap song from Ben Shapiro expressed “white male grievance” and “racist” and “sexist” views, according to a “hip hop” professor…

Associate Professor of Hip Hop A.D. Carson applied his expertise to the song “Facts,” by Shapiro and Canadian rapper Tom MacDonald.

“Given today’s bitter partisan divide and extremist culture wars, it comes as no surprise that Shapiro’s track quickly found a devoted following,” Carson wrote recently in The Conversation.

“But his racist, anti-rap rap lyrics ultimately repeat the same tired charges right-wing politicians have used against hip-hop since its birth over 50 years ago.”

The University of Virginia scholar, whose doctoral thesis was a rap album, compared the “blatant racism” in the song to other music, like Jason Aldean’s anti-riot song “Try That in a Small Town.” That country song contained “coded” racial language, according to several professors.

He wrote further:

By performing over a popular-sounding trap-style beat, Shapiro and MacDonald might lead listeners to overlook their heavy reliance on Black vernacular speech, which toes the line between minstrelsy and abject cultural appropriation.

Because it’s delivered in the form of a conventional rap song, a listener might even be convinced that the racism and sexism the artists are performing are expectations, and Shapiro and McDonald are just doing what all rappers do.

“I would love to believe that racist, sexist, white male grievance rap isn’t where the zeitgeist is in America,” Carson wrote. “But Ben Shapiro and his conservative followers are betting that it is – at least for a brief moment.”

The song topped the Billboard list as a number one single. The pair’s rap plays off Shapiro’s famous line that “Facts don’t care about your feelings,” and focuses on how this song won’t be promoting sexual immorality, guns, or drugs.

It has 16 million views as of this writing.

MacDonald rapped:

This ain’t rap, this ain’t money, cars, and clothes
We ain’t sellin’ drugs, we ain’t gonna overdose
We ain’t pushing guns, ain’t promoting stripper poles
We won’t turn your sons into thugs or your daughters into hoes

“I hope I offend you.”

And the hits just keep coming…

Once the darling of the small banking crisis comeback, New York Community Bancorp has crashed 45% to fresh 30 year lows after The Wall Street Journal reports the bank is seeking to raise equity capital in a bid to shore up confidence in the troubled regional lender.

According to people familiar with the matter, NYCB has dispatched bankers to gauge investors’ interest in buying stock in the company.

There’s no guarantee there will be a deal, or that one would succeed in addressing the bank’s challenges, which as of Wednesday morning had led to a roughly 80% decline in its stock price since January.

This is not a good picture for a bank… Would you hold your deposits there?

Last month, DiNello laid out a series of options the bank could explore to bolster its balance sheet, including selling assets from certain non-core businesses. The bank has also considered turning to newfangled financial instruments that would share the risks of those loans with outside investors, people familiar with the matter said.

As WSJ reports, finding takers for those assets, at least at prices that would make a deal worthwhile, has been challenging and U.S. officials have expressed reservations with banks pursuing credit-risk transfers that would shift the burden of potential losses to entities outside of the regulated banking system.

Finally, as a reminder, NYCB is not alone. The red line below shows ‘small banks’ are in trouble absent The Fed’s BTFP facility…

Oh, and this is fine…

The delinquency rate among large banks hits 3%, the highest in 11 years.

The delinquency rate among small banks hits 7.80%, the highest on record. pic.twitter.com/oVWuj2doBl

— zerohedge (@zerohedge) March 2, 2024

And perhaps that’s why the broad regional bank index is also getting hit today…

Beware the Ides of March as RRP liquidity evaporates.

Think this is isolated?

Think again.

Dear @federalreserve maybe allowing Countrwide Financial And WaMu to buy the assets of insolvent NYCB which bought the assets of insolvent Signature Bank is not the best idea.

— zerohedge (@zerohedge) March 6, 2024

As Chris Whalen details below via The Institutional Risk Analyst, the short answer as to what happens next is that we think that the bank may be sold, one way or another. The profitable Flagstar residential servicing business could be offered for sale in order to make a downpayment for the cleanup of the NYCB legacy multifamily portfolio. But in the wake of credit downgrades, NYCB itself may need to be acquired by another bank.

KBW said in a research note that NYCB could tap into its $78 billion in unpaid balances of mortgage-servicing rights to raise capital through a potential sale. The portfolio has a carrying value of $1.1 billion, analysts said. That is a mere downpayment, however, on a larger mess emanating from the bank’s impaired multifamily assets.

Without an investment grade credit rating, banks cannot hold escrow balances for conventional or government loans. We cannot see how NYCB keeps the billions in conventional and government escrow deposits long-term. The whole Flagstar servicing platform and more than $300 billion in residential loan servicing, mostly for third parties like nonbank mortgage issuers, needs a new home.

Obviously the shareholders of Flagstar are coming to rue the decision to join forces with NYCB, an under-managed community bank with a portfolio of performing but ultimately unsalable multifamily assets. Thanks to the New York State legislature’s 2019 rent control law, which was supported by Governor Kathy Hochul, all banks in New York City that hold rent stabilized assets on the books are now capital impaired.  Several of these banks in New York City may fail as a result of Albany’s actions.

So who might acquire NYCB?

First, we take JPMorgan (JPM) and Wells Fargo (WFC) off the table. The former is already the largest residential mortgage servicer in the US and the latter is exiting the residential mortgage business with finality. The departure of Wells from residential mortgages is bad news for consumers and cause for glee among progressive cadres in the Biden Administration. In any event, neither bank wants any part of the Ginnie Mae sub-servicing book inside Flagstar.  

Next is Citigroup (C), an intriguing possibility for a bank that badly needs new ideas and revenue streams. Citi has been in and out of residential mortgages for the past 50 years. In the 1980s, Citi introduced the first no-doc mortgage in the US market.

Since subprime consumer credit is a big part of Citi’s business, why not add a good sized residential mortgage business and get back into the housing finance game?  There are few other industry segments that have enough size to matter to Citi. Flagstar is the number two warehouse lender after JPM. Overnight, Citi becomes the top bank servicer in the Ginnie Mae market and a significant issuer of MBS. 

After Citi the obvious candidate for NYCB is U.S. Bancorp (USB), which is now the second largest residential bank loan producer after Chase. Although USB is still digesting the acquisition of Union Bank of California, they are a player in residential servicing and loan administration. USB could easily acquire the NYCB mortgage platform and billions in escrow deposits.

The idea of NYCB losing stable escrow deposits argues against the sale of the Flagstar mortgage platform and in favor of selling or recapitalizing the whole bank. But is this possible short of an FDIC intervention? Again, the actions taken by Albany in 2019 make NYCB and other New York banks unsalable short of an FDIC takeover.

If you are an investor looking at NYCB, the big question is the 40% of total loans and leases in multifamily assets. If NYCB were to either sell or risk-share a substantial portion of the rent stabilized multifamily assets, then the prospects for the business improve significantly. But given the disclosures about weak controls over loan underwriting, investors are going to be very cautious about making any assumptions on valuation. And risk-sharing is not yet broadly relevant for commercial assets.

Looking at the volume of risk-sharing deals done by banks so far, virtually all of the transactions are for consumer facing assets. Banco Santander (SAN) leads the pack on risk sharing auto and consumer loans. Commercial loans are far more difficult.  Western Alliance (WAL) and Texas Capital Bank (TCBI) have done risk sharing deals in prime RMBS and warehouse loans, but commercial mortgages will likely be handled as customized, bespoke arrangements done on single loans.  Selling the loans outright to hard money investors may be easier. 

NYCB might want to consider creating a separate “bad bank” containing rent stabilized assets from the legacy NYCB to put pressure on Governor Hochul and the New York legislature to come and clean up their mess. Indeed, FDIC Chairman Martin Gruenberg ought to lead that discussion with Governor Hochul. His agency – and all the FDIC insured banks he represents – now hold the bag on billions in eventual losses on rent-stabilized Signature Bank commercial mortgage loans as well as loans held by other banks. The intemperate actions of the State of New York caused these losses. 

We expect to see a number of creative structures being rolled out to address the impairment of multifamily commercial mortgages on the books of US banks. Risk-sharing is useful and can actually reduce the risk weighted assets of a bank and improve capital ratios, but at a cost to the bank in terms of income. Other techniques involve selling the low-coupon mortgage and replacing it with risk-free collateral that generates a similar cash flow, but frees up regulatory capital for other purposes.

Despite the promise of risk-sharing transactions, at the end of the day raising new capital and managing the delinquency may be a better approach. In the case of NYCB, raising new equity is not feasible. Indeed, any prospective buyer may demand some form of loss sharing from the FDIC on the multifamily book. If, for example, we assume a conservative 20% haircut on rent-stabilized buildings in NYC, many of the smaller institutions are insolvent.

That said, we would not be surprised to see an arranged marriage involving NYCB and a larger player that wants a bigger role in aggregating, selling and servicing residential mortgages. Even the likes of Goldman Sachs (GS), which has a significant presence in lending on residential warehouse loans and mortgage servicing rights, might find NYCB a compelling opportunity — given the proper incentives from FDIC, of course.

Bloomberg columnist Max Abelson wrote an epitaph of sorts for NYCB this week:

“How NYCB got here is a tale of percolating financial risks, changing rules and shifting regulators. New rent restrictions became law in 2019, but instead of acknowledging a hit to its loan book, the bank got bigger. Back-to-back acquisitions, first Flagstar and then parts of Signature Bank, almost doubled the firm’s size and set it on a collision course with new rules for banks holding more than $100 billion of assets.”

We still own NYCB, but we strongly recommend that our readers stand clear until management gives shareholders a very specific roadmap to recovery. The economics of the bank’s multifamily book are gnarly at best. Does the FDIC want to resolve another $100 plus billion asset regional bank? Hell no. Because the mess flows downhill, it may be time for creativity on the part of the FDIC and the State of New York.

FDIC Chairman Gruenberg ought to tell Governor Hochul and New York State to take over the rent stabilized loans from Signature, NYCB and other lenders or face an old fashioned FDIC liquidation as and when any banks fail. The number of public housing units in New York City will soar, placing enormous pressure on the city’s finances. If the multifamily building cannot be financed by a bank, then the City of New York likely will end up as the owner.

Imagine if FDIC went “by the book” and next week sold all of the rent stabilized Signature Bank multifamily assets for whatever hard money bid is available. New York would face a political crisis. Governor Hochul and progressives in Albany caused this mess, which now threatens the solvency of a number of New York banks. The State of New York should take ownership of its fine work and repeal the 2019 rent control legislation.

As a partial government shutdown looms, the House Freedom Caucus has called on Republicans to oppose the ‘Swamp Omnibus’ bill, criticizing it for containing a ridiculous amount of pork. This government funding package is designed to prevent a partial shutdown set for Friday. 

1) The Hitchhiker’s Guide To the House Passing Funding Bill Today

The House debates and votes on a “mini-bus” spending bill to fund six sections of the federal government through the end of the fiscal year.

— Chad Pergram (@ChadPergram) March 6, 2024

“The House Freedom Caucus opposes the $1.65 trillion omnibus spending bill, which will be decided in two halves, the first being brought to the floor this week under suspension of the rules,” Freedom Caucus wrote in a statement. 

The group continued: “Even in the face of $34.4 trillion in national debt, the omnibus will bust the bipartisan spending caps signed into law less than a year ago and is loaded with hundreds of pages of earmarks worth billions.”

Today, the House Freedom Caucus released the following official position urging Republicans to vote against the omnibus and keep their promises to the American people. pic.twitter.com/zH5vMiOoU1

— House Freedom Caucus (@freedomcaucus) March 5, 2024

We pointed out Sunday that US debt is rising at the pace of $1 trillion every 3 months – or – 100 days (read: Hartnett: $1 Trillion Every 100 Days). 

And we’re off: US debt rises by $89BN on the last day of February, to $34.471 trillion, a new record high

Debt has increased by $280BN in February and by $470BN in the first two months of the year.

At this pace debt will hit $37 trillion by year-end and $40 trillion by the end… https://t.co/eETiO355MG pic.twitter.com/GFbkzkY7oE

— zerohedge (@zerohedge) March 2, 2024

Rep. Chip Roy (R-TX) and Sen. Mike Lee (R-UT) coined the new funding package the “Swamp Omnibus.” It was proposed on Sunday, ahead of Friday’s deadline, to avoid a partial government shutdown. 

“In the #SwampOmnibus, the [House GOP] SURRENDERS key demands passed in House [appropriations] bills. “This means MORE ILLEGALS, LESS FREEDOM, & we’ve yet to see the bill that funds Radical Progressive Democrats’ mass-release policies & NGO’s behind it,” Roy wrote on X. 

He continued: “The #SwampOmnibus comes in the context of Congress blowing past BIPARTISAN SPENDING CAPS enacted last year… by $69 BILLION… funding mass-illegal alien releases & radical progressive Democrat-run government $30 billion MORE than Pelosi.” 

In the #SwampOmnibus, the @HouseGOP SURRENDERS key demands passed in House approps bills. This means MORE ILLEGALS, LESS FREEDOM, & we’ve yet to see the bill that funds Radical Progressive Democrats’ mass-release policies & NGO’s behind it… (1/3) #NoSecurityNoFunding #NoOmnibus pic.twitter.com/OACrWoLOpL

— Chip Roy (@chiproytx) March 5, 2024

Despite the lack of earmarks for border security, the funding bill included a “GREEN agenda to limit beef production, and by the corporate meat oligopoly to DOMINATE small ranchers,” Rep. Thomas Massie (R-KY) wrote on X.

🚨 Hidden in this week’s Omnibus:

Lobbyists got $15 million dollars to implement ELECTRONIC TRACKING of all cattle in the U.S.

No law authorizes this!

It will be used by the GREEN agenda to limit beef production, and by the corporate meat oligopoly to DOMINATE small ranchers. pic.twitter.com/jNsmDcxUGT

— Thomas Massie (@RepThomasMassie) March 6, 2024

“There’s a $1,000,000 earmark in the omnibus bill for an LGBTQ center where people have bdsm sex parties,” Massie also pointed out. 

There’s a $1,000,000 earmark in the omnibus bill for an LGBTQ center where people have bdsm sex parties.

After @libsoftiktok & I exposed it, the earmarks’ sponsor wants to remove it from the bill.

There’s just one problem, it’s stuck in the bill we are voting on this week!🤦‍♂️ https://t.co/R28hWWjXbk

— Thomas Massie (@RepThomasMassie) March 6, 2024

And Massie also points out that it appears Republican votes are being bought again…

One Republican Senator gets 8 earmarks in the omnibus today.

No one voted to add these and no one gets to vote to take these out.

We have gone backwards 14 years, to before the 2010 Tea Party wave.

The swamp is back to buying Republican votes for the omnibus with earmarks. pic.twitter.com/DTUOg2UTPv

— Thomas Massie (@RepThomasMassie) March 6, 2024

And more progressive nonsense, such as “Bus Stop Equity” in California.

Just a few highlights of the swamp’s over 1,000-page, pork-filled, omnibus part 1!

This is only the beginning.

I’m a hard NO! pic.twitter.com/BvkxJrPM6I

— Matt Rosendale (@RepRosendale) March 5, 2024

Meanwhile…

We’re already against the next omnibus bill. https://t.co/hKG7LRz2XJ pic.twitter.com/D4k0M9d3mi

— Libertarian Party (@LPNational) February 26, 2024

Democrats continue to ignore the majority of their constituent’s choices… 

Sen. Mike Lee (R-Utah) wrote on X: “Americans have had enough earmarks. And enough inflation. And enough illegal immigration.” 

By Ven Ram, Bloomberg Markets Live reporter and strategist

The yen is perky this morning on suggestions that at least one member of the Bank of Japan may be willing to exit negative rates as soon as this month, but the currency has a long way to go before closing its valuation gap.

Overnight indexed swaps are assigning about a 50% chance of a 10-basis point hike this month and some 80% in April. Regardless of when the BOJ actually gets to the zero-bound on the policy rate, the yen has some significant heavy lifting to do.

A key part of that is the currency’s negative carry. The carry bleed on portfolios that are long the yen against the dollar is significant. For instance, such an exposure since the start of the year would have led to about 6% in losses.

It isn’t always the case that currencies aren’t able to overcome a punitive negative carry, but often it requires overwhelming positive sentiment to help. And that is what the yen is lacking now. Not that traders have abandoned the long yen theme for the year — rather, it’s a case of once bitten, twice shy when it comes to the BOJ actually delivering on its long-expected policy normalization.

Which is why investors haven’t really flocked to the yen this year even though indication after every indication from the BOJ is that it will be done with negative rates in a matter of time. However, just getting to zero-bound won’t do the trick for the yen. With realized inflation still running above 2%, the BOJ’s policy rate needs to get a lot higher for inflation-adjusted rates to start biting — and for the yen to keep climbing from here.

Even so, the next 5% or so is the relatively easy part of the yen to climb against the dollar. But its potential goes far beyond — and a lot of that will come down how far the BOJ is willing to go.

 

One must consider whether the radical left-wing eco-terrorist group that attacked the German power grid on Tuesday to paralyze Tesla’s Gigafactory near Berlin, genuinely aims to save the planet through the shuttering of the plant, or if adversaries of Elon Musk orchestrated this attack to thrust Tesla into turmoil.

Bloomberg reported that the attack suspended Model Y utility vehicle production at the Gigafactory plant in Gruenheide, Germany, for the second day. The factory turns out an average of 6,000 Model Ys per week, which might lead to lower vehicle delivery expectations for the current quarter. 

In a note to clients this morning, Ben Kallo, an analyst at Baird Equity Research, highlighted the need to adjust the automaker’s vehicle deliveries lower for the quarter. He forecasted that Tesla would deliver around 421,100 vehicles in the first quarter, roughly 67,900 less than the Wall Street consensus. 

Kallo, who turned bearish on the stock in late January, said, “A series of one-time production disruptions have added further complexity to the setup” for the first quarter. 

Compounding troubles for Tesla have also been headlines from China, where Gigafactory Shanghai recently logged a slowdown in vehicle shipments. Tesla shares in New York have lost almost $70 billion, or about 11% of market capitalization, so far this month. 

The decline in Tesla has also dented Elon Musk’s wealth, dethroning him as the world’s richest person. He lost that title to Jeff Bezos. 

Authored by Steve Watson via Modernity.news,

MSNBC’s salty anchor Rachel Maddow once again cut away from Donald Trump giving a victory speech after winning 15 of the Super Tuesday states, reasoning that it is “irresponsible to allow” Trump to “knowingly lie.”

As Trump was speaking, Maddow interjected “Yeeeaaaah okay,” while one of the other clowns laughed in the background.

The anchor then stated, “I will say it is a decision that we revisit constantly in terms of the balance between allowing somebody to knowingly lie on your air about things they have lied about before and you can predict they are going to lie about, so therefore, it is irresponsible to allow them to do that.”

Maddow continued, “It is a balance between knowing that that is irresponsible to broadcast and also knowing that as the de facto soon to be de facto nominee of the Republican party, this is not only the man who is likely to be the Republican candidate for president, but this is the way he is running.”

MSNBC anchor Stephanie Ruhle chimed in “Well here is how to balance it. We fact check the hell out of him.”

“Yes, and we do that after the fact,” Maddow responded, adding “That is the best remedy that we’ve got. It does not fix the fact we broadcast it.”

Watch:

Rachel Maddow cuts away from Trump’s victory speech while one of her minions laughs, then tells viewers it’s “irresponsible” to allow Trump to have a platform to “knowingly lie.” What did he lie about? Report and full UNCENSORED speech here: https://t.co/Ejidq4lVR1 pic.twitter.com/aSZleeEJlR

— m o d e r n i t y (@ModernityNews) March 6, 2024

MSNBC and CNN do this all the time.

So what awful lies was Trump spreading this time?

He was talking about the revelation widely reported everywhere this week following a FOIA lawsuit, that the Biden regime secretly flew in thousands of illegal immigrants from foreign countries to at least 43 different American airports from January through December 2023.

Labelling Biden “the worst president in the history of our country,” Trump added “Today it was announced that 325,000 people were flown in from parts unknown. Migrants were flown in airplanes, not going through borders, not going through that great Texas barrier…”

Trump continued, “today it was just announced before I came out, it was unbelievable. I said, that must be a mistake. They flew 325,000 migrants, flew them in over the borders, in, into our country. So that really tells you where they’re coming from.”

“They want open borders and open borders are going to destroy our country. We need borders and we need free and fair election,” he added.

Wow, what an “irresponsible” thing to “knowingly lie” about. We wouldn’t want Americans to hear about such awful lies now would we.

Here is the full uncensored speech:

Here is Trump’s full speech from Super Tuesday… UNCENSORED. MSNBC cut away from it last night, claiming it is “irresponsible.” Watch it and decide for yourself because it should be your choice to decide that. Report here: https://t.co/Ejidq4lVR1 pic.twitter.com/VuPr5DrVrp

— m o d e r n i t y (@ModernityNews) March 6, 2024

As we earlier highlighted, as the Super Tuesday results rolled in, Maddow, along with other MSNBC panelists including Jen Psaki, mocked Americans who think the border crisis is a serious election issue.

*  *  *

Your support is crucial in helping us defeat mass censorship. Please consider donating via Locals or check out our unique merch. Follow us on X @ModernityNews.

After declines in US job openings accelerated in the last few months of 2023, prompting economists to pat themselves on the back for predicting a soft landing and validating their expectations for Fed rate cuts, only to see the trend reverse dramatically last month when job openings unexpectedly surged back over 9 million, moments ago the BLS came out with the latest, January data (which as a reminder always lags the BLS by a month) and which showed another mixed report which revealed that in January job openings dipped modestly from a downward revised December print, but came right on top of expectations, even as both hiring and quits continued their recent slide. 

According to the Biden’s Labor Department, in January the number of job openings dropped by just 42K in January to 8.863MM from 8.889MM. And speaking of the December print, last month we said that “we are certain will be revised lower next month as has been the case with everything under the Biden admin“, and sure enough the number was indeed revised lower from 9026K to 8889K.

According to the DOL, in January, job openings increased in nondurable goods manufacturing (+82,000) but decreased in private educational services (-41,000). Government job openings also dropped by 105K to 900K.

And speaking of revisions, just like in the payrolls report, here too the BLS appears to be tasked with making a great, if erroneous, first impression then quietly revising it lower, and sure enough, 6 of the past 8 months have seen job openings revised lower!

Accurate or not, the modest decline in the number of job openings meant that in January, the number of job openings was 2.739 million more than the number of unemployed workers (which the BLS reported was 6.124 million), up modestly from last month’s 2.621 million.

Said otherwise, in January the number of job openings to unemployed rose to 1.45, a sharp rebound from the October print of 1.35 which was the lowest level since August 2021 and almost back to pre-covid levels of 1.3… and then everything was revised.

But what was more interesting than the increase in the number of job openings in December – which we are certain will be revised lower again next month as has been the case with everything under the Biden admin – was the number of quits: here we find that the number of people quitting their jobs – an indicator traditionally closely associated with labor market strength as it shows workers are confident they can find a better wage elsewhere – tumbled again, sliding by 54K to 3.385MM, which is below the 3.4 million level reported in Feb 2020, just before the covid shutdown.

The number of quits increased in information (+23,000) but decreased in real estate and rental and leasing (-16,000). And unlike last month when the slide in quits was offset by increased hiring, in January there was no silver lining here with the number of workers hired slumped by 100K to 5.687MM. In short: ugly all around.

Finally, no matter what the “data” shows, let’s not forget that it is all just estimated, and it is safe to say that the real number of job openings remains still far lower since half of it – or some 70% to be specific – is guesswork. As the BLS itself admits, while the response rate to most of its various labor (and other) surveys has collapsed in recent years, nothing is as bad as the JOLTS report where the actual response rate remains near a record low 33%

In other words, more than two thirds, or 70% of the final number of job openings, is estimated!

And at a time when it is critical for Biden to still maintain the illusion that at least the labor market remains strong when everything else in Biden’s economy is crashing and burning, we’ll let readers decide if the admin’s Labor Department is plugging the estimate gap with numbers that are stronger or weaker (we already know that they always get revised lower next month).

Oil prices are rising this morning after Saudi Arabia unexpectedly increased prices of its main grade to buyers in Asia and broader financial markets rebounded from Monday’s losses.

Traders will be closely watching Powell’s testimony before the House Financial Services Committee for more detail on the possible timing of interest rate cuts that the market is expecting this year.

“Public enemy No 1 of a protracted rally and the $90/bbl oil price is the uncertainty surrounding interest rate cuts,” Tamas Varga, an analyst at oil broker PVM, wrote in a Tuesday research note.

“The Fed chair’s testimony and the ECB interest rate decision on Thursday could revive hopes for a June reduction in borrowing costs,” Varga said.

Crude was supported technically (at its 200DMA) and by last night’s smaller than expected crude build.

API

• Crude +423k (+1.3mm exp)

• Cushing +500k

• Gasoline -2.8mm (-1.4mm exp)

• Distillates -1.8mm (-400k exp)

DOE

• Crude +1.37mm (+1.3mm exp)

• Cushing +701k

• Gasoline -4.46mm (-1.4mm exp) – biggest draw since Nov

• Distillates -4.13mm (-400k exp) – biggest draw since May

Large product draws dominated the official data with a crude build that met expectations…

Source: Bloomberg

The Biden administration added to the SPR last week once again, +706k barrels…

Source: Bloomberg

US Crude production declined by 100k b/d…

Source: Bloomberg

WTI traded up just shy of $80 ahead of the official data and extended gains after…

The light crude build and products draws come as traders mull a weakening Chinese economy, after the No.1 importer again steered clear of stimulus measures amid a debt crisis in its real-estate sector as it set a 5% growth goal for its gross domestic product this year.

“China’s GDP growth target remained modest and none of the announcements so far have been able to spark optimism,” Saxo Bank noted.