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3 Bill Ackman stocks to buy and hold for long-term gains

Bill Ackman is having a bad year as most of his stock holdings crash. In the UK, Pershing Square Holdings’ share price has dropped by over 20% from its…

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Bill Ackman is having a bad year as most of his stock holdings crash. In the UK, Pershing Square Holdings’ share price has dropped by over 20% from its highest level in 2021. At the same time, his hedge fund’s returns have fallen by over 24%. Unlike most hedge funds, Ackman’s portfolio is highly concentrated, with just eight companies. Here are the best Bill Ackman stocks to buy.

Chipotle Mexican Grill

Chipotle Mexican Grill (NYSE: CMG) is a large company that operates almost 3,000 stores in the US. The company is well-known for its diverse Mexican foods like burritos, tacos, salads, and quesadillas among others. 

Chipotle stock price has been in a strong bearish trend as it has lost about 30% of its value since August 2021. This decline is mostly because of the soaring cost of doing business as the prices of top products like avocados has jumped. Chipotle has also been forced to boost salaries as wages rise. Most importantly, analysts believe that its demand will fall as inflation rises. 

Bill Ackman believes that Chipotle, under the leadership of Brian Niccol, will continue flourishing as it boosts its digital offerings. CMG has been a good investment for Bill Ackman since he bought the shares at about $406 in 2016.

Canadian Pacific Railway

Canadian Pacific Railway (NYSE: CP) is a relatively tiny part of Bill Ackman’s portfolio. CP is a large rail company valued at over $66 billion. The company transports all types of commodities like coal, automotive, ethanol, forest products, and grain among others. 

Canadian Pacific’s stock price has dropped by about 15% from its highest point this year as investors price in weak demand and high cost of doing business. While the company has seen its energy costs surge, it has compensated that by hiking prices.

CP is still a good investment because of the rising demand for its rail services and the ongoing merger with Kansas City Southern. The new company will have the advantage of linking Canada, the US, and Mexico.

Lowe’s 

Lowe’s (NYSE: LOW) is an American home improvement company valued at over $114 billion. It operates in a near duopoly with Home Depot, a company valued at almost $300 billion. 

After benefiting during the pandemic, Lowe’s shares have plummeted since December. The stock has fallen by over 30% as demand for these products fall. The firm is also being affected by the substantial inflation that has lowered the number of home items that people buy.

Still, Lowe’s is a good Bill Ackman stock to invest in because of its strong market share and the fact that it will benefit when the economy recovers.

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Stocks Slide, Ugly Mood Returns As Traders Ask ‘Did Anything Change’

Stocks Slide, Ugly Mood Returns As Traders Ask ‘Did Anything Change’

The brief post-BOE euphoria has worn off, and risk-off sentiment returned…

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Stocks Slide, Ugly Mood Returns As Traders Ask 'Did Anything Change'

The brief post-BOE euphoria has worn off, and risk-off sentiment returned to markets as concern about inflation and the global economy overshadowed the Bank of England’s desperate attempt to restore calm by restarting QE, exacerbated by more hawkish central bank talk and defiance by British PM Liz Truss's tax plan (which has been slammed from the IMF all the way to the White House). Treasuries resumed their slide with UK gilts, while US equity futures fell as European stocks extended a selloff that’s caused valuations to drop to their lowest since 2012. As of 730am, emini S&P futures slid 0.7% to 3704, recovering from losses as big as 1.5% earlier.

The dollar rose and Treasuries resumed their slump as investors focused on expectations the Federal Reserve will continue to deliver aggressive interest-rate hikes. The pound snapped a two-day gain and UK gilt yields rose as Prime Minister Liz Truss defended a giant package of unfunded tax cuts that sent markets into turmoil.

“Other than the dollar, there are not many assets that are trading constructively,” said Julia Raiskin, Asia-Pacific head of markets for Citigroup Inc. “The markets are very pessimistic. Investors are fairly on the sidelines.”

In premarket trading, US-listed Chinese stocks drop in premarket trading, following in the footsteps of Hong Kong- listed peers as the Hang Seng Tech Index erased almost all gains since a March nadir. Alibaba (BABA US) -3%, Nio (NIO US) -2.9%, Baidu (BIDU US) -2.4%, Pinduoduo (PDD US) -2.6%, JD.com (JD US) -2.4%. Bank stocks also slumped after snapping a six-day losing streak the day earlier. Here are other notable premarket movers:

  • Coinbase falls 2.5% in premarket trading after Wells Fargo starts coverage at underweight, with operating results set to remain under pressure. Bakkt (BKKT US) and Riot Blockchain (RIOT US) are both initiated at equal-weight, with Riot declining 3% in premarket trading.
  • Altus Power (AMPS US) slumped 16% in premarket trading after the company’s secondary offering priced at $11.50 per share, below Wednesday’s record close of $14.23.
  • First Solar (FSLR US) gained 1.3% in premarket trading after Evercore ISI analyst Sean Morgan raised the recommendation to outperform from inline, saying the company is poised to benefit from the Inflation Reduction Act.
  • Apple (AAPL US) shares were down 2.6% in premarket trading, set to extend Wednesday’s decline, as BofA Global Research cut the recommendation on the stock to neutral from buy.

European stocks bounced off session lows amid heightened risk-off mood. Euro Stoxx 50 slumped as much as 1.2%. Autos, retailers and real estate are the worst performing sectors as all slump. European miners rose after news that the London Metal Exchange is launching a discussion paper that marks the first step toward a potential ban on new supplies of Russian metal.  Porsche AG rose as much as 5.2% as its shares started trading in Frankfurt after parent Volkswagen AG set the final listing price for the sports-car maker at the upper limit of its offer range. Here are some other notable European movers:

  • Accor shares jumped as much as 8.1%, before paring gains, after the French hospitality company raised FY22 Ebitda guidance to a level which analysts said was above consensus estimates.
  • Rational rose as much as 16% after the German kitchen appliances manufacturer raised its sales and Ebit guidance, citing improvements in the supply chain picture.
  • Capricorn Energy shares rose as much as 8.9% to 261p amid a proposed merger with NewMed Energy that’s expected to deliver total value to Capricorn shareholders of 271 pence per share.
  • H&M shares dropped as much as 7.2%, heading for the lowest close since September 2004, after it reported 3Q results that missed estimates and highlighted “very negative” market conditions.
  • Next fell as much as 10% after the UK high street retailer cut its FY guidance, citing the cost of living crisis and saying the devaluation of the pound is set to prolong inflationary pressures.
  • Colruyt shares plunged 24%, the most intraday on record, after it said the consolidated net result for FY22/23, ex. one-offs, is expected to decrease considerably compared with last year.
  • Ubisoft shares fell after the video-game company pushed back its Skull & Bones title to March 2023 from November, despite maintaining FY guidance. Analysts say the decision raises concern.
  • Wacker Chemie shares dropped as much as 7.8% after Stifel cut its price target, saying lower silicone and polysilicon prices hit sentiment.
  • Hornbach shares dropped as much as 7% after it published its latest 2Q report. The home improvement retailer posted a worse-than expected Ebit decline y/y, Warburg said.
  • European auto stocks fell and were among the worst performing subgroups on the wider market, with Volkswagen and its parent Porsche Automobil Holding SE leading declines.

European bond yields also rose as investors digested the latest inflation data and commentary from European Central Bank officials. Euro-area economic confidence dropped to the lowest since 2020.

Investors are contending with threats posed by discordant moves from central banks over the past few days, with Fed officials adamant on further monetary tightening, the BOE unveiling a £65 billion ($71 billion) plan to support government debt and authorities in Asia trying to prop up weakening currencies.

“The central bank is in a very difficult position right now,” Julie Biel, Kayne Anderson Rudnick portfolio manager and senior research analyst, said of the BOE in an interview with Bloomberg TV. “Everyone has been a little bit backed into a corner in seeing the volatility and market reaction.”

Former Bank of England Governor Mark Carney accused the UK government of “undercutting” the nation’s economic institutions, and said that its fiscal plans were to blame for the drop in the pound and bonds. Simon Wolfson, the boss of Next Plc and a Conservative peer, also appeared to blame the Tory government for a crash in the currency and a worsening outlook for UK inflation, which the company cited as it lowered guidance for sales and profits.

Separately, the European Commission announced an eighth package of sanctions that would include a price cap on Russia’s oil exports as Russia vowed to go ahead with the annexation of the parts of Ukraine that its troops currently control after UN-condemned votes, putting the Kremlin on a fresh collision course with the US and its allies.

Earlier in the session, Asian stocks pared earlier gains spurred by the Bank of England’s unlimited bond-buying plan, as sentiment again turned cautious with fears over a global recession. The MSCI Asia Pacific Index was up 0.2%, having earlier gained as much as 1.2%. Benchmarks in Australia and Japan outperformed, while South Korea’s market closed almost flat. Gauges in Hong Kong and China ended in the red with tech stocks sliding near the lowest since to a sector index was introduced in 2020. Hang Seng Tech Index Slides Toward Lowest Since 2020 Inception The key Asian equity benchmark slumped Wednesday to its lowest since April 2020 on concerns over the Federal Reserve’s ongoing rate hikes. While the the UK central bank’s intervention to avert a crash in the gilt market helped calm investor nerves briefly, few saw the rally as a signal for a full-fledged rebound. 

“We remain very cautious on the markets and would exercise a degree of patience,” Kerry Craig, a global market strategist at JPMorgan Asset Management, said in an interview with Bloomberg TV. Central bank moves, inflation and “the looming risk of recession” need to be monitored, he said. Down almost 12% in September, the MSCI Asian benchmark is set to post its worst monthly performance since the pandemic-triggered crash in March 2020. An index of Asia Pacific stocks excluding Japan is on course for its fifth-straight quarterly loss, its longest losing streak in 21 years.

Japanese equities rose, rebounding along with global peers as investors assessed the Bank of England’s move to buy government bonds. More than 1,100 Topix stocks traded without rights to the next dividend. The Topix rose 0.7% to close at 1,868.80, while the Nikkei advanced 0.9% to 26,422.05. Out of 2,169 stocks in the Topix, 1,854 rose and 271 fell, while 44 were unchanged. “Though there is still a strong uncertainty in the US and UK markets over the rise in long-term interest rates, for now there is a sense of relief in the markets as government bond yields in the UK settled down due to the unlimited purchase plan,” said Tomo Kinoshita, a global market strategist at Invesco Asset Management.

In Australia, the S&P/ASX 200 index rose 1.4% to close at 6,555.00, boosted by gains in mining shares and banks.  In New Zealand, the S&P/NZX 50 index rose 0.7% to 11,200.04

Stocks in India declined for a seventh straight day in the longest losing streak since February, tracking a selloff across global markets amid worries over possible recession.  The S&P BSE Sensex gave up an advance of as much as 1% to end 0.3% lower at 56,409.96 in Mumbai. The NSE Nifty 50 Index slipped 0.2% as both indexes posted their longest stretch of declines in seven months. The key gauges have dropped more than 5% each this month and are on track to record their worst monthly performance since the pandemic led crash of March 2020. Ten of the 19 sector sub-indexes compiled by BSE Ltd. declined Thursday led by the utilities gauge which has lost 11% for the month, making it the worst sectoral performer.

In FX, the Bloomberg Dollar Spot Index first rose then fell, as Treasuries slumped to unwind some of the previous day’s swift rally. The euro fell as much as 1% to $0.9636, before paring losses. It’s significantly more costly to hedge against euro price swings compared to a week ago, as traders bet on wider ranges with risks skewed to the downside. The pound erased losses amid month-end flows, after earlier falling by as much 1.2% to $1.0763. UK bonds extended losses after Prime Minister Liz Truss defended her new government’s giant fiscal package of unfunded tax cuts, which have tipped markets into chaos. Commodity currencies led declines among G-10 peers.  Onshore yuan eked out the first gain in nine days following a stern PBOC warning against “one-sided” speculation, but offshore yuan weakened 0.4%

In rates, Treasuries pared Wednesday’s gains with yields cheaper by up to 11bp across the 5-year tenor into early US session, with the belly’s underperformance helped by a large block sale in 5-year note futures. Treasury 10-year yields near highs of the day at around 3.83%, outperforming bunds and gilts by 3.5bp and 4.5bp in the sector; belly-led losses cheapens 2s5s30s Treasuries fly by 7bp on the day. Moves follow a more aggressive bear flattening move in gilts, wit front-end yields are cheaper by 20bp on the day. US session focus on GDP and Fed speakers throughout the day.   Bunds, Italian bonds dropped and money markets raised ECB tightening bets after German state CPIs rose in September while euro-area economic confidence dropped to 93.7 in September, the lowest since 2020. UK 10-year bonds decline after Truss doubled down on her economic package;

In commodities, Brent rebounded from earlier lows, to trade near $89.50 following reports of OPEC+ considering production cuts. Spot gold falls roughly $12 to trade near $1,648/oz. Bitcoin is under modest pressure but lies within narrow ranges of less than USD 500 at present and well within recent parameters as such.

Looking to the day ahead now, and data releases include German CPI for September, Italian PPI for August, and UK mortgage approvals for August (the calm before the storm). We’ll also get the weekly initial jobless claims from the US, as well as the third estimate of Q2 GDP. From central banks, we’ll also hear from an array of speakers, including ECB Vice President de Guindos, and the ECB’s Simkus, Panetta, Centeno, Villeroy, Knot, Elderson, Rehn, Vasle, Kazaks, Muller and Lane. In addition, there’ll be remarks from the Fed’s Bullard, Mester and Daly, as well as BoE Deputy Governor Ramsden and the BoE’s Tenreyro.

Market Snapshot

  • S&P 500 futures down 1.1% to 3,692.25
  • MXAP up 0.2% to 139.97
  • MXAPJ little changed at 453.71
  • Nikkei up 0.9% to 26,422.05
  • Topix up 0.7% to 1,868.80
  • Hang Seng Index down 0.5% to 17,165.87
  • Shanghai Composite down 0.1% to 3,041.21
  • Sensex down 0.3% to 56,446.56
  • Australia S&P/ASX 200 up 1.4% to 6,554.97
  • Kospi little changed at 2,170.93
  • STOXX Europe 600 down 1.6% to 383.23
  • German 10Y yield little changed at 2.23%
  • Euro down 0.9% to $0.9650
  • Brent Futures down 1.2% to $88.23/bbl
  • Brent Futures down 1.2% to $88.23/bbl
  • Gold spot down 0.9% to $1,644.68
  • U.S. Dollar Index up 0.92% to 113.64

Top Overnight News from Bloomberg

  • Britain is in a self-inflicted financial crisis that threatens to accelerate the economy’s dive into recession -- and the country’s new prime minister is coming under intense pressure to blink
  • The ECB should opt for a “big” increase in interest rates in October, according to Governing Council member Martins Kazaks, who said in an interview that subsequent hikes are likely to be smaller. His Baltic counterparts Gediminas Simkus and Madis Muller also indicated they’d back significant moves, while Mario Centeno of Portugal called for a “measured and balanced” approach
  • The ECB must ensure pay pressures don’t get out of control in its efforts to keep expectations stable, according to Governing Council member Olli Rehn
  • The Riksbank believes it is very important that monetary policy continues to act for inflation to fall back and stabilize at the target of 2% within a reasonable time perspective, the Swedish central bank says in minutes from its latest monetary policy meeting
  • Japan’s capital markets suffered the biggest foreign outflow in three months last week as growing fears of a global downturn fueled a search for liquidity
  • China’s economy stabilized in the current quarter, and the final three months of the year will be key to the nation’s economic recovery, Premier Li Keqiang said
  • As doubts grow over whether Xi Jinping still prioritizes expanding China’s economy over other goals, he’s tipped to appoint a new economic adviser who’s vowed to put growth first
  • OPEC+ has begun discussions about making an oil-output cut when it meets next week, a delegate said

A more detailed look at global markets courtesy of Newsquawk

Asia-Pacific stocks traded higher as the region took impetus from the rally on Wall St where risk sentiment was buoyed and yields retreated following the BoE's announcement to resume Gilt purchases. ASX 200 outperformed in which the commodity-related sectors led the broad advances across industries following the recent upside in energy and metal prices, while firm monthly CPI data did little to dent risk sentiment. Nikkei 225 was also positive but with gains initially capped as more than half of the stocks traded ex-dividend. Hang Seng and Shanghai Comp were also firmer with the Hong Kong benchmark spearheaded by tech and energy stocks, while the mainland also digested reports that the PBoC is setting up a more than CNY 200bln re-lending facility quota for equipment upgrades which aims to expand market demand in the manufacturing sector.

Top Asian News

  • PBoC injected CNY 105bln via 7-day reverse repos with the rate kept at 2.00% and injects CNY 77bln via 14-day reverse repos with the rate kept at 2.15% for a CNY 180bln net injection.
  • Chinese President Xi told Japanese PM Kishida that they attach great importance to the development of China-Japan relations and he is willing to work with Kishida to build relations, while Kishida told Xi that bilateral relations are currently facing many issues and challenges but he hopes to build constructive and stable relations to boost peace and prosperity, in messages to mark 50 years of diplomatic relations.
  • Hong Kong’s Worst Trading Debut in 2022 Sends EV Maker Down 34%
  • US’s Harris Goes to DMZ Hours After North Korea Missile Launch
  • Japan’s First Bond to Help Ocean Planned by Major Seafood Firm
  • Best HK IPO Quarter in Year Ends With Disaster Debut: ECM Watch
  • Yuan Bears Bet China Is Powerless to Fight the Mighty Dollar
  • China Vows to Speed Up Delayed Homes With Special Loans

European stocks are experiencing another bleak session thus far as the overnight gains in futures dissipated heading into the cash open. Sectors are in a sea of red with no clear theme. Autos kicked off the day as the outperformer as the Porsche AG IPO occurred at a premium to the guided price of EUR 82.50/shr. US equity futures are also trading with losses across the board, with relatively broad-based downside of 1.3-1.5% seen across the front-month contracts.

Top European News

  • UK PM Truss says the fiscal statement (i.e. mini-Budget) is the correct plan.
  • UK Chief Secretary to the Treasury says the growth plan will get the economy growing, one of the reasons growth plans included tax cuts was to alleviate the household burden. BoE intervention has had the desired effect. Disagrees with the IMF's remarks.
  • US President Biden's administration was reportedly alarmed by the market turmoil caused by the UK's economic program and is seeking ways to encourage PM Truss's team to dial back its tax cuts, according to Bloomberg.
  • France is reportedly considering proposals for up to two hour power cuts for parts of the country on a rotating basis, via Reuters sources; additionally, telecom names have highlighted power issues with the German and Swedish gov'ts.
  • German Network Regulator says recent gas consumption by households is too high to remain sustainable, via Reuters; gas savings of 20% are required to avoid an emergency.
  • German gov't could make a "low three-digit billion amount" available for the gas price break, discussion of EUR 150-200bln, via Handelsblatt citing gov't circles; will reportedly be announced today.
  • Europe Gas Eases With Traders Weighing Impact of Pipeline Blasts
  • Rational Jumps After Boosting Sales Guidance Above Consensus
  • Truss Says UK Tax Cuts Are the ‘Right Plan’ Amid Market Rout
  • German Economy Seen Shrinking Next Year Due to Energy Crisis
  • Profligate Government to Blame for Pound Drop, Says Wolfson

FX

  • USD has regained some poise after a mid-week pullback; though, the DXY remains off earlier 113.79 highs and thus shy of the YTD/WTD peak at 114.78.
  • Yuan has derived pronounced support from Reuters reports that China's state banks have been told to stock up for intervention offshore, sending USD/CNH to 7.1437 from circa. 7.20 pre-release.
  • Cable managed to 'recover' to a test of 1.09 but failed to breach the level with multiple BoE speakers in focus later.
  • EUR/USD moving at the whim of broader USD action and failing to glean any real traction from multiple speakers and German state/Spanish mainland CPI data.

Fixed Income

  • Core benchmarks are pressured across the board in a modest pullback of the pronounced BoE-induced 'recovery' seen yesterday, with numerous speakers due and the second BoE operation.
  • Specifically, Bund lies towards the bottom of a 200 tick range while Gilts are holding onto the 95.00 handle with the associated yield lifting further above 4.0%.
  • Stateside, USTs are similarly at the lower-end of parameters ahead of data and numerous speakers while the curve flattens further

Central Banks

  • ECB's Simkus says his choice of hike for October is 75bp, says 50bp would be the minimum, via Bloomberg. A 100bp hike would be too much at this point.
  • ECB's Centeno says decisions must be measured and balanced, still far from the neutral rate, via Bloomberg.
  • ECB's Rehn says prospect of recession in Euro Area is likely.
  • ECB's Vasle says current hike pace is "appropriate" response to inflation; expects to raise rates at the next several meetings.
  • ECB's de Cos says so far there is no clear evidence of de-anchoring of inflation expectations. Based on current models, median terminal rate value is at 2.25-2.5% (significant uncertainty).
  • ECB's Kazaks says 75bp will likely be appropriate for October, via Bloomberg.
  • PBoC says they are to add more loans to ensure property delivery when required, via Reuters.
  • China's state banks have reportedly been told to stock up for Yuan intervention offshore, according to Reuters sources, in a bid to defend the weakening Yuan.. State banks were asked to asked offshore branches, such as those in Hong Kong, New York and London, to review holding of the CNH to ensure dollar reserves are ready to be deployed.
  • RBI likely selling USD via state-run banks around 81.92-81.93 levels, according to traders cited by Reuters
  • NBH hikes one-week deposit rate by 125bp, to 13.00%.
  • Turkish President Erdogan says interest rates need to come down further; CBRT needs to lower rates at the next meeting, via Reuters.

Geopolitics

  • Japanese Chief Cabinet Secretary Matsuno said North Korea's multiple missile launches are unacceptable and Japan will maintain close contact with allies including the US to monitor and deal with North Korea, according to Reuters.
  • Turkish President Erdogan said Turkey will increase its military presence in northern Cyprus, according to Sky News Arabia.
  • EU Official expects an agreement on the next Russian sanctions package, or at least major parts of this, before the EU Summit next week. Expects the discussion to focus on referendums, possible annexation, nuclear threat and Nord Stream.
  • Russian State Duma representatives have received invitations to the Kremlin for Friday, September 30th at 13:00BST, via Ria.
  • Russian Kremlin says the ceremony on incorporating new territories will occur on Friday, September 30th - President Putin will speak.

US Event Calendar

  • 08:30: Sept. Initial Jobless Claims, est. 215,000, prior 213,000
  • 08:30: Sept. Continuing Claims, est. 1.39m, prior 1.38m
  • 08:30: 2Q GDP Annualized QoQ, est. -0.6%, prior -0.6%
  • 08:30: 2Q PCE Core QoQ, est. 4.4%, prior 4.4%
  • 08:30: 2Q Personal Consumption, est. 1.5%, prior 1.5%
  • 08:30: 2Q GDP Price Index, est. 8.9%, prior 8.9%

Central Bank Speakers

  • 09:30: Fed’s Bullard Discusses Economic Outlook
  • 13:00: Fed’s Mester and ECB’s Lane Take Part in Policy Panel
  • 16:45: Fed’s Mary Daly Speaks at Boise State University

DB's Jim Reid concludes the overnight wrap

How could you have earned a 42% return yesterday from a AA-rated investment? Simple. At anytime between 8-11am all you had to do was buy 40yr Gilts before the BoE effectively restarted QE only days before QT was suppose to start (it’s been postponed until October 31st - ironically Halloween). The buying operation is aimed at restoring liquidity to a broken long end market and is temporary but it’s another stunning development to a stunning year. I’ve always felt that this debt supercycle would end up with central banks doing QE even if interest rates were positive. The reason being is that the economy can be growing and seeing inflation at a point when investors baulk at funding all the debt. I appreciate this BoE operation is slightly different and I would have never have guessed the series of events that got us here but it might not be the last time a central bank buys government bonds when not at the zero bound given how much debt there is and how much there's likely to be going forward.

It's becoming clearer the extent to which Tuesday's rout at the long-end was exacerbated by collateral calls on LDIs (liability driven investments) that pension funds have typically used in some size in recent years. With these swaps moving so far out of the money, the risk was that investors would have to sell liquid assets to meet margin calls. If they didn't have this (which a lot don't), then obviously there would have been huge liquidity events. To understand the fears that were around over the last 48 hours, Sky News’ economics editor Ed Conway said yesterday that “I am told there were a swathe of pension funds that … would have essentially collapsed by this afternoon”. Whether that's true, we'll never know but it shows the level of fear.

Overall, this isn't quite monetising debt in the purest sense but at the end of the day we have seen fresh central bank buying of debt after unfunded tax cuts pushed up yields dramatically. Despite the BoE’s insistence that these are targeted, temporary purchases designed to ease market dysfunction, global pricing reacted as if they were launching a new QE program to ease financial conditions. Global equities increased, with the S&P 500 (+1.97%) breaking a run of 6 consecutive losses and global bond yields fell across the curve.

In yield terms, 30yr gilts had been trading above 5% prior to the BoE’s announcement, but afterwards they staged a stunning turnaround to fall by an astonishing -105.9bps yesterday. That was easily the largest decline in the 30 years of available Bloomberg data, with the next two closest being a -39.7bps and -30.5bps decline in 1997 and 2009, respectively. It was also the largest absolute daily yield move in the 30yr, with the next two closest being Monday and Tuesday’s sell-offs. The decline takes 30yrs back to 3.92%, which is still above the c.3.5% level prior to the fiscal announcement last Friday but more within normal market reaction levels. Yields on 10yr gilts were down by a smaller -49.8bps, although that reflected the BoE only purchasing gilts with a residual maturity of more than 20 years. Sterling also managed to strengthen for a second day running, with a +1.45% gain against the US Dollar. But that overall performance hides some incredible intraday swings, with sterling moving sharply higher immediately after the BoE’s announcement before tumbling by -2.74% over the subsequent hour and a half before paring back those losses once again. It is down -0.75% in Asia as I type. Remember that markets are still pricing in around +150bps worth of hikes by the next BoE meeting on November 3, and implied sterling-dollar volatility for the next month remains at levels we’ve only previously seen around the GFC, the Covid pandemic and Brexit in the 21st century, so we certainly haven’t heard the end of the UK’s turmoil just yet.

That intervention from the BoE helped sovereign bonds across the world. Indeed, yields on 10yr US Treasuries had been trading just above 4% immediately prior to the intervention, before reversing course to close -21.0bps lower on the day at 3.71%, which is their biggest move lower since the wild intraday swings we had in March 2020 when the Fed was stepping in to buy Treasuries and MBS in unlimited size; sound familiar? Those gains came as investors moved to downgrade the likelihood that the Fed would be pursuing aggressive policy into next year, with the rate priced in for December 2023 coming down by -23.3bps. This morning in Asia, yields on 10yr USTs (+3.6bps) have edged higher again to 3.77% as we type. In terms of the Fed, we did hear from Atlanta Fed President Bostic, who said he favoured another 125bps of hikes this year, but Chair Powell didn’t comment on policy in an appearance at a Community Banking Research Conference.

Over at the ECB, we heard from an array of speakers yesterday, including President Lagarde who said that the ECB would “continue hiking rates in the next several meetings”. Multiple speakers separately endorsed another 75bps hike next month as well, including Latvia’s Kazaks who said that “I would side with 75 basis points”, Austria’s Holzmann who said that “I think 75 would be a good guess”, and Slovakia’s Kazimir who said that 75bps was “a good candidate to continue and keep tightening.” However, sovereign bonds still rallied across the continent, with yields on 10yr bunds (-11.1bps), OATs (-11.8bps) and BTPs (-22.2bps) all down significantly.

When it came to equities, yesterday also finally brought a reprieve from the heavy selling over recent days, which had taken a number of major indices to their lowest levels since late-2020. As mentioned at the top, the S&P 500 (+1.97%) ended its run of 6 consecutive declines with a strong advance that took the index back into positive territory for the week. Despite the rally, the Vix managed to finish above 30 again, as it has every day this week. Indeed, the Vix has finished above 30 on nearly 19% of trading days this year, which is the fourth most in the last 20 years, behind just the crisis years of 2008, 2009, and 2020. The count hides how skewed the distribution is as in ten of those years, the Vix never once finished the trading day above 30. Yesterday's equity rally was less extreme in Europe, with the STOXX 600 (+0.30%), the DAX (+0.36%) and the FTSE 100 (+0.30%) seeing modest gains.

In Asia, the Hang Seng (+1.05%) is leading gains, rebounding from recent steep losses with the Kospi (+1.01%), the CSI (+0.50%), the Shanghai Composite (+0.24%) and the Nikkei (+0.25%) are trading higher. Stock futures in the US are pointing to a slightly more negative start though with contracts on the S&P 500 (-0.11%) and NASDAQ 100 (-0.22%) both in the red. As we go to print, the Swedish media is reporting that coast guards have found a fourth leak on the Nord Stream pipeline. What worries me is that if this can be done to this pipeline what stops it being done to a fully working pipeline.

Elsewhere, the People’s Bank of China (PBOC) stepped up its efforts to limit FX weakness by warning banks against betting on the yuan, after its rapid decline against the US dollar this week which pushed the Chinese currency to as high as 7.25 yesterday. Indeed, the US dollar index (+0.59%) at 113.27 is trending upwards this morning, after hitting a fresh two-decade peak yesterday before pulling back.

There wasn’t much in the way of data yesterday, although US pending home sales for August were down -2.0% (vs. -1.5% expected). With the exception of April 2020 during the lockdowns, that takes them to their lowest level in over a decade. In the meantime, the US goods trade deficit for August narrowed to $87.3bn (vs. $89.0bn expected), which is its smallest level since October 2021.

To the day ahead now, and data releases include German CPI for September, Italian PPI for August, and UK mortgage approvals for August (the calm before the storm). We’ll also get the weekly initial jobless claims from the US, as well as the third estimate of Q2 GDP. From central banks, we’ll also hear from an array of speakers, including ECB Vice President de Guindos, and the ECB’s Simkus, Panetta, Centeno, Villeroy, Knot, Elderson, Rehn, Vasle, Kazaks, Muller and Lane. In addition, there’ll be remarks from the Fed’s Bullard, Mester and Daly, as well as BoE Deputy Governor Ramsden and the BoE’s Tenreyro.

Tyler Durden Thu, 09/29/2022 - 08:08

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Stocks

Expert Panel: Expect a Buyers Market by 2023

Sky-high mortgage costs are driving down competition among home shoppers, and a market firmly in favor of buyers is expected next year, according to a…

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  • Metros in the South and Midwest are the least likely to see price declines over the next year.
  • Vacation market areas are most likely to see price declines. 
  • Rent growth and inflation should outpace stocks and home price appreciation over the next year.

Sky-high mortgage costs are driving down competition among home shoppers, and a market firmly in favor of buyers is expected next year, according to a majority of economists and housing experts polled in the latest Zillow Home Price Expectations Survey (ZHPE).[1] The expert, independent panel also expects rent growth to outpace inflation during the next 12 months, as priced-out potential home buyers exert additional pressure on the rental market. 

Home value growth, which hit record highs over the course of the pandemic, is now slowing as affordability challenges - magnified by quickly rising mortgage rates - are pushing many prospective buyers to the sidelines. Typical home values are ticking down slightly across the U.S. and declining more steeply in some of the most expensive metros, as well as those that grew the fastest over the past two years. 

Although home price growth has slowed, the market is far from pre-pandemic norms. Zillow's latest market report showed listings' typical time on market, while rising, is still 11 days shorter than in 2019.  Inventory is ticking up as well, but is still down almost 42% compared to 2019. The majority of the panel (56%) expects a significant shift in buyers' favor by sometime next year. Another 24% predicted that shift would come in 2024, 13% pointed to 2025, and just 8% expect it after 2025. 

After the frantic rush for real estate over the past two years, prospective buyers are finally seeing a calmer market. Those still able to afford home ownership are quickly regaining lost leverage, but this shift to a more balanced market is still in its early stages. Home shoppers priced out of the market face further hurdles though, as high and rising rents could cut further into their ability to save up for a down payment.

Although the panel-wide 2022 expected home price appreciation rate ticked up to 9.8% from 9.3% in this most recent survey, all 107 survey respondents project home price deceleration in 2023. The share of panelists who believe their long-term outlook might be too optimistic jumped up to 67% from 56% last quarter.

Inexpensive Midwest markets - such as Columbus, Indianapolis and Minneapolis - are the least likely to see home prices decline over the next 12 months, according to survey respondents, of which just 36% reported that home price declines from current levels were likely over the next 12 months. Fast-growing markets in the South, such as Atlanta, Nashville and Charlotte, are also expected to retain their heat by a majority of panelists, with 44% of respondents indicating declines were likely. 

Markets projected to cool the fastest - with 77% of respondents expecting declines - are those that saw some of the largest growth over the course of the pandemic, including Boise, Austin and Raleigh. 

Suburban and exurban areas are predicted by the panel to retain their heat over the next 12 months, while vacation areas and urban areas were considered the most likely to see price declines. 

Rents expected to top growth ranks 

The panel also gave their expectations for the relative growth of rents, inflation, stocks and home values over the coming year. 

Rent growth should remain strong in the short term as high home prices keep many would-be first-time buyers in the rental market. Over the next 12 months, rents are expected to grow more than inflation, stocks and home values.

The panelists predict an average of 5.4% rent growth throughout 2023 –  lower than the 8.6% annual growth they expect to see by the end of this year, but still higher than what Zillow data show to be just under 4% annual growth in the years prior to the pandemic. 

This demand for rentals has already spawned new supply in the pipeline. Builders responded to declining home purchases by ramping up construction on multifamily units, bringing starts to their highest level in years. The panel projects stock prices will rebound over the next three years, outpacing growth in home prices and rents as overall inflation cools.

 

 

 

[1] This edition of the Zillow Home Price Expectations Survey surveyed 107 housing market experts and economists August 16–-27, 2022. The survey was conducted by Pulsenomics LLC on behalf of Zillow, Inc. The Zillow Home Price Expectations Survey and any related materials are available through Zillow and Pulsenomics.

The post Expert Panel: Expect a Buyers Market by 2023 appeared first on Zillow Research.

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Multipolar World Order – Part 2

Multipolar World Order – Part 2

Authored by Iain Davis via Off-Guardian.org,

In Part 1, we discussed the nature of “world order” and…

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Multipolar World Order – Part 2

Authored by Iain Davis via Off-Guardian.org,

In Part 1, we discussed the nature of “world order” and global governance. We learned the crucial difference between the Westphalian model of equal, sovereign nation-states—a mythical ideal, never an actuality—and the various attempts to stamp a world order on that template.

In particular, we considered how the UN has been the leading organisation promoting global governance and how its founding Charter facilitates the centralisation of global power.

We observed that the UN has undergone a “quiet revolution” that has transformed it into a global public-private partnership (UN-G3P).

Latterly, we have seen the rise of a prospective multipolar world order that some say opposes the hegemony of its unipolar predecessor. This new model of global governance will apparently be led by allies Russia and China, the two countries that head up the multilateral partnerships of the BRICS (Brazil, Russia, India, China and South Africa).

The multipolar world order is predicated upon a more prominent role for the G20 rather than the G7. Thereby strengthening Russia’s and China’s positions as permanent members of the UN Security Council.

Whereas the existing unipolar world order established a system of global governance that enables UN-G3P oligarchs to influence policy agendas of nation-states around the world, the new multipolar world order is designed to advance the power of those oligarchs even further - by transforming their influence into absolute control.

Look no further than the Russian and Chinese governments, where the marriage between the political and corporate state is complete. We will address this in detail in Part 3.

President Vlaidimir Putin (left) and President [Supreme Leader] Xi Jinping (right)

WHO WANTS A MULTIPOLAR WORLD ORDER?

We ask: who wants a multipolar world order?

The short answer: everyone.

The longer answer: everyone who has sufficient power and influence to change global governance.

The multipolar model isn’t being pushed solely by the Russian and Chinese governments, their oligarchs and their think tanks. It’s also being promoted by the erstwhile “leaders” of the unipolar world order.

Consider this remark by German Chancellor Olaf Sholtz. His speech, set within the context of Russia’s military intervention in Ukraine—which every member of the Western establishment lambastes for the cameras—was given at the World Economic Forum’s 2022 Davos gathering:

I see another global development that constitutes a watershed. We are experiencing what it means to live in a multipolar world. The bipolarity of the Cold War is just as much part of the past as the relatively brief phase when the United States was the sole remaining global power[.] [. . .] The crucial question is this: how can we ensure that the multipolar world will also be a multilateral world? [. . .] I am convinced that it can succeed – if we explore new paths and fields of cooperation. [. . .] If we notice that our world is becoming multipolar, then that has to spur us on: to even more multilateralism! To even more international cooperation!

Western central banks, too, have looked toward the multipolar model. In a 2011 round table discussion at the Banque de France, then-French Finance Minister Christine Lagarde, who subsequently became the head of the International Monetary Fund (IMF) and then was appointed President of the European Central Bank (ECB), said:

Our starting point is to create the conditions to achieve two closely intertwined objectives, i.e. strong, sustainable, and balanced growth, on the one hand, and an orderly transition to a world that is multipolar in economic and monetary terms, on the other. [. . .] The G20 reached agreement [to] promote the orderly transition from a world where a small number of economies, with their currencies, represent the bulk of wealth and trade, to a multipolar world where emerging countries and their currencies represent a growing if not predominant share.

That same year, Mark Carney, then Governor of the Bank of Canada, delivered a speech to the Canada Club of Ottawa, during which he said:

We meet today in the midst of another great transformation—one that is occurring more rapidly than most recognise. The financial crisis has accelerated the shift in the world’s economic centre of gravity. Emerging-market economies now account for almost three-quarters of global growth. [. . .] [W]eakness in advanced economies and strength in emerging economies [. . .] determines the global economic outlook. [. . .] This shift to a multi-polar world is fundamentally positive, [but] it is also disruptive.

Still a third speech in 2011, this one by Lorenzo Bini Smaghi, who was representing the Executive Board of the ECB, emphasised the potential of the multipolar world order. Smaghi noted that, in order to move towards the new world order, an economic, financial and policy shift was required. Bemoaning the lack of progress in the financial and policy fields, he suggested:

[W]e have a multi-polar economic world, but no multi-polar financial or policy world yet. [. . .] [H]ow can we improve the functioning of the international monetary system? The first avenue is to start building a new institutional framework[.] [This] will have to be designed for this new multi-polar world. [. . .] The second avenue involves implementing policies consistent with the transition to a more complete multi-polar world, in all its dimensions. [. . .] A more balanced multi-polar world also requires deeper financial and economic integration in Europe[.] [. . .] The G20 is thus destined to become an over-arching grouping, capable of tasking institutions like the IMF, World Bank or FSB with specific mandates but also to give guidance on politically sensitive issues, in the way the G7 operated in the past.

The World Economic Forum, which describes itself as the international organisation of public-private cooperation, has been advocating the potential of a multipolar world order for some time.

For example, in 2019 it published an article by Credit Suisse’s Global Head of Investment Strategy & Research, Nannette Hechler Fayd’herbe, who advocated investment in “emerging markets.”

Credit Suisse is one of the nine global investment banking giants that collectively comprise the Bulge Bracket. The opinion of its head of strategic investment is notable:

In 2018, we moved closer to the multipolar world that looks set to replace the bipolar US-Russian geopolitical regime that emerged from the Cold War. China’s ascent as a serious economic and geostrategic rival for the US, and its growing assertiveness with programs like “One Belt, One Road” or “Made in China 2025”, has strengthened its influence on the world stage. [. . .] From an investor standpoint, the newly emerged multipolar world brings national champions [—companies in large countries with a sizeable domestic workforce in strategic sectors—] and brands into focus, including emerging market consumers.

Even the Council of Foreign Relations (CFR), whose elitist members are ardent pro-NATO US foreign policy supremacists, accepts the imminent arrival of the multipolar world order.

Stewart M. Patrick, the CFR senior fellow who defined the International Rules Based Order (IRBO), wrote in 2021:

[T]he Western-led order was on its heels well before Trump, knocked off balance by rising geopolitical competition from China and Russia; a shrinking collective share of global GDP among the member states of the high-income Organization for Economic Cooperation and Development; and public disillusionment with globalization, particularly after the financial crisis. These weaknesses remain. [. . .] The Cornwall summit [G7 summit] will also allow observers to gauge the G-7’s political cohesion and global relevance in an ideologically diverse, multipolar world.

A final example: Speaking at a White House business convention on 21st March 2022, US President Joe Biden said:

We are at an inflection point, I believe, in the world economy[.] [. . .] [I]t occurs every three of four generations. [. . .] Now is a time when things are shifting[.] [T]here’s going to be a new world order out there, and we’ve got to lead it and we’ve got to unite the rest of the free world in doing it.

What’s going on? Why would the architects of the unipolar hegemony obligingly accept being replaced by multipolarity—and offer to help make the transition? Why, no matter where you look, even in the most hawkish Western think tanks, is there universal acquiescence to the emergence of a new multipolar world order?

You could argue that this is the only realistic perspective.

Still, the lack of any resistance at all is conspicuous. It suggests that there is more to this baffling contradiction than meets the eye. Indeed, these statements we have quoted, and many more like them from other Western power brokers, reveal, more than acquiescence to a multipolar world, a clear rationale for the creation of a “new world order.”

The point is, if the current holders of global power wish to retain control, then transition to the multipolar world order is required. They understand that the multipolar system is the necessary next step in the evolution of the unipolar order.

Christine Lagarde – former French Finance Minister, President of the IMF and now Governor of the ECB.

THROWING THE DOLLAR RESERVE CURRENCY AWAY

As if to hammer home the fact that the dollar-backed unipolar world order is over, Jerome Powell, Governor of the US Federal Reserve (the Fed), said in April 2022:

The US federal budget is on an unsustainable path, meaning simply that the debt is growing meaningfully faster than the economy. And that’s by definition unsustainable over time.

He then added a reassuring, but ultimately empty caveat:

It’s a different thing to say the current level of the debt is unsustainable. It’s not. The current level of debt is very sustainable. And there’s no question of our ability to service and issue that debt for the foreseeable future.

If the gods were perfectly aligned, geopolitics didn’t exist, universal peace and joy sprang forth and the world ran smoothly and predictably, then Powell’s reassurances may have been plausible. But that is not how the world works. Nor are Powell’s imaginary “ifs” any basis for a sound global reserve currency. His admission was the salient point.

The US government debt-to-GDP ratio currently stands at an estimated 137.2% of GDP. The cost of the COVID-19 countermeasures and the West’s sanction response to Russia’s military action in Ukraine—including the vast sums the US and some European countries have invested in Ukraine’s supposed militarisation—has only made the situation worse.

Spiralling government debt is nearly as bad in every other major Western economy. It stands at 103.7% of UK GDP and in the Euro Monetary Union (Eurozone), it eclipsed 100% of GDP in 2021.

The economic, financial and political basis of the unipolar world is rapidly evaporating.

As central bankers like Powell (US), Lagarde (EU), Andrew Bailey (UK) Elvira Nabiullina (Russia) and Agustín Carstens (Bank for International Settlements) know, as do all the other major players like Carney (UN), there is every reason to question how long the US can service its debt obligations—that is, repay the minimum required amount.

America’s only option is to keep the metaphorical money printing presses running, which can only lead to further inflation and eventual economic ruin.

As the US economy sinks, so does the dominant global reserve currency and, apparently, the financial power of the Western-aligned oligarchs. This looks likes deliberate self-destruction.

Just two days after the launch of Russia’s so-called “special military operation” in Ukraine, the governments of the US, UK, Canada, and the European Union—the core of the G7—announced that they had decided to freeze the Central Bank of Russia’s $630 billion foreign currency reserves.

While the US administration has done this kind of thing before, it did it to Afghanistan two weeks earlier, taking the wealth of a major developed nation and a fellow member of the UN Security Council sent very clear signals to the rest of the world.

Countries hold foreign currency reserves for numerous reasons, but chief among them is to hedge against the economic impacts of crises of various kinds.

If, for example, the currency of a nation is devalued, holding reserves of a stable foreign currency ensures that it can maintain levels of international trade in the short term. For some markets, notably the global oil market, trade is overwhelmingly conducted in the current leading reserve currency, the US dollar.

As there is no single, overarching framework of “international law” adjudicating reserve currency, if ever the concept of an “international rules based order” were applicable it was to the agreed role of the US dollar as a global reserve currency.

Regardless of the morality of the Russian government’s military action or its human cost, the Western unipolar clique, in seizing Russia’s reserves based purely upon a foreign policy disagreement, announced to the world that their IRBO was completely meaningless.

The only reason nation-states agree to holding a dominant global reserve currency, beyond economic force, is that they trust the stability of that currency. If those currency reserves are seized whenever the issuing state feels like it, then that currency couldn’t be more unstable and has lost credibility as a viable reserve.

Despite the claims of the Western politicians and their mainstream media (MSM) propagandists, the whole of the world is not united in its condemnation of Russia’s military action in Ukraine. Beyond North America, Europe and Australasia, censure is notable for its absence. By grabbing Russia’s reserves, the so-called IRBO more or less openly declared to the rest of the world that its US dollar, as a global reserve currency, was dead.

Vladimir Putin was apparently right to observe:

Imposing sanctions is the logical continuation and the distillation of the irresponsible and short-sighted policy of the US and EU countries’ governments and central banks. [. . . ] The global economy and global trade as a whole have suffered a major blow, as did trust in the US dollar as the main reserve currency. The illegitimate freezing of some of the currency reserves of the Bank of Russia marks the end of the reliability of so-called first-class assets. [. . .] Now everybody knows that financial reserves can simply be stolen.

He also dropped in some virtue signalling, praising the Russian private sector for its “sustainable development” efforts:

I would like to thank the business community and the teams at companies, banks and organisations, which are not only responding effectively to sanction-related challenges but are also laying the foundation for the continued sustainable development of our economy.

The NATO-aligned nation-states behind the sanctions also decided to progressively cut Russian commercial banks out of the Society for Worldwide Interbank Financial Telecommunications (SWIFT) network.

This is the international financial communication system that enables banks and financial institutions to notify each other of international fund transfers using a standardised set of codes.

Both Russia and China have prospective alternatives to the SWIFT system. Russia developed its System for Transfer of Financial Messages (SPFS) in 2014 and China its Cross-Border Interbank Payment System (CIPS) in 2015.

According to the Central Bank of Russia (CBR) SPFS has expanded rapidly in response to the sanctions. Potentially both systems could supplant the West’s, but CIPS appears to be the most likely replacement for SWIFT.

The G7’s claimed objective for these sanctions was to sever the Russian Federation’s access to global markets, but the world is a big place. All the sanctions did was curtail Russia’s ability to trade its energy and other key commodities such as grain and palladium—vital for the manufacture of semiconductors, with the West. Primarily at the West’s own expense.

Russia and China have long sought to “de-dollarise” their economies and have forged numerous bilateral trade agreements outside of the dollar system. With the sanction, the West handed the Russian Federation one of its major monetary foreign policy objectives on a plate. A strange kind of punishment.

This year the IMF reported that countries around the world have increasingly diversified their foreign currency reserves over the past two decades. In the last quarter of 2021, the dollar share of global reserve currencies had already fallen to below 59%. The sanctions against the Russian Federation provided a massive boost to Russian and Chinese ambitions to reset global reserve currencies for the benefit of their own economies.

In June 2022, following the sanctions, the BRICS nations announced their plans to establish a new form of global reserve asset based upon a basket of BRICS currencies. This is a direct challenge to the special drawing rights (SDRs) that the IMF allocates to nation-states. Based upon the underlying value of the currencies in the “basket,” they can be exchanged, like any asset, for goods, services, or commodities—or redeemed for currency.

Jerome Powell – Chairman of the US Federal Reserve

MULTIPOLAR GLOBAL GOVERNANCE IS DIFFERENT BECAUSE REASONS

It is easy to believe, as some do, that the Western oligarchs are in danger of losing their power base. Many of the people who hold such views also contend that the current world order is dominated by these same oligarchs. We have to wonder what they think globalist oligarchs do with all that power and authority. Simply sit idle and watch it slip away as the world turns around them?

In reality, they haven’t been idle at all. As witnessed by their statements and actions, they have been making preparations to move to the new multipolar system for decades.

To illustrate: in 2009, global investor, currency speculator and oligarch George Soros told the Financial Times:

[Y]ou really need to bring China into the creation of a new world order, a financial world order. [. . .] I think you need a new world order that China has to be part of the process of creating it and they have to buy in. They have to own it the same way as, let’s say, the United States owns the Washington consensus, the current order[.] [. . .] I think the makings of it are already there because the G20, in agreeing to peer reviews, effectively is moving in that direction. [. . .] As long as the renminbi is tied to the dollar, I don’t see how the decline in the dollar can go too far. [. . .] [A]n orderly decline of the dollar is actually desirable. [. . .] China will emerge as the motor replacing the US consumer and [. . .] China will be the engine driving it [the world economy] forward and the US will be actually a drag that’s being pulled along through a gradual decline in the value of the dollar.

According to representatives of the Russian and Chinese governments, the multipolar world order, supposedly led by them, will empower the G20, rather than the G7, to manage “global economic governance.” No surprises there.

Further, the stated objective is to supposedly reinstate an “international law-based world order” that will enhance “genuine multipolarity with the United Nations.” The UN Security Council will continue to play “a central and coordinating role,” with the objective of promoting “democratic international relations” and “sustainable development across the world.”

This global agenda is virtually indistinguishable from the one promoted by the unipolar IRBO. The claimed difference is that Russia and China will lead a BRICS-centric multipolar order which does more than pay lip service to international law and multilateral agreement. Allegedly, the multipolar model will abide by international law and focus upon collective decision making.

The belated pushback by some US states against BlackRock’s investment strategy in US pension funds is only a minor irritation for the global corporate titan. While they have pressured the US economy to “decarbonise” they have not taken the same approach in China.

BlackRock, and the Western oligarchs who invest through it, decided to make an enormous investments in China’s “state owned” hydrocarbon giant PetroChina.

The China National Petroleum Corporation (CNPC) is among the largest “fossil fuel” energy companies in the world. It deals in both gas and oil and PetroChina is its publicly listed arm.

In 2021 BlackRock was the first foreign company “allowed” by the Chinese government to launch a mutual fund in China which aims to achieve “long-term capital growth” for Chinese investors. The capital growth will come from BlackRock’s commitment to “sustainable development.” This was met with consternation by the Western MSM, and disgruntled oligarch George Soros, who claimed this was a huge blunder, adding:

The BlackRock initiative imperils the national security interests of the U.S. and other democracies because the money invested in China will help prop up President Xi’s regime.

China’s authoritarian style of technocratic government suits BlackRock. Speaking to Bloomberg’s Erik Schatzker in 2011, BlackRock CEO Larry Fink infamously said:

Markets don’t like uncertainty. Markets like, actually, totalitarian governments where you have an understanding of what’s out there and, obviously, the whole dimension is changing now. [. . . ] with the democratisation of countries. And democracies are very messy, as we know in the United States[.]

This followed the 2010 comment of George Soros that “today China has not only a more vigorous economy, but actually a better functioning government than the United States.” So perhaps his little spat with BlackRock is surprising.

As mentioned in Part 1, oligarchs are not a homogenous group of automatons that all think with one mind. They are collectively committed to long-term goals but often disagree on how to achieve them.

While BlackRock’s investors apparently see China’s technate as advantageous, Soros has always sought to destabalise nation from within, through various revolutionary means, and then use his wealth to instal the system he wants. His apparent backing for violent revolt in Hong Kong and his financial crimes, directed against Chinese companies, hasn’t endeared him to China’s oligarchy.

But upsetting your partners is no reason to loose sight of the long game. Having publicly slated the Chinese government, calling Xi Jinping “the most dangerous enemy” of democracy in 2019, Soros backed NGO’s like the Sunrise Movement and ActionAid USA wrote an open letter to the US administration in 2021 urging closer cooperation with China on the oligarchs’ shared ambition of sustainable development.

Post Russia’s war with Ukraine and the West’s sanction response, BlackRock’s PetroChina investment doesn’t look like such a monumental mistake now. The spike in oil prices saw a huge surge in profits for PetroChina, as it did for nearly every other oil and gas company. But BlackRock’s Chinese investment strategy is astute for other reasons too.

With energy flows suddenly being directed away from the West and towards the East, moves such as the multibillion dollar deal between Russia’s “state owned” Gazprom and China’s “state owned” CNPC will further improve BlackRock’s bottom line.

Pushed by the sanctions, Gazprom and CNPC will conduct their business in the ruble and the yuan. The consequent underpinning of their currencies strengthens the BRICS plan to challenge the primacy of the dollar as a reserve currency. With its Chinese mutual fund in operation, not only will BlackRock investors capitalise on their PetroChina deal, they are also well placed to take advantage of the likely shift in the International Monetary and Financial System (IMFS).

It seems BlackRock possesses almost magical powers of prescience.

There is no hint that the multipolar world order will do anything the tackle the inordinate power of the private sector oligarchs who dominate the United Nations’ global public-private partnership (UN-G3P). Neither they nor their investment portfolios are confined within national borders. Any nation-state can be an investment vehicle and international relations are just part of their strategic financial planning.

The global mechanisms and partnership networks that “act as a force multiplier” for the globalist oligarchs are not at risk. In terms of global governance, from the oligarchs’ perspective, the shift to the multipolar model is simply a change of middle management.

The oligarchs’ policy agendas, including the creation of a new global economy built upon debt–based sustainable development and natural asset classes, set within a $4 quadrillion carbon-neutral IMFS, remain firmly on track. Far from a threat, the multipolar world order is crucial. Without it, the theft of our natural resources and the capitalisation of nature cannot proceed.

Recently, Larry Fink, speaking at the Clinton Foundation’s Global Initiative seminar, said:

If we are going to change the world, there’s just not enough money that is going in to the emerging world. We must change the Charters of the IMF and the World Bank if we are going to get there. [. . .] There’s huge pools of capital but that capital is not equipped[.] [. . .] Its up to the equity owners [. . .] basically the G20, they have to have a desire for doing this. [. . .] If we can do that, the amount of capital that is going to go into the emerging world, into Africa [for example], will be extraordinary. [. . .] there is that opportunity in the next few years to do this and then we will have, not just a tectonic shift in the developed world, but a tectonic shift in all of the world.

Perhaps Larry is thinking of the kind of reforms that the BRICS, exploiting the pseudopandemic, suggested in 2021. Collectively the BRICS stated priorities for reform of the IMF and the World Bank included “innovative and inclusive solutions, including digital and technological tools to promote sustainable development” and stregnthening nations’ capacity to tackle problem relating to “terrorism, money laundering, [the] cyber-realm, infodemics and fake news.”

The hegemons of the multipolar world order would also like to see “reform” of the UN Security Council by increasing “representation of the developing countries,” such as Brazil, India or South Africa, thereby swinging control in the BRICS favour. They also recognised “the 2030 Sustainable Development Agenda as a comprehensive, indivisible, far-reaching and people-centred set of universal and transformative targets.” All of this will supposedly improve “the system of global governance” they said.

The only perceptible difference is that the BRICS “emphasized the urgency of revitalization of the UN General Assembly so as to enhance its role and authority.”

As we discussed previously, under the UN Charter, the General Assembly doesn’t have any “authority.” Yet the BRICS envisaged reform of the General Assembly will be “in accordance with the UN Charter.” If the BRICS statement doesn’t make any sense that is because it doesn’t.

Clearly BlackRock and the BRICS are on the same page, but leaving that aside, this new model of global governance, headed by China and Russia, while the same as the existing model, will be better presumably because Russian, Chinese and Indian oligarchs are nicer people than their Western counterparts. We will explore that assumption in Part 3.

Just like the IRBO, the multipolar world order has signalled its intention to maintain the censorship agenda. The commitment to reform the IMF and the World Banks is firmly based upon an unshakeable commitment to “sustainable development” and Agenda 2030—thus Agenda21—which suits BlackRock, Vanguard and the rest of the global-public-private partnership perfectly.

In order for this new model of G20 based “global governance” to have a bite and not merely a bark, a global tax system is required.

To this end, in December 2021 the G20 and the Organisation for Economic Co-operation and Development (OECD) finalised their “Two Pillar Solution To Address Tax Challenges.”

Supposedly designed to stop the tax avoidance of “multinational enterprises” (MNEs), which it won’t, the impetus for this nascent global tax system has largely come from the G20.

Unsurprisingly, the BRICS core of the multipolar world order are all signatories to the first concerted effort to legislate a single, unified global tax system into being. It seems that the new world order will fund itself into existence just as all empires do—by taxing the people.

Larry Fink – CEO BlackRock

CHANGING THE NEIGHBOURHOOD

The Western, unipolar, debt-ridden world order is economically and financially spent and, for the UN-G3P, is approaching its used by date. The current IMFS, first established with the Bretton Woods Agreement and maintained by the subsequent petrodollar scheme, is finished. It finally pegged out in 2008 with the global financial collapse. Since then it has been kept on life support simply by printing—digitally speaking—trillions of dollars.

Little of that money found its way into the real economy that you and I inhabit. The bulk of it has been siphoned off to prop up the financial markets while the move towards the multipolar system progresses.

This excess supply of the US dollar, the current leading global reserve currency, will keep eroding—and ultimately destroy—its value. Consequently, the US economy in its present form, along with significant swathes of the Western economic order, is degrading.

As noted by BlackRock, the existing drivers of financial exploitation are tapped out. Now that Western economies have reached their limits of growth, new sources of global economic stimulus are required.

Neither Russia nor China have become the world’s engine for growth by chance. China is energy hungry and Russia is energy rich. Collectively they lead the world in military technology and China leads the world in manufacturing which Russia is happy to fuel with its oil, gas and coal.

Despite the enmities of the past, the leadership in both nations not only recognised the mutual benefit of a closer partnership, they forged one.

If capable, all nation-states engage in industrial espionage. It is silly to claim that Russia and China don’t. Equally silly were the comments of the former director of the US National Security Agency (NSA) and then head of US Cyber Command, Gen. Keith Alexander, who, when speaking about China’s technological development, told a 2015 US Senate Armed Forces Committee:

All they’re doing is stealing everything they can to grow their economy. [. . .] It’s intellectual property, it’s our future. I think it’s the greatest transfer of wealth in history.

Tax and inflation are the greatest transfers of wealth in history, but that wasn’t the end of Gen. Alexanders blunders. Contrary to his claims, the Western public-private partnership has done everything it possibly can to assist China’s development.

In 1970 Zbigniew Brzezinski published Between Two Ages: America’s Role In The Technetronic Era. He recognised that private sector power had already exceeded that of governments and saw the a merger of the political and corporate state as the logical way forward in an emerging world dominated by digital technology:

The nation-state as a fundamental unit of man’s organized life has ceased to be the principal creative force: International banks and multi-national corporations are acting and planning in terms that are far in advance of the political concepts of the nation-state.

In 1973 Brzezinki joined the oligarch David Rockefeller in the formation of the Trilateral Commission (think tank). Their objective, with a mind to US led public-private partnership dominance, was to invigorate development in the East, with a particular focus upon China. Recounting their initial purpose and subsequent evolution, the Commission says:

[T]here was a sense that the United States was no longer in such a singular leadership position as it had been in earlier post-World War II years. [. . .] , and that a more shared form of leadership [. . .] would be needed for the international system to navigate successfully the major challenges of the coming years. [. . .] [T]he enduring effects of the financial crisis that began in 2008 has been felt in every nation and region. It has fundamentally shaken confidence in the international system as a whole. The Commission sees in these unprecedented events a stronger need for shared thinking and leadership by the Trilateral countries.

In 2009 delegates from the governments of China and India joined the Pacific Asian Group of the Trilateral Commission. Hence trilateralist George Soros’ promotion of greater involvement for China in the creation of a “new world order” in the same year.

Efforts to shift the centre of global power eastward began in earnest in the 1980’s. Guided by the policy trajectories advised by the Trilaterlists and other globalist think tanks, the West notably stepped up its efforts to bolster China’s economic, financial and technological development.

Between 1983 – 1991, Western foreign direct investment (FDI) in China increased from $920M to $4.37Bn. In 1994, in terms of US overseas investment, China ranked 30th. By 2000, it was 11th, as Western multinational corporations quadrupled their FDI into China between 1994 and 2001. By 2019, it had eclipsed $2.1Tn.

The pseudopandemic saw an initial 42% slow-down in global FDI, but not in China where it grew again by another 4%. Consequently, China overtook the US to temporarily become the world’s leading recipient of foreign direct investment.

While the private sector drove the modernisation of the Chinese economy, the public sector in the West encouraged China to embolden its global political presence.

In 1979, the US granted China full diplomatic recognition; in 1982, the commitment was reaffirmed in the third joint communiqué; in 1984, Beijing was permitted to purchase US military hardware; in 1994, the Clinton Whitehouse intervened to scrap the cold war embargo on the export of “sensitive technology” to China (and Russia); the 2000 US – China Relations Act was signed by President Clinton (a member of the Trilateralist Commission), establishing further improvements to trade relations; In 2003 the US supported China’s entry into the World Trade Organisation and soon thereafter the Bush administration established permanent normal trading relations (PNTR) with China and, in 2005, then Deputy Secretary of State Robert B. Zoellick, called on China to take its place as a “responsible stakeholder.”

A 2019 report by the World Bank, titled Innovate China: New Drivers of Growth, noted the depth of the West’s G3P commitment to Chinese development:

Governments in other high-income countries have supported specific technologies and industries, particularly by targeting research and development (R&D). In the United States, government agencies such as the Defense Department’s Defense Advanced Research Projects Agency (DARPA) and the National Institutes of Health provided critical financing for key technologies. [. . .] These policies are complemented by support for key enabling technologies and industries—such as the space, defense, automotive, and steel industries—including through various funds, such as the European Structural and Investment Funds (five funds worth more than €450 billion) and Horizon 2020 (€77 billion for 2014–20).

Bringing his enthusiasm for the multipolar world order with him, then Bank of England Governor Mark Carney, and now UN Special Envoy for Climate Action & Finance, spoke at the G7 Central Bankers symposium in Jackson Hole, Wyoming, in August 2019. 

This remarkable speech, shocking to anyone who believes that politicians run the world, more or less laid out where the world order is heading:

[A] destabilising asymmetry at the heart of the IMFS is growing. While the world economy is being reordered, the US dollar remains as important as when Bretton Woods collapsed[.] [. . .] In the medium term, policymakers need to reshuffle the deck. That is, we need to improve the structure of the current IMFS. [. . .] In the longer term, we need to change the game. [. . .] Any unipolar system is unsuited to a multi-polar world. [. . .] In the new world order, a reliance on keeping one’s house in order is no longer sufficient.

The neighbourhood too must change. [. . .] [A] multi-polar global economy requires a new IMFS to realise its full potential. That won’t be easy. Transitions between global reserve currencies are rare events. [. . .] [I]t is an open question whether such a new Synthetic Hegemonic Currency (SHC) would be best provided by the public sector, perhaps through a network of central bank digital currencies. [. . .]

[A]n SHC might smooth the transition that the IMFS needs. [. . .] The deficiencies of the IMFS have become increasingly potent. Even a passing acquaintance with monetary history suggests that this centre won’t hold. [. . .] Let’s end the malign neglect of the IMFS and build a system worthy of the diverse, multi-polar global economy that is emerging.

In a nutshell, according to Carney: The “world economy is being reordered,” the dollar only remains “important” in the short term and “we”—the G7 central bankers—need to improve the IMFS by changing “the game” to suit a “multi-polar world” because the unipolar system is unsuitable. “The neighbourhood” (the Earth) must change to realise the potential of a “multi-polar” IMFS.

This requires transforming “the global reserve currency” to some sort of “Synthetic Hegemonic Currency,” perhaps based upon “central bank digital currencies” (CBDCs).

China, thanks in part to Western assistance, leads the world’s developed economies in CBDC technology. It began seriously testing CBDC in 2014, and started rolling it out in cities like Shenzhen, Chengdu and Suzhou in 2020. This year, China extended use of the digital yuan, called e-CNY, as it surged ahead in the race to become the first cashless major economy.

Russia aren’t far behind. Russia 12 leading banks began technical trials of the digital ruble in 2021 prior to its official launch on the 15th February 2022, just nine days before the “special military operation” began in Ukraine. The First Deputy Chairman of the CBR, Olga Skorobogatova, said:

The digital ruble platform is a new opportunity for citizens, businesses and the state. We plan for citizens transfers in digital rubles [to] be free and available in any region of the country[.] [. . .] The state will also receive a new tool for targeted payments and administration of budget payments.

More than that, adoption of CBDC in a cashless society, where no other form of payment is “permitted,” enslaves every citizen to the state. CBDC is both programmable money and a liability of the central banks. Not only does it always belong to the central bank, and never the user, it can be programmed to function as they see fit.

Russia has already installed the legal framework to make this a reality.

In 2019 Vladimir Putin announced amendments to Russian federal law that enables the Russian state to outlaw the use of cryptocurrencies. In a “cashless society” these could potentially be a form of alternative currency.

As yet, the legal amendments have had little effect. But, if and when Russia moves to a cashless control grid the regulatory platform is ready and waiting.

According to the NATO think tank, the Atlantic Council, as 105 countries representing 95% of global GDP explore CBDC, “the G7 economies, the US and UK are the furthest behind on CBDC development.”

It seems strange that the unipolar IRBO is apparently lagging so far behind again. Especially given that fact that some of its leading “thinkers” would like to see “a network of central bank digital currencies.”

Still, in its search for a Synthetic Hegemonic Currency, it may come as some relief to the leaders of the IRBO that, as noted by the Atlantic Council, “many countries are exploring alternative international payment systems” and that the “proliferation of different CBDC models is creating new urgency for international standard setting.”

While it is evident that China are leading, perhaps the IRBO and the Central Bank of Russia can take some consolation in the NATO think tank’s assessment:

The trend is likely to accelerate following financial sanctions on Russia.

The neighbourhood is certainly changing.

Mark Carney – former MD Goldman Sachs, Governor of the Bank of Canada and the Bank of England, UK Prime Minister’s Special Climate Envoy To COP26, Chairman of the FSB, WEF Board of Trustees member and current vice chairman and head of Impact Investing at Brookfield Asset Management and UN Special Envoy on Climate Change.

BUILDING THE NEW IMFS

Russia is the third–largest oil-producing nation after the US and Saudi Arabia and the second–largest producer of natural gas after the US. But since US domestic energy consumption far exceeds Russia’s, it is the second–largest oil exporter, after Saudi Arabia, and the leading natural gas exporter in the world. Russia also possesses the largest gas reserves on Earth.

In 2018, the Shanghai International Energy Exchange started trading oil futures denominated in the Chinese yuan (CNY). All that was required, in order to make the yuan a full-blown petroyuan, was for crude oil exporters to widely accept it as payment. China has been paying Russia and Iran for oil using yuan since 2012, but the sanctions this year moved the credibility of the petroyuan to a whole new level.

The Russian Federation has not only massively increased its oil exports to China, becoming its leading oil supplier, but is accepting payment in renminbi (RMB). The CNY is the principle of account for the RMB. Globally, as a direct consequence of the West’s sanctions, the petroyuan is now a practical reality.

Venezuela, too, has already agreed to accept the petroyuan. If Saudi Arabia accepts the petroyuan, as seems increasingly likely, the yuan will also have taken a leap forward as a potentially dominant global reserve currency.

Perhaps it is just a coincidence that both the pseudopandemic and the war in Ukraine have resulted in nation-states the world over committing to policies that precisely facilitate the transition to the multipolar world order. That both of these world-changing events just happen to “reshuffle the deck” exactly as desired by the global parasite class is certainly uncanny, if not downright unbelievable.

Nonetheless, as the centre of power moves eastward, maybe the new world order will ultimately deliver on the promise claimed by some—namely, that Russia and China really are standing up to the insidious Great Reset. Could it be true? We live in hope.

Despite the fact that the Western public-private partnership has played a pivotal and seemingly intentional role in this polarity shift, perhaps the Russian and Chinese governments are determined to create a better world order for us all, as some commentators suggest:

[A] higher geopolitical reality is being born which will have a much greater benefit to [. . .] humanity more generally if it is not sabotaged. [. . .] A potentially beautiful new future driven by the re-awakening of the spirit of the Silk Road is being painted before our eyes.

When we conclude this series with Part 3, we may just discover that the wondrous vision of a “beautiful new future” led by China and Russia is a realistic prospect.

Or perhaps not.

Tyler Durden Thu, 09/29/2022 - 03:30

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