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Deja Vu All Over Again

Deja Vu All Over Again



Overview:  It was like deja vu all over again.  First, the market reacted immodestly to headlines indicating there was little chance of pre-election fiscal stimulus in the US.  It was hardly new news.  Then the market seemed to react with surprise that there was no last-minute breakthrough in the UK-EU trade negotiations.  Prime Minister Johnson could abandon the talks, but his chief negotiator had already judged that a deal was still possible, and this seems to allow negotiations to continue.  The firm close in US equities failed to carry over much to Asia Pacific trading earlier today.  Only Hong Kong and Indian equities gained.  In Europe, the Dow Jones Stoxx 600 is recouping around a third of yesterday's 2% drop and is snapping the three-day slide.  US shares are steady to a little higher.  The US 10-year note yield is around 0.72%, slightly softer on the day and around four basis points lower on the week.  European bond yields are a little softer.  Peripheral yields are consolidating near record lows, while the German Bund yield, near minus 63 bp is off  eight basis points this week to a new seven month low.  The dollar is mostly softer today, though the Australian dollar and Norwegian krone are exceptions.  Emerging market currencies are mixed.  The Korean won leads the decliners, paring this week's gains, following an unexpected rise in unemployment (3.9% from 3.2%), while the South African rand and Chinese yuan help the JP Morgan Emerging Market Currency Index snap a four-day decline.  Gold is edging higher for the third day as it rebuilds a hold above $1900.  November WTI is little changed on the day and week around $40.70 a barrel.  

Asia Pacific

Japan will tap the nearly JPY8 trillion reserve fund to renew its furlough program.  It will draw down the fund by about JPY550 bln (~$5.2 bln) of which JPY440 bln is for the job support effort.  The remainder will be used for domestic supply chain investment and funds to support agriculture and fisheries.  

In other regional developments, we note that in addition to the unexpected jump in South Korea's unemployment, Singapore's reported a surprise 11.3% drop in non-oil exports in September after a 10.5% gain in August.  As a regional hub, Singapore is often seen reflected regional trends.  A bright spot in the disappointing trade figures was the shipment of electronic goods.  These rose 21.4% year-over-year, surging from the 5.7% rise in August.  The state of emergency in Thailand weighed on local equities, which fell 3.5% this past week. Foreign investors have sold $9 bln of Thai stocks this year before the week and about $1.4 bln of Thai bonds.   

Last weekend, the PBOC reduced to zero the reserve requirement on banks for currency forwards.  Recalling the past use of this policy tool, many said that China was capping the yuan's gains.  We saw it as a milder move and one consistent with the encouragement of foreign portfolio capital inflows and the use of the onshore yuan for hedging instead of the offshore yuan.  Although many ae focused on goods trade and see why the PBOC would lean against yuan strength, we have focused on the integration of China into the global capital markets and see how a yuan that better reflects the investment drivers (possibly the only G20 economy that will growth this year and relatively high yields, and a market that has become more accessible for foreign investors). Separately, but related, note that China reports Q3 GDP at the start of next week.  The Bloomberg survey found a median forecast of 3.3% quarter-over-quarter growth after an 11.5% expansion in Q2.  The IMF sees the world's largest economy expanding 1.1% year-over-year here in 2020 and 8.2% next year.  

The dollar is in a JPY105.00-JPY105.50 range in recent days.  The dollar has alternated between gains and losses this week.  It finished last week near JPY105.60.  Indications that the Reserve Bank of Australia is considering new measures including buying longer-dated bonds weighed on the Aussie this week.  It slid around 2.25% this week, giving back the bulk of the gains registered in the previous two weeks.  The inability to recover the $0.7100-handle today warns of the risk of a test on the two-month low set in late-September near $0.7000.  The PBOC set the dollar's reference rate at CNY6.7332, which was in line with expectations.    China's 10-year bond yield edged higher to nearly 3.24%, the highest this year, a five-basis point increase this week.  


There are two focus points in Europe:  the second-coronavirus wave, that by some measures is eclipsing the US, and the UK-EU trade talks.   The tragic resurgence of the virus is likely to resolve the apparent debate at the ECB.  No one was really expected a move when it meets later this month, but the downside risks are materializing that ECB President Lagarde will recognize this and it will help set the stage for a move in December, armed with new staff forecasts.  This is spurring a swing in market sentiment. When the Fed adopted the average inflation target, many thought this was an aggressive move than the ECB could not match.  To the contrary, the ECB is seen acting before the Fed and the net result has been a widening of interest rate differential (US vs. Germany) and this could be a factor that has weighed on the euro's exchange rate.  

The EU wants the UK to compromise on state aid before it compromises on fishing.  The UK's Johnson and chief negotiator Frost, in effect, have renewed their threat to leave the talks.  A decision is expected over the weekend, but this seems like theater aimed at a domestic constituency.  Talks are scheduled for next week.  Meanwhile, it is only prudent that both sides step up preparation for no agreement.  Size does matter and the EU's economy is six-times larger than the UK economy.  This gives it leverage. German Chancellor Merkel, the consummate strategist, sees room for a compromise, but the extent of her influence now, as she begins her last year in office, is now an open question.  

The euro is in about a quarter of a cent range through the European morning below $1.1720.  The inability to distance itself from the $1.1700 level warns of further downside risks.  The is little doubt that the expiring option for 680 mln euros at $1.1700 has been neutralized.  The next set of expiring options are half a cent away from that one.  Recall that the euro finished last month near $1.1715.  Sterling held above the week's low set on Wednesday a little below $1.2865.  Today may be the first session since October 8 that sterling does not trade above $1.30.  There are about GBP450 mln in options set at $1.2945-$1.2950 that expire today and have also likely been offset.  


The main obstacle to US fiscal stimulus may indeed be the proximity of the election, but not in the way the partisans have suggested.  While the moving target of the White House position might find common ground with the Democratic-led House of Representatives, the problem is that the White House cannot deliver the Senate.  Senate leader McConnell reiterated that support in the Senate is for a package a third of the size of the $1.8 trillion that the White House as endorsed.  With the President lagging in the polls nationally and in several swing states, Trump no longer has the clout to swing the Senate around.  Note that the Pandemic Emergency Unemployment Compensation (13-week extension) that is rising as people exhaust their benefits under the normal program expires in December.

The US reports September retail sales and industrial output figures today.  Retail sales disappointed in August and the core measures that exclude autos, gasoline, and building materials, contracted in August.  The headline is expected to rise by 0.8% and the core by 0.3%. The pace of headline sales slowed in June, July and August.  Industrial production is expected to edge 0.5% higher after a 0.4% gain in August.  The manufacturing sector is the driver.  It rose 1% in August and is expected to have risen by 0.6% in September.  It would be the third successive slower month, but still a solid number.  Consider that last September and October, manufacturing output fell by 0.6% each month.  The University of Michigan releases its preliminary consumer confidence an inflation expectation for October, and at the end of the day, the TIC data (August) will be reported.  

The US dollar reached almost CAD1.3260 yesterday having begun the week near CAD1.3130. It is consolidating between CAD1.3200 and CAD1.3240 so far today.  The $670 mln option at CAD1.3220 that expires today has most likely been hedged.  The 20-day moving average is near CAD1.3270.  A break of CAD1.3200 could spur a move back toward CAD1.3160 but may need a firmer tone to equities.  The S&P 500 began the week with a third consecutive gap higher opening.  As we noted, a three successive gap higher openings are a sign of an over-extended market.  Wednesday's decline closed Monday's gap and yesterday's loss closed last Friday's gap.  Yesterday's strong close was nice, but follow-through buying is needed to secure the gains.  The greenback is little changed against the Mexican peso.  The dollar rose in the first two sessions this week but has softened since.  It fell by nearly 5.5% over the past two weeks and near MXN21.26, it is up about 0.6% this week.  Initial resistance seen near MXN21.35 and support are closer to MXN21.15.  


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America’s Top Graduates Don’t Want Jobs On Wall Street

America’s Top Graduates Don’t Want Jobs On Wall Street

Even after trading Midtown and Wall Street skyscrapers for the familiarity of their parent’s basement, the army of junior investment banking analysts employed at Goldman Sachs and the…



America's Top Graduates Don't Want Jobs On Wall Street

Even after trading Midtown and Wall Street skyscrapers for the familiarity of their parent's basement, the army of junior investment banking analysts employed at Goldman Sachs and the other major investment banks quickly found that there was no way to avoid the punishing 90+ hour weeks that are a hallmark of the investment-banking analyst programs across Wall Street. However, with the explosion of deals during the pandemic, a cadre of Goldman junior analysts decided to go public with their complaints about the hopelessly skewed work-life balance.

That sparked a conversation about whether investment banking analyst slots, once seen as a virtually guaranteed path to success in one of the world's most lucrative industries, were still worth the tremendous effort required to succeed. While the jobs typically offer six-figure compensation packages, competition from the world of tech - not to mention the buy side, where both work-life balance and compensation are more desirable - has stunted their allure.

And as bankers rebel against management's demands that they return to offices full-time, the NYT has just published a story proclaiming that "the lure of investment banking is fading" for the youngest members of the workforce.

To try and give their reporting an empirical basis, the NYT cited data from top MBA programs showing fewer graduates are finding jobs on Wall Street.

The number of applicants to banking analyst programs is hard to track, but business school data, which captures a slightly older cohort of potential financiers, shows a broad decline in interest in investment banking. Last year, the five top-ranked U.S. business schools sent, on average, 7 percent of graduates from their master’s of business administration programs into full-time investment banking roles, down from 9 percent in 2016. The decline was pronounced at the University of Pennsylvania’s Wharton School, where bankers were 12 percent of the M.B.A. cohort in 2020, compared with more than a fifth of the class a decade earlier. Harvard sent just 3 percent of its 2020 class.

After the data, the reporters included a comment from an Accenture consultant who specializes in recruiting.

"The industry is not as attractive" as it once was, said Rob Dicks, a consultant at Accenture who specializes in recruiting in financial services. "Employees want a hybrid model, and the banks are saying no," he said, referring to a combination of in-person and remote work. "The message is: 'The bank knows best, we have a model for doing this, and you will conform to that model.'"

But perhaps the most tantalizing detail included in the story was an interview with Jamie Lee, the son of legendary JPM banker Jimmy Lee. Apparently, before his death, Jimmy Lee advised his son not to accept an offer for an analyst position.

"The technology sector has just completely changed the game," said Jamie Lee, 37, who worked in banking before starting a venture-capital firm this year. "The opportunity cost is simply too high to be sticking around in a job where you’re not getting the treatment that you want."

Mr. Lee’s father, the JPMorgan banker Jimmy Lee, was for decades one of the best-known players in his field, advising companies like Facebook and General Motors before he died in 2015. But when the younger Mr. Lee was finishing college in the mid-2000s, his father urged him to avoid the analyst programs.

"He said, 'Honestly, J, the way that I’ve seen that we work these kids, I’m not sure that I want that for you,'" Mr. Lee recalled.

Even foreign students who once comprised one of the most reliable cohorts for young Wall Street recruits due to the high pay and visa help see tech companies as their No. 1 choice. If they are going into banking, most are hoping to work as an engineer, not a banking analyst.

Before graduating from Mount Holyoke College in 2016, Areeba Kamal worked for a summer as a trading intern handling complex bond products at Bank of America’s Midtown Manhattan tower. She arrived around 8:30 a.m. and often stayed until 10:30 p.m., trying to learn the intricacies of her product. She sent money to her family in Pakistan.

"If you’re an international student, early on you realize your two options are finance and tech," said Ms. Kamal, 29, noting that those fields offer the most pay and help with work visas.

But after that summer in finance, she gravitated toward tech. “I don’t want to work 14 to 15 hours a day on something I don’t care about because it pays a ridiculous amount of money,” Ms. Kamal said. She now works for Apple.

In summary, maybe Goldman CEO David Solomon shouldn't have been so dismissive of his junior employees' complaints.

Tyler Durden Fri, 07/30/2021 - 18:40

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Wrong Predictions Don’t Deter The Predictors

Wrong Predictions Don’t Deter The Predictors

Authored by Cal Thomas via The Epoch Times,

We have always had them among us: fortune tellers, diviners, readers of palms, tarot cards, tea leaves, stars, horoscopes, discerners of animal entrails



Wrong Predictions Don't Deter The Predictors

Authored by Cal Thomas via The Epoch Times,

We have always had them among us: fortune tellers, diviners, readers of palms, tarot cards, tea leaves, stars, horoscopes, discerners of animal entrails, calling on gods of wood and stone, and all sorts of other “seers” who have attempted to convince the gullible that they have the power to predict the future.

To some, climate change proponents are little more than modern-day soothsayers that media continues to legitimize, even when their dire predictions of global catastrophe turn out to be not so dire.

The latest, but assuredly not the last, is President Biden’s climate envoy, John Kerry. Kerry, whose scientific credentials are nonexistent, recently predicted we have only “100 days” to save the planet from climate disaster. That “Chicken Little” prediction was made at the U.N. Climate Summit a few days ago, so we had better subtract the days that have followed.

Kerry said on “CBS This Morning” in February that the world has “nine years” to avert a climate catastrophe.

What happened in the last five months to advance his forecast? He doesn’t say and reporters won’t ask him.

In 1967, a Los Angeles Times story reported, “It is already too late for the world to avoid a long period of famine,” this according to Stanford University biologist Paul Ehrlich, author of the controversial book “The Population Bomb.” Ehrlich also said the U.S. population was “too big” and that involuntary birth control might have to be imposed through sterilizing agents put into staple foods and drinking water. Ehrlich added the Roman Catholic Church might have to be pressured into going along to control the population. In 2018, Ehrlich was still at it claiming that climate disruption was “killing people” and that the collapse of civilization is a “near certainty.”

America is not experiencing a famine, is it? And contrary to too large a U.S. population, the 2020 Census Bureau report showed that the U.S. population has slowed in the past 10 years to its lowest rate since the 1930s. To quote from a Stephen Sondheim musical, “I’m still here.”

In 1970, a scientist named James P. Lodge, Jr. predicted “a new ice age” by the 21st century. Here we are 21 years into the 21st century and some experts are saying the opposite. No wonder critics call it junk science.

Apologists often claim their predictions were based on information available at the time. Yet they want to make changes that would affect our lives and lifestyles, perhaps forever. It’s all about control, not individual freedom.

In 1972, two members of the Department of Geological Science at Brown University wrote President Richard Nixon following a “meeting of 42 top American and European investigators.” Their letter said, “The main conclusion of the meeting was that a global deterioration of climate, by order of magnitude larger than any hitherto experienced by civilized mankind, is a very real possibility, and indeed may be due very soon.”

Nearly 50 years later we are still waiting on the sky to fall.

There’s much more for anyone who takes time to do the research.

Today, because of fear surrounding COVID-19, we have similar apocalyptic statements emanating from politicians and scientists. Are these statements their attempt to obtain more power for themselves and rob us of our individual liberties and the right to make our own choices?

Has much changed since those ludicrous statements were made a half-century ago? Are doomsday predictions being repeated in new ways today by John Kerry and his fellow climate scare travelers?

Will we resist, or blindly follow?

Tyler Durden Fri, 07/30/2021 - 18:20

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74% Of COVID-19 Cases From Massachusetts Outbreak Occurred In Fully Vaccinated People: CDC

74% Of COVID-19 Cases From Massachusetts Outbreak Occurred In Fully Vaccinated People: CDC

Authored by Zachary Steiber via The Epoch Times (emphasis ours),

A COVID-19 outbreak in a Massachusetts county in July primarily occurred among vaccin



74% Of COVID-19 Cases From Massachusetts Outbreak Occurred In Fully Vaccinated People: CDC

Authored by Zachary Steiber via The Epoch Times (emphasis ours),

A COVID-19 outbreak in a Massachusetts county in July primarily occurred among vaccinated people, sparking fears that a variant of the CCP virus can impact that population more than other strains.

Of the 469 cases detected in Barnstable County, 74 percent occurred among the fully vaccinated, according to a new study published on Friday.

Genomic sequencing of 133 patients showed most of them were infected with the Delta variant of the CCP (Chinese Communist Party) virus.

The bulk of the infected people did not require hospital care, but among the five that did, four were fully vaccinated.

The study, published by the Centers for Disease Control and Prevention (CDC), helped drive agency officials to change masking guidance.

CDC officials announced Tuesday that even vaccinated persons should wear masks indoors, an abrupt shift from under three months ago.

The CDC was unable to point to any published data at the time of its announcement, though an internal document leaked Thursday pointed to some published studies, as well as what was at the time unpublished data from Massachusetts.

The agency recommended that both the vaccinated and unvaccinated should don face coverings indoors in areas with high or substantial transmission of the CCP virus. More than half the counties in America meet one of those designations.

[ZH: And as Bloomberg notes, the CDC scaled back their hunt for breakthrough cases just as Delta emerged.

While the Centers for Disease Control and Prevention stopped comprehensively tracking what are known as vaccine breakthrough cases in May, the consequences of that choice are only now beginning to show.

At the time, the agency had identified only 10,262 cases across the U.S. where a fully vaccinated person had tested positive for Covid. Most people who got infected after vaccination showed few symptoms, and appeared to be at low risk of infecting others. 

But in the months since, the number of vaccine breakthrough cases has grown, as has the risk that they present. And while the CDC has stopped tracking such cases, many states have not. Bloomberg gathered data from 35 states and identified 111,748 vaccine breakthrough cases through the end of July, more than 10 times the CDC’s end-of-April tally.]

Researchers, though, said their investigation suggests people in any area should wear masks inside.

“Findings from this investigation suggest that even jurisdictions without substantial or high COVID-19 transmission might consider expanding prevention strategies, including masking in indoor public settings regardless of vaccination status, given the potential risk of infection during attendance at large public gatherings that include travelers from many areas with differing levels of transmission,” they wrote.

Some of the researchers are CDC officials. Others are with the Massachusetts Department of Public Health, which declined to facilitate an interview on the findings.

The cases in Barnstable County stemmed from summer events and large public gatherings held between July 3 and July 17, the researchers said in the study.

A graph from a new study published by the CDC shows that many of the COVID-19 cases linked to an outbreak in Barnstable County, Massachusetts, this month were among vaccinated people. (CDC)

The events attracted thousands of tourists to the area.

The average of COVID-19 cases in the county rose sharply from July 3 to July 17.

Using travel history from the state’s COVID-19 surveillance system, officials identified a cluster of cases among Massachusetts residents. Additional cases were pinpointed by local health officials.

The cluster cases were defined by a positive COVID-19 test within 14 days of travel or residence in Barnstable County since July 3.

By July 26, 469 COVID-19 cases were identified among state residents, with dates of positive specimens ranging from July 6 to July 25.

Researchers found that the bulk were fully vaccinated, a term that refers to people who have gotten two Moderna or Pfizer COVID-19 vaccines, or the single-shot Johnson & Johnson jab.

Initial data—chain reaction cycle threshold values from some of the specimens—indicate that the viral load of the vaccinated and unvaccinated cases are similar, researchers said. However, they said microbiological studies are required to confirm those findings.

Further, the Infectious Disease Society of America and the Association for Molecular Pathology earlier this year said that such values “should not be considered quantitative measures of viral load.”

Still, the findings were among those used by the CDC to justify the sudden shift this week. Where before vaccinated people were told they did not need to wear a mask anywhere, they are now being told to don a face covering inside.

The data demonstrate “that Delta infection resulted in similarly high SARS-CoV-2 viral loads in vaccinated and unvaccinated people,” Dr. Rochelle Walensky, the CDC’s director, said in a statement on Friday.

High viral loads suggest an increased risk of transmission and raised concern that, unlike with other variants, vaccinated people infected with Delta can transmit the virus. This finding is concerning and was a pivotal discovery leading to CDC’s updated mask recommendation.”

The recommendation is not binding but the CDC’s advice is widely adopted by counties, states, and businesses.

The rise in cases in Provincetown, part of Barnstable County, prompted town officials earlier this week to adopt an indoor mask mandate.

The mandate will shift to an advisory when the daily positive testing rate stays below 3 percent for at least five days, according to Town Manager Alex Morse.

While vaccinated people must wear masks inside, unvaccinated people, including children under the age of 12, must wear face coverings in outdoor crowded areas as well as indoors.

As of July 29, 882 cases were linked to the Barnstable County cluster, 531 of whom are state residents. The percentage of breakthrough cases remained at 74 percent.

Follow Zachary on Twitter: @zackstieber
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Tyler Durden Fri, 07/30/2021 - 17:11

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