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Fed Warns Of Negative Feedback Loop, Fragile Liquidity, And More Volatile Prices

Fed Warns Of Negative Feedback Loop, Fragile Liquidity, And More Volatile Prices

Authored by Mike Shedlock via MIshTalk.com,

The Fed’s Financial…

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Fed Warns Of Negative Feedback Loop, Fragile Liquidity, And More Volatile Prices

Authored by Mike Shedlock via MIshTalk.com,

The Fed's Financial Stability Report is a real hoot. Importantly the Fed fails to point a finger at itself...

Image clip from Fed's Financial Stability Report

Please consider the Fed's May 2022 Financial Stability Report

Pertinent Warnings

  • Despite markedly higher Treasury yields, real and financial asset prices generally remained high relative to their corresponding expected cash flows.

  • House prices continued to rise at a rapid pace that outstripped increases in rents. 

  • Structural vulnerabilities persist at money market funds and some other mutual funds, and the rapidly growing stablecoin sector is vulnerable to runs.

  • Leverage was high at life insurers and somewhat elevated at hedge funds.

  • Central counterparties made larger margin calls amid elevated market volatility.

Q: Who was it that created the environment that made those conditions possible?

A: The Fed with help from three rounds of inappropriate fiscal stimulus

Notable Quotes

  • Prices of risky financial assets remained generally high compared with corresponding expected cash flows. Since November, house prices rose at a rapid rate and continued to outstrip increases in rents. Asset prices remain vulnerable to declines in response to negative shocks.

  • Rising inflation, supply chain disruptions, and ongoing geopolitical events might pose risks to the ability of some businesses and households to service their debts.

  • Some types of money market funds (MMFs) and stablecoins remain prone to runs, and many bond and bank loan mutual funds continue to be vulnerable to redemption risks. 

  • Elevated market volatility associated with the Russian invasion of Ukraine has led to increased margin calls by central counterparties (CCPs), which in turn increased the demand for liquidity from a range of market participants.

  • According to some measures, market liquidity has declined since late 2021 in the markets for recently issued U.S. cash Treasury securities and for equity index futures.

  • While the recent deterioration in liquidity has not been as extreme as in some past episodes, the risk of a sudden significant deterioration appears higher than normal.

  • Since the Russian invasion of Ukraine, liquidity has been somewhat strained at times in oil futures markets, while markets for some other affected commodities have been subject to notable dysfunction.

  • It is difficult to predict periods of extreme market illiquidity.

  • Corporate bond valuations eased somewhat but remained high.

  • Farmland prices relative to rents remained elevated.

  • House prices continued to increase at a rapid pace, and price-to-rent ratios remained high relative to historical levels

  • A negative shock to house prices may hurt homeowners, but such a shock is unlikely to be amplified by the financial system.

  • Many small businesses could be adversely affected by rising costs. Increasing labor costs and prices for other inputs may reduce small firms’ earnings and their ability to service their loans.

  • Leverage remained low at banks and broker-dealers but high at life insurance companies and somewhat elevated at hedge funds.

  • Banks remained well capitalized.

  • Vulnerabilities of U.S. banks to the Russian invasion of Ukraine appear to be limited. 

  • Leverage at life insurers remained near its highest level of the past two decades. Life insurers continued to invest heavily in corporate bonds, collateralized loan obligations (CLOs), and CRE debt, which leaves their capital positions vulnerable to sudden drops in the value of these risky assets.

  • Stablecoins are also vulnerable to runs, and the sector continues to grow rapidly.

  • The aggregate value of stablecoins—digital assets that are designed to maintain a stable value relative to a national currency or other reference assets—grew rapidly over the past year to more than $180 billion in March 2022.  The stablecoin sector remained highly concentrated, with the three largest stablecoin issuers—Tether, USD Coin, and Binance USD—constituting more than 80 percent of the total market value. 

  • Additionally, some crypto-assets—such as Bitcoin—have experienced extreme price volatility. Among other things, the EO directs the FSOC to issue a report on the financial stability risks and regulatory gaps posed by digital assets and include recommendations for addressing these risks.

  • Russia’s invasion of Ukraine and subsequent international sanctions disrupted global trade in commodities, leading to surging prices and heightened volatility in agriculture, energy, and metals markets . These markets include spot and forward markets for physical commodities as well as futures, options, and swaps markets that involve an array of financial intermediaries and infrastructures . Stresses in financial markets linked to commodities could disrupt the efficient production, processing, and transportation of commodities by interfering with the ability of commodity producers, consumers, and traders to lock in prices and hedge risks.

  • The risk of futures positions increased with higher volatility, even for participants whose combined physical and futures positions were perfectly hedged. The resulting higher initial margin requirements on exchange-traded futures meant that both short and long hedgers needed cash to post additional collateral.

  • Market liquidity, the ease of entering or exiting a position, diminished as trading became more costly for end users and as market makers pulled back to manage their own risks.

  • Russia’s ongoing war in Ukraine could affect U.S. financial stability through multiple channels.

  • A prolonged conflict, particularly if accompanied by severe and widespread commodity shortages, could lead to substantial volatility in commodity and financial markets, a downturn in economic activity concentrated in Europe, higher inflation and interest rates worldwide, and a broad pullback from risk-taking, transmitting stress to institutions that are exposed.

  • Elevated and persistent inflation combined with a sharp rise in rates could pose risks to the economy and the financial system.

  • Stresses in China, including in the real estate sector, could spill over to the United States.

  • Increased debt levels in many EMEs since the onset of the pandemic have made these economies more vulnerable to adverse shocks. More recently, higher food and energy prices have worsened the terms of trade for some EMEs—particularly commodity importers—and could exacerbate social and political stresses and trigger a downturn in investor risk sentiment and capital outflows.

Those points relate to inflation, asset valuations in general, housing risks, cryptocurrencies, commodities, China, Russia, and life insurers. 

Negative Feedback Loop 

 Recently, depth in these markets has been lower than is typical even after taking into account the level of volatility, as shown for the oil market . This markedly low depth could indicate that liquidity providers are being particularly cautious, and liquidity may be more fragile than usual. Declining depth at times of rising uncertainty and volatility could result in a negative feedback loop, as lower liquidity in turn may cause prices to be more volatile.  

No!

Negative Feedback Loop is a stabilizing event. 

Negative feedback (or balancing feedback) occurs when some function of the output of a system, process, or mechanism is fed back in a manner that tends to reduce the fluctuations in the output, whether caused by changes in the input or by other disturbances.

Whereas positive feedback tends to lead to instability via exponential growth, oscillation or chaotic behavior, negative feedback generally promotes stability. Negative feedback tends to promote a settling to equilibrium, and reduces the effects of perturbations. Negative feedback loops in which just the right amount of correction is applied with optimum timing can be very stable, accurate, and responsive.

Key Omission

Other than the feedback loop error, picked up and repeated in many places including the Financial Times, the report seemed shockingly candid except for one thing. 

The Fed failed to point a finger at itself for the reckless buildup of stock prices, bond prices, house prices, crypto assets, and margin.

Don't Worry, Janet Yellen Says the Financial System is Still Orderly

Meanwhile, as the report hints at one thing, Janet Yellen Says the Financial System is Still Orderly

Key question: How long will things remain orderly given the conditions and risks the Fed laid out?

*  *  *

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Tyler Durden Tue, 05/10/2022 - 15:10

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‘The Scandal Would Be Enormous’: Pfizer Director Worried About Vax-Induced Menstrual Irregularities

‘The Scandal Would Be Enormous’: Pfizer Director Worried About Vax-Induced Menstrual Irregularities

Project Veritas on Thursday released a…

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'The Scandal Would Be Enormous': Pfizer Director Worried About Vax-Induced Menstrual Irregularities

Project Veritas on Thursday released a new segment of undercover footage of Pfizer director Jordon Walker in which the Director of R&D within the company's mRNA operation expressed concern over how the COVID-19 vaccine may be affecting women's reproductive health.

"There is something irregular about the menstrual cycles. So, people will have to investigate that down the line," Walker told an undercover journalist he thought he was on a date with.

"The [COVID] vaccine shouldn’t be interfering with that [menstrual cycles]. So, we don’t really know," he added.

Walker also hopes we don't discover that "somehow this mRNA lingers in the body and like -- because it has to be affecting something hormonal to impact menstrual cycles," adding "I hope we don’t discover something really bad down the line…If something were to happen downstream and it was, like, really bad? I mean, the scale of that scandal would be enormous."

Watch:

 

Tyler Durden Thu, 02/02/2023 - 19:30

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Growing Number Of Doctors Say They Won’t Get COVID-19 Booster Shots

Growing Number Of Doctors Say They Won’t Get COVID-19 Booster Shots

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

A…

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Growing Number Of Doctors Say They Won’t Get COVID-19 Booster Shots

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

A growing number of doctors say that they will not get COVID-19 vaccine boosters, citing a lack of clinical trial evidence.

I have taken my last COVID vaccine without RCT level evidence it will reduce my risk of severe disease,” Dr. Todd Lee, an infectious disease expert at McGill University, wrote on Twitter.

A vial of the Pfizer-BioNTech COVID-19 vaccine is seen in a file photograph. (Justin Sullivan/Getty Images)

Lee was pointing to the lack of randomized clinical trial (RCT) results for the updated boosters, which were cleared in the United States and Canada in the fall of 2022 primarily based on data from experiments with mice.

Lee, who has received three vaccine doses, noted that he was infected with the Omicron virus variant—the vaccines provide little protection against infection—and described himself as a healthy male in his 40s.

Dr. Vinay Prasad, a professor of epidemiology and biostatics at the University of California, San Francisco, also said he wouldn’t take any additional shots until clinical trial data become available.

“I took at least 1 dose against my will. It was unethical and scientifically bankrupt,” he said.

Allison Krug, an epidemiologist who co-authored a study that found teenage boys were more likely to suffer heart inflammation after COVID-19 vaccination than COVID-19 infection, recounted explaining to her doctor why she was refusing a booster and said her doctor agreed with her position.

She called on people to “join the movement to demand appropriate evidence,” pointing to a blog post from Prasad.

“Pay close attention to note this isn’t anti-vaccine sentiment. This is ‘provide [hard] evidence of benefit to justify ongoing use’ which is very different. It is only fair for a 30 billion dollar a year product given to hundreds of millions,” Lee said.

Dr. Mark Silverberg, who founded the Toronto Immune and Digestive Health Institute; Kevin Bass, a medical student; and Dr. Tracy Høeg, an epidemiologist at the University of California, San Francisco, joined Lee and Prasad in stating their opposition to more boosters, at least for now.

Høeg said she did not need clinical trials to know she’s not getting any boosters after receiving a two-dose primary series, adding that she took the second dose “against my will.”

I also had an adverse reaction to dose 1 moderna and, if I could do it again, I would not have had any covid vaccines,” she said on Twitter. “I was glad my parents in their 70s could get covid vaccinated but have yet to see non-confounded data to advise them about the bivalent booster. I would have liked to see an RCT for the bivalent for people their age and for adults with health conditions that put them at risk.”

The U.S. Food and Drug Administration (FDA) granted emergency use authorization to updated boosters, or bivalent shots, from Pfizer and Moderna in August 2022 despite there being no human data.

Observational data suggests the boosters provide little protection against infection and solid shielding against severe illness, at least initially.

Five months after the authorization was granted, no clinical trial data has been made available for the bivalents, which target the Wuhan strain as well as the BA.4 and BA.5 subvariants of Omicron. Moderna presented efficacy estimates for a different bivalent, which has never been used in the United States, during a recent meeting. The company estimated the booster increased protection against infection by just 10 percent.

The FDA is preparing to order all Pfizer and Moderna COVID-19 vaccines be replaced with the bivalents. The U.S. Centers for Disease Control and Prevention, which issues recommendations on vaccines, continues advising virtually all Americans to get a primary series and multiple boosters.

Professor Calls for Halt to Messenger RNA Vaccines

A professor, meanwhile, became the latest to call for a halt to the Pfizer and Moderna vaccines, which are both based on messenger RNA technology.

At this point in time, all COVID mRNA vaccination program[s] should stop immediately,” Retsef Levi, a professor of operations management at the Massachusetts Institute of Technology, said in a video statement. “They should stop because they completely failed to fulfill any of their advertised promise[s] regarding efficacy. And more importantly, they should stop because of the mounting and indisputable evidence that they cause unprecedented level of harm, including the death of young people and children.”

Levi was referring to post-vaccination heart inflammation, or myocarditis. The condition is one of the few that authorities have acknowledged is caused by the messenger RNA vaccines.

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Tyler Durden Thu, 02/02/2023 - 19:10

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Inside The Secret Government Meeting On COVID-19 Natural Immunity

Inside The Secret Government Meeting On COVID-19 Natural Immunity

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

Four of…

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Inside The Secret Government Meeting On COVID-19 Natural Immunity

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

Four of the highest ranking U.S. health officials—including Dr. Anthony Fauci—met in secret to discuss whether or not naturally immune people should be exempt from getting COVID-19 vaccines, The Epoch Times can reveal.

National Institute of Allergy and Infectious Diseases Director Dr. Anthony Fauci during a Senate hearing in Washington on May 17, 2022. (Shawn Thew/Pool/AFP via Getty Images)

The officials brought in four outside experts to discuss whether the protection gained after recovering from COVID-19—known as natural immunity—should count as one or more vaccine doses.

“There was interest in several people in the administration in hearing basically the opinions of four immunologists in terms of what we thought about … natural infection as contributing to protection against moderate to severe disease, and to what extent that should influence dosing,” Dr. Paul Offit, one of the experts, told The Epoch Times.

Offit and another expert took the position that the naturally immune need fewer doses. The other two experts argued natural immunity shouldn’t count as anything.

The discussion did not lead to a change in U.S. vaccination policy, which has never acknowledged post-infection protection. Fauci and the other U.S. officials who heard from the experts have repeatedly downplayed that protection, claiming that it is inferior to vaccine-bestowed immunity. Most studies on the subject indicate the opposite.

The meeting, held in October 2021, was briefly discussed before on a podcast. The Epoch Times has independently confirmed the meeting took place, identified all of the participants, and uncovered other key details.

Dr. Jay Bhattacharya, a professor of medicine at Stanford University who did not participate in the meeting, criticized how such a consequential discussion took place behind closed doors with only a few people present.

“It was a really impactful decision that they made in private with a very small number of people involved. And they reached the wrong decision,” Bhattacharya told The Epoch Times.

An email obtained by The Epoch Times shows Dr. Vivek Murthy contacting colleagues to arrange the meeting. (The Epoch Times)

The Participants

From the government:

  • Fauci, the head of the U.S. National Institute of Allergy and Infectious Diseases and the chief medical adviser to President Joe Biden until the end of 2022
  • Dr. Vivek Murthy, the U.S. surgeon general
  • Dr. Rochelle Walensky, the head of U.S. Centers for Disease Control and Prevention (CDC)
  • Dr. Francis Collins, head of the U.S. National Institutes of Health, which includes the National Institute of Allergy and Infectious Diseases, until December 2021
  • Dr. Bechara Choucair, the White House vaccine coordinator until November 2021

From outside the government:

  • Offit, director of the Vaccine Education Center at Children’s Hospital of Philadelphia and an adviser to the U.S. Food and Drug Administration on vaccines
  • Dr. Michael Osterholm, director of the Center for Infectious Disease Research and Policy at the University of Minnesota and a former member of Biden’s COVID-19 advisory board
  • Akiko Iwasaki, professor of immunobiology and molecular, cellular, and developmental biology at Yale University
  • Dr. Peter Hotez, co-director of Texas Children’s Hospital Center for Vaccine Development and dean of the Baylor College of Medicine’s School of Tropical Medicine

Fauci and Murthy decided to hold the meeting, according to emails The Epoch Times obtained.

“Would you be available tonight from 9-9:30 for a call with a few other scientific colleagues on infection-induced immunity? Tony and I just discussed and were hoping to do this sooner rather than later if possible,” Murthy wrote in one missive to Fauci, Walensky, and Collins.

All three quickly said they could make it.

Walensky asked who would be there.

Murthy listed the participants. “I think you know all of them right?” he said.

Walensky said she knew all but one person. “Sounds like a good crew,” she added.

From top left, clockwise: Dr. Vivek Murthy, Dr. Francis Collins, Dr. Anthony Fauci, and Dr. Rochelle Walensky. (Getty Images)

‘Clear Benefit’

During the meeting, Offit put forth his position—that natural immunity should count as two doses.

At the time, the CDC recommended three shots—a two-dose primary series and a booster—for many Americans 18 and older, soon expanding that advice to all adults, even though trials of the boosters only analyzed immunogenicity and efficacy among those without evidence of prior infection.

Research indicated that natural immunity was long-lasting and superior to vaccination. On the other hand, the CDC published a paper in its quasi-journal that concluded vaccination was better.

Osterholm sided with Offit, but thought that having recovered from COVID-19 should only count as a single dose.

“I added my voice at the meeting to count an infection as equivalent to a dose of vaccine! I’ve always believed hybrid immunity likely provides the most protection,” Osterholm told The Epoch Times via email.

Hybrid immunity refers to getting a vaccine after recovering from COVID-19.

Some papers have found vaccination after recovery boosts antibodies, which are believed to be a correlate of protection. Other research has shown that the naturally immune have a higher risk of side effects than those who haven’t recovered from infection. Some experts believe the risk is worth the benefit but others do not.

Hotez and Iwasaki, meanwhile, made the case that natural immunity should not count as any dose—as has been the case in virtually the entire United States since the COVID-19 vaccines were first rolled out.

Iwasaki referred to a British preprint study, soon after published in Nature, that concluded, based on survey data, that the protection from the Pfizer and AstraZeneca vaccines was heightened among people with evidence of prior infection. She also noted a study she worked on that found the naturally immune had higher antibody titers than the vaccinated, but that the vaccinated “reached comparable levels of neutralization responses to the ancestral strain after the second vaccine dose.” The researchers also discovered T cells—thought to protect against severe illness—were boosted by vaccination.

There’s a “clear benefit” to boosting regardless of prior infection, Iwasaki, who has since received more than $2 million in grants from the National Institutes of Health (NIH), told participants after the meeting in an email obtained by The Epoch Times. Hotez received $789,000 in grants from the NIH in fiscal year 2020, and has received other grants totaling millions in previous years. Offit, who co-invented the rotavirus vaccine, received $3.5 million in NIH grants from 1985 through 2004.

Hotez declined interview requests through a spokesperson. Iwasaki did not respond to requests for comment.

No participants represented experts like Bhattacharya who say that the naturally immune generally don’t need any doses at all.

In an email obtained by The Epoch Times, Akiko Iwasaki wrote to other meeting participants shortly after the meeting ended. (The Epoch Times)

Public Statements

In public, Hotez repeatedly portrayed natural immunity as worse than vaccination, including citing the widely criticized CDC paper, which drew from just two months of testing in a single state.

In one post on Twitter on Oct. 29, 2021, he referred to another CDC study, which concluded that the naturally immune were five times as likely to test positive compared to vaccinated people with no prior infection, and stated: “Still more evidence, this time from @CDCMMWR showing that vaccine-induced immunity is way better than infection and recovery, what some call weirdly ‘natural immunity’. The antivaccine and far right groups go ballistic, but it’s the reality.”

That same day, the CDC issued a “science brief” that detailed the agency’s position on natural immunity versus the protection from vaccines. The brief, which has never been updated, says that available evidence shows both the vaccinated and naturally immune “have a low risk of subsequent infection for at least 6 months” but that “the body of evidence for infection-induced immunity is more limited than that for vaccine-induced immunity.”

Evidence shows that vaccination after infection, or hybrid immunity, “significantly enhances protection and further reduces risk of reinfection” and is the foundation of the CDC’s recommendations, the agency said.

Several months later, the CDC acknowledged that natural immunity was superior to vaccination against the Delta variant, which was displaced in late 2021 by Omicron. The CDC, which has made misleading representations before on the evidence supporting vaccination of the naturally immune, did not respond to a request for comment regarding whether the agency will ever update the brief.

Iwasaki had initially been open to curbing the number of doses for the naturally immune—”I think this supports the idea of just giving one dose to people who had covid19,” she said in response to one Twitter post in early 2021, which is restricted from view—but later came to argue that each person who is infected has a different immune response, and that the natural immunity, even if strong initially, wanes over time.

Osterholm has knocked people who claim natural immunity is weak or non-existent, but has also claimed that vaccine-bestowed immunity is better. Osterholm also changed the stance he took in the meeting just several months later, saying in February 2022 that “we’ve got to make three doses the actual standard” while also “trying to understand what kind of immunity we get from a previous infection.”

Offit has been the leading critic on the Vaccines and Related Biological Products Advisory Committee, which advises U.S. regulators on vaccines, over their authorizations of COVID-19 boosters. Offit has said boosters are unnecessary for the young and healthy because they don’t add much to the primary series. He also criticized regulators for authorizing updated shots without consulting the committee and absent clinical data. Two of the top U.S. Food and Drug Administration (FDA) officials resigned over the booster push. No FDA officials were listed on invitations to the secret meeting on natural immunity.

Fauci and Walensky Downplay Natural Immunity

Fauci and Walensky, two of the most visible U.S. health officials during the pandemic, have repeatedly downplayed natural immunity.

Fauci, who said in an email in March 2020 that he assumed there would be “substantial immunity post infection,” would say later that natural immunity was real but that the durability was uncertain. He noted the studies finding higher antibody levels from hybrid immunity.

In September 2021, months after claiming that vaccinated people “can feel safe that they are not going to get infected,” Fauci said that he did not have “a really firm answer” on whether the naturally immune should get vaccinated.

“It is conceivable that you got infected, you’re protected—but you may not be protected for an indefinite period of time,” Fauci said on CNN when pressed on the issue. “So I think that is something that we need to sit down and discuss seriously.”

After the meeting, Fauci would say that natural immunity and vaccine-bestowed immunity both wane, and that people should get vaccinated regardless of prior infection to boost their protection.

Walensky, before she became CDC director, signed a document called the John Snow Memorandum in response to the Great Barrington Declaration, which Bhattacharya coauthored. The declaration called for focused protection of the elderly and otherwise infirm, stating, “The most compassionate approach that balances the risks and benefits of reaching herd immunity, is to allow those who are at minimal risk of death to live their lives normally to build up immunity to the virus through natural infection, while better protecting those who are at highest risk.”

The memorandum, in contrast, said there was “no evidence for lasting protective immunity to SARS-CoV-2 following natural infection” and supported the harsh lockdown measures that had been imposed in the United States and elsewhere.

In March 2021, after becoming director, Walensky released recommendations that the naturally immune get vaccinated, noting that there was “substantial durability” of protection six months after infection but that “rare cases of reinfection” had been reported.

Walensky hyped the CDC study on natural immunity in August 2021, and the second study in October 2021. But when the third paper came out concluding natural immunity was superior, she did not issue a statement. Walensky later told a blog that the study found natural immunity provided strong protection, “perhaps even more so than those who had been vaccinated and not yet boosted.”

But, because it came before Omicron, she said, “it’s not entirely clear how that protection works in the context of Omicron and boosting.”

Walensky, Murthy, and Collins did not respond to requests for interviews. Fauci, who stepped down from his positions in late 2022, could not be reached.

Murthy and Collins also portrayed natural immunity as inferior. “From the studies about natural immunity, we are seeing more and more data that tells us that while you get some protection from natural infection, it’s not nearly as strong as what you get from the vaccine,” Murthy said on CNN about two months before the meeting. Collins, in a series of blog posts, highlighted the studies showing higher antibody levels after vaccination and urged people to get vaccinated. He also voiced support for vaccine mandates.

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Tyler Durden Thu, 02/02/2023 - 21:10

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