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FOMC Minutes Stole Some of Jackson Hole’s Thunder

There are two highlights in the last full week of August that will draw the attention of investors:  the Federal Reserve’s symposium (Jackson Hole) and the preliminary August PMI reports.  Still, the 800-lb gorilla in the room remains the virus. For…

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There are two highlights in the last full week of August that will draw the attention of investors:  the Federal Reserve's symposium (Jackson Hole) and the preliminary August PMI reports.  Still, the 800-lb gorilla in the room remains the virus. For many countries with limited access to vaccines and/or low vaccination rates, the calls in some Western press to just live with it sounds callous and disconnected. Vaccine hesitancy in the US appears to have been dealt a blow by the recent surge of cases that are taxing several states' hospital capacity.  The number of virus cases in the US has roughly doubled in the past two weeks. 

The supply chains are again being strained.  This can mean higher prices to distribute the scarcity, but also delays and other disruptions.  Some early August survey data already is picking up on this.  Encouraged by a few disappointing economic reports, some economists are shifting growth projections from Q3 to Q4. Several high-profile businesses have postponed their return to the office.  The preliminary PMI data pose headline risk but the market is looking further afield, and many recognize the fluidity of circumstances and the anecdotal reports of some moderation of economic activity due to the virus.  The drop in oil prices to three-month lows, despite US inventories falling to their lowest level since January 2020 is partly a reflection of those concerns over demand.  

Fairly or unfairly, voters will blame leaders for the handling of the pandemic.  Even before the collapse of Afghanistan, US President Biden's support softened, and many attributed this to the surge in the contagion.  France has protested for six consecutive weekends against French President Macron's push for Covid-19 vaccination cards. Hundreds were arrested in Berlin last week to protesting the restrictions that were imposed earlier this month.  There have also been US protests over vaccine requirements and/or passes.  

Two G7 members, Germany and Canada, hold national elections in September.  Germany is going to choose Merkel's successor.  She has been Chancellor since 2005.  Laschet, the head of the CDU, has thus far been an inspiring candidate.  For the first time, the polls suggest it is possible that the Social Democrats, who have been the junior partner to Merkel's CDU in four of the last six governments, alongside the Greens and the Free Democrats could forge a coalition.  Still, it seems very fluid and the evolution of the virus in the coming weeks could be important. 

Canada's Prime Minister Trudeau surprised no one with his call for snap elections on September 20.  Trudeau's gambit is that the inoculation effort offsets the rocky start of the vaccine rollout and the combination of fiscal and monetary support overcomes whatever misgivings some parts of the electorate may have on other issues, and allow the Liberals to regain the parliamentary majority lost two years ago.  The Canadian dollar, which was at four-year highs at the start of June, up around 6% for the year, has weakened in the past two months and is now down about 0.2% for the year, giving exporters some relief.  

Given the dominance of the Liberal Democratic Party in Japanese politics, the winner of its leadership contest in September will most likely be the next prime minister.  The national elections must be held by October 22, four years after the last one.  Prime Minister Suga's support has sagged below 30%, which is seen as a key threshold, but the hurdles to a leadership challenge are high. Lastly, Norway is not a G7 member, but it goes to the polls on September 13. Norway's central bank remains confident that the economy has turned the corner and it reaffirmed its intention to hike rates when it meets 10 days after the election.  

II

The Fed's Jackson Hole confab has been a focal point of speculation looking for a hint of a tapering announcement since early this year.  News that neither ECB's Lagarde nor the BOE's Bailey will be attending helps underscore the domestic emphasis.  Indeed, it seems nearly binary: either Fed chief Powell suggests the central bank is nearing a tapering announcement or he doesn't.  The FOMC minutes from July leave little doubt about it.  Most FOMC officials anticipate that tapering before the end of the year will be appropriate.  

Powell has promised advanced warning to investors before changing the pace or composition of the Fed's purchase.  This is to minimize the chances of a market disruption like the "taper tantrum" of 2013.  At the same time, strategically, it is important that the Fed maintains a maximum amount of flexibility.  Given calendar considerations, and the fact that after the September meeting, the Fed has two more meetings, November and December, indicating in September that it will soon be ready to adjust its bond purchases maximizes the Fed's room to adjust to incoming data, if necessary.   That said, our idea that the burden has shifted from needing more and better data to barring a downside surprise the Fed will reduce its bond purchases appears confirmed by the July minutes.  

Moreover, consider that at the June FOMC meeting, 7 of the 18 Fed officials saw a hike in 2022 as likely being appropriate.  Given the two months of more than 900k growth in non-farm payrolls and other labor market indicators, like weekly jobless claims (new pandemic lows), it would not be surprising if a few more officials were swayed to push a 2023 hike into 2022.  In order to do so, the bond-buying must have ended some time (a few months?) before the increase in rates.  

Several Fed officials have suggested a quicker tapering than was the case last time, and some opined that it could be over around mid-2022.   Assuming tapering begins in December, the average pace over seven months would be about $17 bln.  However, officials will likely want to frontload it a bit to allow for a gradual conclusion.  

The Fed funds futures strip has nearly priced in a hike at the September 2022 FOMC meeting.  Again, recall that the contract settles at the average effective rate (weighted-average) of Fed funds during the month.  Assuming that in the first 21 days of September, until the FOMC meeting concludes, the fed funds rate remains at its current effective average of 10 bp.  Then, the Fed hikes the target 25 bp, and the effective rate averages 35 bp in the last nine days of the month.  This produces an average of about 17.5 bp for the month.  The September 2022 fed funds futures contract settled last week at 16 bp.  By our calculations, the December 2022 contract has a 25 bp hike fully discounted and a very small chance of a second move by the end of next year, as two of the 18 Fed officials "dots" anticipated in June.  

In the past,  Fed officials have suggested they wanted the central bank's balance sheet to only hold Treasuries, and some officials share our concern about buying mortgage-backed securities when the housing market is strong and house prices are rising at a record pace.  This has spurred some speculation that the Fed could accelerate the tapering of MBS more than Treasuries.  Powell himself played down the direct connection between the Fed's purchases and house prices. The July minutes suggest that there is no majority favoring MBS tapering sooner or quicker than Treasuries.

Of course, some officials want to see another jobs report before feeling comfortable to take another step toward tapering.  A week after the Jackson Hole confab, the Bureau of Labor Statistics will release the August employment report.  The early call is for non-farm payrolls to rise by around 750k.  Although slower than the last couple of months, it would still be regarded as strong.  It would raise the three-month average to nearly 880k, the seventh consecutive month it would have accelerated.  The average this year, through July, has been 617k.  Other details, like a further drop in the un- and underemployment rates, would also make some officials more likely to support a formal tapering announcement next month.    

III

Three emerging market central banks meet next week.  Israel's is first on August 23.  Inflation is near  2% year-over-year and the base rate 10 bp.  However, the central bank is under no pressure to hike rates.  The surge in covid cases may temper growth which the central bank projects to be 5.5% this year.  The shekel reached seven-month highs earlier this month and the central bank has indicated that the $30 bln intervention fund, announced in January, is nearly exhausted but that the central bank is not limited to it.  

Hungary's central bank meets on August 24 and this is little doubt that it will deliver another rate hike.  The base rate has doubled this year to 1.2% in two moves (June and July).  Another 30 bp hike is expected in August. Although CPI eased in July for the first time this year (4.6% year-over-year from 5.3% in June), it was primarily due to the base effect.  In fact, the base effect works against further improvement in the coming months.  After next week's likely move, the central bank is expected to hike rates two more times this year.  

South Korea's central bank meets on August 26.  The outcome is a closer call than the other two.  The central bank governor has indicated intentions to raise rates this year.  Inflation is above target, financial risks are perceived to be growing. However, the record covid wave is likely to encourage the central bank to wait for an opportunity in Q4.  The market has one hike priced in over the next three months and two in the next six months.  After falling to its lowest level since last September, the on began recovering in the middle of last week following the implicit threat by the finance ministry to intervene.   The finance minister warned that the won overshot to the downside and officials were "closely monitoring" the market.   


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Are Voters Recoiling Against Disorder?

Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super…

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Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super Tuesday primaries have got it right. Barring cataclysmic changes, Donald Trump and Joe Biden will be the Republican and Democratic nominees for president in 2024.

(Left) President Joe Biden delivers remarks on canceling student debt at Culver City Julian Dixon Library in Culver City, Calif., on Feb. 21, 2024. (Right) Republican presidential candidate and former U.S. President Donald Trump stands on stage during a campaign event at Big League Dreams Las Vegas in Las Vegas, Nev., on Jan. 27, 2024. (Mario Tama/Getty Images; David Becker/Getty Images)

With Nikki Haley’s withdrawal, there will be no more significantly contested primaries or caucuses—the earliest both parties’ races have been over since something like the current primary-dominated system was put in place in 1972.

The primary results have spotlighted some of both nominees’ weaknesses.

Donald Trump lost high-income, high-educated constituencies, including the entire metro area—aka the Swamp. Many but by no means all Haley votes there were cast by Biden Democrats. Mr. Trump can’t afford to lose too many of the others in target states like Pennsylvania and Michigan.

Majorities and large minorities of voters in overwhelmingly Latino counties in Texas’s Rio Grande Valley and some in Houston voted against Joe Biden, and even more against Senate nominee Rep. Colin Allred (D-Texas).

Returns from Hispanic precincts in New Hampshire and Massachusetts show the same thing. Mr. Biden can’t afford to lose too many Latino votes in target states like Arizona and Georgia.

When Mr. Trump rode down that escalator in 2015, commentators assumed he’d repel Latinos. Instead, Latino voters nationally, and especially the closest eyewitnesses of Biden’s open-border policy, have been trending heavily Republican.

High-income liberal Democrats may sport lawn signs proclaiming, “In this house, we believe ... no human is illegal.” The logical consequence of that belief is an open border. But modest-income folks in border counties know that flows of illegal immigrants result in disorder, disease, and crime.

There is plenty of impatience with increased disorder in election returns below the presidential level. Consider Los Angeles County, America’s largest county, with nearly 10 million people, more people than 40 of the 50 states. It voted 71 percent for Mr. Biden in 2020.

Current returns show county District Attorney George Gascon winning only 21 percent of the vote in the nonpartisan primary. He’ll apparently face Republican Nathan Hochman, a critic of his liberal policies, in November.

Gascon, elected after the May 2020 death of counterfeit-passing suspect George Floyd in Minneapolis, is one of many county prosecutors supported by billionaire George Soros. His policies include not charging juveniles as adults, not seeking higher penalties for gang membership or use of firearms, and bringing fewer misdemeanor cases.

The predictable result has been increased car thefts, burglaries, and personal robberies. Some 120 assistant district attorneys have left the office, and there’s a backlog of 10,000 unprosecuted cases.

More than a dozen other Soros-backed and similarly liberal prosecutors have faced strong opposition or have left office.

St. Louis prosecutor Kim Gardner resigned last May amid lawsuits seeking her removal, Milwaukee’s John Chisholm retired in January, and Baltimore’s Marilyn Mosby was defeated in July 2022 and convicted of perjury in September 2023. Last November, Loudoun County, Virginia, voters (62 percent Biden) ousted liberal Buta Biberaj, who declined to prosecute a transgender student for assault, and in June 2022 voters in San Francisco (85 percent Biden) recalled famed radical Chesa Boudin.

Similarly, this Tuesday, voters in San Francisco passed ballot measures strengthening police powers and requiring treatment of drug-addicted welfare recipients.

In retrospect, it appears the Floyd video, appearing after three months of COVID-19 confinement, sparked a frenzied, even crazed reaction, especially among the highly educated and articulate. One fatal incident was seen as proof that America’s “systemic racism” was worse than ever and that police forces should be defunded and perhaps abolished.

2020 was “the year America went crazy,” I wrote in January 2021, a year in which police funding was actually cut by Democrats in New York, Los Angeles, San Francisco, Seattle, and Denver. A year in which young New York Times (NYT) staffers claimed they were endangered by the publication of Sen. Tom Cotton’s (R-Ark.) opinion article advocating calling in military forces if necessary to stop rioting, as had been done in Detroit in 1967 and Los Angeles in 1992. A craven NYT publisher even fired the editorial page editor for running the article.

Evidence of visible and tangible discontent with increasing violence and its consequences—barren and locked shelves in Manhattan chain drugstores, skyrocketing carjackings in Washington, D.C.—is as unmistakable in polls and election results as it is in daily life in large metropolitan areas. Maybe 2024 will turn out to be the year even liberal America stopped acting crazy.

Chaos and disorder work against incumbents, as they did in 1968 when Democrats saw their party’s popular vote fall from 61 percent to 43 percent.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times or ZeroHedge.

Tyler Durden Sat, 03/09/2024 - 23:20

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Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

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

The…

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Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

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

The U.S. Department of Veterans Affairs (VA) reviewed no data when deciding in 2023 to keep its COVID-19 vaccine mandate in place.

Doses of a COVID-19 vaccine in Washington in a file image. (Jacquelyn Martin/Pool/AFP via Getty Images)

VA Secretary Denis McDonough said on May 1, 2023, that the end of many other federal mandates “will not impact current policies at the Department of Veterans Affairs.”

He said the mandate was remaining for VA health care personnel “to ensure the safety of veterans and our colleagues.”

Mr. McDonough did not cite any studies or other data. A VA spokesperson declined to provide any data that was reviewed when deciding not to rescind the mandate. The Epoch Times submitted a Freedom of Information Act for “all documents outlining which data was relied upon when establishing the mandate when deciding to keep the mandate in place.”

The agency searched for such data and did not find any.

The VA does not even attempt to justify its policies with science, because it can’t,” Leslie Manookian, president and founder of the Health Freedom Defense Fund, told The Epoch Times.

“The VA just trusts that the process and cost of challenging its unfounded policies is so onerous, most people are dissuaded from even trying,” she added.

The VA’s mandate remains in place to this day.

The VA’s website claims that vaccines “help protect you from getting severe illness” and “offer good protection against most COVID-19 variants,” pointing in part to observational data from the U.S. Centers for Disease Control and Prevention (CDC) that estimate the vaccines provide poor protection against symptomatic infection and transient shielding against hospitalization.

There have also been increasing concerns among outside scientists about confirmed side effects like heart inflammation—the VA hid a safety signal it detected for the inflammation—and possible side effects such as tinnitus, which shift the benefit-risk calculus.

President Joe Biden imposed a slate of COVID-19 vaccine mandates in 2021. The VA was the first federal agency to implement a mandate.

President Biden rescinded the mandates in May 2023, citing a drop in COVID-19 cases and hospitalizations. His administration maintains the choice to require vaccines was the right one and saved lives.

“Our administration’s vaccination requirements helped ensure the safety of workers in critical workforces including those in the healthcare and education sectors, protecting themselves and the populations they serve, and strengthening their ability to provide services without disruptions to operations,” the White House said.

Some experts said requiring vaccination meant many younger people were forced to get a vaccine despite the risks potentially outweighing the benefits, leaving fewer doses for older adults.

By mandating the vaccines to younger people and those with natural immunity from having had COVID, older people in the U.S. and other countries did not have access to them, and many people might have died because of that,” Martin Kulldorff, a professor of medicine on leave from Harvard Medical School, told The Epoch Times previously.

The VA was one of just a handful of agencies to keep its mandate in place following the removal of many federal mandates.

“At this time, the vaccine requirement will remain in effect for VA health care personnel, including VA psychologists, pharmacists, social workers, nursing assistants, physical therapists, respiratory therapists, peer specialists, medical support assistants, engineers, housekeepers, and other clinical, administrative, and infrastructure support employees,” Mr. McDonough wrote to VA employees at the time.

This also includes VA volunteers and contractors. Effectively, this means that any Veterans Health Administration (VHA) employee, volunteer, or contractor who works in VHA facilities, visits VHA facilities, or provides direct care to those we serve will still be subject to the vaccine requirement at this time,” he said. “We continue to monitor and discuss this requirement, and we will provide more information about the vaccination requirements for VA health care employees soon. As always, we will process requests for vaccination exceptions in accordance with applicable laws, regulations, and policies.”

The version of the shots cleared in the fall of 2022, and available through the fall of 2023, did not have any clinical trial data supporting them.

A new version was approved in the fall of 2023 because there were indications that the shots not only offered temporary protection but also that the level of protection was lower than what was observed during earlier stages of the pandemic.

Ms. Manookian, whose group has challenged several of the federal mandates, said that the mandate “illustrates the dangers of the administrative state and how these federal agencies have become a law unto themselves.”

Tyler Durden Sat, 03/09/2024 - 22:10

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Low Iron Levels In Blood Could Trigger Long COVID: Study

Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate…

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Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate iron levels in their blood due to a COVID-19 infection could be at greater risk of long COVID.

(Shutterstock)

A new study indicates that problems with iron levels in the bloodstream likely trigger chronic inflammation and other conditions associated with the post-COVID phenomenon. The findings, published on March 1 in Nature Immunology, could offer new ways to treat or prevent the condition.

Long COVID Patients Have Low Iron Levels

Researchers at the University of Cambridge pinpointed low iron as a potential link to long-COVID symptoms thanks to a study they initiated shortly after the start of the pandemic. They recruited people who tested positive for the virus to provide blood samples for analysis over a year, which allowed the researchers to look for post-infection changes in the blood. The researchers looked at 214 samples and found that 45 percent of patients reported symptoms of long COVID that lasted between three and 10 months.

In analyzing the blood samples, the research team noticed that people experiencing long COVID had low iron levels, contributing to anemia and low red blood cell production, just two weeks after they were diagnosed with COVID-19. This was true for patients regardless of age, sex, or the initial severity of their infection.

According to one of the study co-authors, the removal of iron from the bloodstream is a natural process and defense mechanism of the body.

But it can jeopardize a person’s recovery.

When the body has an infection, it responds by removing iron from the bloodstream. This protects us from potentially lethal bacteria that capture the iron in the bloodstream and grow rapidly. It’s an evolutionary response that redistributes iron in the body, and the blood plasma becomes an iron desert,” University of Oxford professor Hal Drakesmith said in a press release. “However, if this goes on for a long time, there is less iron for red blood cells, so oxygen is transported less efficiently affecting metabolism and energy production, and for white blood cells, which need iron to work properly. The protective mechanism ends up becoming a problem.”

The research team believes that consistently low iron levels could explain why individuals with long COVID continue to experience fatigue and difficulty exercising. As such, the researchers suggested iron supplementation to help regulate and prevent the often debilitating symptoms associated with long COVID.

It isn’t necessarily the case that individuals don’t have enough iron in their body, it’s just that it’s trapped in the wrong place,” Aimee Hanson, a postdoctoral researcher at the University of Cambridge who worked on the study, said in the press release. “What we need is a way to remobilize the iron and pull it back into the bloodstream, where it becomes more useful to the red blood cells.”

The research team pointed out that iron supplementation isn’t always straightforward. Achieving the right level of iron varies from person to person. Too much iron can cause stomach issues, ranging from constipation, nausea, and abdominal pain to gastritis and gastric lesions.

1 in 5 Still Affected by Long COVID

COVID-19 has affected nearly 40 percent of Americans, with one in five of those still suffering from symptoms of long COVID, according to the U.S. Centers for Disease Control and Prevention (CDC). Long COVID is marked by health issues that continue at least four weeks after an individual was initially diagnosed with COVID-19. Symptoms can last for days, weeks, months, or years and may include fatigue, cough or chest pain, headache, brain fog, depression or anxiety, digestive issues, and joint or muscle pain.

Tyler Durden Sat, 03/09/2024 - 12:50

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