Connect with us

Spread & Containment

Futures Rise To All Time Highs After Chinese Liquidity Injection

Futures Rise To All Time Highs After Chinese Liquidity Injection



Futures Rise To All Time Highs After Chinese Liquidity Injection Tyler Durden Mon, 08/17/2020 - 08:02

Markets drifted higher in a slow start to the week as China flooded the market with a new one-year liquidity and as most European equity indexes traded modestly in the green, shrugging off the unexpected postponement of US-China trade talks and EU regions raising coronavirus travel warnings.

U.S. equity futures rose and traded just shy of all time highs again, as retailers prepared to wind down a better-than-feared quarterly earnings season, while the countdown to Election Day was set to begin with the Democratic National Convention kicking off later in the day.

As Bloomberg notes, trading in markets was subdued on Monday as traders weighed the prospect of tighter quarantine measures against continued government support. Declines among airline shares and travel agencies kept a lid on gains in Europe as Spain and Italy told nightclubs to close and France’s public health agency warned that virus indicators are trending upward. Meanwhile, tensions are continuing to mount between the U.S. and China. On Friday, senior officials from Washington and Beijing postponed trade talks that had been set for this past weekend to discuss the status of the “phase one” trade deal signed early in the year.  A source suggested the US-China meeting was delayed as US wanted more time to allow China to increase US imports; another referenced a conference of senior Communist Party leaders

"The economy is going to continue to reopen as we move into the end of this year,” Brett Ewing, chief market strategist at First Franklin Financial Services, said on Bloomberg TV. "If you can buy into that story, you need to be ahead of money flowing into these value and cyclical stocks -- if you wait for a vaccine to come out, you’re going to be missing probably the biggest opportunity right now."

Europe's Stoxx 600 was up 0.2%, supported by commodity and technology shares amid light trading volumes. Covid-19 vaccine contender CureVac continued Friday’s rally, surging more than 50% in U.S. pre-market trading. Gains in miners and tech are offset by losses in real estate and travel names.

A bit reason for the positive overnight sentiment is that on Monday, The People’s Bank of China offered 700 billion yuan ($101 billion) of one-year funding via the medium-term lending facility, more than offsetting the 400 billion yuan in loans coming due Monday and another 150 billion yuan maturing on Aug. 26. The central bank also added a net 40 billion yuan via 7-day reverse repurchase agreements, after injecting the most short-term funding into the interbank market since May last week.

The MLF injection signals "a moderate easing of the monetary condition and will be good to China government bond performance, especially the short-dated," said Xing Zhaopeng, an economist at Australia and New Zealand Banking Group Ltd. in Shanghai. Interbank borrowing costs also decreased following the cash additions, with the overnight repurchase rate slipping 4 basis points to 2.12%.

The PBOC's extra liquidity injection helped the Shanghai Composite close up 2.3%. The net injection indicates “a more accommodative stance on keeping liquidity levels ample” so that commercial banks can continue to support bond issuance and to stabilize credit growth, said Liu Peiqian, a China economist at Natwest Group Plc. in Singapore.

In rates, yield curves were mixed, as bunds and gilts bull steepen slightly and Treasuries flatten. Treasuries held small gains after retreating from session highs reached during European morning, outperforming gilts and bunds. Yields were lower by as much as ~2bp across the curve with 7- to 30- year sectors leading, flattening 2s10s by nearly 2bp, 5s30s by ~1bp; 10-year, lower by ~2bp at ~0.692%, outperforms gilts and bunds by ~1bp. After last week’s supply-driven surge in long-end yields, there’s apprehension about Wednesday’s 20-year bond and Thursday’s 30-year TIPS auctions. In Europe, peripheral spreads widened marginally.

In FX, the Bloomberg dollar index faded a small dip in Asia to trade flat to slightly down. As a reminder, we showed on Sunday that "short dollar" is now the world's most consensus trade.

Elsewhere, the pound rose against the dollar and edged up against the euro ahead of the next round of Brexit negotiations. The pound is trending near a five-month high against the greenback, close to forming a bullish pattern known as a “golden cross” that signals further gains ahead. The New Zealand dollar fell as Prime Minister Jacinda Arderndelayed the general election by four weeks after a rise of coronavirus cases. The Australian dollar surged past 1.10 against the kiwi for the first time since 2018 on speculation New Zealand interest rates could fall below zero.

In commodities, crude futures trade off the overnight highs, but hold a narrow range. Spot gold rises ~$7 to trade near $1,950/oz, silver gains 1%.

Figures this week are likely to show another jump in housing starts as demand surges for single-family homes in the suburbs, in turn benefiting sales of home improvement chains such as Lowe’s Companies Inc and Home Depot Inc. The retailers, along with Walmart, Kohls and Target are due to report second-quarter earnings later in the week. As of Friday, 457 companies in the S&P 500 had reported results, of which 81.4% came in above dramatically lowered expectations, according to Refinitiv data.

Also in the week ahead, the FOMC minutes due to be released on Wednesday may provide some more clues about whether officials plan to introduce new average inflation targeting language in September. Investors are also girding their portfolios for market moves ahead of the U.S. presidential vote, as election season kicks into higher gear with the Democratic National Convention, which runs Monday through Thursday. The Republican convention will be held from Aug. 24 to Aug. 27 and both will be mostly virtual this year due to the COVID-19 pandemic. On today's relatively quiet calendar, we get the latest Empire State Manufacturing data.

Market Snapshot

  • S&P 500 futures up 0.3% to 3,371.25
  • STOXX Europe 600 up 0.1% to 368.59
  • MXAP down 0.08% to 170.88
  • MXAPJ up 0.3% to 564.58
  • Nikkei down 0.8% to 23,096.75
  • Topix down 0.8% to 1,609.82
  • Hang Seng Index up 0.7% to 25,347.34
  • Shanghai Composite up 2.3% to 3,438.80
  • Sensex up 0.2% to 37,956.54
  • Australia S&P/ASX 200 down 0.8% to 6,076.38
  • Kospi down 1.2% to 2,407.49
  • Brent futures down 0.3% to $44.66/bbl
  • Gold spot up 0.3% to $1,950.47
  • U.S. Dollar Index down 0.1% to 92.99
  • German 10Y yield fell 1.3 bps to -0.434%
  • Euro down 0.08% to $1.1832
  • Italian 10Y yield fell 2.3 bps to 0.862%
  • Spanish 10Y yield fell 1.2 bps to 0.345%

Top Overnight News from Bloomberg

  • European nations are fighting a resurgence of the coronavirus, with Italy and Spain ordering the closure of nightclubs and France’s public health agency warning that all of the country’s Covid-19 indicators are showing an increase
  • Bank of England Chief Economist Andy Haldane, writing in the Daily Mail, said that the U.K. is heading for a “quick recovery” from the coronavirus crisis, expecting the economy to rise by more than a fifth in the second half of this year
  • Stocks in China rose after China’s central bank supplied liquidity to commercial lenders on Monday to help them manage upcoming government bond sales
  • Workers across Belarus are taking part to a general strike, following some of the biggest protests seen in the country, with thousands of people marching to call for the resignation of current president Alexander Lukashenko

Courtesy of NewsSquawk, here is a quick rundown of global markets:

Asian equity markets which began the week mixed amid uncertainty following the indefinite postponement of the US-China trade agreement review talks and with President Trump increasing the pressure on ByteDance and is said to be looking at pressuring other Chinese companies including Alibaba. ASX 200 (-0.8%) and Nikkei 225 (-0.8%) were negative with Australia led lower by underperformance in financials and with a deluge of earnings updates also in focus, while the Japanese benchmark suffered on recent currency effects and after a larger than expected contraction for Q2 GDP. Hang Seng (+0.6%)  and Shanghai Comp. (+2.3%) traded positively despite the ongoing tension between the world’s two largest economies, as risk appetite was helped by efforts from the PBoC which announced a CNY 50bln reverse repo injection and a CNY 700bln in 1-year Medium-term Lending Facility. Furthermore, notable gains were seen in Xiaomi and WuXi Biologics as they are set to join the Hang Seng Index from September 7th and with Xiaomi also buoyed after the CEO debuted a live showcase of products on TikTok. Finally, 10yr JGBs were slightly higher to track the mild gains in T-notes and with the weakness seen in Japanese stocks, although upside was only marginal amid the lack of BoJ presence in the market today.

Top Asian News

  • Church Flareups in South Korea Spur Fear of Old Virus Threat
  • Turkey’s Budget Falls Deeper in the Red as Pandemic Hits Revenue
  • Billionaire Agarwal’s Vedanta Tests India Junk Bond Demand

A choppy start to the week for European stocks [Euro Stoxx 50 Unch] as the region swung between gains and losses in the first hour of cash trading before calming in mixed trade. This comes as the region failed to sustain the mostly positive APAC lead amid a lack of fresh catalysts in what has thus far been a quiet start to the week. Spain’s IBEX (-0.8%) is the marked laggard as the country’s recent COVID-19 case spikes prompted the closure of nightlife, whilst Germany reaffirmed its travel warning to Spain and Tui (-4.8%) extended the suspension of flights to Spain, Portugal, Cyprus and Morocco. Sectors also see a mixed performance with no clear risk profile to be derived, with Basic Resources and Tech holding their top spots, with some aid potentially derived from the PBoC’s liquidity injection overnight, whilst Travel & Leisure, Banks and Real Estate remain the laggards. In terms of individual movers, Monday M&A action from Sanofi (+0.2%) sees the company eking mild gains as it is to acquire Principia Biopharma (PRNB) in an all-cash deal valued at approximately USD 3.4bln. The deal will further strengthen core R&D areas of autoimmune and allergic diseases, Sanofi expects to complete the purchase in Q4 2020. Under the deal, outstanding Principa shares will be purchased for USD 100/shr (vs. Friday’s USD 90.74/shr close), and thus the Co. trades over 10% higher in the pre-market. Elsewhere, Deutsche Lufthansa (-2.0%) conforms to the overall underperformance in the travel sector, albeit the group reached a deal with UFO union on cost cutting measures, but talks have been broken off with the Verdi union on ground personnel.

Top European News

  • U.K. Exam Crisis Grows as Johnson Faces More Chaos This Week
  • Europe’s Fading Rebound Turns Recovery From V-Shape to Bird Wing
  • Europe Travel Shares Fall Again Amid Further Virus Setbacks

In FX, a real Monday summer lull and lacklustre trade in the currency markets, with the DXY going nowhere fast or far from the 93.000 pivot that has been keeping the index and Greenback in general tethered for a while. The US fiscal impasse continues and even the eagerly awaited showdown with China to assess progress towards the Phase 1 trade pact was postponed for another day, so the weekend has passed by without any real meaningful event. Moreover, today’s agenda is hardly promising in terms of potential catalysts to prompt some price action, as the European calendar is bare beyond weekly ECB QE tallies and the US docket only comprises NY Fed manufacturing and NAHB surveys. Back to the DXY, 93.124-92.887 covers the range and the base is just shy of last week’s low as a reference point.

  • CAD/NOK – Marginal G10 outperformers, and perhaps deriving some traction from firmer crude prices, while the former awaits the BoC’s Q2 Senior Loan Officer Survey and latter acknowledges a significantly narrower trade deficit in the run up to this week’s Norges Bank policy meeting. Usd/Cad is straddling 1.3250 and Eur/Nok is still eyeing the psychological 10.5000 level after recent probes below, but no sustained break.
  • JPY/AUD/GBP/CHF/EUR – All narrowly mixed against the Buck, as the Yen rotates around 106.50 in wake of weak GDP and ip data, the Aussie spans 0.7175, Pound flits either side of 1.3100, Franc hovers just above 0.9100 and 1.0750 vs the Euro as Eur/Usd trades around 1.1850. Note, another hefty Swiss bank sight deposits has not hindered the Chf, but did result in some selling pressure last week.
  • NZD – The Kiwi is still lagging and underperforming on NZ’s COVID-19 resurgence that has forced the Government to extend mortgage deferrals by another 6 months to the end of Q1 next year and a new Nzd 510 mn salary subsidy for 470k jobs. Nzd/Usd is towards the bottom end of 0.6523-53 parameters and Aud/Nzd has extended post-RNBZ gains sharply to over 1.1000 before paring back a bit.
  • EM – No adverse reaction to the aforementioned US-Sino trade deal meeting delay, as the PBoC set a firm Cny midpoint fix overnight and added more 7-day liquidity alongside medium term funds, but the Try has depreciated yet again amidst more Turkish trouble in Syria and the Med, not to mention a wider budget shortfall. Usd/Try has been above 7.3950 irrespective of the CBRT’s longer term repo auction.

In commodities, WTI and Brent front month futures have waned off overnight highs since European players entered the fray, again with little to report in terms of fresh fundamentals. That being said, source reports late Friday noted that China will significantly increase imports of US oil – an area China has been lagging in under the Phase 1 deal. On the OPEC front, the JMMC will reportedly be meeting on Wednesday. Although no major surprises are expected, focus will likely fall on any commentary surrounding the oil market outlook, whilst credence will also be given to the compliance of the OPEC+ stragglers and whether they are over-complying as promised. Turning to the US, Friday’s Baker Hughes rig count saw active oil rigs continuing to decrease (-4), but analysts are skeptical that US producers will be able to sustain current production levels given the slump in drilling activity. “Although US producers should be able to bring back some production, even with the limited drilling activity. The Industry is still sitting on a large amount of drilled but uncompleted wells (DUCs), and so can complete these wells in an attempt to sustain production levels” ING writes. Elsewhere, spot gold and silver continue grinding higher, initially due to a weaker USD, but thereafter the preciously metals found mild support at USD 1950/oz and USD 26.60/oz respectively. Precious metal traders this week will be eyeing the FOMC Minutes, US-Sino events, COVID-19 developments, and US stimulus bill updates. Meanwhile, Dalian iron ore prices continued to edge higher, marking a third straight session of gains amid an upbeat demand prospects for steel-making, but traders are also keep an eye on the supply side of the equation. Nickel prices meanwhile were supported by tighter supply from a key supplier – the Philippines.

DB's Craig Nicol concludes the overnight wrap

Two weeks left to play in August and given the calendar for this week there’s every chance that they live up to their billing as the last couple of weeks of the summer lull. Hope for any fiscal breakthrough in the US may have to wait for now with the Democratic and Republican nominating conventions taking place over the next couple of weeks. As our economists noted in their weekly over the weekend however, this presents a problem for the 28.3 million Americans who were receiving some form of unemployment insurance as of the last week in July and who ostensibly (if they had not found a job) had their monthly income fall by over 60% in August. It is also an issue for monetary policymakers who have consistently emphasized the need for further fiscal support to aid the recovery.

To that end, the FOMC minutes from the July 29 meeting should be one of the more interesting events this week – especially if there are signs of a potential average inflation target being discussed - with the other being the various surveys ending with the flash August PMIs on Friday. This should give investors one of the first indications of how the global economy has fared moving into the month, so it’ll be interesting to see if the recent positive momentum in most of the PMIs is sustained. For reference in the July PMIs, with the exception of Japan, all of the other countries (Australia, France, Germany, Euro Area, UK and US) had PMIs above the 50-mark that separates expansion from contraction.

So we’ll see if that helps the S&P 500 complete the final half a percent or so needed to take it to new all-time highs. The other talking point has the bear-steepening in rates which for Treasuries saw 2s10s jump to 56bps, steepening 13bps on the week. A reminder that our global rates strategists’ think there could be more to come and target 0.85% on the 10y Treasury (about 15bps above this morning’s level). See their full note here.

In terms of the weekend just gone, the most notable thing to report is what hasn’t happened with the scheduled meeting between officials from the US and China over progress of the Phase 1 trade deal being postponed. President Trump did however officially order TikiTok’s parent to sell its US assets. Despite that, China stocks have surged this morning with the Shanghai Comp up +2.27% and CSI 300 +2.44%. The Hang Seng has also risen +1.28%. This follows the PBoC injecting CNY 700bn of 1yr funding via the medium-term lending facility. Other markets are lower this morning however – the Nikkei down -0.92% and ASX -0.66%. Elsewhere, yields on 10yr USTs are down -1.4bps and futures on the S&P 500 are up +0.28%. WTI crude oil prices are also trading up +0.81%.

As for the latest on the virus, new cases in the US grew by +0.8% over the past 24 hours vs. 0.9% at the same point last week. Meanwhile, New Zealand delayed its national elections by 4 weeks over the concerns around the recent virus outbreak and South Korea reported 197 cases in the past 24 hours after warning over the weekend of a fresh wave, most of them linked to an outbreak at a church. Elsewhere, Italy and Spain told nightclubs to close, while France’s public health agency warned that all of the country’s Covid-19 indicators are trending upward.

Finally, to recap last week’s moves, risk assets ended the week higher on the whole, in spite of the continued stalemate on a new US stimulus package, with the S&P 500 advancing +0.64% (-0.02% Friday) to close within half a per cent of its all-time high back in February. Volatility also continued to subside, with the VIX index coming down a further -0.16pts to 22.05, its lowest level in nearly 6 months. Elsewhere, equity indices also advanced in Europe, with the STOXX 600 up +1.24% (-1.20% Friday), and the DAX up +1.79% (-0.71% Friday), though sentiment in Europe was rather dampened on Friday by new quarantine rules on French travellers imposed by the UK, as well as continued rises in cases across the continent.

With investors moving into risk assets, safe havens suffered through the week, with yields on 10yr Treasuries rising +14.5bps (-1.1bps Friday) to 0.709%, and gold down -4.44% (-0.44% Friday) in its largest weekly decline since March. Over in foreign exchange markets, the dollar index fell a further -0.36% (-0.26% Friday), while the traditional safe haven Japanese yen weakened by -0.63% (+0.31% Friday) against the US dollar.

The moves on Friday came against the backdrop of some fairly mediocre US data releases. Firstly, retail sales in July rose by a less-than-expected +1.2% (vs. 2.1% expected), though the June reading was revised up by nine-tenths of a per cent to +8.4%. Meanwhile the University of Michigan’s preliminary consumer sentiment indicator for August showed that sentiment was still weak, with the reading rising to just 72.8 (vs. 72.5 in July), and well below the 101.0 back in February. And finally, industrial production was up +3.0%, in line with expectations.

Read More

Continue Reading

Spread & Containment

From LTCM To 1966. The Perils Of Rising Interest Rates

Based on some comments, it appears we scared a few people with A Crisis Is Coming. Our article warns, "A financial crisis will likely follow the Fed’s…



Based on some comments, it appears we scared a few people with A Crisis Is Coming. Our article warns, “A financial crisis will likely follow the Fed’s “higher for longer” interest rate campaign.” We follow the article with more on financial crises to help calm any worries you may have. This article summarizes two interest rate-related crises, Long Term Capital Management (LTCM) and the lesser-known Financial Crisis of 1966.

We aim to convey two important lessons. First, both events exemplify how excessive leverage and financial system interdependences are dangerous when interest rates are rising. Second, they stress the importance of the Fed’s reaction function. A Fed that reacts quickly to a budding crisis can quickly mitigate it. The regional bank crisis in March serves as recent evidence. However, a crisis can blossom if the Fed is slow to react, as we saw in 2008.  

Before moving on, it’s worth providing context for the recent series of rate hikes. Unless this time is different, another crisis is coming.

fed rate hiking cycles

LTCM’s Failure

John Meriweather founded LTCM in 1994 after a successful bond trading career at Salomon Brothers. In addition to being led by one of the world’s most infamous bond traders, LTCM also had Myron Scholes and Robert Merton on their staff. Both won a Nobel Prize for options pricing. David Mullins Jr., previously the Vice Chairman of the Federal Reserve to Alan Greenspan, was also an employee. To say the firm was loaded with the finance world’s best and brightest may be an understatement.

LTCM specialized in bond arbitrage. Such trading entails taking advantage of anomalies in the price spread between two securities, which should have predictable price differences. They would bet divergences from the norm would eventually converge, as was all but guaranteed in time.

LTCM was using 25x or more leverage when it failed in 1998. With that kind of leverage, a 4% loss on the trade would deplete the firm’s equity and force it to either raise equity or fail.

The world-renowned hedge fund fell victim to the surprising 1998 Russian default. As a result of the unexpected default, there was a tremendous flight to quality into U.S. Treasury bonds, of which LTCM was effectively short. Bond divergences expanded as markets were illiquid, growing the losses on their convergence bets.

They also wrongly bet that the dually listed shares of Royal Dutch and Shell would converge in price. Given they were the same company, that made sense. However, the need to stem their losses forced them to bail on the position at a sizeable loss instead of waiting for the pair to converge.

The Predictable Bailout

Per Wikipedia:

Long-Term Capital Management did business with nearly every important person on Wall Street. Indeed, much of LTCM’s capital was composed of funds from the same financial professionals with whom it traded. As LTCM teetered, Wall Street feared that Long-Term’s failure could cause a chain reaction in numerous markets, causing catastrophic losses throughout the financial system.

Given the potential chain reaction to its counterparties, banks, and brokers, the Fed came to the rescue and organized a bailout of $3.63 billion. A much more significant financial crisis was avoided.

The takeaway is that the financial system has highly leveraged players, including some like LTCM, which supposedly have “foolproof” investments on their books. Making matters fragile, the banks, brokers, and other institutions lending them money are also leveraged. A counterparty failure thus affects the firm in trouble and potentially its lenders. The lenders to the original lenders are then also at risk. The entire financial system is a series of lined-up dominos, at risk if only one decent-sized firm fails.

Roger Lowenstein wrote an informative book on LTCM aptly titled When Genius Failed. The graph below from the book shows the rise and fall of an initial $1 investment in LTCM.

LTCM valuations

The Financial Crisis of 1966

Most people, especially Wall Street gray beards, know of LTCM and the details of its demise. We venture to guess very few are up to speed on the crisis of 1966. We included. As such, we relied heavily upon The 1966 Financial Crisis by L. Randall Wray to educate us. The quotes we share are attributable to his white paper.

As the post-WW2 economic expansion progressed, companies and municipalities increasingly relied on debt and leverage to fuel growth. For fear of rising inflation due to the robust economic growth rate, the Fed presided over a series of rate hikes. In mid-1961, Fed Funds were as low as 0.50%. Five years later, they hit 5.75%. The Fed also restricted banks’ reserve growth to reduce loan creation and further hamper inflation. Higher rates, lending restrictions, and a yield curve inversion resulted in a credit crunch. Further impeding the prominent New York money center banks from lending, they were losing deposits to higher-yielding instruments.

Sound familiar? 

The lack of credit availability exposed several financial weaknesses. Per the article:

As Minsky argued, “By the end of August, the disorganization in the municipals market, rumors about the solvency and liquidity of savings institutions, and the frantic position-making efforts by money-market banks generated what can be characterized as a controlled panic. The situation clearly called for Federal Reserve action.” The Fed was forced to enter as a lender of last resort to save the Muni bond market, which, in effect, validated practices that were stretching liquidity.

The Fed came to the rescue before the crisis could expand meaningfully or the economy would collapse. The problem was fixed, and the economy barely skipped a beat.

However, and this is a big however, “markets came to expect that big government and the Fed would come to the rescue as needed.”

Expectations of Fed rescues have significantly swelled since then and encourage ever more reckless financial behaviors.

The Fed’s Reaction Function- Minksky Fragility

Wray’s article on the 1966 crisis ends as follows:

That 1966 crisis was only a minor speedbump on the road to Minskian fragility.

Minskian fragility refers to economist Hyman Minsky’s work on financial cycles and the Fed’s reaction function. Broadly speaking, he attributes financial crises to fragile banking systems.

Said differently, systematic risks increase as system-wide leverage and financial firm interconnectedness rise. As shown below, debt has grown much faster than GDP (the ability to pay for the debt). Inevitably, higher interest rates, slowing economic activity, and liquidity issues are bound to result in a crisis, aka a Minsky Moment. Making the system ever more susceptible to a financial crisis are the predictable Fed-led bailouts. In a perverse way, the Fed incentivizes such irresponsible behaviors.

minsky cycle

Nearing The Minsky Moment

As we shared in A Crisis Is Coming: Who Is Swimming Naked?:

The tide is starting to ebb. With it, economic activity will slow, and asset prices may likely follow. Leverage and high-interest rates will bring about a crisis.

Debt and leverage are excessive and even more extreme due to the pandemic.

debt to gdp

The question is not whether higher interest rates will cause a crisis but when. The potential for one-off problems, like LTCM, could easily set off a systematic situation like in 1966 due to the pronounced system-wide leverage and interdependencies.

As we have seen throughout the Fed’s history, they will backstop the financial system. The only question is when and how. If they remain steadfast in fighting inflation while a crisis grows, they risk a 2008-like event. If they properly address problems as they did in March, the threat of a severe crisis will considerably lessen.


The Fed halted the crises of 1966 and LTCM. They ultimately did the same for every other crisis highlighted in the opening graph. Given the amount of leverage in the financial system and the sharp increase in interest rates, we have little doubt a crisis will result. The Fed will again be called upon to bail out the financial system and economy.

For investors, your performance will be a function of the Fed’s reaction. Are they quick enough to spot problems, like the banking crisis in March or our two examples, and minimize the economic and financial effect of said crisis? Or, like in 2008, will it be too late to arrest a blooming crisis, resulting in significant investor losses and widespread bankruptcies?

The post From LTCM To 1966. The Perils Of Rising Interest Rates appeared first on RIA.

Read More

Continue Reading

Spread & Containment

No Privacy, No Property: The World In 2030 According To The WEF

No Privacy, No Property: The World In 2030 According To The WEF

Authored by Madge Waggy via,

The World Economic Forum…



No Privacy, No Property: The World In 2030 According To The WEF

Authored by Madge Waggy via,

The World Economic Forum (WEF) was founded fifty years ago. It has gained more and more prominence over the decades and has become one of the leading platforms of futuristic thinking and planning. As a meeting place of the global elite, the WEF brings together the leaders in business and politics along with a few selected intellectuals. The main thrust of the forum is global control.

Free markets and individual choice do not stand as the top values, but state interventionism and collectivism. Individual liberty and private property are to disappear from this planet by 2030 according to the projections and scenarios coming from the World Economic Forum.

Eight Predictions

Individual liberty is at risk again. What may lie ahead was projected in November 2016 when the WEF published “8 Predictions for the World in 2030.” According to the WEF’s scenario, the world will become quite a different place from now because how people work and live will undergo a profound change. The scenario for the world in 2030 is more than just a forecast. It is a plan whose implementation has accelerated drastically since with the announcement of a pandemic and the consequent lockdowns. 

According to the projections of the WEF’s “Global Future Councils,” private property and privacy will be abolished during the next decade. The coming expropriation would go further than even the communist demand to abolish the property of production goods but leave space for private possessions. The WEF projection says that consumer goods, too, would be no longer private property.

If the WEF projection should come true, people would have to rent and borrow their necessities from the state, which would be the sole proprietor of all goods. The supply of goods would be rationed in line with a social credit points system. Shopping in the traditional sense would disappear along with the private purchases of goods. Every personal move would be tracked electronically, and all production would be subject to the requirements of clean energy and a sustainable environment. 

In order to attain “sustainable agriculture,” the food supply will be mainly vegetarian. In the new totalitarian service economy, the government will provide basic accommodation, food, and transport, while the rest must be lent from the state. The use of natural resources will be brought down to its minimum. In cooperation with the few key countries, a global agency would set the price of CO2 emissions at an extremely high level to disincentivize its use.

In a promotional video, the World Economic Forum summarizes the eight predictions in the following statements:

  1. People will own nothing. Goods are either free of charge or must be lent from the state.

  2. The United States will no longer be the leading superpower, but a handful of countries will dominate.

  3. Organs will not be transplanted but printed.

  4. Meat consumption will be minimized.

  5. Massive displacement of people will take place with billions of refugees.

  6. To limit the emission of carbon dioxide, a global price will be set at an exorbitant level.

  7. People can prepare to go to Mars and start a journey to find alien life.

  8. Western values will be tested to the breaking point..

Beyond Privacy and Property

In a publication for the World Economic Forum, the Danish ecoactivist Ida Auken, who had served as her country’s minister of the environment from 2011 to 2014 and still is a member of the Danish Parliament (the Folketing), has elaborated a scenario of a world without privacy or property. In “Welcome to 2030,” she envisions a world where “I own nothing, have no privacy, and life has never been better.” By 2030, so says her scenario, shopping and owning have become obsolete, because everything that once was a product is now a service.

In this idyllic new world of hers, people have free access to transportation, accommodation, food, “and all the things we need in our daily lives.” As these things will become free of charge, “it ended up not making sense for us to own much.” There would be no private ownership in houses nor would anyone pay rent, “because someone else is using our free space whenever we do not need it.” A person’s living room, for example, will be used for business meetings when one is absent. Concerns like “lifestyle diseases, climate change, the refugee crisis, environmental degradation, completely congested cities, water pollution, air pollution, social unrest and unemployment” are things of the past. The author predicts that people will be happy to enjoy such a good life that is so much better “than the path we were on, where it became so clear that we could not continue with the same model of growth.”

Ecological Paradise

In her 2019 contribution to the Annual Meeting of the Global Future Councils of the World Economic Forum, Ida Auken foretells how the world may look in the future “if we win the war on climate change.” By 2030, when CO2 emissions will be greatly reduced, people will live in a world where meat on the dinner plate “will be a rare sight” while water and the air will be much cleaner than today. Because of the shift from buying goods to using services, the need to have money will vanish, because people will spend less and less on goods. Work time will shrink and leisure time will grow.

For the future, Auken envisions a city where electric cars have substituted conventional combustion vehicles. Most of the roads and parking spaces will have become green parks and walking zones for pedestrians. By 2030, agriculture will offer mainly plant-based alternatives to the food supply instead of meat and dairy products. The use of land to produce animal feed will greatly diminish and nature will be spreading across the globe again.

Fabricating Social Consent

How can people be brought to accept such a system? The bait to entice the masses is the assurances of comprehensive healthcare and a guaranteed basic income. The promoters of the Great Reset promise a world without diseases. Due to biotechnologically produced organs and individualized genetics-based medical treatments, a drastically increased life expectancy and even immortality are said to be possible. Artificial intelligence will eradicate death and eliminate disease and mortality. The race is on among biotechnological companies to find the key to eternal life.

Along with the promise of turning any ordinary person into a godlike superman, the promise of a “universal basic income” is highly attractive, particularly to those who will no longer find a job in the new digital economy. Obtaining a basic income without having to go through the treadmill and disgrace of applying for social assistance is used as a bait to get the support of the poor.

To make it economically viable, the guarantee of a basic income would require the leveling of wage differences. The technical procedures of the money transfer from the state will be used to promote the cashless society. With the digitization of all monetary transactions, each individual purchase will be registered. As a consequence, the governmental authorities would have unrestricted access to supervise in detail how individual persons spend their money. A universal basic income in a cashless society would provide the conditions to impose a social credit system and deliver the mechanism to sanction undesirable behavior and identify the superfluous and unwanted.

Who Will Be the Rulers?

The World Economic Forum is silent about the question of who will rule in this new world.

There is no reason to expect that the new power holders would be benevolent. Yet even if the top decision-makers of the new world government were not mean but just technocrats, what reason would an administrative technocracy have to go on with the undesirables? What sense does it make for a technocratic elite to turn the common man into a superman? Why share the benefits of artificial intelligence with the masses and not keep the wealth for the chosen few?

Not being swayed away by the utopian promises, a sober assessment of the plans must come to the conclusion that in this new world, there would be no place for the average person and that they would be put away along with the “unemployable,” “feeble minded,” and “ill bred.” Behind the preaching of the progressive gospel of social justice by the promoters of the Great Reset and the establishment of a new world order lurks the sinister project of eugenics, which as a technique is now called “genetic engineering” and as a movement is named “transhumanism,” a term  coined by Julian Huxley, the first director of the UNESCO.

The promoters of the project keep silent about who will be the rulers in this new world. The dystopian and collectivist nature of these projections and plans is the result of the rejection of free capitalism. Establishing a better world through a dictatorship is a contradiction in terms. Not less but more economic prosperity is the answer to the current problems. Therefore, we need more free markets and less state planning. The world is getting greener and a fall in the growth rate of the world population is already underway. These trends are the natural consequence of wealth creation through free markets.


The World Economic Forum and its related institutions in combination with a handful of governments and a few high-tech companies want to lead the world into a new era without property or privacy. Values like individualism, liberty, and the pursuit of happiness are at stake, to be repudiated in favor of collectivism and the imposition of a “common good” that is defined by the self-proclaimed elite of technocrats. What is sold to the public as the promise of equality and ecological sustainability is in fact a brutal assault on human dignity and liberty. Instead of using the new technologies as an instrument of betterment, the Great Reset seeks to use the technological possibilities as a tool of enslavement. In this new world order, the state is the single owner of everything. It is left to our imagination to figure out who will program the algorithms that manage the distribution of the goods and services.

Tyler Durden Tue, 10/03/2023 - 23:45

Read More

Continue Reading

Spread & Containment

Vehicles Sales increase to 15.67 million SAAR in September; Up 15% YoY

Wards Auto released their estimate of light vehicle sales for September: September U.S. Light-Vehicles Sales Bounce Back Despite Gloomy Conditions (pay site).Hard to say exactly how much but sales could have been slightly stronger in September if not f…



Wards Auto released their estimate of light vehicle sales for September: September U.S. Light-Vehicles Sales Bounce Back Despite Gloomy Conditions (pay site).
Hard to say exactly how much but sales could have been slightly stronger in September if not for some lost inventory caused by production cuts related to plant shutdowns from UAW strikes at Ford, General Motors and Stellantis. Sales losses will be more strongly felt in October as production cuts mount.
Click on graph for larger image.

This graph shows light vehicle sales since 2006 from the BEA (blue) and Wards Auto's estimate for September (red).

The impact of COVID-19 was significant, and April 2020 was the worst month.  After April 2020, sales increased, and were close to sales in 2019 (the year before the pandemic).  However, sales decreased in 2021 due to supply issues.  The "supply chain bottom" was in September 2021.

Vehicle SalesThe second graph shows light vehicle sales since the BEA started keeping data in 1967.

Vehicle sales are usually a transmission mechanism for Federal Open Market Committee (FOMC) policy, although far behind housing.  This time vehicle sales were more suppressed by supply chain issues and have picked up recently.

Sales in September were above the consensus forecast.

Read More

Continue Reading