What will stop The Fed?
Investors globally are wondering - after CPI sent the 'peak inflation' narrative to the bottom of the ocean and Powell's Jackson Hole speech (and this FOMC statement and press conference) crushed the 'Fed Pivot' narrative - what other potential indicators/signals (aside from a multi-month slowdown in inflation of course) could prompt Powell and his pals to back off their uber-hawkishness?
We thought of six potential minefields that may have to be avoided if The Fed is to pull off its magic trick of hiking rates to over 4.6% and holding them higher for longer...
1. Frozen Credit Market
Given the tightening in financial conditions - which Powell said The Fed watches closely - we would already expect corporate borrowing costs to be significantly higher than they are currently...
Worse still, if The Fed's Median Dot comes true, corporate spreads will be even wider and eventually lead to the market freezing for most corporate issuers.
“Investment-grade credit spreads are by far the most important metric to watch given the large proportion of investment-grade bonds,” said Chang Wei Liang, a macro strategist at DBS Group Holdings Ltd. in Singapore.
“Any excessive widening in investment-grade credit spreads to over 250 basis points, close to the pandemic peak, could induce a more nuanced policy guidance from the Fed.”
Additionally, while the risk premium for credit would widen if The Fed did what it says it will do, given where HY CDS are trading, we would expect a surge in defaults...
With record amounts of debt on the corporate balance sheets, the rising cost of borrowing will kill many of the Fed-enabled zombies that roam the market.
2. Disappearing Bond Liquidity
The last two days have seen zero trades in Japan's benchmark 10Y government bond.
Additionally, bid-ask spreads for JGBs have exploded since March as liquidity evaporates from the world's largest bond market.
It's not just Japan though as US Treasury liquidity has been worsening dramatically in recent weeks, as a Bloomberg index of liquidity for US sovereign is near its worst level since trading virtually seized up due to the onset of the pandemic in early 2020.
And if The Fed gets its way, that illiquidity in the US Treasury market would be at its highest since the great financial crisis, basically killing the conduit for literally trillions of dollars of capital flow...
Are we turning Japanese?
As Bloomberg notes, thin bond-market liquidity would add pressure to the Fed’s efforts to reduce its balance sheet, which ballooned to $9 trillion through the pandemic. The central bank is currently letting $95 billion in government and mortgage bonds roll off the balance sheet every month, removing liquidity from the system.
3. Global FX Crisis
The dollar has been soaring - to record highs for DXY Dollar Index - as the yield spread/carry-trade attracts flows out of global fiat and into the USDollar...
However, in FX markets, everything is relative - the dollar can only go up if its fiat peers are going down in purchasing power, and that has historically been a problem.
Right now Europe is bearing the brunt as excessive declines in the euro may fuel concern about worsening global financial stability.
“If the euro fell out of bed, the Fed might not want that to get worse,” said John Vail, chief global strategist for Nikko Asset Management Co. in Tokyo.
“It would be more a global financial stability concept rather than anything related to the dual mandate.”
And the fear is spreading, as China's state media recently noted (angrily)...
"A super strong US dollar and the fall of other currencies will, to a certain extent, ease the scorching inflation in the US economy, but the world will have to pay for it."
...the editorial points the finger directly:
" Today, the dollar is once again the world's problem. In a sense, it's hard to believe that the "prosperity" of the US is clean and moral...
...Washington keeps laying mines but never removes them, which will eventually explode the US itself. The incompetence of US financial policymakers has been exposed by the consecutive interest rate hikes that have contributed to the abnormal appreciation of the US dollar with the purpose of defusing the severe inflation. "
Now the anxiety and insecurity brought by the US dollar to the world has heralded the beginning of the decline of its hegemony - regarding Washington's insatiable exploitation, Europe, Asia, the Middle East and other regions have explored the path of "de-dollarization," leading to the inevitable diversification of the international monetary system.
4. Equity Valuation Re-Rating
If real rates are forward looking - and trading on the basis of what they expect The Fed to do - then even at current levels, US equity valuations are dramatically too rich...
And if the short-term interest-rate market's expectations are right, US equity prices should fall even further...
Back in February 2020, the former Dallas Fed chief offered some more thoughts about Wall Street's 'lost generation'.
"The Fed has created this dependency and there's an entire generation of money-managers who weren't around in '74, '87, the end of the '90s, and even 2007-2009.. and have only seen a one-way street... of course they're nervous."
"The question is - do you want to feed that hunger? Keep applying that opioid of cheap and abundant money?"
Simply put, investors must be weaned off their dependency on a Fed put, and accept the reality that the 'wealth' they thought they had was paper profits and not real.
5. Home Equity Evaporation
Talking of paper wealth, if The Fed's current planned trajectory for rates is put into action, we should expect a further collapse in existing home sales...
And with that drying up of demand, home prices are expected to fall by an amount similar to the Great Financial Crisis...
And given that Americans' homes are their largest asset, that is a major blow to the narrative-driven 'strength' of the consumer.
6. Economic Collapse
Finally, and perhaps most importantly, with The Fed's eye so focused on the inflation side of its mandate, it may cause far worse than a 'soft landing' in the economy. If the Median dots come to pass, we should expecte 'hard' economic data to go into freefall - and not even the Biden administration will be able to argue that is not a recession...
So, maybe all of this combined is why the market is calling The Fed's bluff in 2023 - assuming that it will not hold rates 'higher for longer', but will be forced by the ugly recessionary (stagflationary more like) environment to cut rates in 2023...
In fact pricing in over 150bps of rate-cuts in the next two years...
Something The Fed is not expecting at all as it sits in its Ivory Tower proclaiming 'soft landings' everywhere.
We can turn to popular culture for lessons about how to live with COVID-19 as endemic
As COVID-19 transitions from a pandemic to an endemic, apocalyptic science-fiction and zombie movies contain examples of how to adjust to the new norm…
In 2021, conversations began on whether the COVID-19 pandemic will, or even can, end. As a literary and cultural theorist, I started looking for shifts in stories about pandemics and contagion. It turns out that several stories also question how and when a pandemic becomes endemic.
The 2020 film Peninsula, a sequel to the Korean zombie film, Train to Busan, ends with a group of survivors rescued and transported to a zombie-free Hong Kong. In it, Jooni (played by Re Lee) spent her formative years living through the zombie epidemic. When she is rescued, she responds to being informed that she’s “going to a better place” by admitting that “this place wasn’t bad either.”
Jooni’s response points toward the shift in contagion narratives that has emerged since the spread of COVID-19. This shift marks a rejection of the push-for-survival narratives in favour of something more indicative of an endemic.
Contagion follows a general cycle: outbreak, epidemic, pandemic and endemic. The determinants of each stage rely upon the rate of spread within a specified geographic region.
Etymologically, the word “endemic” has its origins with the Greek words én and dēmos, meaning “in the people.” Thus, it refers to something that is regularly found within a population.
Infectious disease physician Stephen Parodi asserts that an endemic just means that a disease, while still prevalent within a population, no longer disrupts our daily lives.
Similarly, genomics and viral evolution researcher Aris Katzourakis argues that endemics occur when infection rates are static — neither rising nor falling. Because this stasis occurs differently with each situation, there is no set threshold at which a pandemic becomes endemic.
Not all diseases reach endemic status. And, if endemic status is reached, it does not mean the virus is gone, but rather that things have become “normal.”
We’re most likely familiar with contagion narratives. After all, Steven Soderbergh’s 2011 film Contagion, was the most watched film on Canadian Netflix in March 2020. Conveniently, this was when most Canadian provinces went into lockdown during the early stages of the COVID-19 pandemic.
In survival-based contagion narratives, characters often discuss methods for survival and generally refer to themselves as survivors. Contagion chronicles the transmission of a deadly virus that is brought from Hong Kong to the United States. In response, the U.S. Centers for Disease Control is tasked with tracing its origins and finding a cure. The film follows Mitch Emhoff (Matt Damon), who is immune, as he tries to keep his daughter safe in a crumbling Minneapolis.
Ultimately, a vaccine is successfully synthesized, but only after millions have succumbed to the virus.
Like many science fiction and horror films that envision some sort of apocalyptic end, Contagion focuses on the basic requirements for survival: shelter, food, water and medicine.
However, it also deals with the breakdown of government systems and the violence that accompanies it.
A “new” normal
In contrast, contagion narratives that have turned endemic take place many years after the initial outbreak. In these stories, the infected population is regularly present, but the remaining uninfected population isn’t regularly infected.
A spin-off to the zombie series The Walking Dead takes place a decade after the initial outbreak. In the two seasons of The Walking Dead: World Beyond (2020-2021) four young protagonists — Hope (Alexa Mansour), Iris (Aliyah Royale), Silas (Hal Cumpston) and Elton (Nicolas Cantu) — represent the first generation to come of age within the zombie-infested world.
The four youth spent their formative years in an infected world — similar to Jooni in Peninsula. For these characters, zombies are part of their daily lives, and their constant presence is normalized.
The setting in World Beyond has electricity, helicopters and modern medicine. Characters in endemic narratives have regular access to shelter, food, water and medicine, so they don’t need to resort to violence over limited resources. And notably, they also don’t often refer to themselves as survivors.
Endemic narratives acknowledge that existing within an infected space alongside a virus is not necessarily a bad thing, and that not all inhabitants within infected spaces desire to leave. It is rare in endemic narratives for a character to become infected.
Instead of going out on zombie-killing expeditions in the manner that occurs frequently in the other Walking Dead stories, the characters in World Beyond generally leave the zombies alone. They mark the zombies with different colours of spray-paint to chronicle what they call “migration patterns.”
The zombies have therefore just become another species for the characters to live alongside — something more endemic.
The Walking Dead, Fear the Walking Dead (2015-), Z Nation (2014-18), and many other survival-based stories seem to return to the past. In contrast, endemic narratives maintain a present and sometimes even future-looking approach.
Learning from stories
According to film producer and media professor Mick Broderick, survival stories maintain a status quo. They seek a “nostalgically yearned-for less-complex existence.” It provides solace to imagine an earlier, simpler time when living through a pandemic.
However, the shift from survival to endemic in contagion narratives provides us with many important possibilities. The one I think is quite relevant right now is that it presents us with a way of living with contagion. After all, watching these characters survive a pandemic helps us imagine that we can too.
Krista Collier-Jarvis does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.disease control pandemic covid-19 vaccine spread lockdown transmission hong kong
Has the pandemic changed our personalities? New research suggests we’re less open, agreeable and conscientious
COVID-related changes in our personalities could go some way to explaining the widespread decrease in wellbeing.
For many of us, some personality traits stay the same throughout our lives while others change only gradually. However, evidence shows that significant events in our personal lives which induce severe stress or trauma can be associated with more rapid changes in our personalities.
A new study, published in PLOS ONE, suggests the COVID pandemic has triggered much greater shifts in personality than we would expect to have seen naturally over this period. In particular, the researchers found that people were less extroverted, less open, less agreeable and less conscientious in 2021 and 2022 compared with before the pandemic.
This study included more than 7,000 participants from the US, aged between 18 and 109, who were assessed before the pandemic (from 2014 onwards), early in the pandemic in 2020, and then later in the pandemic in 2021 or 2022.
At each time point, participants completed the “Big Five Inventory”. This assessment tool measures personality on a scale across five dimensions: extroversion versus introversion, agreeableness versus antagonism, conscientiousness versus lack of direction, neuroticism versus emotional stability, and openness versus closedness to experience.
There weren’t many changes between pre-pandemic and 2020 personality traits. However, the researchers found significant declines in extroversion, openness, agreeableness and conscientiousness in 2021/2022 compared with before the pandemic. These changes were akin to a decade of normal variation, suggesting the trauma of the COVID pandemic had accelerated the natural process of personality change.
Interestingly, younger adults’ personalities changed the most in the study. They showed marked declines in agreeableness and conscientiousness, and a significant increase in neuroticism in 2021/2022 compared with pre-pandemic. This may be due in part to social anxiety when emerging back into society, having missed out on two years of normality.
Personality and wellbeing
Many of us became more health-conscious during the pandemic, for example by eating better and doing more exercise. A lot of us sought whatever social connections we could find virtually, and tried to refocus our attention on psychological, emotional and intellectual growth – for example, by practising mindfulness or picking up new hobbies.
Nonetheless, mental health and wellbeing decreased significantly. This makes sense given the drastic changes we went through.
Notably, personality significantly impacts our wellbeing. For example, people who report high levels of conscientiousness, agreeableness or extroversion are more likely to experience the highest level of wellbeing.
So the personality changes detected in this study may go some way to explaining the decrease in wellbeing we’ve seen during the pandemic.
If we look more closely, the pandemic appears to have negatively affected the following areas:
our ability to express sympathy and kindness towards others (agreeableness);
our capacity to be open to new concepts and willing to engage in novel situations (openness);
our tendency to seek out and enjoy other people’s company (extraversion);
our desire to strive towards our goals, do tasks well or take responsibilities towards others seriously (conscientiousness).
All of these traits influence our interaction with the environment around us, and as such, may have played a role in our wellbeing decline. For example, working from home may have left us feeling demotivated and as though our career was going nowhere (lower conscientiousness). This in turn may have affected our wellbeing by making us feel more irritable, depressed or anxious.
Over time, our personalities usually change in a way that helps us adapt to ageing and cope more effectively with life events. In other words, we learn from our life experiences and this subsequently impacts our personality. As we age, we generally see increases in self-confidence, self-control and emotional stability.
However, participants in this study recorded changes in the opposite direction to the usual trajectory of personality change. This is understandable given that we faced an extended period of difficulties, including constraints on our freedoms, lost income and illness. All these experiences have evidently changed us – and our personalities.
This study provides us with some very useful insights into the impacts of the pandemic on our psyche. These impacts may subsequently influence many aspects of our lives, such as wellbeing.
Knowledge allows us to make choices. So you might like to take the time to reflect on your experiences over the past few years, and how these personality changes may have affected you.
Any changes may well have protected you during the height of the pandemic. However, it’s worth asking yourself how useful these changes are now that the acute phase of the pandemic is behind us. Do they still serve you well, or could you try to rethink your perspective?
Jolanta Burke does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.social distancing pandemic covid-19
Coalesce lands fresh capital to transform data at ‘enterprise scale’
Coalesce is a startup that offers data transformation tools geared mainly toward enterprise customers. Today the company closed a $26 million Series A…
Coalesce is a startup that offers data transformation tools geared mainly toward enterprise customers. Today the company closed a $26 million Series A funding round led by Emergence Capital with participation from 11.2 Capital and GreatPoint Ventures, bringing the company’s total raised to $31.92 million. Co-founder and CEO Armon Petrossian tells TechCrunch that the cash will be put toward building out Coalesce’s product and ecosystem.
Petrossian met Coalesce’s other co-founder, Satish Jayanthi, at WhereScape, where the two were responsible for solving data warehouse problems for large organizations. (In computing, a “data warehouse” refers to systems used for reporting and data analysis — analysis usually germane to business intelligence.) Their clients often encountered challenges in transforming data, Petrossian says, as well as documenting these transformations in a way that made intuitive sense.
To Petrossian’s point, a survey commissioned by data integration platform Matillion found that as much as 57% of the time involved in analytics projects is spent tackling data transformation hurdles. Moreover, 75% percent of data teams feel that outdated migration and maintenance processes are costing them productivity and capital.
“Companies have been struggling with data transformation and optimization since the early days of data warehousing, and with the enormous growth of the cloud, that challenge has only increased,” he told TechCrunch via email. “We are on a mission to radically improve the analytics landscape by making enterprise-scale data transformations as efficient and flexible as possible.”
Coalesce offers tools designed to simplify modeling, cleansing and governance of data primarily in the Snowflake cloud, powered by what Petrossian describes as a “column-aware” architecture that leverages metadata to manage data transformations with an understanding of how the data is related or connected. Users can take advantage of data transformation automation templates that can be edited, packaged and shared, either with code or a visual design tool.
Often, companies approach Coalesce with specific problems, Petrossian said, like needing to transform data from different databases, apps and systems to follow a certain spec or standard. Other customers seek to speed up business intelligence queries by removing the need to search across multiple data sources and formats.
“Our product solves the largest bottleneck in analytics today by combining the speed of an intuitive graphical user interface with the flexibility of code, plus a healthy dose of automation, to enable rapid data transformations,” Petrossian continued. “With Coalesce, the data can be organized in an easy to access and read fashion while using automation to streamline the process and limit the amount of time needed by highly skilled engineers to code manually.”
Petrossian sees Coalesce competing with “extract, transform, and load” data integration vendors, including Informatica and Talend. The aforementioned Matillion also occupies that space, as does Incorta and Etleap.
Fortunately for Coalesce, the ETL market is massive, with one estimate putting it at $10.75 million as of early 2021. While demurring when asked about revenue, Petrossian claimed that Coalesce’s business is quite strong, with “multiple” Fortune 500 customers paying for the startup’s services.
“Our company was born during the pandemic and has given us an opportunity to serve enterprise Fortune 500 companies that are resilient to the potential looming recession,” Petrossian added. “The Coalesce platform is easing the burden of companies struggling to find talented data engineers or architects by providing them with a tool that empowers their existing teams to be much more efficient without compromising flexibility at scale.”
Coalesce currently has 40 salaried employees, spread across locations in four different countries. Petrossian wouldn’t commit to hiring a certain number this year but said the plan is to invest generally in Coalesce’s marketing, sales and engineering operations.
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