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ICE (Black Knight) Mortgage Monitor: “It’s fair to expect prices to weaken later in 2023”

Today, in the Calculated Risk Real Estate Newsletter: ICE (Black Knight) Mortgage Monitor: “It’s fair to expect prices to weaken later in 2023”
A brief excerpt: Some interesting data on negative equity and limited equity.
• As of September, 383K (0.7% …



Today, in the Calculated Risk Real Estate Newsletter: ICE (Black Knight) Mortgage Monitor: "It’s fair to expect prices to weaken later in 2023"

A brief excerpt:
Some interesting data on negative equity and limited equity.

• As of September, 383K (0.7% of) mortgage holders were underwater on their homes – less than half the share prior to the pandemic and in the early 2000s before the Global Financial Crisis

• Likewise, the number of borrowers in limited-equity positions remains historically low, with 1.9M (4.2% of) mortgage holders having less than 10% equity in their homes

• Austin – where home prices remain more than 14% off 2022 peaks – is in the worst position of all markets, with 2.1% of mortgage holders underwater, followed by Las Vegas (1.7%) and Phoenix (1.6%)

• San Jose – despite its home-price struggles last year – and Los Angeles have the lowest negative equity rates at 0.1%

• Overall, the weighted-average combined loan-to-value ratio for all mortgaged homes in the U.S. is 45%, among the strongest we’ve seen, dating back more than 20 years, outside of Feb.-Aug. 2022 at the peak of home prices
emphasis added
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Futures Extend Last Week’s Blockbuster Rally As Oil, Yields Rise

Futures Extend Last Week’s Blockbuster Rally As Oil, Yields Rise

US equity futures extended gains after last week’s blockbuster rally, the…



Futures Extend Last Week's Blockbuster Rally As Oil, Yields Rise

US equity futures extended gains after last week’s blockbuster rally, the biggest of the year, despite some weakness in bonds, as traders remained optimistic that US and European central banks may start cutting interest rates as soon as next year. As of 7:40am, S&P emini futures were higher by 0.2%, near top of Friday’s range, while Europe's Estoxx 600 dropped 0.2% with materials leading declines. South Korea’s Kospi soared more than 5% after regulators banned short selling. The dollar fell for a fourth day. Crude futures rose more than 1.5% after Saudi Arabia and Russia reaffirmed they will stick with their supply curbs through year-end. Bitcoin continued its ascent, last seen above $35K, with Ethereum rising above $1900. 

Among individual stock market movers, Ryanair jumped almost 7% after announcing its first regular dividend. Tesla rose in pre-market trading after Reuters reported the company would produce a new, more affordable electric car model in Germany. Albemarle fell 1% as UBS cut its recommendation on the lithium producer’s stock to neutral from buy. Meanwhile, Morgan Stanley slashed its price target to Street-low of $90 from $155. Here are the other notable premarket movers:

  • Apple Inc. is upgraded to accumulate from neutral at Phillip Securities, a move that comes in the wake of the iPhone maker’s recent results. Shares are down 0.3%.
  • BioNTech ADRs gain 4.7% after the vaccine maker reported a profit for the third quarter, exceeding analysts’ expectations of a loss. The firm also gave quarterly sales results that topped estimates.
  • Birkenstock has received buy-equivalent recommendations from a majority of brokers initiating coverage after the so-called quiet period for analysts at firms that participated in the initial public offering. Shares are down 0.2%.
  • Bumble slumps 7.1% after the Wall Street Journal reported that CEO Whitney Wolfe Herd is stepping down.
  • Dish Network Corp. is down as much as 13% after a satellite television company reported revenue for the third quarter that missed the average analyst estimate and said its CEO Erik Carlson will resign effective November 12.
  • Fortinet Inc. is downgraded to hold from buy at HSBC, a move that comes in the wake of the cybersecurity company’s recent results. Shares down 1.2% in premarket trading.
  • Freshpet shares are up 12% in premarket trading, after the retailer of pet products reported third-quarter results that beat expectations and raised its full-year forecast.
  • Hilton Grand Vacations falls 6% in premarket trading after the manager of timeshare resorts agreed to buy Bluegreen Vacations Holding for $75.00 per share in an all-cash transaction, representing a total enterprise value of approximately $1.5 billion, inclusive of net debt.
  • Paramount Global slides 3.5% in premarket trading after BofA double-downgrades its rating to underperform from buy, on basis of no significant asset sales on the horizon for the media company.
  • Tecnoglass Inc. shares fall 11% in premarket trading Monday after narrowing its full-year revenue outlook to a range of $835 million to $848 million, after previously forecasting between $830 million and $855 million.
  • SolarEdge Technologies falls 0.3% as Wells Fargo adds to the slew of downgrades since the solar equipment supplier’s weak revenue forecast last week, cutting to equal-weight with uncertainties seen outweighing a discounted valuation.

Global equity markets are finding firmer footing after recent US data pointed to a cooling economy, leading traders to price lower rates by June. Ten-year Treasury yields, the benchmark rate for the global cost of capital, edged higher Monday, having slid in recent weeks from the 16-year highs touched last month.

“A better-than-expected US earnings season and the peak in interest rates are all pointing towards a year-end rally,” said Julius Baer strategist, Leonardo Pellandini, echoing a view that has rapidly become consensus when as recently as two weeks ago the Wall Street outlook was that a drop below 4,000 was in the cards. Which is not to say that the permabears are giving up: according to Morgan Stanley’s Michael Wilson who has been wrong most of the year, last week’s market bounce was more of a bear market rally than the start of a sustained upswing, particularly in light of a gloomy earnings outlook and weaker macro data.

More information about how policymakers see the trajectory of inflation may come later in week, with speeches due from Federal Reserve Chair Jerome Powell and Bank of England governor Andrew Bailey.

“There’s a bit more reason for investors to be more optimistic that the Fed is probably done with rate hikes, but one should not let one’s guard down,” Vasu Menon, managing director for investment strategy for OCBC Bank Singapore, said on Bloomberg Television. “If the economy proves to be more resilient, if inflation proves to be more stubborn, bond yields could go up once again.”

Here are the latest market observations from Goldman trader Rich Privorotsky:

Massive stop in of macro risk last week. Very visible in the PB stats with a huge jump in nets and some outsized flows to buy macro products ("Global book saw largest net buying since Dec '21") . It was really a beta chase and that is quite evident from the record amounts IWM calls, the ballooning of SPX calls and a corresponding jump in funding spreads.

L/S scrambling to lock in gains on short alpha bets drove portfolio destruction and the unwind of momentum across the market (later parts of last week saw some of the worst systematic alpha we've seen all year). Non-profitable tech 2 day return = 13.5%, 99th % of the last 5 years. Amazing to see that the market’s correlation to longer dated rates only go higher on the week (rolling 60-day basically back to the highs).

If you look at cross asset price action the market traded as if it had been delivered QE with bonds up/eq up, credit tighter/bonds up, Cyc/def up/bonds up and vol down/bonds up. To some extent that’s true, the QRA did curtail some of the bond supply overhang. As the dust has settled I’m not so sure just how big of an impact this really has, net duration might be platueing very temporarily but the change is really marginal. Market took NFP as Goldilocks print with economy slowing just enough to take pressure off the rate market and yet not enough to project recession. Last week had a lot of weak data with ISM manf, ISM services both coming in light of expectations. The market is repricing forward earnings expectations lower sharply in European and slightly so in the US. GIR actually decomposed the yield moves last a with the lion share driven by a  downgrade to growth and to a lesser extent policy (see side-note).

The technicals are supportive: From here CTA are still going likely to be buying more, L/S nets have already jumped considerably after last week (more could come but think a lot of the squaring now rear view), asset mangers have length to add as the CFTC positioning  data suggests they have trimmed exposure in SPX/NDX to early summer levels (but that’s a far cry from deeply underweight levels to start the year) and vol control probably will at some point start buying again but at at a gradual pace. Vol is back to a 14 handle so any exogenous risk premia for the multiple geopolitical conflicts has slipped to zero. Ironically SPX implied vs realized still shows pretty big downside to spot vol levels. 

European stocks struggled to gain traction as bond yields pared some of Friday’s post-payrolls drop. The Stoxx 600 was modestly red after rising for five straight days. Travel and mining are the best performing sectors. Ryanair shares rise as much as 6.8%, the most since January, after the budget airline announced its first ever dividend and reported second-quarter results that analysts called solid. Here are other notable European movers:

  • Melrose Industries shares rise as much as 4.8%, the most since September, after its subsidiary GKN Aerospace signed a new agreement with GE Aerospace, widening a long-term partnership on the GEnx program
  • JD Sports rises as much as 2.4% in London as Citi initiates with a buy rating, citing that it sees Asia-Pacific representing the largest growth opportunity for sporting-goods stocks
  • Stadler Rail rises as much as 1.5% after Oddo raised its recommendation for the Swiss train maker to neutral from underperform, citing increasingly “rational” multiples after the stock’s plunge over the past two years
  • Evotec drops as much as 7.8%, as RBC downgrades the German pharma company to sector perform on major near-term uncertainty from factors including life science sector headwinds
  • K+S shares slide as much as 7.8% to a June low after the potash producer was cut to sell from neutral at UBS, citing a lack of earnings momentum and a challenging environment for the crop nutrient
  • Telecom Italia shares slip after erasing gains of as much as 5.4% at the open. The Italian carrier’s board approved a sale of its land-line network to KKR for as much as €22 billion
  • Heidelberg Materials falls as much as 3% as UBS downgrades the cement maker to neutral from buy, citing potential for larger and higher-multiple M&A activity, which could weigh on shares
  • PostNL falls as much as 13%, the steepest drop since May 2022, after third-quarter results missed estimates. A recovery in parcel volumes failed to match expectations in the third quarter
  • Oerlikon drops as much as 7.4%, after RBC cuts the polymer processing group to sector perform in note saying that third-quarter results were “sobering” and a cautious outlook won’t help investor confidence

Earlier in the session, the MSCI Asia Pacific Index advances as much as 1.9%, rallying the most since July 13, after US Treasury yields fell on Friday following data releases that showed the US service sector expanded at the weakest pace in five months, job growth moderated and the unemployment rate climbed to 3.9%.

  • Hang Seng and Shanghai Comp conformed to the gains in the region with sentiment supported by weekend comments from the Chinese Premier who stated China will soon release a plan to promote high-standard institutional opening up in the Shanghai Free Trade Zone, whilst the Finance Minister said China will accelerate the issuance and use of government bonds. Traders are also cognizant of the Chinese Trade Balance data due for release tomorrow.
  • Korea’s Kospi index surges as much as 4.1%, the most since January 2021, following the nation’s move to reimpose a full ban on short-selling for about eight months; Kosdaq +6.2%.
  • Japan's Nikkei 225 remained comfortably above the 32,500 level and hit levels last seen at the end of September with the Industrial sectors leading the gains, whilst Final Services and Composite PMIs were revised higher from the Prelim.
  • Australia's ASX 200 posted modest gains as the index is hindered by losses in heavyweight Energy and Mining sectors, although gold names outperformed as the yellow metal held onto recent gains, while Financials were boosted by Westpac post earnings. Participants also look ahead to tomorrow’s RBA decision in which 35/39 analysts polled by Reuters expect a 25bps rate hike.
  • Indian stocks climbed for the third straight day, reflecting the widespread gains across Asia. The S&P BSE Sensex rose 0.9% to 64,958.69 as of 03:45 p.m. in Mumbai, while the NSE Nifty 50 Index gained by a similar measure to 19,411.75. Today’s gain in the Nifty was the third-best Monday performance so far this year. The NSE metal index was the top-performing sector, with 12 of its 15 member stocks advancing on the day. All sectors except the gauge for state-run banks ended in the green.    

In FX, the Bloomberg Dollar Spot Index was flat after the index on Friday posted its worst performance since mid-July. The Japanese yen is one of the weakest G-10 currencies, falling 0.2% versus the greenback; the USDJPY was boosted by short covering by leveraged funds; the yen pared losses after Bank of Japan Governor Kazuo Ueda cautiously hinted that gradual progress is being made toward achieving the bank’s inflation target “Another soft outcome on Japanese labor cash earnings will reinforce our view that BoJ policy tightening is a distant prospect,” Kristina Clifton, Commonwealth Bank of Australia strategist, wrote in a note, referring to data due to come out on Tuesday

In rates, treasuries are slightly cheaper across the curve amid deeper losses in core European rates, partially unwinding Friday’s sharp bull-steepening rally spurred by softer-than-expected October jobs report. US yields cheaper by up to 3bp across front-end of the curve which leads losses on the day, re-flattening 2s10s spread by around 1bp into early US session; 10-year yields around 4.59% with bunds and gilts lagging by 4bp and 3bp in the sector.  Scant economic data is scheduled for this week, while auctions resume Tuesday with $48b 3-year note sale, followed by 10- and 30-year offerings Wednesday and Thursday. Powell is slated to speak Wednesday and Thursday, among more than a dozen planned appearances by Fed officials this week. Dollar IG issuance slate already includes a handful of deals; forecasts for the week suggest around $40b of issuance on deck, higher than average, during economic data drought.

In commodities, oil prices advance, with WTI rising 1.8% to trade near $81.90. Spot gold falls 0.3%.

No US economic data scheduled for the session; ahead this week are trade balance, wholesale inventories and University of Michigan sentiment

Market Snapshot

  • S&P 500 futures up 0.1% to 4,382.00
  • STOXX Europe 600 little changed at 444.09
  • MXAP up 2.0% to 159.84
  • MXAPJ up 2.2% to 499.71
  • Nikkei up 2.4% to 32,708.48
  • Topix up 1.6% to 2,360.46
  • Hang Seng Index up 1.7% to 17,966.59
  • Shanghai Composite up 0.9% to 3,058.41
  • Sensex up 0.9% to 64,930.04
  • Australia S&P/ASX 200 up 0.3% to 6,997.38
  • Kospi up 5.7% to 2,502.37
  • German 10Y yield little changed at 2.69%
  • Euro up 0.1% to $1.0745
  • Brent Futures up 1.4% to $86.04/bbl
  • Brent Futures up 1.3% to $86.01/bbl
  • Gold spot down 0.3% to $1,986.56
  • U.S. Dollar Index little changed at 104.93

Top Overnight News

  • China will further expand market access and increase imports, its premier told a trade fair in Shanghai on Sunday, amid criticism from European firms who said they wanted to see more tangible improvement in the country's business environment. RTRS
  • China will accelerate the issuance and use of government bonds, state-run news agency Xinhua reported on Sunday citing an interview with new finance minister Lan Foan. The finance ministry will steadily promote the resolution of local government debt risk and increase efforts to better leverage the role of special bonds to boost the economy, Xinhua cited Foan as saying. RTRS
  • Foreign firms yanked more than $160 billion in total earnings from China during six successive quarters through the end of September, according to an analysis of Chinese data, an unusually sustained run of profit outflows that shows how much the country’s appeal is waning for foreign capital. WSJ
  • Chinese brokerages surged after authorities proposed to relax capital requirements for firms and signaled support for more acquisitions. BBG
  • Shares in South Korea surged on Monday morning after the country’s financial regulator issued a blanket ban on short selling to appease retail investors ahead of parliamentary elections next year. FT
  • Saudi Arabia and Russia reaffirmed that they will stick with oil supply curbs of more than 1 million barrels a day until the end of the year, even as turmoil in the Middle East roils global markets. The leaders of the OPEC+ coalition announced the plans in separate official statements on Sunday. Riyadh has slashed daily crude production by 1 million barrels and Moscow is curbing exports by 300,000 barrels, on top of earlier cuts made with fellow OPEC+ nations. BBG
  • Trump leads Biden in nearly all the important battleground states according to a new poll (Biden leads among voters under 30 by just a single point and his advantage with Hispanic voters is down to the single digits). NYT
  • Israeli troops encircled Gaza City, effectively cutting off the northern part of the strip from the south, an army spokesman said. Antony Blinken is in Turkey after making unannounced stops in the West Bank and Iraq. White House officials are frustrated at the scale of civilian casualties in Gaza. WaPo
  • Hedge funds extended short positions on Treasuries to a record, CFTC data showed — just before smaller-than-expected US bond sales and weaker jobs data spurred a rally. Also on a collision course: Money markets have raised policy-easing wagers, betting the first Fed rate cut will be in June, with 100 bps of reductions by end-2024. BBG
  • Consumer Discretionary was the most net bought sector on the US Prime book last week and saw the largest net buying since Dec ’21, driven almost entirely by long buys. Last week’s long buying in US Cons Disc ranks in the 93rd percentile vs. the past five years.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded higher across the board following the post-NFP tailwinds from Wall Street on Friday, with sentiment in the region also boosted by South Korea announcing a ban on stock short-shelling which catapulted the KOSPI index to gain over 4%. ASX 200 posted modest gains as the index is hindered by losses in heavyweight Energy and Mining sectors, although  gold names outperformed as the yellow metal held onto recent gains, while Financials were boosted by Westpac post earnings. Participants also look ahead to tomorrow’s RBA decision in which 35/39 analysts  polled by Reuters expect a 25bps rate hike. Nikkei 225 remained comfortably above the 32,500 level and hit levels last seen at the end of September with the Industrial sectors leading the gains, whilst Final Services and Composite PMIs were revised higher from the Prelim. Hang Seng and Shanghai Comp conformed to the gains in the region with sentiment supported by weekend comments from the Chinese Premier who stated China will soon release a plan to promote high-standard institutional opening up in the Shanghai Free Trade Zone, whilst the Finance Minister said China will accelerate the issuance and use of government bonds. Traders are also cognizant of the Chinese Trade Balance data due for release tomorrow.

Top Asian News

  • China Premier said China will continue to promote opening up and market opportunities, and China will actively expand imports, and promote coordination of trading goods and services. He added China will further expand market access and remove barriers to foreign investment in manufacturing. China Premier said in the next five years, China's imports of goods and services are expected to reach USD 17tln on cumulative terms, and China will soon release a plan to promote high-standard institutional opening up in the Shanghai Free Trade Zone, according to Reuters.
  • China's Finance Minister said China will accelerate the issuance and use of government bonds, and China will steadily promote the resolution of local government debt risks, according to Reuters citing state media.
  • Alibaba's (9988 HK/BABA) Ant Group has received Chinese government approval to release products powered by its 'Bailing' AI model to the public, according to Reuters.
  • PBoC injected CNY 18bln via 7-day reverse repos with the rate at 1.80% for a CNY 658bln net daily drain, according to Reuters.
  • China's Shenzhen state asset regulator says if Vanke (2202 HK) faces extreme conditions it has sufficient liquidity to assist, via Reuters citing sources.
  • South Korea to ban all stock short-selling through the first half of 2024 to help create a "level playing field" for both retail investors and institutional and foreign investors, according to financial regulators cited by Reuters.
  • The Japanese government reportedly plans to submit an extra budget to Parliament on November 20th, according to Asahi.
  • BoJ Governor Ueda reiterated that Japan's economy is recovering moderately and is likely to continue recovering and repeated that the BoJ will patiently maintain monetary easing to support economic activity, according to Reuters. He said long-term interest rates may rise somewhat, but what's important is to look at the real interest rate that takes into account inflation expectations. He added the BoJ will continue massive bond-buying even under the new operation decided last week and will conduct nimble market operations when interest rates rise, depending on the level and speed of moves of long-term rates. He said even if long-term rates come under upward pressure, he doesn't expect the 10-year JGB yield to sharply exceed 1%, and BoJ needs to carefully weigh the effect of the policy in stimulating the economy and the potential side-effects under YCC. Ueda said the BoJ will keep Yield Curve Control and negative short-term rates intact until the sustained achievement of 2% inflation is foreseen. Ueda said the BoJ needs to have more conviction that wages will keep rising.
  • BoJ Minutes from the September 21-22 meeting (two meetings ago) said members expressed the need to continue patiently with monetary easing to achieve the sustainable inflation target, alongside wage growth, according to Reuters.
  • Japanese government is to hold a meeting with management and labor unions this month, via Nikkei.
  • RBA Shadow Board calls for a rate hike to curb inflation, according to Canberra Times.

European bourses are in the red with trade thus far relatively cagey and contained after last week's action and as the region awaits fresh catalysts, Euro Stoxx 50 -0.3%. Sectors are mixed with outperformance in Travel & Leisure post-Ryanair while the likes of Real Estate, Construction and Chemicals lag. Stateside, futures are modestly firmer in a continuation of Friday's action going into a week that features numerous Fed speakers incl. Chair Powell and data prints such as Manheim & UoM; ES & NQ +0.2%. Berkshire Hathaway (BRK): Reported a +40.6% increase in Q3 operating earnings to USD 10.76bln (exp. 8.95bln), or around USD 4.96/shr per Class B share (exp. 4.42), and around USD 7,442 for each Class A share (exp. 6,625). Q3 revenue USD 93.2bln (exp. 88.1bln); Q3 insurance underwriting operating income USD 2.422bln (vs USD 1.247bln Q/Q), Q3 insurance investment income USD 2.47bln (vs 2.369bln Q/Q). Ended the quarter with USD 157.2bln of cash. Executed USD 1.1bln of share repurchases in Q3 (vs USD 1.4bln in Q2). Its outlook acknowledges challenges like the pandemic's impact, geopolitical risks, and inflation pressures. +0.6% in pre-market trade.

Top European News

  • ECB President Lagarde said the ECB is determined to bring inflation down to 2%. “According to our projections, we will get there in 2025”, according to an interview with Greek press conducted on 30th October and released on 4th November.
  • UK PM Sunak will reportedly unveil a North Sea annual oil and gas licensing bill which will allow companies to bid yearly for new licences to drill for fossil fuels, according to the FT. "There is currently no fixed period between licensing rounds - but this would change under a bill to be announced in Tuesday's King's Speech... Ministers said projects would have to meet net-zero targets and claimed the policy would guarantee energy security.", according to the BBC.
  • UK Chancellor Hunt is facing calls from Tory MPs to lower taxes after figures revealed a multi-billion GBP improvement in public finances since March's budget, according to The Times.


  • Buck continues to buckle after 'dovish' Fed, NFP and ISM misses as DXY slips into a softer 105.15-104.84 range, Pound, Euro and Franc all extend gains vs Dollar to form 1.2400+ triple top, probe 1.0750 and approach 0.8950 respectively.
  • EUR/USD faces decent option expiry interest below 1.0800.
  • USD/JPY capped by 21 DMA and expiries at 150.00 strike after BoJ Governor Ueda maintains that patient monetary easing is still needed.
  • Aussie prepares for likely RBA hike, with AUD/USD holding above 0.6500 and AUD/NZD cross eyeing return to 1.0900.
  • Loonie underpinned by a bounce in crude and hawkish line from BoC's Rogers ahead of Canadian Ivey PMIs and Market Participants Survey.
  • PBoC sets USD/CNY mid-point at 7.1780 vs exp. 7.2868 (prev. 7.1796)


  • Bonds hand back more of Friday's post-payrolls and services ISM gains.
  • Bunds towards the lower end of 129.90-130.38 band alongside EGB peers after stronger than expected German factory orders and not as weak as feared EZ Sentix index.
  • Gilts and T-note near base of 94.78-95.15 and 108-02/07+ respective ranges.


  • Crude benchmarks are firmer and have continued to climb despite a lack of fundamental updates occurring in European hours, with the move primarily a recovery from Friday’s pressure and aided by geopolitics alongside a softer USD.
  • As it stands, WTI Dec’23 and Brent Jan’24 contracts are at the top end of circa. USD 1.50/bbl parameters but remain well within Friday’s and by extensions last week’s parameters.
  • Spot gold is little changed with the overall tone a tentative one as we await fresh catalysts and continue to analyse last week’s data and potential associated Fed implications. Finally, base metals are generally firmer owing to the constructive APAC tone.
  • Saudi Arabia December OSPs: Arab Light prices maintained for Asia and the US, but large cut to NW Europe, according to Reuters: Asia +4.00/bbl (prev. +4.00/bbl) vs Oman/Dubai average, NW Europe +4.90/bbl (prev. +7.20/bbl) to Ice Brent settlement, US +7.45/bbl (prev. +7.45/bbl) vs ASCI.
  • Saudi Ministry of Energy reaffirmed that Saudi Arabia will continue the voluntary cut of 1mln BPD through December, according to the state news agency SPA.
  • Russia's Deputy PM Novak reaffirmed Russia to continue the additional voluntary supply cut of oil and petroleum products exports by 300k BPD until the end of December this year. He said the voluntary cut decision will be reviewed next month to consider deepening the cut or increasing oil production, according to Reuters.

Geopolitics: Israel-Hamas

  • Israeli PM Netanyahu said there will be no ceasefire until hostages are returned, according to Reuters. Israel's army says it has cut the Gaza Strip in two, according to AFP.
  • Four civilians, three of them children, were killed by an Israeli airstrike in south Lebanon on Sunday evening, according to Sky News.
  • Hezbollah said it fired multiple Grad rockets at the northern Israeli town of Kiryat Shmona in retaliation for an Israeli airstrike in South Lebanon, according to Reuters.
  • Hezbollah lawmaker Fadallah said the Israeli strike which killed children is a “dangerous development”, and will have repercussions, according to Reuters.
  • Lebanon said it will submit a complaint to the United Nations over the killing of civilians including children in an Israeli strike in South Lebanon, according to the Lebanese Foreign Minister cited by Reuters.
  • Israeli military spokesperson said their attacks in Lebanon are made based on intelligence information, according to Reuters.
  • Evacuations from Gaza to Egypt through Rafah crossing were reportedly suspended since Saturday after Israeli strikes on ambulances, according to Egyptian official sources cited by Reuters.
  • Qatar's Foreign Ministry spokesperson said the Hamas political office in Doha will remain open so long as it can be used towards peace, and there's no reason to close it now, and added that Qatar is working with Egypt to ensure Rafah crossing remains open, according to Reuters.
  • Egyptian Foreign Minister Shoukry says he cannot justify Israel's actions against Palestinians as self-defence, according to Reuters.
  • Diplomatic adviser to the UAE President said Israel's response to the October 7 attack is disproportionate, and added the Palestinian issue is an Arab issue, according to Reuters.
  • Saudi Arabia strongly condemned the statement issued by an Israeli minister regarding dropping a nuclear bomb on the Gaza Strip, according to Reuters.
  • US Central Command announced that the Ohio-class nuclear submarine has arrived in the Middle East.
  • US President Biden said "yes" when asked if there has been any progress on a humanitarian pause in Gaza, according to Reuters.
  • US Secretary of State Blinken said the US is intensely focused on bringing home hostages from Gaza. He said a humanitarian pause could advance the prospect of getting hostages back, while adding the current flow of aid to Gaza is grossly insufficient, according to Reuters.
  • US Secretary of State Blinken told Palestinian leader Abbas that the Palestinian Authority should play a central role in what comes next in Gaza, according to a Senior State Department Official cited by Reuters. Blinken made clear that Palestinians must not be forcibly displaced and reiterated US commitment to advancing dignity, and security for Palestinians and Israelis alike, according to Reuters.
  • Iran's Defense Minister warned the US it "will be hit hard" if it does not implement a ceasefire in Gaza, according to Tasnim cited by Reuters. Iran's Vice President said the tragedy in Gaza cannot be ignored, according to Reuters.
  • The Turkish Foreign Minister reportedly discussed the situation in Gaza with the Egyptian and Jordanian counterparts. They exchanged views on stopping attacks on civilians in Gaza and achieving an urgent ceasefire, according to a Turkish diplomatic source cited by Reuters.
  • French Foreign Minister said the humanitarian conference on November 9th will cover the respect of international law, and will call for a concrete mobilization for the civilian population in Gaza, according to Reuters.
  • TotalEnergies (TTE FP) has raised security vigilance for its operations in the Middle East, according to Reuters.

Geopolitics: Others

  • Armed factions claim to target Ain al-Assad base in Iraq with 4 missiles, according to Sky News Arabia citing their correspondent.
  • US Secretary of State Blinken in Iraq, said he had a very good and candid conversation with the Iraqi leader and said attacks on US personnel are a matter of Iraqi sovereignty and against its own interests, according to Reuters.
  • The Turkish military conducted air strikes against Kurdish militants in northern Iraq, hitting 15 targets, according to the Defense Ministry cited by Reuters.
  • Russian Defense Ministry said a new atomic submarine conducted a test launch of a Bulava intercontinental missile in the White Sea, according to Reuters.
  • Belarus Foreign Ministry summons Polish Charge D'Affaire over violation of its airspace on Nov 2nd, according to a statement.
  • Russia is moving to expand its military presence in eastern Libya, according to Bloomberg.
  • Japanese PM Kishida said Japan will continue to contribute to enhancements of Philippine security capabilities and stated that in the South China Sea, a trilateral cooperation to protect the freedom of the sea is underway, according to Reuters.
  • China's Defense Ministry, in response to Canada accusing Chinese fighter jets of 'unsafe interception,' states that China's response was professional while adding Canada's move violates China's laws and jeopardizes China's security, according to Reuters.
  • Iraqi PM arrived in the Iranian capital as part of an official visit, according to Asharq News.
  • Russian President Putin has decided to run for President again in 2024, via Reuters citing sources; Russian President Putin has not announced he would run for another presidential term and no campaign yet, via Peskov.

US Event Calendar

  • Nothing major scheduled

DB's Jim Reid concludes the overnight wrap

The week after payrolls is usually very light on US data and this rings true this week. The highlight for us will probably be today's US Senior Loan Officers Opinion Survey (SLOOS) even if it’s unlikely to be an immediate market mover. Bank lending standards are in deep recessionary territory and the longer they stay there the more risk that refinancings won't happen (or come at a much higher cost) which will slow the economy and potentially cause accidents. For now a combination of excess savings, private markets, and the lack of need for refis could have weakened the usual impact on the economy, even with the typical lag. So the trillion dollar question is can the economy get by long enough for bank lending standards to gradually improve to normal levels? I'm sceptical of this but we will see if any trends emerge today at 7pm London time.

The big story of last week was the epic rally in bonds and equities. It seems our seasonal chart we published on October 27th (link here), that basically said the bottom in US equity markets in H2 occurs on that day (using nearly 100 years of data), has picked the local lows perfectly. The S&P 500 (+5.85%) had its best week in a year and 10 and 30yr US yields rallied -26.4bps and -24.8bps respectively and had their best week since March and January. For Treasuries there was much talk about the QRA (quarterly refunding announcement) driving the rally. There's no doubt that this was the initial catalyst but the rally had 4 stages. First the QRA, then the weak ISM, then the dovish Fed (all on the same day), and then finally a weak payrolls report on Friday which we'll discuss at the end when we briefly recap the past week. The one thing we’ll say here is that the Sahm Rule got a little closer to being triggered with US unemployment (3.9%) now 0.5pp above its lows in April. The trigger is the 3m moving average being 0.5pp above the 3m moving average lows of the last 12 months and when this happens the US economy has always been in, or about to be in, recession (using post WWII data). It is currently 0.33% above the lows. So one to watch. The fascinating thing about markets is that the path to a hard landing is often via the appearance of a soft landing first. So we’re in this window where the data is softening but if it only ends up softens a bit, and then stabilising, then its great news. However if it's the start of something bigger it's not. The former scenario won out last week as you’ll see in more detail at the end in our review.

Moving onto this week, outside of the SLOOS, the week is full of Fed speak stored up from the Fed blackout period and with the FOMC being firmly behind us. See DB’s Brett Ryan week ahead here for more details on the Fed speakers but the main one is Powell at the IMF conference on Thursday. Last Wednesday he talked about tighter financial conditions doing some of the Fed’s work for them. After the huge 60/40 rally since, will he still feel the same way by Thursday? Elsewhere in the US, tomorrow’s trade numbers are of minor interest and then Friday’s University of Michigan's consumer confidence is the other main highlight with focus on the 1yr and longer-term inflation expectations. The former spiking from 3.2% to 4.2% last month and more importantly, the latter picking back up a couple of tenths.

Moving back across the pond, markets will focus on German factory orders (today) and industrial production tomorrow. Other notable indicators due include Italian retail sales (Wednesday) and industrial production (Friday), the trade balance for France (Wednesday), the ECB Consumer Expectations Survey (Wednesday), and UK monthly GDP (Friday).

In China, all eyes will be on the inflation data (Thursday) following last week's misses on the PMIs. Current median estimates on Bloomberg suggest the CPI is expected to fall back into negative territory (-0.1% YoY vs 0.0% in September) and the PPI is also seen falling (-2.7% vs -2.5%). Prior to the inflation prints, there will also be trade balance data tomorrow.

As well as Powell speaking this week, ECB President Lagarde (Thursday) and BoE Governor Bailey (Wednesday) will all make appearances. Staying with central banks, the RBA have their latest meeting tomorrow with our economists (more here) expecting a +25bps hike.

In corporate earnings, with more than 400 of the S&P 500 members having already reported, things will slow down a bit until Nvidia report on November 21st. The key names this week are in the day-by-day week ahead at the end. See our equity strategists' global review of earnings season so far here.

Asian equity markets are rallying this morning following Western markets on Friday. The KOSPI (+4.20%) is leading the way and is trading sharply higher after South Korea reimposed a ban on short selling until the end of June 2024. Elsewhere, the Nikkei (+2.41%) is also climbing after returning from a long weekend while the Hang Seng (+1.69%), the CSI (+1.34%) and the Shanghai Composite (+0.88%) are also trading higher. US stock futures are broadly flat with US Treasuries 0-2bps higher across the curve.

Early morning data showed that Japan’s services activity expanded at the softest pace this year as the final estimate of the au Jibun Bank services PMI fell to 51.6 in October from 53.8 in September. Meanwhile, the final composite PMI was at 50.5 in October, down from 52.1 in September.

Staying in Japan, BOJ Governor Kazuo Ueda has said this morning that the central bank is gradually making progress towards its inflation target as Japanese companies are becoming more proactive in setting prices and wages. However, he added that it was still insufficient to justify a pivot away from the central bank’s ultra-loose policy.

In commodities, oil prices are gaining ground in Asia with Brent futures up +0.47%, trading at $85.29/bbl after Saudi Arabia & Russia, two top oil exporters, reaffirmed that they will continue with their oil supply cuts of more than 1 million barrels a day until the end of the year.

Looking back on last week now, Friday saw the release of US nonfarm payrolls for October. T he headline result came in below expectations at 150k (vs 180k expected), a significant drop from the revised 297k (previously 336k) in September. The unemployment rate drifted upwards to 3.9% (vs 3.8% expected), and average hourly earnings was at 0.2% (vs 0.3% expected). In sum, the data was weaker across the board, and was taken as further evidence of a cooling of the US economy and labour market.

Off the back of this, markets moved to price in meaningful and earlier cuts to the Fed rate. The rate priced in for the December 2024 meeting fell -19.8bps on Friday, and -22.3bps week-on-week, bringing the expected rate to 4.345%. In other words, c. 100bps of cuts are now priced until 2024 year-end. This Fed repricing saw the 2yr Treasury yield fall by -15.0bps on Friday, and -16.2bps over the week, reaching their lowest level since early August at 4.84%. Friday’s rally was less pronounced on the long-end, with the 10yr yield down -8.7bps and 30yr down -3.4bps. B ut longer-dated bonds outperformed over the week, with the 10yr down -26.4bps to 4.57%, and the 30yr down -24.8bps, their strongest weekly rallies since March and January respectively. Over in Europe, bonds saw slightly smaller gains, with 10yr German bunds down -18.7bps week-on-week (and -7.2bps on Friday).

The jobs data underpinned Friday’s rally in equity markets, with the S&P 500 up +0.94%. Friday marked the fifth consecutive day of gains for the index, with an overall weekly increase of +5.85%, its best week since this time last year. Tech also enjoyed a strong week, after the NASDAQ recorded a weekly gain of +6.61% (and +1.38% on Friday). But it was the small-cap Russel 2000 index that saw the largest outperformance, with a +7.56% weekly gain its largest since early 2021 (+2.71% on Friday). Friday’s rally did not falter in the face of a speech from Lebanese group Hezbollah, which emphasised that further conflict by the group would ‘depend on escalation’. On the whole, the speech was interpreted as limiting the risks an immediate broadening of the conflict. After the strong week, the VIX equity volatility measure fell -6.4pts week-on-week (and -0.8pts on Friday) to 14.9, its largest weekly decline since March 2022. Over in Europe, the STOXX 600 posted a more modest gain of +3.41% (and +0.17% on Friday).

Turning to commodities, oil prices declined for the second week in a row amid limited signs of escalation in the Middle East and softer economic data. Brent crude dropped -2.26% on Friday, and -6.18% on the week to $84.89/bbl. WTI crude fell -5.88% week-on-week (and -2.36% on Friday) to $80.51/bbl. Gold fell -0.68% on the week, but jumped +0.38% on Friday.

Finally in FX, lower rates and easing perceptions of geopolitical risk weighed on the dollar, with the broad dollar index seeing its largest daily and weekly declines since mid-July (-1.04% on Friday and -1.44% week-on-week).

Tyler Durden Mon, 11/06/2023 - 08:20

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Exchange flow gap hits 10K BTC — 5 things to know in Bitcoin this week

A "significant" shift in Bitcoin hodler sentiment provides the backdrop to BTC price action clinging to its highest levels in 18 months.



A "significant" shift in Bitcoin hodler sentiment provides the backdrop to BTC price action clinging to its highest levels in 18 months.

Bitcoin (BTC) begins the second week of November still holding strong near 18-month highs — where might BTC price moves head next?

The largest cryptocurrency has fought off sell pressure to seal another impressive weekly close.

In what analysis is increasingly describing as a change in sentiment, Bitcoin and altcoins alike are refusing to retrace gains which first kicked in over one month ago.

Amid a torrid macroeconomic environment, crypto is striking out on its own where assets such as stocks are feeling the pressure, and bulls are hopeful that the upside is not yet over.

Plenty of potential volatility triggers lie in store in the coming week. With inflation still on everyone’s mind, the United States Federal Reserve will deliver a round of remarks as part of planned engagements, with Chair Jerome Powell among the speakers.

A short trading week on Wall Street will mean an extended period of “out-of-hours” trading next week, allowing crypto to potentially see more volatile moves into the next weekly close.

Behind the scenes, Bitcoin is technically as resilient as BTC price action suggests — hash rate and difficulty, already at all-time highs, are due to add to their record tally in the coming days.

Cointelegraph delves deeper into these issues and more in the weekly overview of what to expect when it comes to Bitcoin market activity in the short term and beyond.

Bitcoin bulls refuse to give an inch

Like last week, Bitcoin did not disappoint with the weekly candle close into Nov. 6.

At just over $35,000, the close in fact set a new 18-month high, and preceded a bout of volatility which saw a brief trip to just below the $36,000 mark, data from Cointelegraph Markets Pro and TradingView shows.

BTC/USD 1-week chart. Source: TradingView

A fierce tug-of-war between buyers and sellers means that current resistance levels are proving hard to overcome, while liquidations mounted at the close.

As noted by popular trader Skew, the hourly chart suggests that “both sides of the book were swept” on exchanges.

On Nov. 5, Skew additionally showed increasing open interest (OI) on largest global exchange Binance — a key prelude to volatility in recent weeks.

Continuing, fellow trader Daan Crypto Trades referenced funding rate data showing longs paying shorts.

“There's still quite a lot of positions that opened during the weekend so I'd expect some further volatility after the futures open and on Monday to take those out (on both sides),” part of X commentary read at the time.

As Cointelegraph reported, bets among market participants include $40,000 as a popular BTC price target. The timing is up for debate, but predictions for the end of 2023 revolve around even higher levels.

For the meantime, however, more conservative approaches remain. Among them is popular trader Crypto Tony, who over the weekend told X subscribers not to bet on bulls sweeping through resistance.

“I am only short if we lose that support zone at $34,100, and will close my current long position if we lose $33,000,” he wrote, updating his current trading strategy.

“I would not recommend longing here into resistance at all.”

Fed speakers lead macro week

With a break from U.S. macroeconomic data prints this week, attention is once more on the Fed as a source of market volatility.

Various speaking engagements over the week prior to the Veterans Day holiday on Nov. 10 will see officials including Chair Powell take to the stage.

The timing is perhaps more noteworthy than the speeches themselves — the Fed continued a pause in interest rate hikes last week, this despite the data showing inflation beating expectations.

Previous comments have directed markets away from expecting a pivot in rates policy until well into next year. Per data from CME Group’s FedWatch Tool, bets for the outcome of the next rates decision, due in just over one month, are for a repeat pause.

Fed target rate probabilities chart. Source: CME Group

“All attention remains on the Fed,” financial commentary resource The Kobeissi Letter wrote in X comments on the upcoming macro diary.

Kobeissi added that volatility may continue in the coming days on the back of turbulence on bond markets. Stocks also saw notable changes last week, with the S&P 500 making an abrupt about turn after dropping through the second half of October.

Continuing, investment research platform Game of Trades suggested that “major economic volatility” is on the horizon thanks to a rare contraction in U.S. consumer credit.

“This has happened ONLY 3 times in the last 75 years,” it noted, referring to savings as a percentage of U.S. national income.

The other two occasions coincided with the 2008 Global Financial Crisis and March 2020 COVID-19 crash.

Hash rate, difficulty propelled to new all-time highs

It feels as if Bitcoin network fundamentals’ march higher is truly relentless after this year’s gains.

Hash rate and mining difficulty have cancelled out every comedown on the road to current all-time highs, and the upcoming adjustment will cement those levels.

Difficulty is slated to increase by another 2.4% on Nov. 12, taking its tally to nearly 64 trillion for the first time in Bitcoin’s history, per data from monitoring resource

Bitcoin network fundamentals overview (screenshot). Source:

Hash rate, while more fluid and hard to measure accurately, has nonetheless made its trend obvious in recent months.

As noted by James van Straten, research and data analyst at crypto insights firm CryptoSlate, last week was especially significant for hash rate — the estimated combined processing power dedicated to the network by miners.

As Cointelegraph reported, one theory which calls for the trend to continue into next year’s block subsidy halving revolves around miners’ own goals.

In an interview in September, Filbfilb, co-founder of trading suite DecenTrader, argued that miners would want to up their BTC retention prior to the halving cutting their BTC reward per block by 50%.

By the time of the halving itself, however, BTC/USD could trade at $46,000 as a result, he suggested.

Exchange flow gap reaches second-highest levels

As crypto markets come back to life, profitability conditions among Bitcoin hodlers are changing.

As Cointelegraph reported, the initial return above $30,000 saw the BTC spot price head above the acquisition cost of various more recent investor cohorts.

Now, signs of change are visible on exchanges, with inflows taking a back seat and withdrawals nearing year-to-date highs.

For Van Straten, the phenomenon marks a “a significant shift in the Bitcoin exchange flow.”

“A renewed momentum in Bitcoin withdrawals is evident, with over 61,000 BTC recently withdrawn, a substantial surge from the year-to-date low of nearly 43,000 BTC,” he wrote in CryptoSlate analysis on Nov. 3.

“This uptick suggests an increasing preference for investors to hold their Bitcoin assets off-exchange, possibly indicating a stronger long-term belief in the value of Bitcoin.”

He added that the gap between exchange deposit and withdrawal volume in BTC terms had reached its second-largest value ever — a “remarkable” 10,000 BTC, per data from on-chain analytics firm Glassnode.

“This differential is only shadowed by the FTX collapse aftermath, which witnessed an overwhelming peak of over 80,000 BTC withdrawn,” the analysis concluded.

“These trends could suggest a shift in investor sentiment, with more investors seemingly opting to hold their assets long-term rather than seeking immediate liquidity on exchanges.”
Bitcoin exchange flow data chart. Source: James Van Straten/X

Glassnode also shows aggregate capital inflows hitting year-to-date highs — an event described by popular social media trader and analyst Ali as representing “strong investor confidence.”

Crypto "fear" hits post-$69,000 highs

Improving sentiment often contains a double-edged sword in crypto, as the average hodler’s mindset becomes increasingly profit-focused.

Related: Sam Bankman-Fried convicted, PayPal faces SEC subpoena, and other news: Hodler’s Digest, Oct. 19 – Nov. 4

This is evidenced by the Crypto Fear & Greed Index — the classic market sentiment indicator which flashes a warning when the market enters phases of irrational exuberance.

Fear & Greed hit 84/100 during Bitcoin’s trip to current all-time highs in November 2021, and as of Nov. 6 is just 10 points off that peak.

At 74/100, the market is already “greedier” than at any point in the past two years. For Crypto Tony, however, there is still leeway for further upside before the sentiment imbalance becomes impossible to ignore.

“I want to see EXTREME GREED before i consider closing some positions,” he told X subscribers about the Index’s readings on Nov. 5, arguing that Ethereum (ETH) should head higher first.

Fear & Greed’s historical extremes have come in at around 95/100, the last time being in February 2021.

Crypto Fear & Greed Index (screenshot). Source:

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

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October’s Sobering Jobs Report Adds to Mounting Bad Economic News

The Bureau of Labor Statistic (BLS) released new jobs data on Friday. According to the report, seasonally adjusted total nonfarm jobs rose 150,000 jobs in…



The Bureau of Labor Statistic (BLS) released new jobs data on Friday. According to the report, seasonally adjusted total nonfarm jobs rose 150,000 jobs in October, month over month. The unemployment rate rose slightly from 3.8 percent to 3.9 percent over the same period. The headline payroll increase of 150,000, however, was possibly among the best news to be found in today's new jobs data, however. Once we delve more deeply into the numbers, we find substantial evidence that the "strength" of the job situation is greatly overstated by the payroll numbers while employed persons, wages, and other measures point to trouble ahead in in economy already strained by growing bankruptcies, mounting debts, and disappearing savings. For example, more than one-third of all new employment growth in the payroll survey for October came in the form of government jobs. Specifically, out of the alleged 150,000 new jobs produced in October (month over month), 51,000 of them were government jobs. Looking at growth in new government jobs as a percentage of all new jobs, October's measure of 34 percent was the second-highest in more than a decade. Since 2010, only July of this year showed a higher proportion of government jobs as the driver of new job creation. Moreover, the trend over the past two years has been clearly upward:
govt jobs
In other words, over the past two years, the "good" jobs numbers have depended more and more on growth in government jobs to deliver those "blow out" jobs totals we've seen since over the past two years. Where is the money coming from for all these government jobs? Tax revenues are falling, so a lot of that government employment must come from deficit spending. As Daniel Lacalle recently noted, the current claims of continued economic growth have been made possible my immense amounts of deficit spending. That is, without our ongoing trillion-dollar-plus deficits, economic growth measures would turn negative, since—as we've seen—as much as a third of new job creation would vanish. Or, as Lacalle puts it: "the country is in a recession disguised by bloated deficit spending."

Employed Persons vs. Total Jobs

So far, we've only looked at the payroll survey, however. The payroll survey (i.e., the establishment survey)—which estimates total jobs, both part time and full time—shows actual job growth. The household survey, on the other hand, shows that the total number of employed persons actually fell by 348,000 in October, month over month. That's the largest month-over-month decline in employed persons since April 2020, in the midst of the Covid Panic:
Moreover, the gap between the two surveys in estimated job growth has repeatedly grown larger since early 2022. Prior to that time, the two surveys tended to track together. This has not been the case in recent years, however, with the establishment survey claiming significantly more growth than the household survey. For October, this gap was at 2.6 million:
This gap also suggests that more workers are holding multiple jobs. Today's jobs data does indeed show that multiple job holders rose to a new high. Of course, multiple jobholding could be a sign of a boom, as was the case in 2007 and 2019. However, in an economy marked by entrenched price inflation, as is now the case, a rising number of multiple job holders may be a sign that more workers must work more hours to make ends meet.  This latter scenario is plausible given that today's employment data also points to continued slowing in hourly earnings. Year over year, average hourly earnings in October were up 4.1 percent. That the most sluggish growth rate in 29 months.
Another piece of bad news from today's job report is the fact that "temporary help services" went deeper into negative territory. Year over year, temporary help services were down 6.1 percent. That's the largest drop since the Covid Panic, and strongly suggests that recession is on the way. During the last four recessions, negative temporary job growth has preceded recessions, and year-over-year temp-job growth has now been negative for eleven months in a row:
Overall, however, employment tends to be a lagging indicator of where the economy is headed. Since the early 1970s, significant job losses tend to materialize only after a recession has already started. We must look elsewhere to get some more reliable hints about what the future holds. Such measures include the yield curve, whish is currently negative and points to a brewing recession. The money supply—which is currently experiencing the largest declines since the Great Depression—also points to declining economic activity. Meanwhile, bankruptcies are rising, the saving rate is falling, and the leading economic index continues to drop.

The Experts Assure Us Everything Is Great

None of this prevents the corporate media from continuing to insist that the economy couldn't be much better than it is. Phrases like "there's no recession in sight" are a favorite phrase, and an article by Greg Ip at The Wall Street Journal this week carried the title "The Economy Is Great. Why Are Americans in Such a Rotten Mood?" The Ip article continues a growing tradition of high-earning economists and reporters acting perplexed as to why anyone could think the economy isn't excellent. Paul Krugman, for example, recently declared the economy to be "surreally good." Such analyses, of course, ignore numbers such as October's loss of 348,000 jobs and thoroughly lackluster wage growth. Moreover, there is little acknowledgement that consumers are acutely aware of the real-world effects of price inflation since the covid crisis.  Shelter prices, for example, have increased 17 percent since 2021 while average earnings have increased by only 13 percent. In many markets, rising prices are far worse than this. True believers in the consumer price index attempt to assure us that price inflation is now fully under control, and real wages are now headed upward. To find the good news in these claims, however, we'd have to forget that real wages went down for a full two years from 2021 to 2023, and that the CPI likely understates the true magnitude of rising prices. In any case, the fact that real wage may be positive this month for many people doesn't magically erase the pain that consumers enduring throughout 2021 and 2022. Even worse, as many saw their real wages fall, they exhausted their savings in the process. Meanwhile, the Federal Reserve has painted itself into a corner, and it has to choose between continued economic weakness, or to unleash more price inflation on the economy.  With 40-year highs in price inflation barely behind us (let's hope), inflation indicators remains double the Fed's arbitrary goal of two-percent inflation. The Fed has been forced to allow interest rates to rise in order to combat this ongoing price inflation, but rising interest rates will lead to more bankruptcies and the end of countless zombie companies that depend on ultra-low interest rates to stay afloat. Those business that don't fail will face higher debt costs and less access to capital as new business loans become more expensive. This all means layoffs and falling demand for workers. Does the Fed have a plan to pull a rabbit out of hat and steer the economy into a soft landing? Of course not. It never has had a plan. After all, Fed economists were still claiming there was no recession as late as mid-2008, when the nation had been in recession for months. Fed forecasts are notoriously unreliable as they virtually always err on the side of promulgating sunny news about the economy. Once the Fed decides to take action, however, its options are limited. Then, as now, the only tool in the Fed's tool box is to force down interest rates and flood the economy with new money at the first sign of trouble. Whether or not this happens at the first undeniable sign of a jobs recession will depend on whether the Fed—for political reasons—fears price inflation more than recession. Wall Street is betting that the Fed will return to dovish policy again soon in an attempt to counter bad employment news: markets ended up this week in response to the weak jobs numbers.

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