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Macro as September Winds Down

Macro as September Winds Down

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The dollar began September extending its losses, but reversed higher and is winding down the month at its best levels against the euro and sterling in a couple of months. The Canadian and Australian dollars have approached last month's lows, and even the strong demand for the Mexican peso and Chinese yuan appeared to have dried up.   The quarter-end adjustments are thought to require net dollar buying.  

The apparent contrast between the lack of new monetary and fiscal signals in the US while other major centers are expected to ease policy still this year may have encouraged short-term players and trend followers to cover short dollar exposure.  Indeed, when the weekly initial jobless claims edged higher (second time in three weeks), and Treasury Secretary Mnuchin seemed to emphasize the desire to negotiate new fiscal support, the dollar, which had been well bid,  softened. The resurgence of the virus in Europe and the increased volatility of equities may have also encouraged the position adjusting in the foreign exchange market.   We expect that additional support for the US economy will be forthcoming, but not until after the election, and maybe, not until next year.   The recent market movements may be more about positioning than inherently favorable for the dollar, even if the upside correction continues a little longer.   

As September winds down, it seems clear that the strong momentum that many high-income countries enjoyed at the start of the quarter eased, and this will make Q4 more challenging.  Manufacturing is doing better than services, which continue on the whole to be more hamstrung by the virus.  Attempts to begin returning to work and school have been stymied by new outbreaks.  It is making for an uneven and fragile recovery. 

The week ahead provides several new data points.  There are several top-tier US economic reports, including September jobs and auto sales.  The eurozone reports the preliminary estimate for September inflation, and Japan's Tankan Survey will be released.  Investors can look forward to China's PMI and other countries, of which only have preliminary releases. The UK and the EU enter the home stretch for the trade pact negotiations that ought to be completed before the mid-October EU Summit if countries are to complete the ratification process.   The first US presidential debate will take place on September 29.  It will draw interest, but polls suggest a low percentage of undecided and those that cite the debate as salient for their choice. 

The historic contraction in the US second quarter will be "relived" in the sense that another revision will be made.  China makes one estimate and is done with it. Many are critical of it because it is seen as politicized and not always consistent with other data.   The US, in contrast, makes an estimate and revises it for years, and sometimes the revisions can be statistically significant.  The robustness of the various US estimates lies not in any one's estimate's accuracy but in the objective process of the calculation. 

Economists will use the August personal income and consumption data to polish Q3 GDP forecasts. The report will also drive home the problem of extrapolating from the volatile data.  Personal income is expected to drop sharply after having surged earlier in the crisis.  Consumption jumped nearly 2% in July and likely slowed to a still-strong pace even if below 1%.  Of course, part of the early rise in income was due to government transfers. The loss of the federal unemployment insurance and the expiration of the Payroll Protection Plan contributes to the Q4 fiscal drag that is fueling expectations for a sharp slowdown from what looks like a strong Q3.  The median forecast in the Bloomberg survey envisions a 25% GDP (annualized rate) in Q3.  The median forecast for Q4 is a 5% pace in Q4, which perhaps not surprisingly matches the NY Fed's Nowcast estimate.  At least two large US-headquartered banks cut Q4 forecasts as they gave up on the prospects of fiscal stimulus.

The PCE deflator, for which the Fed's now has a 2% average target, will draw attention.  A 0.3% increase on the month would put the year-over-year rate at 1.2% compared with 1.0% in July. The same monthly increase in the core rate would see the year-over-year pace slow to 1.3% from 1.5%.  Boston Fed President Rosengren opined that "we'd be lucky" to get inflation to 2% in four years. 

The US nonfarm payrolls report is often the most anticipated and market-sensitive economic report. The labor market continues to recover, but the pace has slowed considerably, and the weekly initial jobless claims have risen for two of the past three weeks through September 18.  The median forecast in the Bloomberg survey sees nonfarm payrolls increasing by 850k, after 1.37 mln in August.  The headline August number was flattered by around 340k government (mostly census) workers.  Private sector employment growth is forecast to be about 175k less than in August.  Industrial output and retail sales disappointed in August, and this could point to downside risk with the September employment report.

On the other hand, some employees were being recalled after Labor Day.  The unemployment rate, derived from the household survey, is expected to slip to 8.2%, which was the rate in the summer of 2012 as the recovery from the Great Financial Crisis was taking hold.  It has been in a range this year of 3.5% in February to 14.7% in April.  Although the data will impact Q3 GDP forecasts, it will have little impact on monetary or fiscal policy.  The Fed has no intention of lifting rates until inflation is above 2%, and the obstacle to fiscal stimulus is political will not economic need.

Manufacturing, and the auto sector, in particular, have helped fuel the recovery in the industrial sector.  Auto sales are gradually recovering and are likely to have increased for the fifth consecutive month in September.  Here too, though, the monthly increase may be slowing.  A nearly 15.6 mln unit seasonally adjusted annual pace is expected at 15.2 mln in August.  The average this year has been almost 13.6 mln compared with 16.9 mln in the first eight months of last year.  A wider range of high-frequency economic reports has shown a loss of momentum.  

II

The eurozone is awash in liquidity, and this has helped drive the three-month Euribor a little below the ECB's deposit rate of minus 50 bp, which theoretically is the floor for rates.  Despite this, banks took another 175 bln euros in loans with rates that could easily be as low as minus 100 bp on top of the 1.3 trillion euros taken in the previous operation at the end of Q2.  Over the past ten weeks, the ECB's balance sheet has been expanding by slightly less than 20 bln euros on average.  Many expect the ECB to extend its Pandemic Emergency Purchase Program in December. Still, recent comments suggest the possibility of another rate cut, as the dual-rate appears to have created new possibilities.  

The preliminary estimate September CPI will be released on September 30.  The August report showed the first negative reading (-0.2%) four years, and the deflation risk may have contributed to the focus in some quarters on the euro's strength.   Yet, most would agree that the August CPI overstated conditions.  The cut in the German VAT, changing seasonal sales promotions and sales, and discounts for tourism and travel services depressed the metric.  The point is that the noise-to-signal ratio was strikingly high.  

The monthly headline rate fell 0.4% in July and another 0.4% in August.  It likely stabilized in September.  Due to the base effect (rose 0.2% in September 2019), it must rise by around 0.4% to return the year-over-year rate to zero.  The median forecast in the Bloomberg survey is for a 0.3% month-over-month increase that leaves the year-over-year rate unchanged at -0.2%.  The core rate is expected to be unchanged at the record low 0.4% seen in August.  We suspect that deflation is mostly driven by transitory factors, but low inflation remains a chronic condition (of course, not in only Europe).  

The UK-EU formal trade talks resume September 28, and time is of the essence.  The strains are threatening to boil over, increasing recognition of the potential for significant disruption.  The controversial Internal Market bill that overturns part of the Withdrawal Agreement will be voted on again in the coming week.  The compromise forged that requires Parliament approval to trigger the most egregious measures ensures that it will be approved in next week's final vote before heading to the House of Lords.  The upper chamber can attach amendments and delay the process.  Meanwhile, the EC has threatened to take legal action if the measure is not withdrawn by the end of the month.  

Even pre-Covid, many observers expressed concern that the UK would not be ready to exit the standstill agreement at the end of the year, without significant disruptions and delays.  Recent reports underscore this observation.  Many UK truckers may not be prepared with proper paperwork and border controls.  Consider that, according to some accounts, a typical UK truck of groceries would need over 400 separate certificates to enter Northern Ireland.  Facilities (e.g., sanitary and phytosanitary) in Britain that would check goods coming from Northern Ireland (and the EU) are not going to be ready, according to senior UK officials cited. Specific definitions and regulations have not been agreed between the UK and the EU. The resurgence of the virus and new social distancing measures pose new obstacles.  

Japan's new prime minister begins as the economy appears to be growing by around 15.5% (annualized) inQ3, the first quarterly expansion since before the sales tax increase last October.  The Suga government upgraded its economic assessment of output, exports, and employment while keeping the overall view unchanged.  This week's release of the Tankan Survey will likely shed light on why the PMI remains below 50 if things are improving.  The results are broken down not just in terms of activity (manufacturing and non-) but also in size.  Japanese companies were hit hard, but the recovery for large businesses seem stronger, and the Tankan Survey will likely bear this out.  

The BOJ is looking through the drop in the core inflation rate (excludes fresh food) to -0.4% in September, the most deflationary reading in four years.  It suffered some of the same transitory distortions as Europe did, but also, the Japanese government offered discounts for tourism and travel.  Monetary policy was a main "arrow" of Abenomics and seems nearly naturally transferable to the Prime Minister Suga.  Governor Kuroda has not committed to anything but extending the emergency lending programs set to expire at the end of March 2021.  






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Are Voters Recoiling Against Disorder?

Are Voters Recoiling Against Disorder?

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

The headlines coming out of the Super…

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Are Voters Recoiling Against Disorder?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The…

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Low Iron Levels In Blood Could Trigger Long COVID: Study

Low Iron Levels In Blood Could Trigger Long COVID: Study

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

People with inadequate…

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Low Iron Levels In Blood Could Trigger Long COVID: Study

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

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

(Shutterstock)

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

Long COVID Patients Have Low Iron Levels

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

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

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

But it can jeopardize a person’s recovery.

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

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

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

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

1 in 5 Still Affected by Long COVID

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

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

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