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Market noise is becoming very messy

One thing we are probably not going to have to worry about in markets in the coming weeks is volatility. The amount of noise assailing my eardrums from multiple directions is becoming very loud and conflicted. Chief amongst though is that old chestnut,…

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One thing we are probably not going to have to worry about in markets in the coming weeks is volatility. The amount of noise assailing my eardrums from multiple directions is becoming very loud and conflicted. Chief amongst though is that old chestnut, inflation. Is it transitory or sticky? Well, that depends on who you are talking to. Overnight, the Bank of Canada abruptly ended its QE programme and signalled rate hikes are on the way. Similarly, the Brazil central bank surprised markets by hiking 1.50% to 7.75% to combat inflation and some anticipated pre-election fiscal largesse by President Fire-Starter. They also indicated that they would hike by as much again at their next policy meeting. Turkey’s dictator, meanwhile, has forced his central bank to cut rates despite rampant inflation. Long BRL/TRL anyone? Russia beat them all to the punch, hiking last week and the markets are locked and loaded for the RBNZ in November.

In contrast, the UK budget last night saw gilt yields sink as growth forecasts were upgraded for 2022, reducing the government’s projected borrowing requirement. The Bank of England hiking trade is suddenly looking very crowded. In the US, the inflation story is playing out mostly in the short end of the yield curve with yields rising there even as long-dated yields sink, leaving the US dollar stubbornly firm near the top of the week’s range. The Bank of Japan will, by contrast, remain unchanged at lower forever and this evening’s ECB policy meeting will more than likely feature the European Central Bank of Japan dampening longer-term inflation expectations even as they leave policy rates unchanged in negative territory. Europe is no closer to removing the monetary punch bowl to keep the lights on than they were a decade ago. It’s great if you are German though, as markets pay Germany to borrow from them. Even Australia, where the RBA has let more doves fly than Prince, seems to be on the cusp of changing tack, declining to intervene today to cap 3-year yields at their 0.10% target.

Fed expected to hit taper trigger

That mixed bag will receive another member next week in the form of the latest US Federal Reserve FOMC policy decision. The FOMC should announce the start of their tapering of QE, and this is a trade that has either been ignored by markets because it didn’t suit their buy everything narrative or has been woefully under-priced. Interest rates will still be near zero per cent even after QE is tapered, but in a world addicted to, and expecting the Federal Reserve to backstop the speculative excesses of the world, one shudders to think what a good dose of reality will bring to financial markets. One sweetener for the Fed to stay dovish going forward appears to be coming from Washington DC. The Democrats spending and tax plans appear to be in more disarray by the day and whatever emerges, if it does, will be a shadow of its former self. The Republicans won’t have to do any campaigning for next year’s mid-terms at this stage, the factions within the Democratic Party will do the job for them. Usually, that’s good for equities, American investors like government paralysis. Tonight’s US PCE Prices and Core Prices data may present a more near-term threat though if prices jump above forecast, with a lower GDP print already priced into markets.

The equity space is just as confused. China’s Evergrande faces another offshore coupon payment deadline tomorrow, with China’s government still relatively silent on the issue other than to tell the founder to use his own money to pay debtors first. The Communist Party Central Committee meeting looms between the 8th and 11th of November. President Xi’s shared prosperity policy hasn’t suddenly gone away and nor have the travails of the property sector. The delta variant is also girding itself to challenge the country’s Covid-19 zero policy and that’s on top of China’s energy crunch and supply-chain issues. Yet some notable commentators are urging investors to fill their boots and buy the dip in Chinese equities. On the regulatory challenge front alone, I’m not sure the repricing of risk into equity prices is complete; let’s hope they’re right. If anyone needs evidence to this fact, Reuters is reporting China’s state planner has met with representatives of China’s coal sector to help better identify those “profiteering” from soaring coal prices. China coal futures are limit-down this morning.

I must apologise to readers yesterday as I had the Apple results out by a day. Today is Apple day in fact and Amazon also releases its quarterly earnings as well. Although tech giants outperformed last night, it wasn’t enough to hold the Nasdaq in positive territory. Other indices sunk despite excellent results from the likes of Ford, and it seems that the US earnings story is running out of momentum. I expect both Apple and Amazon to deliver crowd-pleaser results today, but if Wall Street can’t rally on that, it may be time to batten down the hatches ahead of the FOMC next week which I continue to believe, is the one ring to rule them all. I note that Asia has steadfastly refused to buy into the American dream this week, with equity markets trading on the heavy side. China nerves will be part of that story, but so will the contradictory noise coming from the energy, commodity, fixed interest, and virus spaces amongst others. Samsung’s results are a classic case in point today. Excellent earnings but sounding warnings of memory chip prices and demand next year and supply chain disruptions while forecasting a recovery in corporate IT demand. A bit of a head-scratcher that one, especially as it is on both sides of that trade as a manufacturer and consumer.

Currency markets and precious metals are by contrast an ocean of calm, even as equity and bond markets are chasing their tails. Base metals have started to roll over and even energy prices look like they are on the cusp of a temporary correction lower. The China energy crunch and the prospect of lower refined metal and factory production could explain the base metal space. The prospect of Iranian oil returning to international markets, the energy space.

Markets tend to get very noisy with confusing movements before a large directional move. Nowhere is that more apparent than the crypto-verse. Bitcoin and ethereum have fallen this week as the post-ETF nonsense wears off and both are potentially on the cusp of a large correction lower. Meanwhile, another coin with a picture of a dog, Shiba Inu, has rallied by over 200% this week, making it a crypto-meme I suppose. I note it is not even built on its own code; it uses ethereum’s. Anyway, the price is super cheap, as opposed to the big two, and the retail space has piled into it in a meme-orgy. I received a TikTok today (as a file attachment, I don’t have an account. My daughters don’t want Dad in their “space”), in which had a bloke in a football shirt was exhorting viewers to “hold on and not sell” their cute doggy picture coins. He says hold on, I say pump and dump. And don’t get me started on (un)stable coins, supposedly back one-for-one with US dollars but whose issuers are incredibly elusive at proving just that.

The noise continues in Asia where the Bank of Japan, which has just left policy rates unchanged at -0.10% while downgrading CPI and GDP projections for 21/22, whilst slightly upgrading both for 2022/23. In Australia this morning, export prices rose by 6.20% in Q3 QoQ, but import prices rocketed higher to 5.40% from 1.90% previously as imported inflation rears its head. Australian 3-year CGB’s are trading at 0.50% this morning in response after the RBA did not intervene to cap rates at its 0.10% target. Yes, you read that correct, 0.10% target.

The Caligula’s of volatility will be loving life now, but like any one of his orgies, you get unlimited wine, but you risk getting chopped up as well. The contradictory noise across asset classes is signalling a big move is coming and I believe next week’s FOMC could be the catalyst if the FOMC holds its nerve. I am erring to a higher US dollar, higher US yields, lower equities, and a bit of a reckoning in the crypto-space. In the meantime, I’m going to fetch my earplugs.

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International

Beloved mall retailer files Chapter 7 bankruptcy, will liquidate

The struggling chain has given up the fight and will close hundreds of stores around the world.

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It has been a brutal period for several popular retailers. The fallout from the covid pandemic and a challenging economic environment have pushed numerous chains into bankruptcy with Tuesday Morning, Christmas Tree Shops, and Bed Bath & Beyond all moving from Chapter 11 to Chapter 7 bankruptcy liquidation.

In all three of those cases, the companies faced clear financial pressures that led to inventory problems and vendors demanding faster, or even upfront payment. That creates a sort of inevitability.

Related: Beloved retailer finds life after bankruptcy, new famous owner

When a retailer faces financial pressure it sets off a cycle where vendors become wary of selling them items. That leads to barren shelves and no ability for the chain to sell its way out of its financial problems. 

Once that happens bankruptcy generally becomes the only option. Sometimes that means a Chapter 11 filing which gives the company a chance to negotiate with its creditors. In some cases, deals can be worked out where vendors extend longer terms or even forgive some debts, and banks offer an extension of loan terms.

In other cases, new funding can be secured which assuages vendor concerns or the company might be taken over by its vendors. Sometimes, as was the case with David's Bridal, a new owner steps in, adds new money, and makes deals with creditors in order to give the company a new lease on life.

It's rare that a retailer moves directly into Chapter 7 bankruptcy and decides to liquidate without trying to find a new source of funding.

Mall traffic has varied depending upon the type of mall.

Image source: Getty Images

The Body Shop has bad news for customers  

The Body Shop has been in a very public fight for survival. Fears began when the company closed half of its locations in the United Kingdom. That was followed by a bankruptcy-style filing in Canada and an abrupt closure of its U.S. stores on March 4.

"The Canadian subsidiary of the global beauty and cosmetics brand announced it has started restructuring proceedings by filing a Notice of Intention (NOI) to Make a Proposal pursuant to the Bankruptcy and Insolvency Act (Canada). In the same release, the company said that, as of March 1, 2024, The Body Shop US Limited has ceased operations," Chain Store Age reported.

A message on the company's U.S. website shared a simple message that does not appear to be the entire story.

"We're currently undergoing planned maintenance, but don't worry we're due to be back online soon."

That same message is still on the company's website, but a new filing makes it clear that the site is not down for maintenance, it's down for good.

The Body Shop files for Chapter 7 bankruptcy

While the future appeared bleak for The Body Shop, fans of the brand held out hope that a savior would step in. That's not going to be the case. 

The Body Shop filed for Chapter 7 bankruptcy in the United States.

"The US arm of the ethical cosmetics group has ceased trading at its 50 outlets. On Saturday (March 9), it filed for Chapter 7 insolvency, under which assets are sold off to clear debts, putting about 400 jobs at risk including those in a distribution center that still holds millions of dollars worth of stock," The Guardian reported.

After its closure in the United States, the survival of the brand remains very much in doubt. About half of the chain's stores in the United Kingdom remain open along with its Australian stores. 

The future of those stores remains very much in doubt and the chain has shared that it needs new funding in order for them to continue operating.

The Body Shop did not respond to a request for comment from TheStreet.   

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Government

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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Government

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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