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Rumor Bought, Fact Sold

Rumor Bought, Fact Sold

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(Weekly initial jobless claims since 1987)
Overview: Speculation that the US Senate would pass the large stimulus bill worth around 10% of US GDP is thought to have fueled a bounce in equities in recent days. The bill was approved and will now go to the House, where a vote is expected tomorrow. If the rumor was bought, the fact has been sold.  The first to crack was the Asia Pacific region. Equities were mixed with the Nikkei shedding 4.5% and the Kospi off 1%. China and Hong Kong markets also slipped. Australia resisted and rose 2.3%. Indonesia, returning from yesterday's holiday, played catch-up and jumped 10% (which also helped lift the rupiah). Led by energy, materials, and financials, Europe's Dow Jones Stoxx 600 is almost 1.5% lower to snap a two-day 11.5% advance. The S&P 500 posted its first back-to-back gain since February 11-12 yesterday but is around 1.3% lower today. Benchmark yields are coming back softer with most major market yields are off 3-5 bp, while the European peripheral rates are off 9-11 bp, and Greece's 10-year yield is off 28 bp. The US 10-year yield is around 6 bp lower at 0.80%. The greenback is softer against all the majors. The yen (~+0.9%) and euro (~+0.6%) are leading the way. Emerging markets currencies are mixed with several Asia Pacific currencies outperforming, while the more liquid and accessible ones are posting modest losses. Gold is lower for the second sessions while May WTI is giving back yesterday's 2% gain in full.  

Asia Pacific

Although official figures show Japan, which had been one of the first countries outside of China to be infected, it has appeared relatively contained. However, Tokyo Governor Koike is urging residents to stay indoors and is warning that a lockdown may be imposed, as cases jumped. Separately, the BOJ continues to buy a record amount of ETFs. It bought JPY201 bln of ETFs today, matching the record of the previous two purchases.  

Singapore is reported its biggest rise in infections so far after improvement had been seen. Singapore reported Q1 GDP contracted by 10.6% quarter-over-quarter. Economists in the Bloomberg survey had forecast an 8.2% decline. Industrial output imploded by 22.3% in February, skewed in any event by the Lunar New Year. Still, it was half again as high as the median forecast.  

The People's Bank of China appeared to protest the recent weakness of the yuan by setting the reference rate today considerably stronger (for the yuan) than the bank models suggested. The reference rate was set at CNY7.0692, about 100 bp lower (for the dollar) than the models implied. This is the most since China's markets re-opened from the extended Lunar New Year holiday on February 3. The dollar is allowed to move 2% in either direction from the reference rate, while other currencies, such as the euro, are given wider berth. There is some thought that the PBOC is more concerned here with volatility than defending a specific level.  

The three-month cross-currency basis swaps improved to around minus 50 bp from minus 80 bp late yesterday. It is the least in about two-weeks. The dollar had been bumping against a cap in the JPY111.50-JPY111.70 area but has pulled back today. It is approaching this week's low, set Monday, near JPY109.65. A break of the JPY109.20 area could target the JPY108.30 area, where the 200-day moving average is found. There is a $740 mln option at JPY110 that will be cut today. The Australian dollar is fighting to extend its advance the fifth consecutive session. It reversed lower after reaching nearly $0.6075 yesterday and was sold to $0.5870 today before finding a solid bid. It is hovering around little changed late in the European morning. The intraday technicals suggest the risk is on the downside in North America today.  

Europe

Germany's Der Spiegel is reporting that the G7 was unable to reach an agreement on a statement. The report suggested that the US insistence on calling Covid-19 the "Wuhan Virus" scuttled the effort as other members refused. The World Health Organization is opposed to naming viruses after cities or countries, and the Spanish Flu did not originate in Spain.  

Spain had its deadliest day so far, while the number of fatalities and new infections slowed in Italy, according to reports. The EU has approved Italy's request to extend state guarantees for a debt moratorium from banks to small businesses. The ECB has clarified that its Pandemic Emergency Purchase Program (PEPP) announced last week (750 bln euros) will not be circumscribed by the capital key (roughly proportionate to GDP) as are its other sovereign bond purchase programs. This is important as it gives considerably more flexibility to the Eurosystem.  

The UK's February retail sales fell by 0.5%, excluding auto fuel. Economists had been looking for a small decline, but the January series was revised up to a heady 1.8% (from 1.6%). The Bank of England meets today, and it is Governor Bailey's first meeting at the helm. No change in policy is expected. The base rate was cut twice this month from 75 bp to 10 bp. 

The euro is advancing for the fourth consecutive session. It finished last week a little below $1.07 and is near $1.0950 in late European morning turnover. It is approaching the initial (38.2%) retracement of the slide March 9 high near $1.15 that is found by $1.0965. Above there is $1.10, where a roughly 840 mln option is struck that expires today. Sterling is firm but within yesterday's range (~$1.1640-$1.1970). A move above $1.20 could spur a quick move toward $1.21, which is roughly the (38.2%) retracement objective.  

America

St. Louis Fed President Bullard, who warned that Q2 GDP could contract 50% at an annualized pace and unemployment could surge to 20%, said yesterday what many economists also realize, weekly initial jobless claims are going to "skyrocket" for the week ending March 21. This report is the closest thing to a real-time read on the economy for businesses and investors.  The median guesstimate in the Bloomberg survey has crept up to 1.65 mln (in recent days from 1.45 mln), which would be more than twice the previous record peak set during the Great Financial Crisis.  There are some individual forecasts for more than twice the median. Outside of the weekly jobless claims, the US reports February goods trade figures and another look at Q4 GDP. The Kansas City Fed reports its March survey results.  

Four-weeks through three-month US T-bills have slipped slightly into negative territory (an implied yield of around minus four-six basis points at an annualized rate). Bills are bought on a discounted basis (below the face value). They mature at face value, and the difference is the return. The implied negative yield means some are paying a little above face value. It is an expression of the incredible demand for liquidity and reveals systemic strain. It is an anomaly that is taking place in an emergency setting. Rates are negative in the EMU, Switzerland, and Japan, and they have been for several years. There is a reflection of policy, and given that, if rates were not negative, it would be evidence of dysfunction. 

The bill that is likely to emerge from the US Congress does not have the $3 bln to fund the purchases of 77 mln barrels of oil to top up the Strategic Petroleum Reserves. The Trump Administration reportedly is looking to reallocate funds that have already been budgeted to the Department of Energy. Congressional approval is required, and it is often a rubber-stamp, but if part of the reason it was dropped from the bill on the grounds of aiding an unreformed carbon industry, it might not be traditional lay-up. Oil prices did not react much to US fiscal developments, and the May WTI contracted extended its recovery for a third session. US oil inventories are rising and now at the highest level since last July. Storage prices are already reportedly rising. While government purchases may not impact prices of crude, it could create more space in private storage. It seems that the rising cost of storage globally may discipline even low-cost producers. The projected global surplus, adjusted in light of the three-week lockdown in India, could be 2-3 times the ground storage space, according to some industry projections, in Q2. Lastly, another juxtaposition is taking place. After haranguing OPEC and Saudi Arabia to not keep artificially elevated oil prices, the Trump Administration has offered to mediate talks between the Saudis and Russians to stem the precipitous drop in prices.   

The Canadian dollar has extended its recovery today. The US dollar reached almost CAD1.4670 on March 19 and is testing the lows since then near CAD1.4150. The greenback is heavier for the third consecutive session. A break of this area could signal a move toward CAD1.40, but the intraday technicals lean against this and appear more consistent with a push back toward CAD1.4300. The US dollar has fallen against the Mexican peso for the past two sessions (~5.7%).  It has found support around MXN23.85-MXN23.90 after having set a record high near MXN25.46 two days ago (March 24).   It is back above MXN24.00 as North American dealers set to return. Initial resistance is expected in the MXN24.40-MXN24.50 area.    





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Economic Earthquake Ahead? The Cracks Are Spreading Fast

Economic Earthquake Ahead? The Cracks Are Spreading Fast

Authored by Brandon Smith via Alt-Market.us,

One of my favorite false narratives…

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Economic Earthquake Ahead? The Cracks Are Spreading Fast

Authored by Brandon Smith via Alt-Market.us,

One of my favorite false narratives floating around corporate media platforms has been the argument that the American people “just don’t seem to understand how good the economy really is right now.” If only they would look at the stats, they would realize that we are in the middle of a financial renaissance, right? It must be that people have been brainwashed by negative press from conservative sources…

I have to laugh at this notion because it’s a very common one throughout history – it’s an assertion made by almost every single political regime right before a major collapse. These people always say the same things, and when you study economics as long as I have you can’t help but throw up your hands and marvel at their dedication to the propaganda.

One example that comes to mind immediately is the delusional optimism of the “roaring” 1920s and the lead up to the Great Depression. At the time around 60% of the U.S. population was living in poverty conditions (according to the metrics of the decade) earning less than $2000 a year. However, in the years after WWI ravaged Europe, America’s economic power was considered unrivaled.

The 1920s was an era of mass production and rampant consumerism but it was all fueled by easy access to debt, a condition which had not really existed before in America. It was this illusion of prosperity created by the unchecked application of credit that eventually led to the massive stock market bubble and the crash of 1929. This implosion, along with the Federal Reserve’s policy of raising interest rates into economic weakness, created a black hole in the U.S. financial system for over a decade.

There are two primary tools that various failing regimes will often use to distort the true conditions of the economy: Debt and inflation. In the case of America today, we are experiencing BOTH problems simultaneously and this has made certain economic indicators appear healthy when they are, in fact, highly unstable. The average American knows this is the case because they see the effects everyday. They see the damage to their wallets, to their buying power, in the jobs market and in their quality of life. This is why public faith in the economy has been stuck in the dregs since 2021.

The establishment can flash out-of-context stats in people’s faces, but they can’t force the populace to see a recovery that simply does not exist. Let’s go through a short list of the most faulty indicators and the real reasons why the fiscal picture is not a rosy as the media would like us to believe…

The “miracle” labor market recovery

In the case of the U.S. labor market, we have a clear example of distortion through inflation. The $8 trillion+ dropped on the economy in the first 18 months of the pandemic response sent the system over the edge into stagflation land. Helicopter money has a habit of doing two things very well: Blowing up a bubble in stock markets and blowing up a bubble in retail. Hence, the massive rush by Americans to go out and buy, followed by the sudden labor shortage and the race to hire (mostly for low wage part-time jobs).

The problem with this “miracle” is that inflation leads to price explosions, which we have already experienced. The average American is spending around 30% more for goods, services and housing compared to what they were spending in 2020. This is what happens when you have too much money chasing too few goods and limited production.

The jobs market looks great on paper, but the majority of jobs generated in the past few years are jobs that returned after the covid lockdowns ended. The rest are jobs created through monetary stimulus and the artificial retail rush. Part time low wage service sector jobs are not going to keep the country rolling for very long in a stagflation environment. The question is, what happens now that the stimulus punch bowl has been removed?

Just as we witnessed in the 1920s, Americans have turned to debt to make up for higher prices and stagnant wages by maxing out their credit cards. With the central bank keeping interest rates high, the credit safety net will soon falter. This condition also goes for businesses; the same businesses that will jump headlong into mass layoffs when they realize the party is over. It happened during the Great Depression and it will happen again today.

Cracks in the foundation

We saw cracks in the narrative of the financial structure in 2023 with the banking crisis, and without the Federal Reserve backstop policy many more small and medium banks would have dropped dead. The weakness of U.S. banks is offset by the relative strength of the U.S. dollar, which lures in foreign investors hoping to protect their wealth using dollar denominated assets.

But something is amiss. Gold and bitcoin have rocketed higher along with economically sensitive assets and the dollar. This is the opposite of what’s supposed to happen. Gold and BTC are supposed to be hedges against a weak dollar and a weak economy, right? If global faith in the dollar and in the U.S. economy is so high, why are investors diving into protective assets like gold?

Again, as noted above, inflation distorts everything.

Tens of trillions of extra dollars printed by the Fed are floating around and it’s no surprise that much of that cash is flooding into the economy which simply pushes higher right along with prices on the shelf. But, gold and bitcoin are telling us a more honest story about what’s really happening.

Right now, the U.S. government is adding around $600 billion per month to the national debt as the Fed holds rates higher to fight inflation. This debt is going to crush America’s financial standing for global investors who will eventually ask HOW the U.S. is going to handle that growing millstone? As I predicted years ago, the Fed has created a perfect Catch-22 scenario in which the U.S. must either return to rampant inflation, or, face a debt crisis. In either case, U.S. dollar-denominated assets will lose their appeal and their prices will plummet.

“Healthy” GDP is a complete farce

GDP is the most common out-of-context stat used by governments to convince the citizenry that all is well. It is yet another stat that is entirely manipulated by inflation. It is also manipulated by the way in which modern governments define “economic activity.”

GDP is primarily driven by spending. Meaning, the higher inflation goes, the higher prices go, and the higher GDP climbs (to a point). Eventually prices go too high, credit cards tap out and spending ceases. But, for a short time inflation makes GDP (as well as retail sales) look good.

Another factor that creates a bubble is the fact that government spending is actually included in the calculation of GDP. That’s right, every dollar of your tax money that the government wastes helps the establishment by propping up GDP numbers. This is why government spending increases will never stop – It’s too valuable for them to spend as a way to make the economy appear healthier than it is.

The REAL economy is eclipsing the fake economy

The bottom line is that Americans used to be able to ignore the warning signs because their bank accounts were not being directly affected. This is over. Now, every person in the country is dealing with a massive decline in buying power and higher prices across the board on everything – from food and fuel to housing and financial assets alike. Even the wealthy are seeing a compression to their profit and many are struggling to keep their businesses in the black.

The unfortunate truth is that the elections of 2024 will probably be the turning point at which the whole edifice comes tumbling down. Even if the public votes for change, the system is already broken and cannot be repaired without a complete overhaul.

We have consistently avoided taking our medicine and our disease has gotten worse and worse.

People have lost faith in the economy because they have not faced this kind of uncertainty since the 1930s. Even the stagflation crisis of the 1970s will likely pale in comparison to what is about to happen. On the bright side, at least a large number of Americans are aware of the threat, as opposed to the 1920s when the vast majority of people were utterly conned by the government, the banks and the media into thinking all was well. Knowing is the first step to preparing.

The second step is securing your own financial future – that’s where physical precious metals can play a role. Diversifying your savings with inflation-resistant, uninflatable assets whose intrinsic value doesn’t rely on a counterparty’s promise to pay adds resilience to your savings. That’s the main reason physical gold and silver have been the safe haven store-of-value assets of choice for centuries (among both the elite and the everyday citizen).

*  *  *

As the world moves away from dollars and toward Central Bank Digital Currencies (CBDCs), is your 401(k) or IRA really safe? A smart and conservative move is to diversify into a physical gold IRA. That way your savings will be in something solid and enduring. Get your FREE info kit on Gold IRAs from Birch Gold Group. No strings attached, just peace of mind. Click here to secure your future today.

Tyler Durden Fri, 03/08/2024 - 17:00

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Wendy’s teases new $3 offer for upcoming holiday

The Daylight Savings Time promotion slashes prices on breakfast.

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Daylight Savings Time, or the practice of advancing clocks an hour in the spring to maximize natural daylight, is a controversial practice because of the way it leaves many feeling off-sync and tired on the second Sunday in March when the change is made and one has one less hour to sleep in.

Despite annual "Abolish Daylight Savings Time" think pieces and online arguments that crop up with unwavering regularity, Daylight Savings in North America begins on March 10 this year.

Related: Coca-Cola has a new soda for Diet Coke fans

Tapping into some people's very vocal dislike of Daylight Savings Time, fast-food chain Wendy's  (WEN)  is launching a daylight savings promotion that is jokingly designed to make losing an hour of sleep less painful and encourage fans to order breakfast anyway.

Wendy's has recently made a big push to expand its breakfast menu.

Image source: Wendy's.

Promotion wants you to compensate for lost sleep with cheaper breakfast

As it is also meant to drive traffic to the Wendy's app, the promotion allows anyone who makes a purchase of $3 or more through the platform to get a free hot coffee, cold coffee or Frosty Cream Cold Brew.

More Food + Dining:

Available during the Wendy's breakfast hours of 6 a.m. and 10:30 a.m. (which, naturally, will feel even earlier due to Daylight Savings), the deal also allows customers to buy any of its breakfast sandwiches for $3. Items like the Sausage, Egg and Cheese Biscuit, Breakfast Baconator and Maple Bacon Chicken Croissant normally range in price between $4.50 and $7.

The choice of the latter is quite wide since, in the years following the pandemic, Wendy's has made a concerted effort to expand its breakfast menu with a range of new sandwiches with egg in them and sweet items such as the French Toast Sticks. The goal was both to stand out from competitors with a wider breakfast menu and increase traffic to its stores during early-morning hours.

Wendy's deal comes after controversy over 'dynamic pricing'

But last month, the chain known for the square shape of its burger patties ignited controversy after saying that it wanted to introduce "dynamic pricing" in which the cost of many of the items on its menu will vary depending on the time of day. In an earnings call, chief executive Kirk Tanner said that electronic billboards would allow restaurants to display various deals and promotions during slower times in the early morning and late at night.

Outcry was swift and Wendy's ended up walking back its plans with words that they were "misconstrued" as an intent to surge prices during its most popular periods.

While the company issued a statement saying that any changes were meant as "discounts and value offers" during quiet periods rather than raised prices during busy ones, the reputational damage was already done since many saw the clarification as another way to obfuscate its pricing model.

"We said these menuboards would give us more flexibility to change the display of featured items," Wendy's said in its statement. "This was misconstrued in some media reports as an intent to raise prices when demand is highest at our restaurants."

The Daylight Savings Time promotion, in turn, is also a way to demonstrate the kinds of deals Wendy's wants to promote in its stores without putting up full-sized advertising or posters for what is only relevant for a few days.

Related: Veteran fund manager picks favorite stocks for 2024

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Inside The Most Ridiculous Jobs Report In Recent History: Record 1.2 Million Immigrant Jobs Added In One Month

Inside The Most Ridiculous Jobs Report In Recent History: Record 1.2 Million Immigrant Jobs Added In One Month

Last month we though that the…

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Inside The Most Ridiculous Jobs Report In Recent History: Record 1.2 Million Immigrant Jobs Added In One Month

Last month we though that the January jobs report was the "most ridiculous in recent history" but, boy, were we wrong because this morning the Biden department of goalseeked propaganda (aka BLS) published the February jobs report, and holy crap was that something else. Even Goebbels would blush. 

What happened? Let's take a closer look.

On the surface, it was (almost) another blockbuster jobs report, certainly one which nobody expected, or rather just one bank out of 76 expected. Starting at the top, the BLS reported that in February the US unexpectedly added 275K jobs, with just one research analyst (from Dai-Ichi Research) expecting a higher number.

Some context: after last month's record 4-sigma beat, today's print was "only" 3 sigma higher than estimates. Needless to say, two multiple sigma beats in a row used to only happen in the USSR... and now in the US, apparently.

Before we go any further, a quick note on what last month we said was "the most ridiculous jobs report in recent history": it appears the BLS read our comments and decided to stop beclowing itself. It did that by slashing last month's ridiculous print by over a third, and revising what was originally reported as a massive 353K beat to just 229K,  a 124K revision, which was the biggest one-month negative revision in two years!

Of course, that does not mean that this month's jobs print won't be revised lower: it will be, and not just that month but every other month until the November election because that's the only tool left in the Biden admin's box: pretend the economic and jobs are strong, then revise them sharply lower the next month, something we pointed out first last summer and which has not failed to disappoint once.

To be fair, not every aspect of the jobs report was stellar (after all, the BLS had to give it some vague credibility). Take the unemployment rate, after flatlining between 3.4% and 3.8% for two years - and thus denying expectations from Sahm's Rule that a recession may have already started - in February the unemployment rate unexpectedly jumped to 3.9%, the highest since February 2022 (with Black unemployment spiking by 0.3% to 5.6%, an indicator which the Biden admin will quickly slam as widespread economic racism or something).

And then there were average hourly earnings, which after surging 0.6% MoM in January (since revised to 0.5%) and spooking markets that wage growth is so hot, the Fed will have no choice but to delay cuts, in February the number tumbled to just 0.1%, the lowest in two years...

... for one simple reason: last month's average wage surge had nothing to do with actual wages, and everything to do with the BLS estimate of hours worked (which is the denominator in the average wage calculation) which last month tumbled to just 34.1 (we were led to believe) the lowest since the covid pandemic...

... but has since been revised higher while the February print rose even more, to 34.3, hence why the latest average wage data was once again a product not of wages going up, but of how long Americans worked in any weekly period, in this case higher from 34.1 to 34.3, an increase which has a major impact on the average calculation.

While the above data points were examples of some latent weakness in the latest report, perhaps meant to give it a sheen of veracity, it was everything else in the report that was a problem starting with the BLS's latest choice of seasonal adjustments (after last month's wholesale revision), which have gone from merely laughable to full clownshow, as the following comparison between the monthly change in BLS and ADP payrolls shows. The trend is clear: the Biden admin numbers are now clearly rising even as the impartial ADP (which directly logs employment numbers at the company level and is far more accurate), shows an accelerating slowdown.

But it's more than just the Biden admin hanging its "success" on seasonal adjustments: when one digs deeper inside the jobs report, all sorts of ugly things emerge... such as the growing unprecedented divergence between the Establishment (payrolls) survey and much more accurate Household (actual employment) survey. To wit, while in January the BLS claims 275K payrolls were added, the Household survey found that the number of actually employed workers dropped for the third straight month (and 4 in the past 5), this time by 184K (from 161.152K to 160.968K).

This means that while the Payrolls series hits new all time highs every month since December 2020 (when according to the BLS the US had its last month of payrolls losses), the level of Employment has not budged in the past year. Worse, as shown in the chart below, such a gaping divergence has opened between the two series in the past 4 years, that the number of Employed workers would need to soar by 9 million (!) to catch up to what Payrolls claims is the employment situation.

There's more: shifting from a quantitative to a qualitative assessment, reveals just how ugly the composition of "new jobs" has been. Consider this: the BLS reports that in February 2024, the US had 132.9 million full-time jobs and 27.9 million part-time jobs. Well, that's great... until you look back one year and find that in February 2023 the US had 133.2 million full-time jobs, or more than it does one year later! And yes, all the job growth since then has been in part-time jobs, which have increased by 921K since February 2023 (from 27.020 million to 27.941 million).

Here is a summary of the labor composition in the past year: all the new jobs have been part-time jobs!

But wait there's even more, because now that the primary season is over and we enter the heart of election season and political talking points will be thrown around left and right, especially in the context of the immigration crisis created intentionally by the Biden administration which is hoping to import millions of new Democratic voters (maybe the US can hold the presidential election in Honduras or Guatemala, after all it is their citizens that will be illegally casting the key votes in November), what we find is that in February, the number of native-born workers tumbled again, sliding by a massive 560K to just 129.807 million. Add to this the December data, and we get a near-record 2.4 million plunge in native-born workers in just the past 3 months (only the covid crash was worse)!

The offset? A record 1.2 million foreign-born (read immigrants, both legal and illegal but mostly illegal) workers added in February!

Said otherwise, not only has all job creation in the past 6 years has been exclusively for foreign-born workers...

Source: St Louis Fed FRED Native Born and Foreign Born

... but there has been zero job-creation for native born workers since June 2018!

This is a huge issue - especially at a time of an illegal alien flood at the southwest border...

... and is about to become a huge political scandal, because once the inevitable recession finally hits, there will be millions of furious unemployed Americans demanding a more accurate explanation for what happened - i.e., the illegal immigration floodgates that were opened by the Biden admin.

Which is also why Biden's handlers will do everything in their power to insure there is no official recession before November... and why after the election is over, all economic hell will finally break loose. Until then, however, expect the jobs numbers to get even more ridiculous.

Tyler Durden Fri, 03/08/2024 - 13:30

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