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Stocks On A Long Monetary Leash

M2 Money Stock – Weekly % Year-on-Year Change  Stunning to see the weekly monetary aggregates (M2) continue to grow at an unprecedented 25 percent year-on-year rate.  Not so stunning to see the stock market mania being led and fueled by … Continue…



M2 Money Stock – Weekly % Year-on-Year Change 

Stunning to see the weekly monetary aggregates (M2) continue to grow at an unprecedented 25 percent year-on-year rate.  Not so stunning to see the stock market mania being led and fueled by the money supply growth.

Yet, it is stunning, actually frightening, to see stocks need the 25 percent money growth to sustain its momentum.   This is unprecedented and unsustainable as inflationary pressures are and will surely continue to build even in the flawed official measures.

The stock market’s momentum must continue or else.

“There Is No Plateau, No Middle Ground”

The economic situation in a country after several years of bubblelike behavior resembles that of a young person on a bicycle; the rider needs to maintain the forward momentum or the bike becomes unstable. During the mania, asset prices will decline immediately after they stop increasing—there is no plateau, no ‘middle ground.’ The decline in the prices of some assets leads to the concern that asset prices will decline further and that the financial system will experience ‘distress.’ The rush to sell these assets before prices decline further becomes self-fulfilling and so precipitous that it resembles a panic. The prices of commodities—houses, buildings, land, stocks, bonds—crash to levels that are 30 to 40 percent of their prices at the peak. – Charles Kindleberger 

S&P500 And M2 Money Weekly Year-on-Year Growth 

Inflationary Pressures Building 

We closely follow the manufacturing industry, especially the electronics sector, where inflationary pressures are increasing dramatically.

This from the latest global PMI. Some hoarding is actually breaking out in various sectors as producers are expecting higher input prices due to continued supply chain issues and strong demand.

Watch especially semiconductors.  Recall our post on how the long secular deflation in semiconductor prices may be coming to end.

…what we believe has been one of the largest factors, along with globalization to the disinflationary forces over the past 30 years. That is the secular decline in the price of semiconductor prices.  Semiconductors are the basic building block of today’s economy, as was oil during the industrial revolution.  – GMM,  Oct 2020

Inflation Expectations 

Inflation expectations are also rising across the board.

Stocks and corporate bonds aren’t the only markets that have been looking past the pandemic—the bond market’s gauge of inflation expectations has strengthened back to pre-Covid levels as well. – Barron’s


After all,

Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output. – Milton Friedman

The FED 

We sense the Fed governors also sense and are growing increasingly concerned about all of the above and becoming reluctant to continue “carpet bombing” the economy with more monetary stimulus.

Federal Reserve Bank of Chicago President Charles Evans said Friday that although the latest job creation data is disappointing, he wasn’t yet ready to call for changes in central-bank monetary policy. – WSJ, Dec 4th

The economy as a whole is running pretty hot (GDP Now at 11.2% Q4 print) and even though the latest lockdowns as COVID cases spike could slow things a bit, economic output should be close to fully recovering its losses from the Q4 2019 peak by year-end.

Two Economies

It is better to think of A Tale of Two Economies, the super-hot economy, which has benefited from the COVID crisis, and the depressed economy, such as travel and hospitality, where employment is still 20 percent below February 2020 levels vs -6.2 percent for total nonfarm jobs.

Labor Market Lagging Economic Rebound 

The following chart illustrates the labor market is significantly lagging the economic recovery.  Not uncommon but the distance between the two economic indicators is a bit surprising.  We suspect automation and technology-led productivity increases are the main culprits, and we also suspect the pandemic has accelerated the disruptions and the technological-led structural economic change.

In other words, nobody knows what the future holds.  Us mere humans think linearly and extrapolate past and present to the future, society and the economy progress in a nonlinear fashion.

It’s unlikely the FED is going to slam on the breaks anytime soon but it does sound they are growing increasingly concerned that there is too much stimulus in such a hot economy.

Cruise Missiles, Not Carpet Bombing

We believe economic policymakers will have to resort to strategic precision strikes on the weak pockets of the economy by bringing out the cruise missiles of targeted fiscal policies rather than using the blunt tools of monetary policy.  Using monetary policy to fine-tune an economy, for example, especially an economy full of so many distortions, is tantamount to threading a needle with boxing gloves on.  Good luck with that.

Still,  the question remains how does Treasury finance another round of stimulus without resorting to the digital printing press as demand for its debt securities is so punk at these fake and repressed interest rates?

The Fed’s Dilemna

A 25 percent growth rate in the monetary aggregates is clearly unsustainable but the stock market is addicted and dependent on that liquidity emission, which is driving its forward momentum and keeping the bicycle rolling.   Therein lies the rub, folks.

We don’t see a way out and expect the term “inflation” to come back into the lexicon of the market geniuses much sooner than most think.

A further issue to consider is given the substantial imbalances that have built up in the economy and financial market over the years,  there is no middle ground on the inflation/deflation spectrum endgame but only what economists call a corner solution.   That is lots of inflation or deflation.

What is going to happen to the stock market, for example,  if the Fed normalizes monetary policy with the monetary aggregates growing only at their normal rates of, say, 5-8 percent year-on-year?   What if the Fed has to keep the monetary spigots on to keep the asset markets afloat?  It doesn’t take a rocket scientist to see the rabbit hole monetary authorities have descended in to over the past 10 years.

The Carol K. Provisio 

Finally, we do have to give a shout out to Carol K.,  GMM’s crack stock picker, noting what she has pounded into us in 2020 — that the stock market is a market of stocks and some stocks, especially the tech stocks of the future, are in a secular bull market.  We are thankful that she is on board and acts as a check on our natural contrarian tendencies to bet against the market.

Permabulls automatically bat .700 as the stock market has risen 72 percent of the time on an annual basis over the past 70 years.  That’s too easy.

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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…



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.


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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February Employment Situation

By Paul Gomme and Peter Rupert The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000…



By Paul Gomme and Peter Rupert

The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000 average over the previous 12 months. The payroll data for January and December were revised down by a total of 167,000. The private sector added 223,000 new jobs, the largest gain since May of last year.

Temporary help services employment continues a steep decline after a sharp post-pandemic rise.

Average hours of work increased from 34.2 to 34.3. The increase, along with the 223,000 private employment increase led to a hefty increase in total hours of 5.6% at an annualized rate, also the largest increase since May of last year.

The establishment report, once again, beat “expectations;” the WSJ survey of economists was 198,000. Other than the downward revisions, mentioned above, another bit of negative news was a smallish increase in wage growth, from $34.52 to $34.57.

The household survey shows that the labor force increased 150,000, a drop in employment of 184,000 and an increase in the number of unemployed persons of 334,000. The labor force participation rate held steady at 62.5, the employment to population ratio decreased from 60.2 to 60.1 and the unemployment rate increased from 3.66 to 3.86. Remember that the unemployment rate is the number of unemployed relative to the labor force (the number employed plus the number unemployed). Consequently, the unemployment rate can go up if the number of unemployed rises holding fixed the labor force, or if the labor force shrinks holding the number unemployed unchanged. An increase in the unemployment rate is not necessarily a bad thing: it may reflect a strong labor market drawing “marginally attached” individuals from outside the labor force. Indeed, there was a 96,000 decline in those workers.

Earlier in the week, the BLS announced JOLTS (Job Openings and Labor Turnover Survey) data for January. There isn’t much to report here as the job openings changed little at 8.9 million, the number of hires and total separations were little changed at 5.7 million and 5.3 million, respectively.

As has been the case for the last couple of years, the number of job openings remains higher than the number of unemployed persons.

Also earlier in the week the BLS announced that productivity increased 3.2% in the 4th quarter with output rising 3.5% and hours of work rising 0.3%.

The bottom line is that the labor market continues its surprisingly (to some) strong performance, once again proving stronger than many had expected. This strength makes it difficult to justify any interest rate cuts soon, particularly given the recent inflation spike.

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Spread & Containment

Another beloved brewery files Chapter 11 bankruptcy

The beer industry has been devastated by covid, changing tastes, and maybe fallout from the Bud Light scandal.



Before the covid pandemic, craft beer was having a moment. Most cities had multiple breweries and taprooms with some having so many that people put together the brewery version of a pub crawl.

It was a period where beer snobbery ruled the day and it was not uncommon to hear bar patrons discuss the makeup of the beer the beer they were drinking. This boom period always seemed destined for failure, or at least a retraction as many markets seemed to have more craft breweries than they could support.

Related: Fast-food chain closes more stores after Chapter 11 bankruptcy

The pandemic, however, hastened that downfall. Many of these local and regional craft breweries counted on in-person sales to drive their business. 

And while many had local and regional distribution, selling through a third party comes with much lower margins. Direct sales drove their business and the pandemic forced many breweries to shut down their taprooms during the period where social distancing rules were in effect.

During those months the breweries still had rent and employees to pay while little money was coming in. That led to a number of popular beermakers including San Francisco's nationally-known Anchor Brewing as well as many regional favorites including Chicago’s Metropolitan Brewing, New Jersey’s Flying Fish, Denver’s Joyride Brewing, Tampa’s Zydeco Brew Werks, and Cleveland’s Terrestrial Brewing filing bankruptcy.

Some of these brands hope to survive, but others, including Anchor Brewing, fell into Chapter 7 liquidation. Now, another domino has fallen as a popular regional brewery has filed for Chapter 11 bankruptcy protection.

Overall beer sales have fallen.

Image source: Shutterstock

Covid is not the only reason for brewery bankruptcies

While covid deserves some of the blame for brewery failures, it's not the only reason why so many have filed for bankruptcy protection. Overall beer sales have fallen driven by younger people embracing non-alcoholic cocktails, and the rise in popularity of non-beer alcoholic offerings,

Beer sales have fallen to their lowest levels since 1999 and some industry analysts

"Sales declined by more than 5% in the first nine months of the year, dragged down not only by the backlash and boycotts against Anheuser-Busch-owned Bud Light but the changing habits of younger drinkers," according to data from Beer Marketer’s Insights published by the New York Post.

Bud Light parent Anheuser Busch InBev (BUD) faced massive boycotts after it partnered with transgender social media influencer Dylan Mulvaney. It was a very small partnership but it led to a right-wing backlash spurred on by Kid Rock, who posted a video on social media where he chastised the company before shooting up cases of Bud Light with an automatic weapon.

Another brewery files Chapter 11 bankruptcy

Gizmo Brew Works, which does business under the name Roth Brewing Company LLC, filed for Chapter 11 bankruptcy protection on March 8. In its filing, the company checked the box that indicates that its debts are less than $7.5 million and it chooses to proceed under Subchapter V of Chapter 11. 

"Both small business and subchapter V cases are treated differently than a traditional chapter 11 case primarily due to accelerated deadlines and the speed with which the plan is confirmed," explained. 

Roth Brewing/Gizmo Brew Works shared that it has 50-99 creditors and assets $100,000 and $500,000. The filing noted that the company does expect to have funds available for unsecured creditors. 

The popular brewery operates three taprooms and sells its beer to go at those locations.

"Join us at Gizmo Brew Works Craft Brewery and Taprooms located in Raleigh, Durham, and Chapel Hill, North Carolina. Find us for entertainment, live music, food trucks, beer specials, and most importantly, great-tasting craft beer by Gizmo Brew Works," the company shared on its website.

The company estimates that it has between $1 and $10 million in liabilities (a broad range as the bankruptcy form does not provide a space to be more specific).

Gizmo Brew Works/Roth Brewing did not share a reorganization or funding plan in its bankruptcy filing. An email request for comment sent through the company's contact page was not immediately returned.


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