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The Great Reconciliation Of Asset Prices In 2022

The Great Reconciliation Of Asset Prices In 2022

Authored by Michael Pento via PentoPort.com,

The coming new year will be fraught with risk due to the removal of central bank and government supports. This could very likely lead to the collap

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The Great Reconciliation Of Asset Prices In 2022

Authored by Michael Pento via PentoPort.com,

The coming new year will be fraught with risk due to the removal of central bank and government supports. This could very likely lead to the collapse of the most overvalued stock market in history.

According to the Conference Board, US economic growth is set to slow from 5.5% annual growth for all of 2021, to 3.5% during 2022. Of course, Wall Street apologists almost never predict a recession until we are in the middle of one. Nevertheless, it is clear that the growth of the economy will slow significantly next year. And, in the view of Pento Portfolio Strategies, the risk of a recession and an asset bubble collapse is high.

S&P 500 EPS growth will plunge from 45% this year, to just 5-6% in ’22. Again, this is the optimistic view that leaves a great deal of room for error to the downside and virtually zero to the upside. After all, you can only open up an economy once following a global pandemic, and that already happened this year. And, it will be nearly impossible to comp the previous two years’ $6 trillion fiscal support, along with the $4.6 trillion expansion of the monetary base.

We recently learned from the Bureau of Labor Statistics (BLS) that Consumer Price Inflation (CPI) surged by 6.8%, and Producer Price Inflation (PPI) shot up by 9.6% y/y in November. This helped to send Real Average Hourly Earnings down by 1.9 percent from November 2020 to 2021. CPI is running at a 40-year high and is at a rate that is 3.4 times higher than the Fed’s asinine 2% target.

Of course, the clueless Fed finally started reacting to all this inflation by announcing at the December FOMC meeting that it would be speeding up the pace of its taper by two times. But this is happening just when the rate of inflation is actually peaking. In reality, Fed-Head Jerome Powell had no choice but to expedite the tapering of his QE program. After all, it is an untenable notion that the Fed should be adding to the supply of money at a breakneck pace when CPI is the highest since 1982. But without question, Mr. Powell deserves much derision for waiting until inflation reached a multi-decade high before starting to taper asset purchases, let alone begin to raise interest rates off the current level of 0%.

It will take (ten) 25 basis point rate hikes to reach a 2.5% Fed Funds Rate (FFR), which the FOMC now regards as a neutral overnight lending rate. Powell believes a neutral FFR would be 50 bps above the FOMC’s 2% inflation target—assuming inflation falls to that level. In spite of these plans, the chances are very small that the Fed will end up being able to hike rates very much at all before the entire artificial economic construct comes crashing down. This is because the yield curve is already rapidly heading towards inversion even before the tapering of QE has really even begun. An inverted yield curve is a predictor of a recession that has worked 100% of the time. The spread between 2 and 10-year Notes has already contracted from 159 bps at the end of March to just about 75 bps today. Meaning, by the time the QE taper is consummated, there probably won’t be very much room at all to hike rates before an inversion takes place.

But regardless of the Fed’s feckless nature, the fact remains that the biggest buyer and direct supporter of Mortgage-Backed Securities and Treasury Bonds, along with its stated support of corporate debt (including Junk bonds), will be exiting the market entirely come March ‘22. This leaves a tremendously dangerous vacuum in place, especially in non-government-backed debt. The Fed’s QE program has kept the massive real estate and equity bubbles afloat, as well as the $12 trillion worth of Business debt from imploding. But Powell’s Put has expired because inflation is now a big problem.

Then, you must factor in the stubborn COVID Delta variant and the new and more contagious Omicron mutation, which Mr. Powell now views as potentially adding upward pressure on inflation. This could cause the Fed to tighten its monetary policies even more quickly. The consumer will also be left with the complete lack of any fiscal support of any significance next year, after receiving $50k on average per American family over the previous two years.

The truth is, the solvency of nearly every developed nation on earth is contingent on interest rates that remain in the sub-basement of history–AKA, record lows and around zero percent. This is only possible if central banks maintain complete domination of free-market forces and keep their hydraulic presses down on yields. Let’s be honest, without the backstop of these state-owned entities, solvency and inflation concerns would combine to force yields much higher. In the case of the US, with CPI inflation at 6.8% and a national debt-to-income ratio above 725%, it would be impossible for a 10-year Treasury bond to yield just 1.4% without the heavy hand of the Federal Reserve. The point here is that the US has immense solvency and inflation problem now, yet still enjoys record-low borrowing costs thanks to the Fed.

However, this function is now changing. A central bank can usually usurp the free market regarding its sovereign borrowing costs as long as both solvency and inflation concerns are quiescent. For example, the Fed has yet to truly exit its yield curve suppression programs, which have existed for the better part of the last two decades, because consumer price inflation was not an issue. This is true even though our Nation’s debt to GDP ratio is higher today than any time since WWII. Up until this point, that growing trend towards insolvency has been veiled thanks to the central bank’s interventions. But the resurgence of inflation, in conjunction with that humongous debt burden, has become extremely problematic.

In the absence of inflation, central banks have been able to print enough money to ameliorate recessions, bear markets, real estate debacles, and solvency concerns–such as the European debt crisis circa 2012. Where Bond yields in the southern periphery soared to 40% before European Central Bank chief Mario Draghi promised to monetize the debt issues away. Again, he could only accomplish that because inflation was not a concern a decade ago in the Eurozone.

Turning back to the US, the next recession, which is likely to occur in ’22, will cause solvency concerns to spike as revenue collapses and the National Debt-to-Federal-income ratio soars. However, this time around the Fed’s ability to monetize away collapsing asset prices and crumbling economic growth will be fettered by an inflation rate that is already many times greater than it is comfortable with.

That leaves the Fed and Treasury with a dangerous dilemma: allow asset prices and the economy to implode, which will certainly fix the inflation problem; but will most likely lead to a depression. Or, try and pull the economy and assets higher by once again borrowing and printing multiple trillions of dollars, which will send the rate of inflation skyrocketing from its 40-year high. That will risk destroying confidence in the USD and any faith that remains in the bond market. Therefore, the stock market and economy would collapse anyway as inexorably rising inflation pulls yields on sovereign, municipal and corporate bonds ever higher.

Wall Street’s perma-bulls will never admit that the Fed’s Put has now expired. Of course, the Powell Pivot will indeed happen once again as he continues to meander between hawkish and dovish depending on the lagging economic data he receives. But his next pivot back to an uber dove will only occur ex-post the Great Reconciliation of Asset Prices. This is why a buy-and-hold strategy no longer works and why identifying inflation and deflation cycles has become so critical.

*  *  *

Michael Pento is the President and Founder of Pento Portfolio Strategies, produces the weekly podcast called, “The Mid-week Reality Check”  and Author of the book “The Coming Bond Market Collapse.”

Tyler Durden Tue, 12/21/2021 - 08:44

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CDC Now Recommends COVID Testing For All Domestic Air Travel, Including The Vaccinated

CDC Now Recommends COVID Testing For All Domestic Air Travel, Including The Vaccinated

Authored by Jack Phillips via The Epoch Times,

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CDC Now Recommends COVID Testing For All Domestic Air Travel, Including The Vaccinated

Authored by Jack Phillips via The Epoch Times,

The Centers for Disease Control and Prevention (CDC) is recommending that all domestic travelers undergo COVID-19 testing before and after they travel - regardless of vaccination status.

In an update on the agency’s website, anyone traveling within the United States may want to consider “getting tested as close to the time of departure as possible,” and no more than three days before a flight. It previously only recommended testing for people who have not received COVID-19 vaccines or up-to-date booster shots.

The CDC update is also recommending that people take a test before or after a trip if they went to crowded spaces “while not wearing a well-fitting mask or respirator.”

In April, a Florida federal judge struck down the CDC mandate that required people to wear masks inside airports or on airplanes. Justice Department officials have signaled they will challenge the rule, implemented after President Joe Biden took office in early 2021, in court.

A spokesperson for the agency told AFAR Magazine on May 19 that “COVID-19 vaccines are effective at preventing severe disease and death,” but added, “since vaccines are not 100 percent effective at preventing infection, some people who are up to date can still get COVID-19.”

“People who are up to date with their COVID-19 vaccines may feel well and not have symptoms but still can be infected and spread the virus to others,” the spokesperson said.

In January of this year, the CDC also implemented a change to its international travel rule, requiring plane passengers aged 2 and older to show a negative COVID-19 test from no more than a day before boarding a flight or proof of recovery from COVID-19 within the previous 90 days. Foreign nationals have to show proof of COVID-19 vaccination as well.

Neither the CDC nor the White House has given any public indication of when the mandatory testing rule for international travelers will be relaxed. Travel groups have pushed for that rule to be removed for months now.

In a letter to the White House, a group representing more than 250 organizations called for an end to the rule, saying it’s only caused “slow economic recovery of the business and international travel sectors.”

After the federal judge’s order was handed down last month, the CDC issued a new recommendation that people inside airports and airplanes wear masks, despite nearly all major airliners having scrapped enforcement.

And during a news briefing last week, CDC Director Rochelle Walensky, who has been criticized for her agency’s messaging during the COVID-19 pandemic, said that people living in counties that the agency deems to have high COVID-19 transmission should wear masks in indoor settings.

Tyler Durden Mon, 05/23/2022 - 17:40

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How many bots are on Twitter? The question is difficult to answer and misses the point

Elon Musk’s focus on the number of bots on Twitter, whether genuine or a distraction, does little to address the problems of misinformation and spam….

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Yes, worry about Twitter, but don't worry whether there are hordes of spambots running rampant there. gremlin/E+ via Getty Images

Twitter reports that fewer than 5% of accounts are fakes or spammers, commonly referred to as “bots.” Since his offer to buy Twitter was accepted, Elon Musk has repeatedly questioned these estimates, even dismissing Chief Executive Officer Parag Agrawal’s public response.

Later, Musk put the deal on hold and demanded more proof.

So why are people arguing about the percentage of bot accounts on Twitter?

As the creators of Botometer, a widely used bot detection tool, our group at the Indiana University Observatory on Social Media has been studying inauthentic accounts and manipulation on social media for over a decade. We brought the concept of the “social bot” to the foreground and first estimated their prevalence on Twitter in 2017.

Based on our knowledge and experience, we believe that estimating the percentage of bots on Twitter has become a very difficult task, and debating the accuracy of the estimate might be missing the point. Here is why.

What, exactly, is a bot?

To measure the prevalence of problematic accounts on Twitter, a clear definition of the targets is necessary. Common terms such as “fake accounts,” “spam accounts” and “bots” are used interchangeably, but they have different meanings. Fake or false accounts are those that impersonate people. Accounts that mass-produce unsolicited promotional content are defined as spammers. Bots, on the other hand, are accounts controlled in part by software; they may post content or carry out simple interactions, like retweeting, automatically.

These types of accounts often overlap. For instance, you can create a bot that impersonates a human to post spam automatically. Such an account is simultaneously a bot, a spammer and a fake. But not every fake account is a bot or a spammer, and vice versa. Coming up with an estimate without a clear definition only yields misleading results.

Defining and distinguishing account types can also inform proper interventions. Fake and spam accounts degrade the online environment and violate platform policy. Malicious bots are used to spread misinformation, inflate popularity, exacerbate conflict through negative and inflammatory content, manipulate opinions, influence elections, conduct financial fraud and disrupt communication. However, some bots can be harmless or even useful, for example by helping disseminate news, delivering disaster alerts and conducting research.

Simply banning all bots is not in the best interest of social media users.

For simplicity, researchers use the term “inauthentic accounts” to refer to the collection of fake accounts, spammers and malicious bots. This is also the definition Twitter appears to be using. However, it is unclear what Musk has in mind.

Hard to count

Even when a consensus is reached on a definition, there are still technical challenges to estimating prevalence.

a network graph showing a circle composed of groups of colored dots with lines connecting some of the dots
Networks of coordinated accounts spreading COVID-19 information from low-credibility sources on Twitter in 2020. Pik-Mai Hui

External researchers do not have access to the same data as Twitter, such as IP addresses and phone numbers. This hinders the public’s ability to identify inauthentic accounts. But even Twitter acknowledges that the actual number of inauthentic accounts could be higher than it has estimated, because detection is challenging.

Inauthentic accounts evolve and develop new tactics to evade detection. For example, some fake accounts use AI-generated faces as their profiles. These faces can be indistinguishable from real ones, even to humans. Identifying such accounts is hard and requires new technologies.

Another difficulty is posed by coordinated accounts that appear to be normal individually but act so similarly to each other that they are almost certainly controlled by a single entity. Yet they are like needles in the haystack of hundreds of millions of daily tweets.

Finally, inauthentic accounts can evade detection by techniques like swapping handles or automatically posting and deleting large volumes of content.

The distinction between inauthentic and genuine accounts gets more and more blurry. Accounts can be hacked, bought or rented, and some users “donate” their credentials to organizations who post on their behalf. As a result, so-called “cyborg” accounts are controlled by both algorithms and humans. Similarly, spammers sometimes post legitimate content to obscure their activity.

We have observed a broad spectrum of behaviors mixing the characteristics of bots and people. Estimating the prevalence of inauthentic accounts requires applying a simplistic binary classification: authentic or inauthentic account. No matter where the line is drawn, mistakes are inevitable.

Missing the big picture

The focus of the recent debate on estimating the number of Twitter bots oversimplifies the issue and misses the point of quantifying the harm of online abuse and manipulation by inauthentic accounts.

screenshot of a web form
Screenshot of the BotAmp application comparing likely bot activity around two topics on Twitter. Kaicheng Yang

Through BotAmp, a new tool from the Botometer family that anyone with a Twitter account can use, we have found that the presence of automated activity is not evenly distributed. For instance, the discussion about cryptocurrencies tends to show more bot activity than the discussion about cats. Therefore, whether the overall prevalence is 5% or 20% makes little difference to individual users; their experiences with these accounts depend on whom they follow and the topics they care about.

Recent evidence suggests that inauthentic accounts might not be the only culprits responsible for the spread of misinformation, hate speech, polarization and radicalization. These issues typically involve many human users. For instance, our analysis shows that misinformation about COVID-19 was disseminated overtly on both Twitter and Facebook by verified, high-profile accounts.

Even if it were possible to precisely estimate the prevalence of inauthentic accounts, this would do little to solve these problems. A meaningful first step would be to acknowledge the complex nature of these issues. This will help social media platforms and policymakers develop meaningful responses.

Filippo Menczer receives funding from Knight Foundation, Craig Newmark Philanthropies, Open Technology Fund, and DoD. He owns a Tesla.

Kai-Cheng Yang does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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Monkeypox Outbreak Primarily Spreading Via Sexual Contact: WHO Officials

Monkeypox Outbreak Primarily Spreading Via Sexual Contact: WHO Officials

Authored by Jack Phillips via The Epoch Times (emphasis ours),

The…

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Monkeypox Outbreak Primarily Spreading Via Sexual Contact: WHO Officials

Authored by Jack Phillips via The Epoch Times (emphasis ours),

The recent outbreak of the monkeypox virus in North America and Europe is primarily spreading through sex, according to World Health Organization (WHO) officials on Monday, while confirming about 200 cases so far.

The virus itself is not a sexually transmitted infection, but WHO officials said the recent surge in cases is linked to homosexual men. However, they said that anyone can contract monkeypox, which is generally confined to Central and West Africa.

“We’ve seen a few cases in Europe over the last five years, just in travelers, but this is the first time we’re seeing cases across many countries at the same time in people who have not traveled to the endemic regions in Africa,” Dr. Rosamund Lewis, who runs WHO’s smallpox research, said in a streaming event on social media.

So far, the United States has confirmed at least two cases and a third suspected case is being investigated by officials in Florida. The cases have been reported in New York City and Massachusetts.

Many diseases can be spread through sexual contact. You could get a cough or a cold through sexual contact, but it doesn’t mean that it’s a sexually transmitted disease,” Andy Seale, who advises WHO on HIV, hepatitis, and other sexually transmitted diseases, or STDs. Seale said monkeypox isn’t considered an STD.

Meanwhile, Dr. David Heymann, who chaired a meeting of the World Health Organization’s advisory group on infectious disease, told The Associated Press that the leading theory to explain the spread of the disease was sexual transmission at events held in Spain and Belgium. Monkeypox has not previously triggered widespread outbreaks beyond Africa, where it is endemic in animals.

We know monkeypox can spread when there is close contact with the lesions of someone who is infected, and it looks like sexual contact has now amplified that transmission,” said Heymann.

“It’s very possible there was somebody who got infected, developed lesions … and then spread it to others when there was sexual or close, physical contact,” Heymann said, adding that “these international events … seeded the outbreak around the world, into the U.S., and other European countries.

*  *  *

[ZH: as Michael Snyder notes, however]

Of course sexual activity is not the only way that monkeypox can be spread.

Officials at the WHO need to make that very clear.

But so far authorities have identified two “superspreader events” which seem to have been catalysts for this global outbreak. 

One was a pride festival in the Canary Islands

The Canaria Pride festival, held in the town of Maspalomas between May 5 and 15, has become a hotspot for the monkeypox outbreak, reports El País.

The massive party was attended by over 80,000 people, including three Italian men who later tested positive for the virus.

A health source told the newspaper: “Among the 30 or so diagnosed in Madrid, there are several who attended the event, although it is not yet possible to know if one of them is patient zero of this outbreak or if they all got infected there.”

And the other was a fetish festival in Antwerp, Belgium

Many of the patients who have come forward so far are gay men and Belgium’s three confirmed cases of monkeypox have been linked to a large-scale fetish festival in the port city of Antwerp. Kuipers said in his briefing that while a notable number of men who have sex with men are among the patients the virus is ‘not confined to them’. The virus can be spread via mucus membranes in the mouth, nose and eyes or via open wounds.

As we move into the summer months, the WHO is warning that similar events could cause the outbreak to accelerate even more

Now the World Health Organization is warning that summer festivals and mass gatherings could accelerate the spread of monkeypox.

“As we enter the summer season in the European region, with mass gatherings, festivals and parties, I am concerned that transmission could accelerate, as the cases currently being detected are among those engaging in sexual activity, and the symptoms are unfamiliar to many,” said Dr Hans Kluge, WHO regional director for Europe.

But even if health authorities do a great job of explaining the dangers, will people avoid engaging in high risk activities?

Of course not.

Another very interesting thing that has come to light is the fact that an international biosecurity conference that was held in Munich in March 2021 actually simulated the type of scenario that we are facing now

Elite media outlets around the world are on red alert over the world’s first-ever global outbreak of Monkeypox in mid-May 2022—just one year after an international biosecurity conference in Munich held a simulation of a “global pandemic involving an unusual strain of Monkeypox” beginning in mid-May 2022.

*  *  *

Last week, officials in Belgium said they would implement a mandatory, 21-day quarantine for individuals who contracted monkeypox. Germany has four confirmed cases linked to exposure at “party events … where sexual activity took place” in Spain’s Canary Islands and in Berlin, according to a government report to lawmakers obtained by the AP.

This is not COVID,” Heymann told AP. “We need to slow it down, but it does not spread in the air and we have vaccines to protect against it.

Heymann said studies should be conducted rapidly to determine if monkeypox could be spread by people without symptoms and that populations at risk of the disease should take precautions to protect themselves.

Symptoms include fever, body aches, and rashes. Though related to the smallpox virus, symptoms are typically less severe for monkeypox. The latter is notably distinguished from smallpox by the appearance of swollen lymph nodes during the symptomatic phase of the virus, immediately preceding a swollen rash that spreads to the inside of the mouth and the hands and feet.

Tyler Durden Mon, 05/23/2022 - 16:20

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